Brookings: Experts - Edward Sayre

Middle East Youth May Be Key to Economic and Political Stability

Samantha Constant — Sat, 19 Feb 2011 10:47:00 -0500

Introduction

Over the past several weeks, the world watched enraptured as crowds led by young Egyptians thronged the streets of Cairo to protest President Hosni Mubarak’s rule and to force him from office. No two countries are exactly alike. But many of the same demographic and economic forces that produced the Egyptian earthquake are present throughout the region—which could mean more tremors ahead.

Like Egypt, most countries in the Middle East are experiencing an unprecedented youth bulge. In countries from Morocco to Iran, people ages 15 to 29 make up the largest share of the population. Ominously for the region’s rulers, neither Tunisia nor Egypt, the epicenters of the uprising, is particularly unique in its demographic tilt. Young people represent 29 percent of the population in both Egypt and Tunisia, compared with 28 percent in Bahrain, 30 percent in Jordan, 31 percent in Algeria, and 34 percent in Iran, all of which have faced their own protests. The comparable number in most Western countries is around 20 percent.

What’s more, the next few years may represent a point of maximum demographic pressure across the region—a period somewhat analogous to the 1960s in the United States when the first baby boomers surged onto the political and cultural scenes. In Bahrain and Jordan, the share of the population under 30 is projected to continue rising for several years. But in countries such as Egypt, Tunisia, and Iran, the youth bulge is either peaking now or will peak shortly. That means the generational demand for change could also be cresting.

Read the full article at the National Journal website »

Authors

Samantha Constant

Publication: National Journal

Image Source: © Hamad I Mohammed / Reuters

Qatar’s Bid for the World Cup: Shifting to a Knowledge Based Economy

Edward Sayre — Thu, 02 Dec 2010 16:21:00 -0500

Qatar's bid to host the 2022 World Cup tournament was successful, making it the first Arab nation to host the quadrennial sporting event. Edward Sayre reviews Qatar's economic and social development over the last 30 years leading up to this historic first.

This week could be a historic one for the Middle East. Despite the ongoing potential for conflict that always seems to loom over the region, there is a possibility that an Arab country will, for the first time, be chosen as the host of a major international sporting event. Host countries for the World Cup finals will be announced on December 2 and Qatar has submitted an impressive bid to host the 2022 tournament. Even despite controversy surrounding the site selection process, getting to this stage is a major achievement for this Arab nation.

Let’s not forget how far Qatar has come in a relatively short period of time. According to World Bank estimates, Qatar’s GDP per capita was $34,152 in 1980. Almost 30 years later, its GDP per capita was estimated at $121,000 for 2009, ranking it second highest in the world. Qatar’s Human Development Index is 50 percent higher today than the average figure for all the Arab states, giving the country a rank of 38 out of 169 countries with comparable data. This broader index includes health outcomes and educational outcomes, indicating that Qatar has turned its wealth into human wealth.

What happened in the intervening 30 years is mostly connected to the wealth of the country’s oil and natural gas resources. Currently, 60 percent of Qatar’s GDP is directly accountable to its energy resources sector. While Qatar’s oil production is dwarfed by its neighbors Saudi Arabia, Kuwait and UAE, it has the world’s third largest natural gas reserves (behind Russia and Iran). Furthermore, what sets Qatar’s recent development path ahead of others is that it has invested heavily in liquefied natural gas (LNG) technology and production facilities over the past 20 years and is now the world’s leading exporter of LNG.

With a population of just over a million people and labor force of only 500,000, most of the industrialization of Qatar has occurred with the assistance of foreign workers. Increasing the number of nationals employed in the private sector or the “Qatarization of the workforce” is a challenge for Qatar and many of its neighbors since the generous welfare state makes private sector and quasi-public sector jobs less appealing that the public sector.

The hosting of the World Cup by Qatar is likely to have a positive economic impact throughout the region. Previous studies have shown that short-run employment increases by 15 to 25 percent as a result of major international sporting events. With youth unemployment rates in the broader Middle East region ranging from two to five times higher than older age groups, much of the employment gain is likely to be distributed to the youth.

There has been an attempt in the past five years for Qatar to shift its development from one solely dependent on oil and natural gas to a ‘knowledge-based economy.’ It has already made great strides in doing so. Education reform passed in 2001 has attempted to break the mold of the rote memorization system that is characteristic throughout the Arab world. The development of Education City by the Qatar Foundation for Education, Science and Community Development is aimed at making Doha the center of educational excellence in the Middle East region.

Doha has already hosted international meetings on politics and economics. Now, it is time to have Doha and Qatar highlight the Arab world’s potential by showcasing a knowledge economy that will thrive, even when the world’s energy needs no longer depend upon the Middle East region.

Authors

Edward Sayre

Image Source: © Fadi Al-Assaad / Reuters

Timely Action by the G-20 Can Help Middle Eastern Countries Help Themselves

Edward Sayre — Tue, 02 Nov 2010 00:00:00 -0400

Editor's Note: This article is one of a series of articles in a report titled "The G-20 Seoul 2010 Summit: Strengthening the Global Recovery."

Framing the Issue

As nations begin to recover from the worldwide recession sparked by the 2008 financial crisis, the Middle East hopes to continue where its macroeconomic performance had left off, with record levels of growth and job creation. However, in order for this to occur, the G-20 needs to support policies that promote continued private sector job growth in the Middle East as well as trade reform that addresses global imbalances and public sector reform that precludes future budget crises in the region. Saud Arabia, as the region’s sole representative at the G-20 Summit in Seoul, has a critical role in bringing to the table these priority areas that affect the Middle East and North Africa.

The enduring challenge facing countries in the Middle East is high levels of unemployment, which had recently begun to improve before the onset of the 2008 global financial crisis. Leading up the financial crisis, the years from 2000 to 2008 witnessed the highest levels of sustained economic growth for the region in the past 30 years. This boom in the region saw exports and foreign investment rise dramatically, budget deficits shrink, and such strong overall macroeconomic performance that unemployment, the perennial Middle Eastern macroeconomic weakness, fell more dramatically than at any time in its recent history. In Morocco, for example, the unemployment rate fell to less than 10 percent for the first time in 35 years. However, despite improvements in overall unemployment levels, this period of rapid economic growth did not resolve the region’s education and youth employment problems, and countries entered the global slowdown with large pre-existing hurdles, including high rates of youth unemployment and deteriorating job quality.

The 2008 global economic crisis and the regional crisis brought on by the sovereign debt crisis in Dubai in late 2009 threatened to reverse the macroeconomic advances that were supported by the boom. Fortunately, the Middle East was not as severely affected as other regions by the global slowdown and has managed to weather the crisis with relatively strong growth rates. But, the factors that prevented a recession in the region, including high public spending and lack of integration with the global economy, are now impeding the region’s rapid recovery. According to the World Bank’s most recent Regional Economic Outlook, the region’s sustained growth during the recovery depends on global developments and improved emerging market demand. The G-20 has the ability to assist the Middle East during the recovery phase through guidance and policy support in three areas: trade reform, public sector reform and private sector development.

Policy Considerations

Trade imbalances are a key focus of the G-20 Summit agenda. If the Middle East is going to benefit from the global recovery, it must have support in reducing the large non-oil current account deficits that still exist in most countries in the region. For example, even with a robust tourism sector, Egypt is forecasted to have a record current account deficit in 2010. Specific policies that promote better global trade balances by eliminating currency distortions could improve the balance of trade outlook for the region. However, the most important single factor for improving trade in the short run would be to ensure macroeconomic stability in southern Europe. The fall in Middle East exports has been largely driven by lower demand in Europe; and any continued debt crisis such as those currently being experienced by Greece and Ireland and that threaten Spain and Portugal will harm Middle East trade prospects tremendously. By weakening the euro, these fiscal crises in Europe decrease the competitiveness of Middle Eastern exports.

Another vital area for G-20 assistance to the Middle East, and one that should be addressed during the Summit, comes in the area of public sector reform. Many G-20 nations are reforming their public sector labor market policies due to fiscal crises. Middle Eastern governments have long attempted to offer social protection through bloated public sector payrolls that offer lifetime jobs with generous wages and benefits. The concern is that without a fiscal crisis, governments in the Middle East postpone making difficult decisions about restructuring their public sectors and reversing the perverse incentives that make jobs in the public sector the preferred employment for young graduates. These incentives push young people toward getting an education simply for the credentials needed for government jobs rather than pursuing education and opportunities for skills development as part of a dynamic and productive workforce. The lessons of the current budget crisis in many G-20 countries should not be lost on the Middle East. While Saudi Arabia is the only official member of the G-20 from the Middle East, other countries in the region can work with the G-20 to develop a broad agenda of public sector reform that can avert future fiscal crises brought on by overly-generous public sectors.

The third area that should be addressed by G-20 countries during the Summit is the need for a growing and dynamic private sector. In order for reforms concerning trade and international financial flows to have a direct impact on the Middle East, the private sector needs to be able to respond effectively to international incentives and signals produced by a competitive global economy. The Middle East has too often relied on the public sector to be the engine of job growth, and this is no longer sustainable. However, the private sector is currently hampered by a regulatory environment that makes it exceedingly costly to hire new workers and expand operations. The private sector in the Middle East is also constrained by limited access to capital and reduced access to markets. Guidance and specific initiatives aimed at developing the private sector in the Middle East can go a long way toward helping private sector firms expand their markets and connect with larger businesses within the value chain of production. This will spur job creation and help in reducing the dependence of young people in the Middle East for government jobs. Given that young people in the Middle East who are without jobs in countries like Lebanon, Morocco and Algeria are likely to seek out job opportunities in Europe, many members of the G-20 have an interest in ensuring that there is sufficient private sector job creation in the Middle East. The G-20 SME Finance Challenge represents a positive step in supporting private sector development in the Middle East and other regions. The G-20 should continue to engage multilateral and bilateral organizations in working together in toward addressing the constraints in private sector development. In the Middle East in particular, the G-20 can capitalize on momentum of the entrepreneurship agenda initiated by President Obama’s Cairo speech and the Presidential Summit on Entrepreneurship held last spring to address these challenges.

Action Items for the G-20

The three areas of trade reform, public sector restructuring and private sector development are difficult to tackle and require intra-regional collaboration to devise concrete policy solutions. Saudi Arabia should take the lead in convening a post-G-20 Arab Summit that would bring together leaders from the region to discuss policy reform measures to expand private sector opportunities and better trade integration that would promote long-term growth opportunities for the Middle East.

Authors

Edward Sayre

Timely Action by the G-20 Can Help Middle Eastern Countries Help Themselves

Tue, 02 Nov 2010 00:00:00 -0400

Edward Sayre assesses how Middle East economies have fared in the two years following the global financial crisis. He states that the G-20 has the ability to assist the Middle East during the recovery phase through guidance and policy support in three areas: trade reform, public sector reform and private sector development.

Publication: The G-20 Seoul 2010 Summit: Strengthening the Global Recovery

Israeli-Palestinian Peace Talks Must Be Inclusive

Samantha Constant and Edward Sayre — Wed, 29 Sep 2010 16:53:00 -0400

Editor’s note: this article originally appeared in The Guardian on September 29, 2010.

The future of a viable Palestinian state will ultimately lie in the choices that President Abbas makes in the coming days. His overtures to the Arab League to garner support on next steps is a positive move.

Whether or not the peace talks will proceed in the long run is unclear. But if negotiations are to continue – and be successful – now is the time for Abbas to re-examine how they can truly become more inclusive and representative of the realities at play in the West Bank and Gaza.

With Gaza under the control of Hamas, decision-making regarding the future of its population's welfare and statehood will end up without the buy-in of Hamas. Saudi Arabia, a major player in past peace negotiations, is currently sidelined while it could serve as a stabiliser of relations between Hamas and the Palestinian Authority. The exclusion of affected players around the table makes neither political nor economic sense.

Finding a way to bring Gaza representatives into the discussions is critical, not only for the legitimacy of the negotiations but because in order to have a viable and sustainable two-state solution, the West Bank and Gaza need to be integrated economically.

Currently, the government of Israel has in place more than 500 barriers to movement in the West Bank. In 2008, a World Bank study found that these barriers increase costs to Palestinian businesses by increasing the distance of internal routes from one West Bank town to another by as much as 40%. Additionally, with the completion of the security wall, the government of Israel plans on implementing a "back-to-back" transportation system for all goods from the West Bank moving into Israel. In Gaza, the back-to-back system caused delays of more than 24 hours at the Karni crossing as well as increased costs and damaged goods because of excessive handling and spoilage during the loading and unloading process.

Even without this system, it takes almost two hours for Palestinian goods from the West Bank to cross into Israel. Since Israel is the destination for over 85% of Palestinian exports, representing 45% of total West Bank GDP, further delays will make Palestinian exports uncompetitive with those coming from Asia and Latin America.

For the West Bank to have a viable economic future, it needs Gaza. It needs the potential of a Gaza port and airport to serve as a connection to the outside world as Israel plans to continue the regime of imposing increasingly high costs on Palestinian imports and separation from the West Bank economically. Today, outside a few areas of growth, the Palestinian economies of both territories continue to suffer. Unemployment in 2009 was nearly 40% for men in Gaza and nearly 20% in the West Bank. This does not even take into account youth unemployment, which is as high as 65% in Gaza with young people having to wait an average of two years after graduation to find a job.

Because their economic future depends on each other, the current diplomatic efforts need someone at the table who can speak for the interest of Gaza. Given Hamas's militant position, this does not have to be Ismail Haniyeh or any other official Hamas representative. In fact, absence of direct talks with Hamas does not mean that indirect representation is impossible.

This could be achieved in two ways. First, a set of high-ranking bureaucrats or expatriate Palestinians who are sympathetic to Hamas could sit at side tables to the main talks between the Palestinian Authority and Israel to ensure that Hamas's voice is heard. Second, another Arab head of state could stand to represent and be a liaison to Hamas.

The second approach is more likely to be successful than the first. The reason is simple. Excluding Hamas from the talks is only one example of the many other representatives that are missing. Palestinians from outside the West Bank, including refugees in surrounding Arab states, do not have a voice for their interests. But because the issue of refugees is on the table, they too must be represented.

Saudi Arabia has emerged as the country that is best suited to give voice and represent the various political factions in a reconciliatory manner – especially when looking at how to tackle Palestinian-to-Palestinian politics. The Arab Peace Initiative, spearheaded by King Abdullah, showcases the country's inclination toward addressing the Palestinian-Israeli conflict through regional Arab diplomacy and co-operation.

In a recent letter to the Saudis on their national day, the US secretary of state, Hillary Clinton, acknowledged the contribution of the king's regional vision via the bilateral peace talks. This now must translate into practical action: along with speaking to Syria about its role this week, the US – alongside Egypt and Jordan – needs to proactively seek other countries in the region to engage.

Securing peace is certainly a formidable challenge, but finding ways to sustain peace and prosperity can only be done through total inclusion and unbiased representation. Ultimately, the real test of success will be President's Abbas's ability to secure a deal that can bridge the growing political divide between the two territories and meet the economic needs of all Palestinians.

Authors

Samantha Constant
Edward Sayre

Publication: The Guardian