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Qatar firms’ failure to pay

Qatar firms’ failure to pay

Qatar firms’ failure to pay leaves migrant workers destitute – report that details how ‘Despite government measures, thousands left struggling during Covid outbreak as companies withhold salaries and benefits, research shows’

by Pete Pattisson

Supported by

Qatar firms’ failure to pay

26 Nov 2020

Companies in Qatar have failed to pay “hundreds of millions of dollars in salaries and other benefits to low-wage workers since the coronavirus outbreak, according to new research by the human rights group Equidem.

Construction workers at Al Janoub stadium during a media tour in Doha, Qatar. The stadium is the second among eight stadiums being built for the Fifa World Cup 2022 in Qatar. Photograph: Ali Haider/EPA

In its report, Equidem describes how thousands of workers have been dismissed without notice, put on reduced wages or unpaid leave, denied outstanding salary and end of service payments, or forced to pay for their own flights home.

The report’s findings appear to amount to “wage theft” on an unprecedented scale, leaving “worker after worker” destitute, short of food and unable to send money home during the pandemic, in one of the richest countries in the world.Advertisement

“I came here to work for my family, not to be a beggar living on my own,” said a cleaner from Bangladesh, who said he had not received his salary for four months.

In separate research, the Business and Human Rights Resource Centre found that unpaid or delayed wages were cited by workers in 87% of cases of alleged labour abuse affecting almost 12,000 workers since 2016.

Around 2 million migrant workers – mostly from south Asia – work in Qatar, many on construction projects related to the 2022 World Cup.

Equidem praises some measures put in place by the Qatar government during the coronavirus pandemic. In March, the government made it mandatory for companies to continue to pay workers in quarantine or government-imposed isolation, and set up a £625m loan scheme to help companies do so, but the report warns of “widespread failure to comply” with this and other regulations.

The government later permitted companies that had stopped operating due to Covid restrictions to put workers on unpaid leave or terminate their contracts as long as they complied with requirements of the labour law, including giving a notice period and paying outstanding benefits.

The report highlights a number of companies that exploited or ignored this directive. Up to 2,000 workers employed by one construction company were laid off on the spot, workers claim. Most did not receive their outstanding salary or end of service settlement, a payment equivalent to three weeks’ salary for each full year of work.

“Many migrant workers are in an extremely vulnerable position with no real ability to assert their rights or seek remedy for violations,” says the report.

Mustafa Qadri, the director of Equidem, said the lack of a lawful right to organise or join a trade union has been particularly damaging. “It has prevented workers from having a seat at the table with government and employers to negotiate an equitable share of funds,” he said.

The report describes similar findings in the United Arab Emirates and Saudi Arabia, as well as policies in response to the pandemic which amount to racial discrimination. In both countries, the authorities required private companies to continue to provide wages and benefits to nationals, but allowed them to reduce wages or stop paying non-nationals.

In a statement, the Qatar government said its response to the pandemic, “has been driven by the highest international standards of public health policy and the protection of human rights”.

The government has provided free testing and treatment and said, “employers failing to pay their staff on time or withholding end of service payments have faced disciplinary action, including heavy fines and bans that prevent them from operating”.

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Qatar’s migrant workers beg for food as Covid-19 infections rise Read more

Will the Middle East Remain Habitable?

Will the Middle East Remain Habitable?

Michael Young discusses in an interview with Olivia Lazard the political impact of environmental degradation in the region. It is about whether the Middle East Remain Habitable?

Will the Middle East Remain Habitable?

  • November 19, 2020

Olivia Lazard is a visiting scholar at Carnegie Europe. Her research focuses on the geopolitics of climate, the transition ushered by climate change and the risks of conflict and fragility associated with climate change and environmental collapse. Lazard has over twelve years of experience in the peacemaking sector at field and policy levels. With an original specialization in the political economy of conflicts, she has worked for various non-governmental organizations, the United Nations, the European Union, and donor states in the Middle East, Latin America, Sub-Saharan and North Africa, and parts of Asia. In her fieldwork, her focus was on understanding how globalization and the international political economy shaped patterns of violence and vulnerability. Diwan interviewed her in mid-November to examine how environmental issues are impacting the Middle East.

Michael Young: Climate change has been largely ignored by regimes and even societies in the Middle East, yet it is affecting them in fundamental ways. Can you outline some of the major effects of climate change and tell us why we in the region should pay attention.

Olivia Lazard: Climate change has been ignored the world over because we fail to understand that our governance and economic systems are exhausting nature’s capacity to function, and therefore to sustain us and other species. The challenge ahead is difficult to apprehend. It is not just a matter of energy transition; it is a matter of profound political and socioeconomic transformation. It is about disrupting the status quo. So it is easy to understand why this is not welcomed by autocratic regimes who may stand to lose grip on power, or by democratic societies where coordinated action can be even more complex. Even as certain parts of the world, such as Europe, move closer to a climate transition, we are still at the very early stages of a long journey toward the profound transformations that we are going to need in order to genuinely address the drivers of climate change and, more broadly, ecological disintegration that threaten our ability to survive as a species on this planet.

So, I agree with you that regimes in the Middle East ignore climate change, because they rarely like to talk about transformative change. But I wouldn’t say that the societies ignore climate change per se. In fact, I think it is fair to say that the Arab Spring was a climate-disrupted appetizer that upended the world’s understanding of the region, but also of the links between societal and environmental shocks. Arab societies were actually precursors in ringing the alarm bells on a combination of events that lead to disruption and protracted sociopolitical conflicts: drought, monoculture failings, speculation over staple goods leading to market failures, and worsening social disenfranchisement with no safety net in sight. Increasing temperatures, erratic weather patterns, the unreliability of rainfall, protracted drought, and increasing reliance on chemical inputs to grow crops were all the long-term backstory to these issues back in 2011, which few analysts picked up on. The biophysical factors that characterize climate change were already at play.

MY: How were the Arab uprisings climate-disrupted appetizers, as you’ve said?

OL: This is a side of the story that still doesn’t get told very often when we examine the Arab Spring and its aftermath, so let me dwell a bit on it by looking at Tunisia. In Tunisia, landscapes across the country are ecological deserts—export-oriented monocultures as far as the eye can see. It makes them very vulnerable to climate and economic shocks. Two years ago, I was traveling across the country and I could see that, between the touristy coast where inequalities could not be starker and the extractives regions of the south, decades-long agricultural and economic policies had turned a country which used to be fertile into a bare piece of rock and dust.

Today, a decade after the start of the Arab Spring, you have a country where unemployment is still soaring, where youths find no meaning or economic opportunities outside of the informal economy, where urban centers of the hinterland are boiling with anger and frustration, and where the free movement of people is extremely constricted from one governorate to another. Look around in a place such as Sidi Bouzid, and you either see depressing concrete in town or depressing desert as far as the eye can see. There is no life, there are no prospects. Both the land and the economy have come to a standstill. So people feel stuck. Local cultures have lost their vibrancy and intergenerational divides are growing wider. In this bare and inert environment, drug consumption, domestic violence, and radicalization are rising.

The land is actually the canvas of terrible policies that have favored extraction and predatory politics over resilient social fabrics, culture, and vibrant economies. And the problem is that climate change exacerbates problems that are already present. In Sidi Bouzid in 2010, the spark was Mohammed Bouazizi’s self-immolation. But his story was yet another reminder of problems running deeper and taking root in environmental exploitation, abuse of hard security at the expense of social and human security, enduring economic inequalities, poor governance, and rising violence. It is striking to see how national and international responses to these problems are missing out on the environmental story as a backdrop to social and economic violence. They just do not focus on it.

The picture that I am trying to paint here is one of interconnectedness between the environment and human security, which has always existed but that we really have only started noticing more as a result of climate disruption. Climate change will have two consequences—to exacerbate and disrupt. The Middle East knows this well. The history of landscapes in the region is one of abundance that cradled human civilization. But mismanagement of resources led to natural exhaustion and cycles of violence for centuries. Today, the region is in an advanced stage of desertification, with fewer and fewer resources to support human populations. The environmental degradation is coupled with an atmospheric accelerating force resulting in extreme natural shocks—floods, devastating droughts, and resulting fires. Unsurprisingly, the Middle East concentrates yet again all the ingredients that mark the history of our times.

Where human security is weakened by predatory and hard security-oriented regimes, economies tend to be more extractive toward nature. But nature can no longer sustain extraction. Resources are not just running lower—such as water or land fertility—they are also more erratic. The Middle East is now replete with foretellers of climate catastrophes—massive floods in the Arabian Peninsula, fires in the Levant, and drought everywhere.

These disasters are mostly showing one thing, namely that people have no safety nets to rely upon from their governance systems. There is no preparedness, no relief capacity. This means, once again, that Middle Eastern populations are left to struggle for their own dignity, or karama, the key word during the Arab Spring. It may well become a refrain of disruptions to come related to climate shocks.

Still, some regimes in the Middle East are talking about climate change. I am thinking particularly of the United Arab Emirates, but they do so in a “business as usual” way. They aim to demonstrate that economic power and technological innovation are a way to face the crisis. This is not going to work. Governance and socioeconomic systems need to be rethought in terms of their relationship with nature. We also have to look a lot more in the direction of nature-based solutions in order to navigate the unfolding disaster.

MY: There has been an argument that the Syrian uprising was caused by the drought between 2007 and 2010. Your thoughts?

OL: Without a doubt the drought played a role in the multidimensional uprising in Syria. But the drought itself has a story. It began in 2007 and became protracted over the years. Rainfall patterns were becoming more erratic. This was the result of two things: global warming resulting from excess carbon dioxide accumulation in the atmosphere and changes in landscapes at the local level. Apart from the coastline, over time Syrian land was denuded of natural vegetation, which is responsible for stocking water underground and pumping it into the atmosphere.

In addition to breaking the ecological integrity of the land (which regulates local climates), there were other things that created additional stress for the agricultural capacity in the area of Dar‘a and elsewhere. The Assad regime relied on two main crops for export—wheat and cotton—both of which are highly water intensive. So, atmospheric conditions were not providing rain, and on top of it there were agricultural incentives, such as subsidies, pushing unsustainable ground water consumption. In parallel, the liberalization of the economy led to hikes in diesel prices which farmers could not afford. The crops eventually failed, collapsing an already fragile economy and pushing people into acute food insecurity and economic vulnerability, which they were left to navigate mostly by themselves.

What followed was a mass movement from rural to urban zones, as well as a boom in the informal economy, which is often accompanied by abuse and insecurity for all members of a family household. This is an extremely violent process of the disintegration of livelihoods and security that spirals out of control. In those cities to which people moved, the population influx led to unsustainable water consumption, which created tensions between “old” and “new” communities. The land was impossibly stretched, and the state only concentrated on containing a bubbling situation by unleashing the security forces. Populations were squeezed between scarcity and violence. No wonder communities revolted. So, again, this is a story of exacerbation and disruption.

I was in Syria in 2009, and I remember then that all the communities with which I spoke accepted President Bashar al-Assad as the “devil they knew.” They knew that the equilibrium between the central state, the clans, and the various communities was precarious, but it was an equilibrium to which they could adhere for lack of a better alternative. When mass displacement, impoverishment, and violence started increasing, this equilibrium was upset. The state reacted in a such a way that it broke irremediably the multiple contracts that Assad had with various constituencies.

When you look through the lens of the environment, you can actually retrace the story of peoples, economic policies, and governance structures. Ask any elder in the Middle East what the land was like 60–70 years ago, and they will spend hours telling you stories about fruits and vegetables tasting better, people being more resilient, and communities being more intertwined. The state of the land is usually a reflection of socioeconomic situations—either of resilience or destitution. With increasing liberalization over the last decades, especially through structural adjustments, there have been inequalities and social dislocation. In the Middle East, governance structures are highly centralized and informally organized according to ancestral cultural and identity groups. The mix between the two has led to politics of group benefits and zero-sum games. In modern economies, that means that land and other natural resources are mostly integrated in an economic trickle-up model in which resources accrue to a few at the expense of social and natural public goods.

Climate change is a systems-disruptive force. It will upset old equilibriums to which authoritarian states and inefficient bureaucracies are ill-adapted to respond. So, yes, climate change is tied in with politics in the region, and it will have exponential effects over the coming years.

MY: One consequence of drier climates is that it will exacerbate water scarcity. Can you outline potential scenarios if the question of water is not adequately addressed by Arab states? What might be some ways of resolving the issue?

OL: Let’s fix a slight misconception first. Water scarcity leads to climate disruption leads to water scarcity. In other words, climates become drier because of inadequate water and land management. When you do this globally, all the while burning fossil fuels, you end up with a global climate regime deregulation. Agricultural, energy, and extractive policies are the primary drivers of water scarcity. Climate change exacerbates an already existing state of water scarcity.

Now, on scenarios. It is very hard to lay these out, because they depend on water levels, water sources and flows, water infrastructure, and socioeconomic relationships to water. What I can tell you is that water scarcity is a process of man-made depletion. It is not an overnight shortage. So, necessarily, the disruptions and sociopolitical breakdowns that result from it also take place in a process of exacerbation until it reaches points of disruption.

We can look at two different countries to understand how water scarcity impacts stability. Jordan is currently experiencing its worst drought in 900 years. The consecutive refugee flows coming from Palestine, then Iraq, then Syria over the last decades have led to repeated sudden bursts of population concentration in various parts of the country. In recent years, Mafraq and Irbid Governorates have been under acute water stress every summer, leading to severe tensions between refugee and host communities, higher criminality, xenophobia, and the reinforcement of tough security measures on the part of the Jordanian state. As a result of water running low, people have dug random boreholes into local water tables, which tends to worsen water stress for everyone, but also can lead to water pollution.

At a more structural level, in and near those governorates you have intensive forms of agriculture that drain water tables further. In Amman, where the government is under more direct political pressure, the city has been moving toward more efficient water infrastructure, and it is looking at desalination plants to increase the availability of water. But it is not the same story across the country. Water vulnerability is increasing and is having a series of knock-on effects. These effects are so far contained, so the two questions we need to ask are “until when?” and “and then what?” Here, we need to look at policy responses and ecological interdependencies underpinning Jordan’s water resources. It gives us an idea of the type of violence that may emerge and how far it can go geographically.

From an ecological standpoint, technology can only get you so far. As long as Jordan can make up for water shortages that sustain its economies, it will maintain a level of stability and water conflicts may remain confined to social tensions or to geographically confined zones. But that will have a growing cost over time, which will destabilize the country’s economy and sociopolitical fabric. If Jordan also reacts with force rather than rethinks its investment in the social and environmental fabric, it will likely pay a heavy price in the coming decade.

Iraq, on the other hand, is moving into active water conflict, especially around the ancestral ecosystem of the southern marshes. The water branches feeding into this ecosystem are impacted by hydroelectric infrastructures reducing the flow of water, general pollution, growing salination, and the collapse of local biodiversity. Because of the environmental degradation, people are moving into cities, which are themselves facing water stress. This has led to greater demand for water imports, forcing all households, including vulnerable ones, to spend their income on making up for the lack of available water. This leads again to growing social tensions, but also growing frustration with a central state that remains crippled by its inability to provide basic services, and therefore needs to constantly find ways of legitimizing itself.

Iraq is dependent for its water supply on Turkey and Iran. The more the Iraqi government fails to deliver at home, the more it is likely to escalate tensions with its neighbors. Over time, if this doesn’t lead to open warfare—which it probably won’t given Iraq’s weak defense capacity—it will reduce the chances for water-based cooperation to stop water depletion. This will impact all countries’ stability negatively, and will make them more vulnerable to climate change. The more individual states prioritize their national needs first, rather than cooperating on the basis of ecological integrity and environmental regeneration, the more they will undermine their own stability and cause environmental degradation. In other words within decades this region of the world may simply become uninhabitable.

In terms of solutions, there are a few. But I’ll focus on broad strokes. First, states and regions would need to transition away from activities that deplete water tables. This is no small feat as it is multisectoral. You need a shift toward regenerative agriculture, energy-efficient systems, and infrastructure development that do not encroach on ecosystems. The process does not just require an economic transition at the country level, it also requires a change in economic infrastructures and frameworks at the international level. Agricultural produce for example should be isolated from international speculation, and production should primarily serve for internal consumption and to reinforce resilience. Countries should encourage a diversity of cultures, including a return to indigenous seeds and crops, rather than systematized crops that are simply not suited to the ecological make-up of areas undergoing desertification.

Secondly, Middle East states need to adopt regenerative landscaping practices that literally help them to plant rain into the soil again. Globally, we need to harness the hydrological cycle in order to recover livable climates at local and global levels again, and preemptively manage floods. The interesting thing is that this is a sector that requires new competencies and which is also labor intensive. It is about redesigning landscapes so that they retain water, leading them to again become productive. This is a message that particularly resonates in the Middle East because rebooting functional ecosystems is also about rebooting local soil-related cultures. The Middle East was the cradle of civilization and culture as a result of its agricultural might for an enormous part of its history. There is the potential to recover for the future.

MY: Do you envisage a time when governments in the region will be able to wean themselves off the extractive policies that have damaged their environments? Or are they not thinking in these terms?

OL: They are not. Nor is it just governments in the region. Extractive policies are a function of growth-oriented economies that require energy. As long as we don’t change what extractive policies are used for, extraction will not cease. A tree will be worth more dead than alive. Underground resources will be more valuable unearthed and used than buried. Aggressive underground resource extraction made the Middle East what it is today. It came with economic growth as well as economic predation, inequalities, disenfranchisement, corruption, violence, and war. It also came with authoritarianism.

Unfortunately, we are likely to see the same type of story develop over the new scramble for resources related to renewable energy. For a long time, the Middle East played a central part in the global economic march that led us to where we are. But the Middle East won’t hold the same importance in tomorrow’s energy competition because it is not endowed with the needed resources such as rare earths and related materials. Admittedly, Middle Eastern countries are endowed in natural sunlight that can help their power transition, but the materials and technology used to harness this renewable energy is where the resource competition will play out, and give rise to new drivers of instability globally. These materials and technology are not located in the Middle East, which means that the center of gravity in energy politics will incrementally shift. This transition will be unsettling, but it may also represent an opportunity to try out different economic models on the basis of ecosystems regeneration. The European Union has already indicated its readiness to work with Middle Eastern partners on multiple transitions. It is however necessary to have a hard look at which type of governance systems are needed to usher in truly resilient transitions in a way that revive local and national economies from the ground up—literally.

MY: What for you are the top three most pressing environmental problems that countries in the region will need to prioritize in the coming decade?

OL: Water scarcity and land degradation will lead to crop failures. Floods will create more humanitarian and economic disasters, and will damage infrastructures that are already fragile. Urbanization is likely to increase, depleting water tables even more. Global energy shifts will lead to changes in oil price structures that may actually lead to more revenues in the short term and, possibly, more investments in security forces. The most pressing environmental problem is that we are entering an era of vicious cycles rather than isolated shocks. But this is not inevitable and what’s at stake is to break those cycles.

The overall challenge across the Middle East, like elsewhere in the world, is to rebuild ecological integrity. That means recreating landscapes that can hold carbon and water, and therefore sustain human activity again. It is about restoring equilibriums that help both to chart another socioeconomic path forward as well as to adapt to climate change and reverse it over time.

So that requires two tempos of change: adaptation and transformation. With respect to adaptation, climate-related disasters are already locked into the planet’s system due to past emissions and environmental degradation. The most pressing thing is to anticipate where and how disasters will hit and prepare accordingly. It requires ensuring continuous and shock absorption relief capacity in the future, which will demand internationally and regionally pooled resources. In addition, it will require redesigning landscapes in such a way that they can buffer the impact of disasters and store as much flood water as possible. This sounds abstract when you are not familiar with ecological design, but if you have a look at projects such as Greening the Desert in Jordan or regenerative projects in Saudi Arabia, you can get a sense of how to work with landscapes to adapt to new challenges.

On transformation, achieving this is hard work. Climate change calls for a profound redesign of political and socioeconomic systems. It is about transforming the way in which agriculture, energy, infrastructure, and other economic systems are set up and relate to the environment. And it is about investigating which governance systems best deliver on a safe operating space for human populations in a viable environment.

International Day for Tolerance

International Day for Tolerance

The International Day for Tolerance is an annual observance day declared by UNESCO in 1995 to generate public awareness of the dangers of intolerance. It is observed on 16 November.

International Day for Tolerance

“Tolerance is respect, acceptance and appreciation of the rich diversity of our world’s cultures, our forms of expression and ways of being human.” UNESCO’s 1995 Declaration of Principles on Tolerance.

In 1996, the UN General Assembly adopted Resolution 51/95 proclaiming 16 November as International Day for Tolerance.

International Day for Tolerance

This action followed the adoption of a Declaration of Principles on Tolerance by UNESCO’s Member States on 16 November 1995. Among other things, the Declaration affirms that tolerance is neither indulgence nor indifference. It is respect and appreciation of the rich variety of our world’s cultures, our forms of expression and ways of being human. Tolerance recognizes the universal human rights and fundamental freedoms of others. People are naturally diverse; only tolerance can ensure the survival of mixed communities in every region of the globe.

In 1995, to mark the United Nations Year for Tolerance and the 125th anniversary of the birth of Mahatma Gandhi, UNESCO created a prize for the promotion of tolerance and non-violence. The UNESCO-Madanjeet Singh Prize for the Promotion of Tolerance and Non-Violence rewards significant activities in the scientific, artistic, cultural or communication fields aimed at the promotion of a spirit of tolerance and non-violence. The creation of the Prize has been inspired by the ideals of UNESCO’s Constitution that proclaims that “peace, if it is not to fail, must be founded on the intellectual and moral solidarity of mankind”. The prize is awarded every two years on the International Day for Tolerance, 16 November. The Prize may be awarded to institutions, organizations or persons, who have contributed in a particularly meritorious and effective manner to tolerance and non-violence.

MESSAGE FROM THE DIRECTOR-GENERAL

International Day for Tolerance

“At a time when extremism and fanaticism are unleashed too often, at a time when the venom of hatred continues to poison a part of humanity, tolerance has never been more vital a virtue.”

 — Audrey Azoulay, Director-General of UNESCO
on the occasion of the International Day for Tolerance

Download the full message in PDF format
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WHAT DOES UNESCO FOR TOLERANCE

HOW CAN INTOLERANCE BE COUNTERED?

1. Fighting intolerance requires law:

Each Government is responsible for enforcing human rights laws, for banning and punishing hate crimes and discrimination against minorities, whether these are committed by State officials, private organizations or individuals. The State must also ensure equal access to courts, human rights commissioners or ombudsmen, so that people do not take justice into their own hands and resort to violence to settle their disputes.

2. Fighting intolerance requires education:

Laws are necessary but not sufficient for countering intolerance in individual attitudes. Intolerance is very often rooted in ignorance and fear: fear of the unknown, of the other, other cultures, nations, religions. Intolerance is also closely linked to an exaggerated sense of self-worth and pride, whether personal, national or religious. These notions are taught and learned at an early age. Therefore, greater emphasis needs to be placed on educating more and better. Greater efforts need to be made to teach children about tolerance and human rights, about other ways of life. Children should be encouraged at home and in school to be open-minded and curious.

Education is a life-long experience and does not begin or end in school. Endeavours to build tolerance through education will not succeed unless they reach all age groups, and take place everywhere: at home, in schools, in the workplace, in law-enforcement and legal training, and not least in entertainment and on the information highways.

3. Fighting intolerance requires access to information:

Intolerance is most dangerous when it is exploited to fulfil the political and territorial ambitions of an individual or groups of individuals. Hatemongers often begin by identifying the public’s tolerance threshold. They then develop fallacious arguments, lie with statistics and manipulate public opinion with misinformation and prejudice. The most efficient way to limit the influence of hatemongers is to develop policies that generate and promote press freedom and press pluralism, in order to allow the public to differentiate between facts and opinions.

4. Fighting intolerance requires individual awareness:

Intolerance in a society is the sum-total of the intolerance of its individual members. Bigotry, stereotyping, stigmatizing, insults and racial jokes are examples of individual expressions of intolerance to which some people are subjected daily. Intolerance breeds intolerance. It leaves its victims in pursuit of revenge. In order to fight intolerance individuals should become aware of the link between their behavior and the vicious cycle of mistrust and violence in society. Each one of us should begin by asking: am I a tolerant person? Do I stereotype people? Do I reject those who are different from me? Do I blame my problems on ‘them’?

5. Fighting intolerance requires local solutions:

Many people know that tomorrow’s problems will be increasingly global but few realize that solutions to global problems are mainly local, even individual. When confronted with an escalation of intolerance around us, we must not wait for governments and institutions to act alone. We are all part of the solution. We should not feel powerless for we actually posses an enormous capacity to wield power. Nonviolent action is a way of using that power-the power of people. The tools of nonviolent action-putting a group together to confront a problem, to organize a grassroots network, to demonstrate solidarity with victims of intolerance, to discredit hateful propaganda-are available to all those who want to put an end to intolerance, violence and hatred.

International Day for Tolerance

RESOURCES

Iraq’s Dire Fiscal Crisis

Iraq’s Dire Fiscal Crisis

Kirk H. Sowell describes in Carnegie Endowment for International Peace, how a newly appointed government finds it challenging to make ends meet through Iraq’s Dire Fiscal Crisis. In effect, like most oil-exporting countries of the MENA region, Iraq has to come to terms with the changing fundamentals of the world economy as aggravated by the pandemic.

Iraq’s Dire Fiscal Crisis


2 November 2020

Iraq’s Dire Fiscal Crisis

Iraq’s Prime Minister inherited a series of fiscal crises. As his interim government struggles to avert a complete economic collapse, austerity measures may come at the expense of much-needed reforms.

Since taking office, Iraqi Prime Minister Mustafa al-Kadhimi has faced a series of fiscal and security crises amid collapsing public services and protests. The collapse in global oil prices due to the coronavirus pandemic and the Saudi-Russia oil price war caused Iraq to face an internal solvency crisis as early as June. This fiscal crisis has short and long-term implications. In the short-term, Baghdad continuously struggles to pay public sector salaries, which required the state to borrow from the Central Bank over the summer. With low oil revenue, the state’s monthly profits are covering just over 50 percent of its expenses. In the longer-term, Iraq faces a looming macro-fiscal state collapse—potentially within the next year.

The state is struggling to cover its monthly expenses. Over successive governments, the size of the public sector has grown to the point that Iraq needs to spend more than its total revenue on basic payments—public sector salaries, pensions, food aid, and welfare—to keep a majority of Iraq’s population out of destitution. In 2019, oil revenue averaged $6.5 million per month, and with modest non-oil revenues (largely customs, well less than $1 billion per month), this covered operational expenses with a small amount left over for capital spending. Since the recovery of oil prices after the March collapse, Iraq’s monthly oil revenues have averaged just over $3 billion/month, hitting a high of $3.52 billion in August. In testimony before parliament in September, Finance Minister Ali Allawi revealed[1] that with revenues at these levels, the government was still borrowing 3.5 trillion Iraqi Dinars (IQD) — just over $3 billion—from the Central Bank each month.

On October 10, as Iraq’s cash crunch became more acute, Allawi explained that state employee compensation rose from 20 percent of oil revenues in 2005 to 120 percent today. To help the public understand why the government of such an oil-rich country was broke, he explained that a government of this size should have at least $15 to 20 billion in funds to pay monthly expenses on an ongoing basis, but when this government took office, only about $1 billion was available.[2] This is in part due to weak revenues, the result of low oil prices and Iraq’s adherence to OPEC’s limitations on oil exports. In the past, Iraq’s oil exports have reached 3.5 million barrels per day (bpd), yet they decreased to 2.5 million bpd in recent months. Prominent figures, including former oil minister Ibrahim Bahr al-Ulum, have argued in favor of leaving the OPEC agreement unilaterally. Yet Allawi, speaking before Parliament, explained that while he agreed that OPEC’s quota formula was unfair, Iraq needs the OPEC agreement to keep oil prices from collapsing. More recently, according to the Iraq Oil Report, the government has signaled that it may try to thread the needle by increasing exports by 250,000 barrels per day to satisfy critics—an amount above its quota, but still about 750,000 barrels per day below peak production, and thus hopefully too small an increase to incur Saudi retaliation.

Iraq’s monthly oil revenue to collapsed from $6.2 billion in January to just $1.4 billion in April. The figure recovered to $2.9 billion in May and has gradually improved since, but in August was still just $3.5 billion. Since the government only had about $3 billion in expendable reserves in May, it became clear that Iraq could not pay state employees in June. Salaries over the summer were paid as money became available. As late as July 28, the prime minister’s spokesman admitted that employees at the Culture & Antiquities Ministry (apparently the lowest priority), were still waiting to be paid.

The government saw this crisis coming and began preparing the public for austerity. Finance Minister Allawi made multiple public appearancesdescribing Iraq’s situation as dire and arguing for radical reform. In particular, he predicted that the government, while protecting base salaries, would make large cuts to employee benefits and other costs. On June 9, the cabinet followed through when it voted to implement a series of austerity measures, including cutting benefits, cutting unessential spending, and capping income from “double-salary” payments.[3] Kadhimi’s advisor Hisham Daoud described the new policies as “not enough but only a start” toward reform.

Kadhimi, with no electoral base or political base of his own, has faced the fiscal crisis with a weak hand. This became clear when Parliament overwhelmingly rejected the government’s austerity policies on June 10, one day later. Even MPs friendly to the government described the government’s measures as premature, suggesting that they should try to raise revenue through customs first. Parliament eventually passed a borrowing law on June 24 to allow the government to borrow just enough to make basic payments. This law, however, prohibited the government from cutting benefits. Previously, the cabinet had the authority to cut benefits because, unlike salaries set by law, benefits were set by previous cabinet decrees. Thus, Parliament made the long-term problem worse.

In July, protests resurged in Baghdad as a result of the fiscal crisis. The shortage of money caused Iraq’s electricity shortage to worsen dramatically. Outgoing Electricity Minister Luay al-Khatteeb attributed the decline to two factors: lack of maintenance and the suspension of planned electricity projects.

The government has a few possible, but politically difficult, fixes at its disposal. They could cut the subsidy of roughly $1 billion per month to private electricity consumption, which exists because the ministry only collects a fraction of consumer payments. Finance Minister Allawi pointed out that “people don’t pay their electricity bills” and that “95 percent” of consumption costs was absorbed by the state, asserting that “electricity is not a constitutional right.”[4] Yet such an effort will recall former prime minister Haider al-Abadi’s experience trying to extract electricity payments in 2017, which precipitated a strong protest movement. So far, Kadhimi has shown no sign of pushing the issue. His published comments during a cabinet meeting devoted to the electricity issue focused on “reducing bureaucracy” and improving maintenance, sidestepping the fact that maintenance workers have to be paid.

Iraq’s fiscal crisis comes on the heels of the political crisis of the outgoing government, which left the country without a budget for most of 2020. In such cases, Iraqi law allows the government to spend one twelfth of the previous year’s actual spending each month. Since this year’s revenues have been low, it never had the money to spend that much and simply spent what it had on basic payments. In September, the government released a budget for 2020 and the planned deficit was large—well over 100 percent—so as with past budgets much of the deficit will likely not be spent. The total anticipated revenues are 67.4 trillion dinars, or $57 billion, compared with proposed expenditures of 148.6 trillion dinars, or  $125.7 billion. Oil revenue in 2019 was $78.5 billion yet is projected to be just $49.3 billion for 2020. The government withdrew the bill just two days after it arrived in parliament.

In September the government ran out of money, having used up the borrowing authority from the June bill.[5] Given the population’s overwhelming dependence on state salaries, this brought the short-term financial problems to the fore. Furthermore, Parliament refused to authorize the new borrowing authority Allawi sought because the government had not submitted a “reform plan.” Thus in early October the government released a “White Paper” reform plan. The plan draws a broad and long path to reform that does not directly address the immediate crisis, except to the extent that its publication formally satisfies Parliament’s precondition for new borrowing.

An important part of Allawi’s efforts was his advocacy of Iraq accepting an International Monetary Fund “Stand-By Agreement” (SBA) which might be the only way to prevent a fiscal collapse next year. The agreement would also require spending cuts that parliament has already rejected. Allawi stressed that the IMF would not require cuts to programs protecting the poor, but rather to public sector compensation that, in Allawi’s view, Iraq needed to cut anyway.[6]

This set the stage for a new debacle as the government then sent a new borrowing law to Parliament only to condemn it. A member of Parliament on the Finance Committee criticized the figures in the bill as irresponsible.[7] Given the parliament’s role in aggravating the crisis, this was grandstanding. The looming parliamentary elections, due no later than 2022 and possibly earlier, are driving the political theater. Parliament will presumably pass an amended version of the government’s borrowing bill to allow the government to pay salaries. In the meantime, with salaries being paid late, disposable income is squeezed, further damaging an already weak economy. But Iraq could face a much worse scenario in 2021, as the IMF’s updated forecast for Brent oil prices projects $46.70 per barrel. Iraq’s Central Bank, which rescued the government over the summer, relies on a steady flow of dollars from oil revenues and given current prices range from $40 to $45, reserves are gradually declining. According to financial analyst Ahmed al-Tabaqchali, at current oil prices the Central Bank can continue to print money to fund the government “for about eight or nine months.”[8]  

In terms of immediate steps, at a minimum, a devaluation of the Iraqi dinar (long pegged at 1,182 to the dollar) seems likely in 2021. This would relieve some pressure on the Central Bank and make the government’s expenses cheaper (since its income is in dollars), but it would also drive up inflation over time. The bigger threat is that by mid-to-late 2021, the Central Bank will no longer be able to support the government, forcing austerity through non-payment of operational expenses, including salaries.

It is clear that the government needed to adopt a policy of cutting public sector expenses while increasing its capital investment in agriculture and industry and devoting more resources to education and health. Kadhimi’s reform measures in June were too little, too late.  Still, the austerity that Parliament has resisted will be inevitable if oil prices do not rise dramatically in the months to come. A key priority from an international point of view is that the IMF, as a condition for its loans, impose upon Iraq the reforms for which Allawi has been advocating and which parliament has so rejected. It does not seem likely that reform will come to Iraq by any other means.

Kirk H. Sowell is the publisher of the biweekly newsletter Inside Iraqi Politics (www.insideiraqipolitics.com). Follow him on Twitter @uticarisk.

[1] See 2:13:00.

[2] In most of these comments, Allawi gives the figures in Iraqi dinars. I have converted them to dollars. Thus, he said, for example, that the Finance Ministry had 1.3 trillion IQD when he came into office. This is slightly over $1 billion.

[3] When a family received a payment for a deceased breadwinner and receives another government benefit.

[4] Discussion begins around 1:06:00.

[5] Testimony by the finance minister and discussion of the budget starts at 1:38:00.

[6] In the previously cited video from Parliament on September 8, he refers to the IMF briefly around 2:25:00, then again around 2:48:00, and once more near then end of the four-hour video in response to an MP attacking the IMF option.

[7] The reading begins at 00:09:00 and the comments referred to in the text follow.

[8] Author interview conducted on October 28, 2020 via Skype.More on: 

5G and edge: unlocking new possibilities

5G and edge: unlocking new possibilities

In Manama, 5G and edge: unlocking new possibilities could have been perceived by all elites of the Gulf media as a reassuring means to help reach landscapes of a better future.

With 5G we’ll see an entirely new range of applications enabled by low latency of 5G and the proliferation of edge computing – transforming the art of the possible, said professional services firm Accenture in a new report.

“5G standards have been finalized late last year. We’ll soon start to see a growing number of devices rolling out across the regions. By 2025, it’s estimated that there will be 1.2 billion 5G connections covering 34% of the global population,” said Tejas Rao, Managing Director – Technology Strategy & Advisory, Growth Markets at Accenture in the company’s Business Functions Blog.

From digital to augmented consumer

The evolution of the consumer is one major leap forward. 3G and 4G helped to create the digital consumer, always connected to the internet through their mobile devices. But with 5G we’ll see an entirely new range of applications enabled by the low latency of 5G and the proliferation of edge computing – transforming the art of the possible.
Rather than simply experiencing digital through their devices, consumers will have their experience of the world around them enhanced and augmented through real time data and the technologies such as augmented reality/virtual reality (AR/VR) that it enables through edge computing.

The edge cloud forms

The evolution of the network in this context is synonymous with the evolution of the cloud.  So rather than what we typically see today in the public cloud, which is services residing in centralized data centers, those cloud services will move to the edge of a mobile network – the ’edge cloud’ – to drive real time cloud computing capabilities. And that development will support a wide range of new use cases across every industry, with network connectivity itself becoming the platform on which others can build new services and solutions.

From capacity and coverage to network as a platform

Accordingly, we are starting to see the strategic intent of maximizing capacity and coverage that informed network build in the 3G/4G world shift. Instead the focus is now on how to unlock 5G to deliver innovative solutions and services.

With networks no longer having to be the same everywhere, they can be built or sliced to support new use cases and opportunities for specific industries. Today’s web platform companies are already exploring this and making investments in order to capitalize on the transformational changes that 5G’s low latency can offer.

Low latency–currency for the 5G world

Ultra-reliable low latency is the new currency of the network world, underpinning new capabilities in many industries that were previously impossible. And these are not in the realm of science fiction. They are becoming possible today, ranging from real-time language translation to remote robotics and from autonomous logistics to AR-enabled industrial maintenance.

As they plan their future networks, operators need to understand how to intelligently direct 5G network investments from just pure coverage and capacity, and towards unlocking new revenue streams and business value. This is a significant departure from previous generations of network deployment. The network has moved from being a pipeline to instead becoming a platform and gateway for solution innovation and real-time connectivity services.

Partnering and collaboration will become more important than ever as operators sit at the center of new ecosystems developed around the ultra-reliable low latency, real time data at scale and responsiveness that the ‘edge cloud’ delivers.

New landscape of opportunity–and challenge

This emerging landscape of mobile edge networks can unlock many new opportunities to create value. These consist of new services to drive revenue and new possibilities for managing network costs. But the new networks also pose some novel challenges to preserving margins.

Today’s cloud world is characterized by the presence of a limited number of mega data centers in remote locations with data travelling from device to cloud and back again in order to execute a computational process or data analysis. Data typically makes the round trip travelling at 50 to 100 milliseconds over today’s 4G mobile networks.

Data travelling over 5G at less than five milliseconds facilitates the edge cloud and the ability to create new services that it empowers. But achieving that requires a proliferation of micro data centers numbering in the tens of thousands. To support edge capabilities, these will need to be deployed closer to the consumers and enterprises that use them and densely installed in urban settings.

They will need to handle the progression from millions to billions of connected devices. And move from remote connectivity to providing ultra-reliable, low-latency capabilities at the edge as data flows accelerate to real-time in order to execute time-sensitive services, from autonomous vehicles to real-time visual analytics.

Deciding where and how to play

As they create these capabilities, operators need to understand where they want to locate the edge and what the operational implications of their choice will be. That means understanding the likely demands of the territories they cover and the use cases for specific industries that are likely to be most relevant.

The one-size-fits-all approach of the 3G/4G world is no longer useful. Instead, operators need to take a more targeted view of where they want to play and the likely returns they can generate from placing much more specific bets than in the past.

Bloated public salaries at heart of Iraq’s economic woes

Bloated public salaries at heart of Iraq’s economic woes

Bloated public salaries at heart of Iraq’s economic woes

Until recently, labour markets in the MENA’s oil-exporting countries were characterized by a large public sector, a small, weak private sector, and depending on the country, a sizable agricultural industry, and a sizable informal sector. But in the case of Iraq like elsewhere in the region, the volatility of oil prices and the pandemic impacted the economy, resulting in a critical situation where bloated public salaries at the heart of Iraq’s economic woes result in increasingly unstoppable youth unemployment.
The currently general upheaval in the region, rural to urban and cross-border migration has not helped, leading to an even greater informal market.

Bloated public salaries at heart of Iraq’s economic woes by Samya Kullab is a vivid picture or a series of pictures on life in Iraq as perceived by a locally based journalist.

People shop for clothing at the used-clothes market in Baghdad, Iraq, Tuesday, Oct. 20, 2020. Iraq is in the throes of an unprecedented liquidity crisis, as the cash-strapped state wrestles to pay public sector salaries and import essential goods while oil prices remain dangerously low. (AP Photo/Khalid Mohammed)

BAGHDAD (AP) — Long-time Iraqi civil servant Qusay Abdul-Amma panicked when his monthly salary was delayed. Days of waiting turned to weeks. He defaulted on rent and other bills.

A graphic designer for the Health Ministry, he uses about half his salary to pay his rent of nearly 450,000 Iraqi dinars a month, roughly $400. If he fails to pay twice in a row his landlord will evict him and his family, he fears.

“These delays affect my ability to survive,” Abdul-Amma said.

Iraq’s government is struggling to pay the salaries of the ever-swelling ranks of public sector employees amid an unprecedented liquidity crisis caused by low oil prices. September’s salaries were delayed for weeks, and October’s still haven’t been paid as the government tries to borrow once again from Iraq’s currency reserves. The crisis has fueled fears of instability ahead of mass demonstrations this week.

The government has outlined a vision for a drastic overhaul of Iraq’s economy in a “white paper” presented last week to lawmakers and political factions. But with early elections on the horizon, the prime minister’s advisers fear there is little political will to execute it fully.

“We are asking the same people we are protesting against and criticizing to reform the system,” said Sajad Jiyad, an Iraq researcher.

The white paper’s calls for cutting public sector payrolls and reforming state finances would undermine the patronage systems that the political elite have used to entrench their power.

A major part of that patronage is handing out state jobs in return for support. The result has been a threefold increase in public workers since 2004. The government pays 400% more in salaries than it did 15 years ago. Around three-quarters of the state’s expenditures in 2020 go to paying for the public sector — a massive drain on dwindling finances.

“Now the situation is very dangerous,” said Mohammed al-Daraji, a lawmaker on parliament’s Finance Committee.

One government official said political factions are in denial that change is needed, believing oil prices will rise and “we will be fine.”

“We won’t be fine. The system is unsustainable and sooner or later it will implode,” the official said, speaking on condition of anonymity to discuss internal politics.

Iraq’s activists have called for a march on Oct. 25, expected to draw large crowds, a year since massive anti-government protests first brought tens of thousands to the streets demanded reforms and an end to the corrupt political class.

“As far as meeting our demands, there have been no changes,” said Kamal Jabar, member of the Tishreen Democratic Movement, founded during the protests last year. “To us, the white paper is a joke.”

Abu Ali, a merchant in Baghdad’s commercial district of Shorjah, fears what the following months have in store. The state is the primary source of employment for Iraqis, and civil servants are the lifeblood of his business.

“The delays in salary payments have affected the market directly,” he said. “If these delays continue our business and the economy will collapse.”

Abdul-Amma’s September pay was 45 days late, and he still hasn’t received the October pay that was supposed to come on the first of the month. He worries about the coming months as well.

“I have a history of chronic heart disease, and one of my daughters is also sick,” said the father of four. He pays $100 in medical fees per month.

But to the architects of the reform paper, he is part of the problem: Public sector bloat is first in line for reform.

“We hope the civil service and bureaucracy will recognize a need for change,” Finance Minister Ali Allawi told The Associated Press in a recent interview.

Iraq relies on oil exports to fund 90% of state revenues. Those revenues have plunged to an average $3.5 billion a month since oil prices crashed earlier this year.

That’s half the $7 billion a month needed to pay urgent expenses. Of that, $5 billion is for public sector salaries and pensions, according to Finance Ministry figures. Iraq also imports nearly all of its food and medicine; with foreign currency reserves at $53 billion, the World Bank estimates the country can sustain these imports for another nine months. Foreign debts account for another $316 million.

Poor productivity of public workers is the heart of the issue, Allawi said.

“We’ve ended up with a low productivity, high-cost public sector that doesn’t really earn its keep,” he said. “In one way or another this issue has to be tackled by either reducing numbers, which is politically difficult, reducing salaries … or increasing productivity.”

The white paper calls for public sector payments to be reduced from 25% of GDP to 12% but doesn’t detail how. Officials said one step may be to restore taxes on civil servants’ benefits that previous administrations had lifted.

To meet month-to-month commitments now, the government has had to borrow internally from its foreign currency reserves. A request of a second loan of $35 billion was sent to parliament, drawing criticism from lawmakers.

Haitham al-Jibouri, head of parliament’s Finance Committee, said in televised remarks that if borrowing was the government’s only plan he would fetch a shopkeeper from Bab al-Sharqi, a commercial area in the capital, to do the finance minister’s job.

Parliament’s endorsement of the loan and the reform paper is crucial for the government to avoid a full-scale economic crisis.

But this will prove difficult with elections slated for next June, since factions want to hand out jobs to maintain their constituencies.

“Whoever decides to push ahead and support reforms first will lose out, they will also need to convince other political players who will also lose out,” said Jiyad. “That is a tough sell.”

Al-Kadhimi’s advisers privately acknowledge the challenges of having the system that produced such mismanagement and corruption be its own savior.

One official recalled a remark made by the finance minister at a meeting of a high-level committee tasked with managing the crisis.

He looked at the room of officials charged with halting the country’s fast spiral toward insolvency and said, “I can’t believe this was done for 10 years and none of you did anything to stop it.” There was silence.