Papers, Articles, etc...

RECENT REGIONAL ISSUES PAPERS


 

Food Security: The Basic Threat in an Overburdened Region

Amal A. Kandeel

 Middle East Policy, vol. 21, no. 4, winter 2014

Since the 1980s, after two decades of low and stable international food prices, the world’s agricultural commodities markets began to experience the effects of a number of structural factors that had been silently increasing the prices of basic food commodities. By the second half of 2008, when the world’s economy was hit by an unanticipated financial meltdown, the global food-price crisis had already set in. The latter’s impacts and long-term effects were much more universal and pervasive than those of the former. Despite how interconnected many parts of the world’s financial markets were, many countries were neither directly nor deeply, if at all, involved in the highly complex financial practices and products adopted by the giant U.S. and European institutions whose collapse triggered the markets’ crash. This was not the case for agricultural and food-commodity markets. All over the world people depended in one form or another on these markets, whether as consumers, producers, or both.

About three years later, one Arab country after another started to boil over into street protests. In Tunisia and Egypt, they quickly turned into mass uprisings; in Syria, Libya and Yemen, into protracted upheavals. Average per capita income in these countries (except Libya) was about 10 percent (Yemen), 20 percent (Egypt and Syria), and 50 percent (Tunisia) of the world’s average throughout 2008-12 (no meaningful data is available for Syria past 2010).1 That a global food crisis of the magnitude experienced in 2007-08 would culminate in significant wide-spread socioeconomic stress in those Arab countries would have been predictable — had the dynamics of developments in the commodities and financial markets and the interconnected pressures they placed on these Arab economies been watched closely. This is not about hindsight. Riots and protests on a much smaller scale have broken out in various countries when liberalization policies affected food or energy markets, energy prices affecting all other economic activities and people’s purchasing power, including the affordability of food. And there are examples of much worse food-insecurity situations where similar protests did not break out, but famine set in and people died. It was inevitable that the global food-price crisis would have serious material consequences on the ground in low-middle-income Arab countries.

The Arab countries that have remained engulfed in turmoil since 2011 or that are still in transition from economic and political fragility continue to be vulnerable to external pressures arising from the agricultural commodities market. On one hand, many of the factors that had driven prices steeply upward in agricultural commodities and food markets until they aligned with other global economic conditions to create intolerable inflation and a food security crisis did not go away. On the other hand, the Arab populations whose food security the food-price inflation was bound to undermine in 2007-08 are economically worse off today than they were at the dawn of the first uprising in 2011. Many are much worse off.

GLOBAL AGRICULTURAL PRICES

In early 2009, a few months after the global financial meltdown, slumping international demand, including for agricultural and food commodities, caused global prices for these products to recede from the highs reached 12 months earlier.2 The decrease in demand for agricultural commodities was partly due to a drop in speculative trading. Many large financial institutions had become involved in this practice during the years leading up to the 2007-08 crises, as they saw lucrative gains in a tightening agricultural market and sought to diversify their portfolios or realize quick windfalls. The market’s cooling-off was short-lived, however, despite the fact that many population groups worldwide suffered from the recession for much longer than its official lifespan, through mass unemployment, loss of livelihoods, and the evaporation of pension funds and other savings.

Around May 2009, global prices for agricultural and food commodities started to pick up once again.3 By 2011 and 2012, the Food and Agricultural Organization’s (FAO) Food Price Index had already reached average values that exceeded what had been recorded in 2008. Although the monthly index dropped slightly during 2013, it resumed its rise in 2014. In fact, according to the latest data published, through July of this year, it had already risen above the annual average for 2008.4

Until that month, the prices of the five commodity groups that comprise this index (cereals, sugar, vegetable oils, meat and dairy products) had not increased at equal rates. The prices of cereals — some used for food and others as animal fodder — can have the most significant total bearing on overall food prices, since cereal consumption affects the demand for and prices of meat and dairy products as well. At present, the Cereal Price Index for January-July 2014 is still lower than its 2008 level. The gap had narrowed considerably but briefly during the spring months. However, these movements in this index remain relevant because Arab countries as a group are the world’s leading importers of cereals in particular, not just of food in general. For a majority of people in low-income and low-middle-income countries, cereals constitute a staple that makes up a large portion of their overall nutrition. Furthermore, today the access to food of a significant percentage of the Arab populations affected by war and internal turmoil — in Iraq, Syria, Libya, Yemen and the Occupied Palestinian Territories — is deeply compromised due to these upheavals and their severe ramifications for production, incomes, savings, and foreign currency reserves, as well as logistics, transportation and importation. (read more)

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Regional Upheaval: The Stakes for the GCC

Amal A. Kandeel

Middle East Policy, vol.20 no.4, winter 2013

The protracted crisis in Syria that has persisted for nearly three years is an indication of the high stakes involved in its potential outcomes for several regional and international actors whose goals and interests often do not converge. Sectarianism is widely viewed to be the primary factor underlying the positions of regional actors towards this crisis. If this is accurate, then it would be because, under current geopolitical conditions, certain parties to this crisis perceive that some of their foreign-policy interests would be served by particular religious sects once they are in power in Syria. However, concerns over issues that are much more concrete and pragmatic than religious zeal underpin such perceptions. After all, it was not long ago that some of the countries pitted against each other today in Syria were engaged in peaceful cooperation. What was different then were not the predominant sectarian or religious affiliations of their populations. The differences were in the dispositions of certain governments towards the objectives of regional coexistence and stability.

COUNTRY CONCERNS AND INTERESTS

Members of the Gulf Cooperation Council (GCC) are at the forefront of the Eastern camp, actively supporting anti-Assad groups in Syria. Within the GCC, however, distinct lines separate regimes that have chosen to invest heavily in specific outcomes in Syria and those who have not. Qatar, followed closely by Saudi Arabia, represents the former group. Yet even for these two countries, regime perspectives, interests and goals are not entirely congruent.

All the GCC member states share concerns about the intolerable human suffering that has resulted from the conflict in Syria. They also share a concern about how developments in Syria could impinge on regional dynamics that involve Iran, in particular, and how these ramifications could affect them. At the same time, the nature and level of individual country engagement in the developments surrounding the crisis in Syria have not been uniform across the GCC. The Qatari and Saudi regimes have been the most active in the Syrian arena. The leadership of the United Arab Emirates has shown much less interest in a particular outcome along specific religious lines, and its involvement has been much less purposeful, determined and pointed in the context of the crisis. Meanwhile, the Omani and Kuwaiti regimes have been among the most publicly disengaged. Oman has a long-standing cooperative relationship with Iran, unique in the GCC, and has maintained an almost neutral approach, humanitarian issues aside. Bahrain, too, keeps a low profile, but for the opposite reason. It perceives itself as the most vulnerable in the GCC to Iranian military aggression.1

The hydrocarbon sector is central to the economic and financial prosperity of all GCC countries, regardless of their varying degrees of fossil-fuel resource wealth. This sector remains the paramount source of government revenue and hard currency and an indispensable foundation for development, job creation, and overall economic security and stability. The centrality of this role requires governments to take into account and respond to changing regional as well as global strategic and economic factors and conditions that could affect this sector. This includes engagement in appropriate interactions with countries and organizations that are at present, or are projected to become, major players in world energy markets, whether as producers and exporters, or as consumers and importers. Forerunners among these are Asia, Europe and the United States, principal markets for GCC oil and natural gas.

In the increasingly interdependent international political, commercial and financial environment that extensive globalization has produced, the sustainability of the hydrocarbon sector’s pivotal role in the GCC area’s economy, financial stability and security has become connected to a complex strategic security matrix. Its components include, among other things, resource and market diversification, logistical operations and their security, and technology and its applications. Now more than ever before, the Levant is considered by the GCC to occupy an essential geostrategic place in this matrix. Perceptions and considerations of this strategic role have been implicitly reflected in the nature and level of involvement of GCC countries in the Syria crisis…(read more)

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Amal A. Kandeel
Middle East Policy, vol.18 no.2, summer 2011;

At the dawn of 2011, crushing social grievances over the oppressive economic marginalization and political exclusion that deepened throughout the rule of former President Hosni Mubarak had stoked sufficient public fury to spark a revolt. Egypt was rattled by the eventual revolutionary earthquake of January 25-February 11. Aftershocks of much less intensity have continued since then, and the ground has not yet settled. Understanding the salient issues that culminated in this upheaval, and others that comprise undercurrents of perceptions and attitudes within the society, is essential to grasping some important changes that could occur down the road.

On the eve of the revolution, Egypt had been subject to the autocratic rule of Mubarak and the National Democratic Party (NDP) since he took office in 1981. The 1980s was a decade of recession and deepening financial and economic woes in the Arab region. This was due in large part to the dampening effect of the Iran-Iraq War on the regional economy and the reverse oil shock that sapped government coffers and national incomes of current-account and capital inflows from oil exports, expatriate transfers, and the petrodollar bonanza in general. Things were made worse in Egypt by the government’s economic and financial mismanagement. By the end of the decade, the country had accumulated a staggering debt and was struggling with crises in major areas of the economy. In the early 1990s, the government reached out to the International Monetary Fund (IMF) and the World Bank for help. With far-reaching conditionality, they forgave or restructured some of Egypt’s external debt. The United States, too, stepped in and did likewise. While this brought some financial relief and macroeconomic corrections, the economic, political and social price of “assistance” and “reform” was in other important ways severely detrimental to Egypt’s national interests and would continue to haunt it. Although Egypt achieved considerable economic growth in 1990-2009, averaging a decent 4.5 percent annually,1 a small minority enjoyed most of the gains; balanced, all-inclusive development was not achieved. The extent of socioeconomic and political deterioration that occurred during the last 20 years gradually pushed the country towards an inevitable explosion. By 2007, the sense of imminent internal collapse that charged the air in Egypt was inescapable. I will never forget attempting to bring this reality to the attention of some influential officials in a prominent international organization the same year, only to find my meeting coldly shortened and uneasily ended. By 2010, Egypt seemed like a ship without a captain…(read more)

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o   Defusing Egypt’s Demographic Time Bomb

Raymond Gilpin, Amal A. Kandeel and Paul Sullivan

USIP Peace Brief 81, March 2011

Summary

  • Limited opportunities for economic progress and political expression helped force Egypt’s youthful population on the streets and precipitated the demise of long-time leader Hosni Mubarak. Prospects for stability are linked to the government’s ability to address youth employment—a core demand of the protesters.
  • The January/February 2011 protests could be the tip of the iceberg. Robust and sustained action is needed to improve human security, starting with employment and income generation opportunities.
  • An effective economic transition in Egypt need not be a zero-sum game. Done correctly, employment-based economic restructuring that focuses on the most vulnerable (and volatile) segments of the population could lay the foundation for a stronger, stable and more peaceful Egypt.
  • The next steps in Egypt’s revolution will tackle the difficult task of expanding economic opportunity and providing space for more representative, accountable and participatory governance. Fundamentally, this would require the Egyptian government and military to progressively cede control of the levers of economic power.
  • Employment creation that focuses on the youth is not a silver bullet and will not guarantee success on its own. It will, however, broaden the constituency for reform by making Egypt’s youth bulge more involved in shaping the destiny of the country’s 82 million citizens…(read more)

 

RECENT ARTICLES

SAUDI GAZETTE (in print and online)                                                                                                                                                   

Pulling the plug: paving the way for market liberalization or further chaos?

Amal A. Kandeel

15 May 2014

Egypt and Yemen have become deeply fragile economically since revolutions began in the Arab region in late 2010. They are still in delicate transitions and prone to a renewal of significant instability. Nevertheless, the goal of liberalizing subsidized energy prices has resurfaced clearly on their government agendas during the last volatile three years despite acute risks and simmering instability. Some claim it is because of that. And they argue that energy prices should be raised to international markets’ price levels.

Any government that has to steer through the maze of entangled political, economic, social and security challenges and stresses each of these countries has been experiencing throughout their revolutions’ aftermaths faces the terrible dilemma of how to deal with the universal energy subsidies that are already in place…(read more)

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THE NATIONAL, UAE (in print and online)

o Egypt The Future forum pays off for nation’s economy

Amal Kandeel

5 April 2015

Egypt’s mid-March investment conference made a splash beyond the government’s expectations. It revealed an international change of heart – the attendance of global government and business leaders, as well as officials from regional and international banks and development organisations, reflected the revival of interest in investing in Egypt.

The Egypt the Future forum’s energetic beat was set at its opening session with announcements of US$4 billion in financial support from each of the UAE, Saudi Arabia and Kuwait. Oman added $500 million. These initial announcements kicked off the conference with a positive spin for the economy’s outlook. By the end of the forum, Egypt had secured $60 billion in investments and financing.

After months of painstaking efforts to stabilise the country, the conference’s success represented a leap forward. It has affirmed that the government has taken concrete steps to restore internal stability, and made progress on economic reform – both precursors to a steady recovery in investment. The signal to global capital holders has been that it is time to take a second look at Egypt’s market, or else miss the boat.

Things have come a long way since the middle of 2013. European Union “expressions of concern” about the unorthodox manner in which political change was taking place in Egypt gave way to re-expanding cooperation. Egypt’s commercial trade with the EU, its largest trading partner and investor, is rebounding.

Eight European countries including Germany, France and the UK participated in the conference. Most notably, the forum uncovered a breakthrough improvement in Egyptian-German rapport. Siemens secured the lion’s share of investments in Egypt’s electricity sector. The German chancellor, Angela Merkel, topped this with an invitation to the Egyptian president, Abdel Fattah El Sisi, to visit Germany; economic issues will be an integral part of the visit’s agenda.

Egypt’s economic relations with the world’s second- and fifth-largest economies are also upbeat. China and Egypt are deepening cooperation in infrastructural development and commercial exchange. Egypt is also expected to join the China-led Asian Infrastructure Investment Bank launched in October 2014. Russia plans to weigh in with a free-trade agreement and investments in energy, as well as military cooperation.

No magic wand could have instantly turned the economy around after the severe disruptions it experienced since 2011. An ambitious economic vision, firm policy reforms and favourable external factors have yielded incremental improvements in fundamental economic signals that Egypt can build upon.

By July last year, the government was ready to start a bold five-year plan to phase out energy subsidies that claim 13 per cent of its spending. Increases in electricity and public transport prices supported additional revenue generation for the two cash-strapped sectors, whose services are essential to a healthy investment and development environment.

In September, the government launched the Suez Canal expansion project, the initial stage in a broad development plan for the canal’s zone. It is designed to turn the area into an international logistical and commercial hub and tourist centre. This project is expected to contribute to economic growth and employment well beyond its 5-year implementation phase. Securing its $8.5bn in funding locally allowed the government to avoid additional external borrowing.

According to the Central Bank, a 10 percent decrease in Egypt’s external debt was recorded between June and December 2014. Meanwhile, the drop in hydrocarbon prices over the past year is helping contain inflation, moderating pressures on Egypt’s currency and improving investment incentives. It is supporting the energy subsidy elimination plan and relaxing food price concerns. All this could accelerate reducing the fiscal deficit. The trade deficit, too, could narrow somewhat, helped further by the central bank’s recent currency devaluations that boost export competitiveness.

The government has also issued a revised investment law that simplifies business start-up processes, separates criminal and administrative liabilities, and encourages investment in underdeveloped localities, among other incentives. This instrument capped months of economic adjustments to increase investments in Egypt. Its location, resources and large market continue to underpin these efforts.

o Economic forum signals bright prospects for Egypt’s recovery

Amal Kandeel

11 March, 2015

Heads of state and representatives of international organisations are among those who will participate in Egypt’s economic conference beginning on Friday. The forum reflects the need for significant investment in vital sectors of Egypt’s economy to raise their productivity and output, so as to meet citizens’ aspirations for better living standards.

Egypt is facing considerable challenges. These include a high unemployment rate, significant inflation, excessive fiscal and external debt levels and low international reserve buffers.

The conference will not be a panacea for all these and other troubles that have multiplied since 2011. However, it’s a good launching pad for rigorous investment efforts.

The event revolves around two central issues. One is a revamped investment law designed to encourage and facilitate investment in Egypt. The second is a set of 36 projects from a dozen sectors, worth about $60 billion (Dh 220bn). The government hopes to attract 50 to 75 per cent of their funding, including public-private partnerships.

Officials have expressed euphoria over the new investment law without disclosing many details of it. From the information that has emerged – it simplifies procedures for new ventures, redefines the scope of liability that forms the basis for legal procedures against violations and guarantees that investors can fully exercise their ownership rights and repatriate their capital – it seems reasonable…(read more)

 

o Recovering Egypt is ripe for investment

Amal Kandeel

4 March 2015

With Egypt’s economic conference barely a week away, anticipation about the opportunities it will unveil is high in the country as well as among foreign business communities.

Those familiar with Egypt know that the scope for investing there is immense because expansions and improvements are needed in every economic sector.

That is why the outcome of the conference on March 13 to 15, will be pivotal for the economy’s growth and stability over the next five to six years – a critical recovery phase long overdue after the dramatic deterioration experienced since 2011.

The results of this forum will have a wide-ranging resonance and, therefore, implications for regional and international peace and security as well.

Anchoring economic stability in the country of 84 million people, with almost 30 per cent youth unemployment and high international market exposure, is imperative for Egypt to address its economic, social and security challenges.

This in turn would enable it to maintain its much-needed constructive role in the acutely volatile geopolitical environment casting a shadow over the Middle East.

The dust from the 2011 revolutionary storm in Egypt and its destabilising aftermath has not yet settled completely. These turbulent events coincided with the hard-hitting repercussions of the global financial crash and economic recession that caused a worldwide slump in foreign direct investment (FDI).

With the recent softening of hydrocarbon prices, the onus is shifting, perhaps sooner than expected, more towards an internally-driven economic recovery than one leveraged by external transfers. That may well be a blessing in disguise.

Steady improvements have already been observed in Egypt’s economic prospects with a robust reform agenda being pursued by the government. This increasingly positive outlook has been confirmed in recently released assessments by Moody’s and the IMF…(read more)

 

o Houthis want to control key strait but it’s not that easy

Amal Kandeel

8 February, 2015

Attention is increasingly fixed on the Houthis’ advance in Yemen. Since last summer, the rebel group has laid siege to the capital Sanaa. Last month, they seized the presidential palace. This past weekend, they took over the government and dismissed parliament.

What is particularly significant is their sweep across three governorates, which together with Sanaa, form a corridor parallel to the Red Sea coast. Aab and Thamar are inland and are a short distance from the Strait of Bab el Mandeb, the Red Sea’s gateway to the Indian Ocean.Al Hudaydah, the northernmost of the three and Yemen’s second main seaport, is roughly 200 kilometres from the strait. South of Al Hudaydah, the formidable mountainous Taiz, which overlooks the strait has so far held against the Houthis. It is considered key to the strait, which the Houthis, backed and financed by Iran, want to control.

They already control several towns leading to the strait, which gives them considerable political leverage. The strait is one of the principal maritime transit points for north-south trade. It is also a vital international oil transit chokepoint for ships plying between the Mediterranean Sea and the Pacific Ocean. In 2013, about 3.8 million barrels of oil passed through the strait every day, which is almost 7 per cent of international maritime oil trade.

The strait’s importance is inextricably linked to the Suez Canal, on which roughly one-tenth of world maritime trade and one-fifth of global container traffic depend. More than half of the oil shipments that cross the strait are moved through the canal to Europe, North America and Asia…(read more)

 

o Regional warfare undermines already vulnerable water security

Amal Kandeel

6 January, 2015

The Middle East and North Africa region accounts for about nine per cent of the planet’s geographic area, has roughly five per cent of the world’s population and just one per cent of the world’s supply of freshwater. Freshwater resource stress has grown in the region in the past 25-50 years and has become more acute since 2011.

Lebanon is endowed with the highest annual average precipitation of about 800mm, while Egypt receives the least, 50mm. Most of the region is arid. Annual rainfall, and consequently the distribution of agricultural land, varies considerably across the region. So does the distribution of hydrocarbon wealth, which helps determine a country’s ability to augment freshwater supply with desalinated water. The most water-scarce Arab countries are oil exporters, so they can afford to desalinate water, but other water-stressed countries don’t have the economic resources to do so on a large scale.

Climate is a big enough challenge for and constraint on fresh water availability in Arab countries. Geopolitical factors have compounded this situation further. More than half of the Arab region’s freshwater supply comes from a resource that is shared with other countries and originates outside the region. For example, Iraq and Syria share the Euphrates-Tigris river system, mainly with Turkey, where this trans-boundary freshwater basin originates. Egypt and Sudan are riparian countries of the Nile River system, which originates in Ethiopia and Tanzania. As a result of geographic interdependencies, the quality, quantity and security of the region’s freshwater supply do not depend on natural availability alone. Nor do they depend on water’s availability and the degree of efficient resource management within each Arab country. In Syria, Iraq, Egypt and Jordan, for example, which rely heavily on trans-boundary freshwater that originates outside their borders, supply is affected by measures taken in upstream countries. Absent full cooperation among the riparian countries, the supply of the more dependent and vulnerable countries can be put at grave risk or substantially decreased…(read more)

 

o Small business might be key to regional success

Amal A. Kandeel

29 October, 2014

The Arab world is home to about 350 million people and rising – and young people comprise more than half that figure.

How will their energies be utilised? Youth have the highest unemployment rates in the region. Before the first winds of political change began to pick up in 2011, many young people looked to government for employment and opportunity. In Egypt, the most populous Arab country, 80 per cent of youth surveyed in 2010 held this view of government. But if realising this wish was difficult then, it is almost impossible now.

In North Africa and some parts of West Asia, no Arab government has the financial capacity to create enough jobs for the majority of the unemployed youth. Yet many young people still wait for unproductive jobs in overstaffed and under-equipped civil service sectors. They console themselves with excuses, assumptions and convictions that government is responsible for their plight. This attitude does not solve the problem…(read more)

 

o Suez project has the potential to transform Egypt

Amal A. Kandeel

18 October, 2014

It is the Egyptian people’s gift to the world.” This is how Egyptian president Abdel Fattah El Sisi referred to the new Suez Canal in his speech at the UN general assembly in New York last month. A massive project in its own right, it is the centrepiece of an even more ambitious undertaking, a comprehensive development plan for the whole Suez Canal Zone (SCZ).

The Suez Canal is a major transit route for international trade, including the transport of crude oil, petrochemicals, and Liquefied Natural Gas (LNG). In 2012 about 8 per cent of world maritime trade, 7 per cent of total seaborne-traded oil, and 13 per cent of globally trade LNG passed through the canal.

Its strategic location is unmatched, just as there is no substitute for maritime transport (the cheapest) in world trade (80 per cent of global trade by volume).

Since its construction, the canal has been expanded several times to keep up with the changing needs of maritime trade. Today the canal consists of a single-lane channel, except along 40 per cent of its 193.3km length. Because two-way traffic is confined to these 80.5km that comprise six bypasses where ships can change direction, crossing can take up to half a day.

The canal’s expansion project involves digging a new 34.4km waterway parallel to the existing one and expanding and deepening 37.6km of four of the six bypasses. This would cut ships’ crossing time in half, reduce operating costs and double the canal’s carrying capacity to about 95 ships per day…(read more)

 

o This region could lead the way in the food security debate

Amal A. Kandeel

29 April, 2014

Seven years ago, steep price increases thrust concerns about global food security to the fore. Fortunately, the price of agricultural commodities began to recede from their record levels in the second half of 2008 after the onset of the global financial crisis. Since then, prices have bounced back. In March 2014, the global food index rose sharply, fuelling fears of a return to previous peaks.

Long-and short-term structural and cyclical factors brought about these price increases. These factors include declining growth in global agricultural productivity, increasing world demand for food commodities, a small number of countries supplying a large percentage of the agricultural commodity output and highly inelastic supply and demand.

These factors have produced a system that poses two main types of food security risk worldwide – to price and to quantity.

A low-income country that is moderately dependent on food imports is most vulnerable to price fluctuations. Quantity risk affects a country that has a similar dependency but is not constrained by its finances. Countries that have low-income levels as well as limited agricultural production are worst off.

As a group, Arab countries are leading importers of food. Food-import dependency is projected to increase in the next decade as populations grow and freshwater resources decline. This dependency makes these countries vulnerable to conditions in global agricultural and food markets…(read more)

 

o Subsidy removal will undermine region’s economies

Amal A. Kandeel

19 November, 2013

When it was first mooted that energy subsidies might end in Egypt, Yemen and Tunisia – three countries where household income is low and poverty high – it was clear a crisis would occur if such a policy was implemented any time soon. All three nations are economically fragile, in states of delicate transition and prone to instability.

There is, in fact, an outright and dangerous disconnect between the reality of those who live day to day in these countries and those who seek to remove the subsidies and float energy prices to levels approaching those in the western world.

This is because talk about energy subsidy reform for Arab countries is not, in any sense, a debate. Rather, it is a monologue conducted by international lending agencies – and there are always dangers in listening to only one side of a story.

It is true, of course, that universal subsidies are a vast waste of resources.

When a government imposes a subsidy, four things generally happen. Firstly, a subsidised product is sold below the actual cost of its production. Secondly, people tend to consume more of that particular product. Thirdly, other public spending priorities get sidelined and lose funding. And finally, government deficits tend to grow as subsidies take hold…(read more)

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AL-ARABIYA NEWS

o  The global souq: sensing beyond the dividing lines

Amal A. Kandeel

31 July 2011

Situated in Old Cairo across the street from Al-Azhar Mosque, Khan El-Khalili is one of Egypt’s oldest and most historic bazaars. Some of its outermost sections lead to courtyards with historic buildings dating back to the 12th and 13th century, and some even earlier. This old market houses a medley of mostly small shops, lined up along a web of meandering, narrow, paved alleys.

It is a popular place for Egyptians and tourists alike, where the colors, sounds, and scents of Egypt’s culture weave an intensely alive replica of a segment of life in that country hundreds of years ago. All the traditional Egyptian handcrafts that are gradually facing extinction are on display there: leather goods, wood-work, glass-ware, copper-ware, alabaster, picturesque textile and rugs, timeless Egyptian shell-decorated artifacts from small boxes to the oude (a musical string-instrument), sur commande hand-mixed perfumes, fine silver and gold jewelry, and even jade.

Topping it all are the floating, delicate as well as intriguing, aromas of both everyday and fanciful spices and herbs familiar to all traditional Egyptian homes, which are called upon for enthusing the taste buds in the hearty Egyptian cuisine, as well as for tonic and medicinal purposes.

Khan El-Khalili has something for every personality. It is equally generous to the casual stroller who frequents the place not necessarily to shop for souvenirs but rather to be nostalgically immersed in this seamless symphony that pays tribute to one of the richest, ages-old cultural identities of the Egyptian persona.

The Khan has been one of my favorite places to visit in Egypt for as long as I can remember. To my heart’s content, when I traveled to other countries in the Middle East, I quickly discovered their own versions of an old traditional souq (i.e. market in Arabic). For example, the Covered Market in Istanbul, and Souq Waqf in Doha…(read more)

 

INEC, UNITED STATES INSTITUTE OF PEACE/ECONOMISTS FOR PEACE AND SECURITY

The Arab food security challenge

Amal A. Kandeel

25 March 2011

While the Arab region experiences revolutions and waves of unrest, its populations continue to feel deeper pressures as unforgiving food prices gather to create another storm.  It’s been two years since the last food crisis and the its shockwaves have barely receded. Now the massive demonstrations and toppled regimes of the last few weeks, driven in large part by suffocating costs of living amidst poverty, attest to the coming of another crisis on a grand scale.

Five percent of the world’s population lives in the Arab region, and must do with just one percent of the planet’s freshwater. This freshwater supply is seasonally and geographically unevenly distributed; even the diminished regional average per capita share says nothing about the severe shortages that some countries such as Jordan and Yemen suffer. Agriculture claims 85 percent of this water. Some of this agricultural use is irrigation, but some countries (e.g. the Maghreb) rely mostly on rainfall. Both irrigated and rain-fed Arab agriculture, however, are vulnerable to global warming; so are food supply and its security. Although annual average agricultural value added has overall increased faster than the population since 1970, domestic food sufficiency has deteriorated in several countries. Expansions in development, income, and food demand from which large population segments have been excluded, and accession to the WTO, have contributed to domestic food price increases that strained government budgets and left millions impoverished. Considerable constraints on production growth have resulted in increasing food importation and import dependency.

Members of the Gulf Cooperation Council (GCC) [United Arab Emirates, Bahrain, Saudi Arabia, Oman, Qatar and Kuwait] are best able to finance this option when oil prices are high and food prices not. Most Arab countries, however, are not exporters of hydrocarbons. Many are net importers of energy. Because their freshwater is not abundant, they also depend significantly on external food purchases. They import inflation from both international food and global energy markets.

People in Arab countries rely to varying extents on government food subsidies to mitigate the effects of price increases and volatility. Population growth and a resumed rise in food price would require more and more fiscal resources to be allocated to these programs. This cannot be sustainable for very long outside the GCC without compromising other government expenditure priorities, including investments in public goods and services for which no alternative provider exists, and which are essential if these economies are to adequately sustain more people…(read more)

Addressing the grievances of Egypt’s revolutionaries

Raymond Gilpin, Amal A. Kandeel and Paul Sullivan

13 March 2011

Limited opportunities for economic progress and political expression helped force Egypt’s youthful population on the streets and precipitated the demise of long-time leader Hosni Mubarak.  The next steps in Egypt’s revolution will tackle the difficult task of expanding economic opportunity and providing space for more representative, accountable and participatory governance.  An effective economic transition need not be a zero-sum game.  Done correctly, employment-based economic restructuring that focuses on the most vulnerable (and volatile) segments of the population could lay the foundation for a stronger, stable and more peaceful Egypt.

Making progress requires a phased approach that emphasizes the following:

  1. First, avoid the temptation to overreach.  Multiple projects would be wasteful.  Targeted interventions that remove obstacles and constraints would be preferable.  For example, it takes over 1,000 days to enforce business contracts, 72 days to register a property and 4.2 years to close a business.[2]  Addressing these issues could help unleash the dynamism of Egypt’s private sector, demonstrate that government jobs are not the only option and absorb a fair amount of Egypt’s unemployed
  2. Second, take a closer look at how best to integrate Egypt’s small and medium-scale industries into the value chain of core businesses in the manufacturing and service sectors.  Most reform efforts have focused on expanding opportunities for large-scale enterprises (owned by the military and the politically-connected).  Exploring modalities to foster growth among small manufacturing and service firms would create space for new entrants.  The net result will be a positive-sum game; not the zero-sum game feared by most of the elite.  This is a potentially quick-impact way to leverage existing human resources and diversify opportunity.
  3. Third, introduce initiatives that would help align Egypt’s education and training institutions with the realities and requirements of a vibrant economy.   This would make the workforce more prepared for the job market and encourage much-needed investment.
  4. Fourth, adopt a conflict-sensitive approach to economic reform.  Any strategy must prioritize vulnerable groups, emphasize equity, disadvantage spoilers and aim to defuse tensions between the status quo and the disadvantaged…(read more)

Food security lingers

Amal A. Kandeel

4 February 2011

Grains prices have risen by at least 50% since mid-2010, approaching 2008 food crisis levels. For some classes of corn, prices have reached 83-94% of 2008 averages; for rice, 75%; and for wheat, 70-90%. Global grain consumption is projected to exceed production by about 61 million tons in 2010/11. However, stocks are projected to remain 15% higher than in 2007-08 when a food crisis brought home abject poverty and hunger to millions of people. This might not preclude another food crisis. Demand is not as strong as it might have been had a global economic recovery taken hold. Yet massive unemployment lingering in the recession’s wake guarantees that the effects of escalating food prices will be more painful than in 2007-08. Due to purchasing power losses and budgetary constraints on domestic and international food aid programs food security is now more compromised.

Since the 1980s long-term factors have slowed global agricultural production. Other medium- and short-term factors (e.g. bad weather, speculative trading) have contributed to market volatility. Meanwhile, food demand has been rising as world population grows and incomes increase. After two decades of food price stability, mounting pressures on agricultural output are tightening the global food supply, and prices are trending up. Food insecurity consequently increased among low-income and middle-income groups even in the US during 2000-07.

It is essential to reverse disincentives and remedy conditions that have curtailed food crop production growth and laid the foundation for sustained immoderate price inflation. The following especially need to be reformed:
-Shrinking investment in, and declining donor assistance to, agricultural production in poor and developing countries, and agricultural R&D in developed countries.
-World Bank market liberalization measures that prescribed eliminating (not reforming) state intervention in agriculture; and increasing specialization in producing and exporting few cash crops, deepening reliance on food importation.
-WTO agricultural trade rules that paved the way for an uneven playing field between developed and developing countries…(read more)

 


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Amal A. Kandeel

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Amal A. Kandeel

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