POMED Notes: “Economic Challenges of Transition”

On Thursday, The Carnegie Endowment for International Peace hosted a one-day conference with high-level representatives of Islamist parties from Egypt, Tunisia, Morocco, and Libya. The Third panel of speakers discussed the “Economic Challenges of Transition,” featuring Mondher Ben Ayed, president and CEO of TMI and Oradist (Tunisia), Nael Al-Masalha, chairman and director of Al-Essra Hospital (Jordan), and Hussein Elkazzaz, managing director and co-founder of SKPOS Consulting (Egypt). Massood Ahmed, Director of the Middle East and Central Asia department at the International Monetary Fund, chaired the discussion.

For full event notes, continue reading below, or click here for the PDF

Massood Ahmed introduced the topic noting that amid all of the unrest and an international financial crisis, the countries represented on the panel had managed to avoid an economic crisis. However, said Ahmed, the countries have seen no growth, or even negative growth, unemployment, rising social pressures, and increased macro instability. The challenge now is how to avoid a crisis. Ahmed stated the revolution was brought on by a sense that the growth that was occurring wasn’t doing so evenly. Governments now face a “huge project of economic transformation” and the governments will be judged on how they make growth more inclusive.

Mondher Ben Ayed said the revolutions were for liberty and dignity, not for bread and food. He alerted the audience of a publication by the Tunisian government that was presented to the constituent assembly outlining a budget and economic strategy. “This vision was detailed,” said Ben Ayed, and asserted that employment comes from growth. In order to absorb the amount of new job seekers every year, Ben Ayed stated that the Tunisia’s economy needs to grow at 7 percent annually. This growth will need to come from both domestic and international investment, and for this to occur the Tunisian government must foster a hospitable investment environment. To create this environment, the document outlines 3 pillars: Political reforms such as the eradication of corruption, adoption of transparency, and an independent judiciary, 13 defined social reforms, and infrastructure development projects financed by public spending. According to Ben Ayed, the announcement of these programs placed Tunisia on a sustainable track of development, which will provide temporary jobs for the unemployed, easing immediate pain, but also provided the Tunisian people with realistic expectations. This has also assured the people that the transitional government will vacate power on schedule, but leaving the country with a solid political framework and a resilient economy.

Nael Al-Masalha spoke about economic reform in Jordan. As a medical professional, he spoke in “medical language” saying that economic reforms must “work to stop the bleeding in order to support other vital signs of life.” He called for serious reform to curb corruption. His experience in the private sector led him to believe that a focus on small business and entrepreneurship is where growth will come from. The government employs around 6000 people annually to “camouflage” the real number of unemployed Jordanians, Al-Masalha said, and called for the encouraging expatriates to return by providing the right political environment domestically. Al-Masalha concluded by saying international agreements and relations should be respected and seen as an integral part of globalization, and that Islamic movements cannot ignore the fact that “international order” affects every aspect of life, “especially the economy.”

Hussein Elkazzaz addressed the Freedom and Justice Party’s (FJP) economic strategy in Egypt, saying the process began with a dialogue to get feedback and understand different perspective, and then technically forming a plan to address the findings. The result was a program that rested on four pillars: Expanding the private sector, limiting and shrinking the government, empowering civil society, and integrating Egypt in the global economy. Egypt’s contribution of less than one-quarter of one percent of the world economy, from a population of around 80 million, shows that Egypt is not operating at its potential, Elkazzaz said. He cited a recent book, Why Nations Fail, explaining that Egypt is an example of the negative effects of extractive political institutions. “Extracting the resources and opportunities for a very narrow group of people,” said Elkazzaz results in the compounding of wealth in a handful of the powerful. The FJP wants to transform Egypt from an extractive economy into an inclusive one, reversing the polices of the Mubarak regime.

Elkazzaz explained that the FJP’s aim is to transform the jobs in the public sector to jobs that create value. “Civil society will create a system of checks and balances to curb actions of the government,” he said, adding, “The institution of the government can defeat the program of any party.” Elkazzaz stated that the strength of the Egyptian economy would be what is now its weakness: human capital. Providing access to millions of those eager to be integrated into meaningful positions will “redefine” “value-adding industries.” The objectives of the program are to “broaden the demand, create a fair distribution system through growth, redefine the relationship between state and citizen, and increase the competitiveness of the Egypt in the global economy. Funding will come from “serious” foreign direct investment in a number of industries, such as tourism, IT, textiles, and infrastructure. According to Elkazzaz, Egypt is facing a liquidity issue and also working to secure the IMF loan. The FJP has plans that will produce “tangible improvements” in the first 100 days, and stated two conditions necessary for success: support from the private sector and domestic and international partnerships.

During the Q&A session, the panelists fielded questions about laws governing foreign direct investment, education, and social justice. “Everyone will have an equal chance to win contracts,” said Mondher Ben Ayed, noting that reforming the education system is one of the 13 projects introduced by the interim government. Tunisia is working to provide opportunities to the 5% of their population that have college degrees but cannot find jobs. The worry is giving Tunisians “employability” and skills that match the needs of the job market. Marwan Mouasher of the Carnegie Endowment asked a question about reforming the value system- critical thinking, questioning, acceptance—which was denied due to rulers “fears” of education. Elkazzaz agreed that the education system needed reform at all levels, including its value system. Another question was about the ability of the government to remove the military’s control of the economy. Elkazzaz said that the process would be gradual, but the control would diminish as the civil economy grows. He cited Spain and South Africa as models of demilitarization and reconciliation, affirming that the remnants of the regime who may have benefited from its rule will not be excluded, but would have to “accept the new rules.” Elkazzaz and Ben Ayed acknowledged the importance of social justice. “The values of the revolution are dominant in my mind, and are more important than the agenda of any party,” said Elkazzaz. Ben Ayed noted that the society has paid the price of the inability of previous governments to correctly address political reform.