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Hunger continues to rise in the Near East and North Africa

Hunger continues to rise in the Near East and North Africa

Further to the article on the MENA wars over water, energy and food, here is the most obvious consequence as Around 52 million in Near East, North Africa, suffering chronic undernourishment, new UN food agency report reveals 

Hunger continues to rise in the Near East and North Africa region where over 52 million people are undernourished.

Conflicts and widening rural-urban gaps hamper the region’s efforts to end hunger by 2030.

Photo: ©FAO/ Louai Beshara
A child collects eggs in Al-Ghizlaniyah near Damascus. In Syria, FAO assists vulnerable communities to increase their dietary diversity and improve food and nutrition security through backyard poultry production.

8 May 2019, Cairo/Rome – Hunger in the Near East and North Africa region (NENA) continues to rise as conflicts and protracted crises have spread and worsened since 2011, threatening the region’s efforts to achieve the 2030 Agenda for Sustainable Development, including Zero Hunger.

The Regional Overview of Food Security and Nutrition in the Near East and North Africa, published today by the Food and Agriculture Organization of the United Nations (FAO), indicates that 52 million people in the region are suffering from chronic undernourishment. 

Conflict continues to be the main driver of hunger across the region.  More than two-thirds of hungry people in NENA, approximately 34 million people, live in conflict-affected countries, compared to 18 million hungry people in countries that are not impacted directly by conflict. 

Stunting, wasting, and undernutrition are also far worse in conflict countries than in the other countries. 

“Conflicts and civil instability have long-lasting impacts on the food and nutrition security of both affected and surrounding countries in the regions” said Abdessalam Ould Ahmed, FAO Assistant Director-General and Regional Representative for the Near East and North Africa. 

“The impact of the conflict has been disrupting food and livestock production in some countries and consequently affecting the availability of food across the region,” he added. 

“Rising hunger is also compounded by rapid population growth, scarce and fragile natural resources, the growing threat of climate change, increasing unemployment rates, and diminished rural infrastructure and services” Ould Ahmed underscored.
The report highlights that the region is not facing just a hunger crisis as some of the highest rates of obesity are also found in countries within the region, putting pressure on people’s health, lifestyles and national health systems and economies.  Addressing obesity requires food systems that ensure that people have access to healthy nutritious food and also increased public awareness and information on the risks associated with overweight and obesity.

Inadequate rural transformation hampers efforts to eradicate hunger and malnutrition by 2030 

The report shows that not only do conflicts undermine the region’s Zero Hunger efforts, but also the degree of rural transformation. 

“Countries that are not in conflict and have gone furthest in transforming rural areas in a sustainable way including through better management of water resources, have achieved better food security and nutrition outcomes than those in conflict or with lower levels of rural transformation,” Ould Ahmed said, noting how the report stresses that more efforts are needed to boost rural employment, stimulate economic growth in rural areas, reduce urban-rural gaps, and improve agricultural productivity and rural infrastructure and services. 

The report highlights how unemployment, particularly for young people and women across all age groups is a significant challenge in the NENA region and is often higher than in other regions of the world. This is aggravated by rural-urban gaps – with significant disparities in living standards and poverty rates between rural and urban areas – and differences in labour productivity between traditional agriculture and industry and services. This gap is deepened by differences in access to education, health as well as other public services and housing.

At the same time, rural areas accommodate around 40 percent of the population, where the majority of poor are living. The report shows that the average wages for those employed in agriculture are likely to be far below those of workers outside the sector. Partially as a result of lower wages in agriculture, rural areas in the NENA region generally have higher income poverty rates than urban areas. On average, rural poverty is about twice as high as poverty in urban areas.

Transforming agriculture to achieve Zero Hunger

At a regional level, there are significant opportunities for transforming agriculture in a sustainable way, starting with the provision of  improved access to markets for farmers, promoting investments in agriculture, transfer of technology and other innovations, more efficient and effective management of water resources, as well as key policy changes that support the shift from subsistence farming to commercial and diversified production systems.

“There is a great need to encourage our region’s farmers to produce according to the comparative advantage of the region,” Ould Ahmed said, highlighting that the NENA region has a great potential in the production of crops and livestock products that are least intensive in arable land and water and more intensive in use of labour.

The report highlights that greater efforts and actions are needed to support the development and implementation of policies and programmes to abolish rural-urban differences. 

Key facts and figures

  • Number of hungry people in the Near East and North Africa: 52 million, 33.9 million are in conflict countries directly and 18.1 million in non-conflict countries.
  • Children under five affected by stunting (low height-for-age): 21.1 percent.
  • Children under five affected by wasting (low weight-for-height): 8.7 percent.
  • Children under five who are overweight (high weight-for-height): 9.1 percent

Note to editors: NENA countries include Algeria, Bahrain, Egypt, Iran (Islamic Republic of), Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Sudan, the Syrian Arab Republic, Tunisia, the United Arab Emirates and Yemen.

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‘Get them all out!’: Algeria Three Years on after Panama Papers

‘Get them all out!’: Algeria Three Years on after Panama Papers

‘Get them all out!’: Algeria three years on after Panama Papers – and to mark World Press Freedom Day, Lyas Hallas, Algerian journalist – a member of ICIJ elaborates on the current situation of Algeria.

To celebrate the third anniversary of the Panama Papers – and to mark World Press Freedom Day – we’re speaking with reporters from around the world about the investigation each week.

For our final instalment, we spoke with the International Consortium of Investigative Journalists’ member Lyas Hallas. Lyas was the sole reporter to work on the Panama Papers investigation in Algeria, Africa’s largest country.

Like many of our partners, Lyas’ work is still having an impact. Most recently, authorities arrested some wealthy Algerians named in the Panama Papers and street protesters calling for the president’s resignation and an end to corruption waved banners that featured the businessmen’s faces.

THREE YEARS ON

‘Get them all out!’ The Panama Papers connections to Algeria’s latest revolution

Published on May 2, 2019, Reporting by Will Fitzgibbon

What was the biggest impact in Algeria after the Panama Papers’ revelations?

There was an immediate debate about assets held by Algerians overseas. The reaction shook the leaders of our country who had planned their retirements abroad. The Panama Papers also hit hard the businessmen who consort with politicians and who enjoy tax and banking advantages at home and yet who hide their money offshore. The revelations politically weakened ministers who were at the height of their power and others who were on the cusp of bouncing back.

One example was the then Industry Minister Abdesselam Bouchouareb, who was tipped to be the next prime minister before that became awkward due to the global firestorm in the wake of the investigation

Maybe my work contributed to bringing attention to the pillage of the country’s resources. – Lyas Hallas

What was your favorite moment of the Panama Papers investigation? What surprised you the most?

Favorite moment? A huge ‘catch’ when just one minute after I opened the Panama Papers database for the first time, I found Rym Sellal, the daughter of the then prime minister, Abdelmalek Sellal. It was very motivating.

I also didn’t expect to find the owner of an offshore company linked to the entourage of former energy minister Chakib Khelil who is at the heart of the SONATRACH corruption scandal, our state-owned oil and gas company.

Italy and Algeria had opened court cases and Italian judges had identified this offshore company as one of 17 used to launder $216.92 million (€194 million) in bribes. Yet neither Italy nor Algeria had called on Khelil as a witness. Ditto for the son of the former SONATRACH CEO who received six years in prison for corruption.

What also stuck with me about the Panama Papers is the interest of Algerians in this kind of story.  In two years, I published a dozen stories and there was a buzz every time. During the recent protests in Algeria, citizens took to the streets waving images of some of the people featured in his Panama Papers reporting. Lyas Hallas

What were the most significant reactions to your investigations?

The general public reacted well, which was satisfying… In Switzerland, a criminal court dismissed a case brought by an Algerian businessman based, in part, on my Panama Papers reporting.

I had to resign from the newspaper where I worked in order to get my investigation published. I had a story on the Minister of Industry at the time, Abdeslam Bouchouareb.

Bouchouareb put a bit of pressure on the editor – I don’t know what they said. Five days before the agreed publication date with ICIJ, I had to find another newspaper to publish my story… I found one easily, which was good.

I was harassed online by various digital players in the pay of government officials.

Some people said I was dancing to the tune of foreigners and others accused me of faking documents. Khelil wrote on Facebook, without naming me directly, that I was a “Zionist agent.” Obviously, I didn’t react to this kind of nonsense, which was mostly anonymous.

Some people even called me an “agent of Rebrab” [editor’s note: Issad Rebrab, Algeria’s richest man]. I had worked for 11 months in a newspaper where he is the majority shareholder and from which I resigned to publish my Panama Papers story. Yet Rebrab tried to sue me in France because of the Panama Papers.

For someone who has not followed anything, what has happened in Algeria now?

President Abdelaziz Bouteflika’s desire to seek a fifth term sparked massive demonstrations on February 22 that forced him to resign. Algerians have long lived through his power grab as a great collective humiliation. Bouteflika did leave, but the system that he built — even if it’s weakened — is still in place.

Every Friday during the protests, millions of people rallied in unity around the theme “Get them all out!” The term “all” referred to those widely-despised figures from the Bouteflika era who, in the eyes of the demonstrators, embodied mediocrity, injustice and corruption.

What’s the connection between your Panama Papers investigations and recent events?

It’s not my job to spark protests. Maybe my work contributed to bringing attention to the pillage of the country’s resources and to the lack of some people’s “tax patriotism.” Or maybe it accentuated the feeling of injustice among many Algerians given the impunity of some people I wrote about.

During the recent protests, one of the main slogans was “You have devoured the country, band of looters!” Some protest banners included photos of politicians and businessmen I exposed.

In response to the demonstrations, authorities jailed some of these businessmen, including Issab Rebrab, in order to calm protestors and temper the country’s anger. A few days ago, the Supreme Court reopened a case involving Khelil. They are not being investigated for what I wrote about, but for similar practices to the things I uncovered.

Can you give us a summary of your investigations around these recently arrested men?

Businessman Ali Haddad, and as I mentioned earlier Issad Rebrab, have been arrested.

My investigation of Haddad revealed the illicit transfer of foreign currency through a complex arrangement involving foreign partners in the group of companies that carries out infrastructure projects in Algeria. Anti-corruption investigations against Haddad have not yet been concluded, but he was arrested at the borders with Tunisia while trying to flee.

As for Issad Rebrab, he was detained on charges of “misrepresentation of illicit transfers of capital from and to foreign countries, overcharging of imported equipment and importation of second-hand equipment while he had benefited from customs, tax and banking benefits”. My investigation questioned his background and the origin of his fortune. Policy makers have always made it easy for businessmen close to them to access credit, import licenses and government contracts, while guaranteeing them impunity since for business in Algeria, political support is needed.

The Supreme Court has reopened the case of Chakib Khelil, who has fled the country.  Khelil is accused of bribery in a case involving contracts awarded by the state-owned oil company. My investigation revealed that his wife and his son were beneficiaries of offshore companies linked to a money laundering machine worth $220 million (€197 million) in commissions.

You are a veteran of journalism in Algeria. In what state was investigative journalism in Algeria before these demonstrations?

Investigative journalism in Algeria is fragile. It’s difficult to access information and Algerian media remains fundamentally based on opinion.

Even if Algerian media has some freedom in what it says, it doesn’t invest enough in going after real information. It’s subject to the government’s agenda and corporations’ marketing strategies. I would even say that it’s in a pretty sick state because it hasn’t evolved independently of the political forces now being protested against.

Algerian media didn’t develop an economic model based on its relationship with the audience that would have allowed financial independence. Advertising revenue has made the media dependent on advertisers and policymakers.

In short, much of the press is completely discredited. Especially given that the media itself was not untouched by corruption.

Algerians today are demanding a new kind of information and the current media are having a hard time satisfying this demand. Of course, there are small islands of resistance that try to offer quality information. But, it’s necessary to completely rebuild the system.

What is your hope for Algerian journalism after these protests and regime change?

I remain optimistic. The entire community of Algerian journalists is aware of the stakes. I hope that we will have the collective intelligence to set new rules of the game; rules that will establish healthy competition and favor new editorial practices to properly inform Algerians.

I don’t dismiss the value of Algeria’s press in the past, which emerged from struggles that saw journalists sacrifice their lives from generation to generation to be able to freely exercise their profession, especially in the 1990s, a decade in which terrorism had wreaked havoc on Algeria. We lost a hundred journalists and others who were murdered because they were journalists.

But the media system as a whole requires a re-foundation to clarify the ground rules. The opacity that Algeria’s media has evolved into exposes it to arbitrariness.

People’s Rebellion is the only way to fight Climate Breakdown

People’s Rebellion is the only way to fight Climate Breakdown

There seems to be some race between the USA and Europe with France’s TOTAL that recently signed with Algeria a contract for a polypropylene plant in the country.  There were afterwards two days of public demonstrations in different localities close to the country’s oil bases in the South. Locals were out and about shouting out their frustrations of possibly turning into passive witnesses to fracking within walking distance to their familiar and naturally unkind environment.  Far from being left behind, Exxon Mobil also signed a gas contract with SONATRACH that was immediately followed by more public anger. Far north, along the 1000 miles long shores, Italy with its oil company ENI is rumoured to most probably sign a historic agreement in Algiers that will allow it to officially win the operation of two offshore oil blocks East and West of the capital city. It looks as if the absent and dormant elites, political or business alike got together, and that people’s rebellion is the only way to fight climate breakdown.

Whether it is a legitimate offshore operation with diversification as its goal or merely a costly stunt to divert attention from the potential fracking of those ginormous pockets of shale oil in the deep Saharan south would remain to be seen.
Meanwhile in the UK, George Monbiot’s thoughts dated October 18, 2018, on the same issue of the country’s future being tossed alternatively between the capital’s plush offices and the countryside’s and villages bucolic streets.

As the fracking protesters show, a people’s rebellion is the only way to fight climate breakdown

Our politicians, under the influence of big business, have failed us. As they take the planet to the brink, it’s time for disruptive, nonviolent disobedience

It is hard to believe today, but the prevailing ethos among the educated elite was once public service. As the historian Tony Judt documented in Ill Fares the Land, the foremost ambition among graduates in the 1950s and 60s was, through government or the liberal professions, to serve their country. Their approach might have been patrician and often blinkered, but their intentions were mostly public and civic, not private and pecuniary.

Today, the notion of public service seems as quaint as a local post office. We expect those who govern us to grab what they can, permitting predatory banks and corporations to fleece the public realm, then collect their reward in the form of lucrative directorships. As the Edelman Corporation’s Trust Barometer survey reveals, trust worldwide has collapsed in all major institutions, and government is less trusted than any other.

As for the economic elite, as the consequences of their own greed and self-interest emerge, they seek, like the Roman oligarchs fleeing the collapse of the western empire, only to secure their survival against the indignant mob. An essay by the visionary author Douglas Rushkoff this summer, documenting his discussion with some of the world’s richest people, reveals that their most pressing concern is to find a refuge from climate breakdown, and economic and societal collapse. Should they move to New Zealand or Alaska? How will they pay their security guards once money is worthless? Could they upload their minds on to supercomputers? Survival Condo, the company turning former missile silos in Kansas into fortified bunkers, has so far sold every completed unit.

Most governments, like the UK, Germany, the US and Australia, push us towards the brink on behalf of their friendsTrust, the Edelman Corporation observes, “is now the deciding factor in whether a society can function”. Unfortunately, our mistrust is fully justified. Those who have destroyed belief in governments exploit its collapse, railing against a liberal elite (by which they mean people still engaged in public service) while working for the real and illiberal elite. As the political economist William Davies points out, “sovereignty” is used as a code for rejecting the very notion of governing as “a complex, modern, fact-based set of activities that requires technical expertise and permanent officials”.

Nowhere is the gulf between public and private interests more obvious than in governments’ response to the climate crisis. On Monday, UK energy minister Claire Perry announced that she had asked her advisers to produce a roadmap to a zero-carbon economy. On the same day, fracking commenced at Preston New Road in Lancashire, enabled by the permission Perry sneaked through parliament on the last day before the summer recess.

The minister has justified fracking on the grounds that it helps the country affect a “transition to a lower-carbon economy”. But fracked gas has net emissions similar to, or worse than, those released by burning coal. As we are already emerging from the coal era in the UK without any help from fracking, this is in reality a transition away from renewables and back into fossil fuels.

@GeorgeMonbiot

Read more on The Guardian

MENA region’s Construction Disputes at $91 million in 2017

MENA region’s Construction Disputes at $91 million in 2017

Zawya #CONSTRUCTION of August 13th, 2018, posted this article by Anoop Menon, Thomson Reuters Projects News about an omnipresent side of the MENA region’s construction disputes in its diverse markets since the advent of oil and its ensuing building and infrastructure development dynamics. Like everyone knows this market has unlike preceding times become characterised by a high volume of claims and disputes mainly since market conditions that were booming up to the sudden crash of June 2014 oil prices have altered to the point where the MENA region’s Construction Disputes at $91 million in 2017 seem to continue into this year unabated. Meanwhile, the report says in its Executive Summary:

Since then, the region is feeling the pinch, and in such an environment, cents are cherished and counted. Many contractors are struggling and are naturally looking to squeeze as much as they can from contracts. This includes pursuing any payments that they’re owed through claims and formal disputes if necessary.

The value of construction disputes in the Middle East last year was double the global average and reached its highest level since 2011, although the time is taken to resolve them reduced marginally, according to a new report by building consultancy Arcadis.


Middle East construction dispute value double the global average

Average value of construction disputes in the Middle East touched $91 million in 2017, says Arcadis Getty Images/PhotoAlto/getty images

Average value of construction disputes in the region touched $91 million in 2017, says Arcadis report.

Arcadis’s annual 2018 Global Construction Disputes Report said the average length of time needed to resolve a dispute in the Middle East in 2017 declined 1.5 percent year-on-year to 13.5 months. The global average increased by 6.5 percent to 14.8 months.

However, the average value of disputes in the region in 2017 increased by a whopping 62 percent year-on-year to $91 million, despite the volume of disputes being about the same as in the previous year, the report said. In comparison, the global average dispute value increased by 33.5 percent year-on-year to $43.4 million.

The report’s findings are based on an assessment of the construction disputes handled by the Netherlands-based firm’s contract solutions team over the previous 12 months.

According to the report, the 2017 dispute value is the region’s highest since 2011, when the average dispute value was $112.5 million. However, 2011 also saw the region reporting the lowest average length of disputes at nine days, before moving to double digits in subsequent years, where it has remained.

A press statement that accompanied the report attributed the steep rise in value to “a small number of high-value disputes and a flow of ‘mid-value’ final account claims.”

The report pointed out that the economic backdrop for 2017 remained similar to 2016, when liquidity issues “due to a comparatively low oil price” squeezed cash flow across the supply chain and saw contractors taking a tougher approach to entitlements.

Recurring factors

The most common reasons cited for disputes saw two new entrants in 2017. A failure to make interim awards on extensions of time and compensation was the top cause of disputes, while owner-directed changes took the third. Failure to properly administer the terms of a contract, a recurring issue for the past three years, took the second spot.

The report pointed out that both the first and third causes are related to “client responsibility”.

“When the project manager or engineer is the material influence for the dispute, the most common causes include a failure to be impartial to the employer’s interests, a lack of understanding of the procedural aspects of the contract, or a lack of authority that is limited by levels of authority issued by the employer (i.e. not allowed to issue variation orders over a certain value),” it said.

Rob Nelson-Williams, regional head of contract solutions for Arcadis Middle East, said in the press statement that the firm continues to see “a lot of the same issues” crop up in its analysis of construction disputes in the Middle East.

“This underlines the need to get the basics right, and the importance of seasoned technical and commercial advice when it comes to contract or claims strategy,” he said.

According to the report, as regional construction-related events loom closer and as pressure increases to meet fixed deadlines, “a sharper focus on removing ambiguity from within a contract at the very outset and better training on how to prepare a robust and credible claim are two relatively simple steps that would make a significant difference.”

On the dispute resolution front, as in previous years, party-to-party negotiation and arbitration were the two most common methods of resolving construction disputes in the region in 2017, the report said, with a Dispute Adjudication Board taking the third spot.

(Reporting by Anoop Menon, Editing by Michael Fahy)

(anoop.menon@thomsonreuters.com)

© Thomson Reuters Projects News 2018

Development Overruns of an Algerian Motorway

Development Overruns of an Algerian Motorway

In an article titled Dr. Abderrahmane Mebtoul: “Algeria Still Faces Significant Challenges” written by Mohsen Abdelmoumen of the American Herald Tribune, a question relating to the development overruns of an Algerian motorway that crosses the country from its western Moroccan border to its eastern Tunisian one was tabled at the university professor.
In few words, the East-West motorway project was launched in 2009. Costing $11.2bn, it is considered as Algeria’s most important road project, and probably the most extensive public works project in the world.
It was scheduled for completion in the fourth quarter of 2013 but was delayed by about a year. Some penetrating stretches to link coastal towns and seaports to this motorway are still pending to date.
The Algerian Government financed the project as part of a $60bn national economic and social recovery programme started in 2005. , and the works have generated over 100,000 jobs.
The project will cut travel times and provide better and safer access to the north of the country, stimulating economic development..

The picture above is of CREECUSA .


What are the reasons for the delays and additional costs accumulated on the East-West motorway and how administrative deficiencies can be explained?

The east-west motorway has a distance of 1 216 km with a cross-profile: 2 × 3 lanes where 24 Wilayas (Governorates) are served by having provided rest areas, service stations, truck stops and maintenance and operation centres of the highway. The East-West motorway has not changed the national road landscape since it has mainly followed the route of the National 4 and 5, which rally Algiers to Oran and Algiers to Constantine. On the other hand, it risks upsetting the economic life of the 19 Wilayas directly crossed and 24 served. In a country where 85% of trade is carried out by road, the impact is likely to be felt quickly. Eleven tunnels were drilled on two three-lane track, and 390 engineering structures have been completed, including 25 viaducts, to join the borders Tunisian, in the east, and Moroccan, in the west. The equipment program consists of the construction of 42 service stations, 76 rest areas (motels, parking areas, playgrounds, etc.), 57 toll stations, 70 interchanges and 22 ‘gendarmerie’ guard posts, as well as guard points of the Civil Protection. To that, it will be necessary to foresee the maintenance costs because one often forgets that a road is maintained and, according to the international standards, it varies between 84,000 Dollars to 135,000 Dollars/year and per km. This raises the problem of toll costs. Programmed initially at 7 billion Dollars and to be delivered in 2010, the last segment delivered at the beginning of the year 2019 with 12 lanes to connect the east-west motorway to the Highlands highway project with a cost estimated by the government in 2017 at about 13 billion Dollars for 1,216 kilometres, which sets the average completion price of one kilometre of highway at nearly $11 million. To the $13 billion already spent, annual maintenance costs will have to be added. These amounts will, no doubt, be higher than average because of the numerous malfunctions committed during its implementation and the delay in the transition to the paying plan. Motorists will pay for travel on the East-West motorway starting in 2018. According to the project prepared by the Ministry of Public Works and Transport, the toll on this highway will be calculated on the basis of a tariff of 1.2 Dinar (DZD) per kilometre. Some directors of public works justify the delay in delivery of the East-West motorway by problems related to the compensation of landowners who have been expropriated. To illustrate their comments, some of these directors stated that in the city of Medea, the price per square meter does not exceed DZD450 (average price DZD115 = one Dollar in 2017) and between 700 and DZD1,000 in Bejaia. In the Wilaya of Tizi-Ouzou, the services of the estates offered the expropriated sum of DZD1,200 per square meter and between 700 and DZD900 in Bouira. A large part of the owners refused the proposed price. To return to the cost of the East-West motorway, any reliable project must clearly highlight the hierarchy of objectives, the expected results by sector, scope, performance indicators, indicators of specific objectives and deadlines, and finally the risk hypothesis. However, the people in charge of this project stick vaguely to the technical description without worrying about the costs, which should in principle be the main concern of the government, the minister, and the managers. For international comparisons, variations are depending on whether there is a constraint or not, but it is necessary to avoid risky comparisons and to compare only what is comparable. In Algeria, all the factors are favourable: the labour force is at least 10 times less expensive than in Europe; there is relatively little bad weather; the materials used in large quantities, aggregates (tuff, sand, and gravel) cost practically only their extraction costs and crushing, fuel is 5 to 7 times cheaper, rents, electricity and gas too, the temporary occupations of land that cost fortunes in Europe are not even paid in Algeria when it comes to the public domain; but there are administrative problems and bureaucratic procedures, not to mention the expropriations and demolitions that are sources of extra costs.

Read more related articles of AHT . . .

Saudi Arabia’s ‘liberal’ Crown Prince, one year after

Saudi Arabia’s ‘liberal’ Crown Prince, one year after

FOX BUSINESS of June 21st, 2017 reported that “The new crown prince, Mohammed bin Salman, is the elderly monarch’s 31-year old son and minister of defence. The young man, after having reached the ultimate power in the Kingdom of Saudi Arabia set about to implement an ambitious economic agenda to reduce Saudi Arabia’s dependence on oil and carve out a more muscular foreign policy. 
Sukru Cildir, PhD Candidate, Lancaster University examines here how Saudi Arabia’s ‘liberal’ Crown Prince, one year after his designation as the heir apparent of the Kingdom of Saudi Arabia, is performing as it were in real life.

Saudi Arabia’s ‘liberal’ Crown Prince is a year into his tenure – how is he doing?

File 20180724 194149 balabn.jpg?ixlib=rb 1.1

When Mohammad bin Salman, first announced his ambitious, nationwide reform programme – bearing the rather theatrical title, Vision 2030 – targets included diversifying the economy, improving public services such as health and education, and, front and centre, drastically reducing dependence on oil. Two years on – and now Crown Prince – bin Salman’s reforms continue apace.

It may seem surprising that such an oil-rich state – 16% of global oil reserves; 13% of global oil supply – should be trying to turn its back on the commodity that took it from poor desert kingdom to wealthy world player. But with 87% of state revenue coming from oil, reform has been in the pipeline for some time. In fact, in some ways Saudi Arabia is retreading very old ground. Five-year plans for diversifying the economy have been regularly trotted out since the 1970s – they just haven’t worked particularly well.

There have been improvements to economic infrastructure, and some development of a previously poor transport system – but no major movement on the kingdom’s oil addiction. Most members of the country’s ruling elite have been noncommittal on reform, and have refused to address structural problems in both the economy and the government.

A five-year plan decades in the making.
Shutterstock

A prince of progress

So, when the young bin Salman – popularly known as “MbS”, and already strongly associated with reform – ascended from deputy to Crown Prince in June 2017, there was an expectation of real change. Vision 2030 contains a list of ambitious aims: entering the top 15 largest world economies; increasing the private sector share of GDP from 40% to 65%; manufacturing 50% of military equipment domestically; raising the export element of non-oil GDP from 16% to 50%; increasing non-oil state revenues five-fold; and many others. These ambitions seem far loftier than those of previous reform efforts, and are arguably more critical to the kingdom’s long-term prosperity than they have ever been before.

In order to meet these goals, bin Salman quickly introduced a liberalising agenda for both the economy and society. Perhaps his grandest project is NEOM, a planned megacity expected to cost US$500 billion dollars, take between 30 and 50 years to complete, and, it is hoped, attract vast sums of foreign investment. Located in Tabuk, a northern border region near Egypt, Jordan and Israel, the idea is to construct an ultra-modern, futuristic hub of international business, commerce, and digital tech. The government expects to fund the enterprise by privatising parts of state-run industrial programmes – including 5% of the world’s largest oil company, Saudi Aramco.

At the same time, bin Salman has made efforts to cut back the bureaucracy and restrictive legislation that has strangled the Saudi private sector. He has curtailed the power of the religious police, allowed women to drive and open their own businesses without the permission of a male guardian.

Timing and sustainability

But why now? Why after so many half-hearted attempts, is diversifying the oil economy quite so important? It is partly because of the industry landscape. The last few years have seen a soaring renewable energy sector, while the shale oil revolution in the US has helped saturate an already contracting market. At one stage oil prices plummeted from US$140 to less than US$30 a barrel, leading to rising unemployment, an increasing budget deficit, and dwindling financial reserves. An IMF report on the kingdom’s finances even floated the possibility of bankruptcy, should Saudi Arabia fail to urgently restructure its economy.

There is also a political angle. When bin Salman became Crown Prince he did so at the expense of incumbent Mohammad bin Nayef, his cousin, who was summarily stripped of all his official duties, angering sections of the public and the Saudi ruling elite. Bin Salman’s strident reforms are intended to help consolidate his position, build legitimacy, and send a message to those who would oppose him.

Is the sun finally setting on the Saudi oil juggernaut?
SHUTTERSTOCK

Rumblings of discontent

Bin Salman’s unyielding style of governance, however, mixed with Saudi Arabia’s unique political culture, may make for a rocky road ahead. First, tensions are rising with the conservative elements in the kingdom’s powerful religious and tribal establishments. It remains to be seen how obstructive they might be to the implementation of reforms.

Second, bin Salman’s aggressive, provocative stance towards Iran raises the possibility of war between the two states. Besides the obvious human cost, this would distract from reform and drain the Saudi coffers, abruptly halting costly projects such as NEOM.

Third, bin Salman has ordered a series of arrests, which include corruption charges against businessmen, government ministers and members of his own royal family. He was also alleged to be behind the detention of the Lebanese prime minister, Saad Hariri, in late 2017, who was reportedly forced to offer his resignation on Lebanese television – though four months later Hariri and Saudi King Salman were seemingly on good terms. These developments and claims not only make bin Salman very unpopular in parts of his own government, they also discredit his liberalisation programmes, and leave the country looking unstable to foreign investors and the private sector.

The ConversationThere is no doubt that the current reform programme is a giant step forward for the kingdom’s future welfare, and will surely facilitate further integration with the West. But how these reforms are implemented is more important than the garish manner with which they have been announced. Given how provocative and aggressive bin Salman has been in his foreign and domestic policies, this “progressive” prince may soon face a whole new set of challenges.

 

This article was originally published on The Conversation. Read the original article.

 

IMF’s alarming report on Algeria’s economy outlook

IMF’s alarming report on Algeria’s economy outlook

The release of July 2018 report of the International Monetary Fund calls on the highest authorities to analyse the prospects of the Algerian economy with lucidity according to internal and external constraints and no longer to sail on sight. In July 2018, the IMF’s alarming report on Algeria’s economy outlook, contrary to the views of gloom must be realistic. The country is in a situation that could take on another dimension and possibly worsen without any deep change in the system of governance, adapting it to new internal and global changes.
There is a unanimity of national and international experts on the Government that clearly shows lack of strategic vision, as if suffering from lack of foresight. We always said:
“The greatest ignorant is the one who does not listen; instead of beliefs everything to deepen the culture of tolerance and favour the interests of Algeria and not his interests.
The IMF report of July 2018
For the IMF in its last report, the country remains faced with significant challenges, posed by the decline in oil prices four years ago. Economic choices are also likely to “complicate macroeconomic management”, undermining growth “and” aggravating risks to financial stability in the medium term. Despite a critical budget adjustment in 2017, budget deficits and the external current account remain high. Overall economic activity has slowed down, although growth outside the oil sector has remained stable. The current policies of the Government according to the IMF weaken the resilience of the economy rather than strengthen it. Therefore, without profound reforms, these measures may lead the country into a deadlock at horizon 2020/2022. In any case and despite these measures to pay off some of the liquidity injected through monetary financing, the Bank of Algeria which raised the minimum reserve rate from 4% to 8% in January whilst resuming its absorption operations by taking bank deposits at seven days and also envisaging a moderate increase in the price of management, the use of printing money to finance the budget deficit risks aggravating imbalances, increasing inflationary pressures and accelerating the loss of foreign exchange reserves, notably through the use of banknotes to finance the budget deficit which according to the Bank of Algeria, the amounts loaned to the Treasury was in the order of 5,723 Dinars (DZD) as at the end of March 2018.
The inflationary thrust has undoubtedly not (yet) taken place, and even growth is expected to have a net rebound this year to 3%, compared to 1.6% in 2017, but for the IMF, unconventional financing representing 23% of GDP which will have enabled the funding in the first quarter 2018, for nearly 50% of the credits to the public sector, the economy will also have reached its limits from 2020 with rates of inflation and unemployment record likely to exceed in 2020/2022, 15%.
Quoting the IMF report, the increase in liquidity will stimulate demand, which will result in short-term price increases due to insufficient domestic supply and savings opportunities. At the same time, the hardening of import barriers is likely to fuel inflationary pressures by reducing supply – even by leading to shortages for specific products. Wage and price expectations could quickly adjust and strengthen each other. The authorities could then be forced to resort to monetary financing in subsequent years, which could lead to an inflationary spiral in the economy.
The International Monetary Fund advises to “use a wide range of financing instruments, including the issuance of public debt securities at the market rate, public-private partnerships, asset sales and, ideally, borrowing to finance well-chosen investment projects. “No progressive depreciation of the Dinar combined with efforts to eliminate the parallel market in foreign exchange would also promote adjustment”.
Two factors: demographic pressure and changes in foreign reserves
The Algerian population evolution looks thus:

DZ population

For that, 350.000/400,000 productive jobs per year will have to be created with a real growth rate of 9/10% over several years to avoid sharp social tensions. However, the blocking of investment in Algeria does not lie in changes in laws or the elaboration of utopian strategies, bureaucratic vision, as one does not fight the informal sphere by strict administrative measures, but by improving on the functioning of the society, with a focus on participatory and civil society.
Hence the urgency of a speech of truth for the foreign exchange reserves have evolved as follows:
According to the IMF, foreign exchange reserves will, in 2022, allow less than five months of estimated import and in 2023 assessed at $12 billion less than three months of import.
Growth is expected to slow very strongly as early as 2020, causing an increase in the unemployment rate. It will also result in a particular persistence of budgetary deficits and, above all, external deficits which will gradually eliminate all the leeway available to Algeria.
As per the IMF, Algeria needs a barrel at $87.6 to achieve a balanced budget by 2016 compared to $60 in 2007, $80 in 2009, $125 in 2010, $140 in 2012, $110 in 2015. As for 2017, under the year’s Finance Act, the level is close to $75.
As far as 2018 is concerned, the supplementary finance law of 2018, as approved on 5 June 2018, for an additional envelope of DZD500 billion (approximately $4.4 billion) to cover all current public and unproductive expenditure, generalized subsidies, other costs and mismanagement not to say bribery, will require a barrel exceeding $100, for not to draw off the foreign reserves that could then increase.
Conclusion: The return to confidence and growth within the framework of universal values as a condition of political, social and economic stability.
To meet future challenges, to project on the future, far from any devastating populism, new governance, a language of truth and morality of the leaders are necessary.
A certain budgetary rigour, better governance, a change of course in the current economic policy, with a barrel between $60/70, Algeria can sense out, possessing assets. Debt is low, 20% of GDP, external debt 2.5% of GDP. However, above all, Algeria needs a return to trust to secure its future, to move away from the vagaries of the rentier mentality, to rehabilitate work and intelligence, to bring together all its political, economic and social parties, avoiding division on secondary subjects, to learn to respect our different sensibilities. This is how eternal Algeria can realise as bound by its oath of November 1st, 1954, a sustainable development accommodating economic efficiency and profound social justice to which we are deeply attached.
admmebtoul@gmail.com

Huge Impact of Stranded Fossil Fuel Assets

Huge Impact of Stranded Fossil Fuel Assets

Nature Climate Change proposed article on a study by J.-F. Mercure, H. Pollitt, J. E. Viñuales, etc. on how the huge impact of stranded fossil fuel assets could have on life in the future . Here are some excerpts and views of the mainstream world media on such study. In few words, this new study suggested that the momentum behind the technological change in global power and transportation sectors would cause a massive decline in the demand for fossil fuels in the near future and that will result in the quasi abandonment of huge fossil fuel installations worldwide. A good exemple could be the near to be concluded purchase of OxxonMobil’s ‘Raffineria di Augusta’ (pictured above) by Algeria’s SONATRACH.


Macroeconomic impact of stranded fossil fuel assets

Abstract:
Several major economies rely heavily on fossil fuel production and exports, yet current low-carbon technology diffusion, energy efficiency and climate policy may be substantially reducing global demand for fossil fuels1,2,3,4. This trend is inconsistent with observed investment in new fossil fuel ventures1,2, which could become stranded as a result. Here, we use an integrated global economy–environment simulation model to study the macroeconomic impact of stranded fossil fuel assets (SFFA). Our analysis suggests that part of the SFFA would occur as a result of an already ongoing technological trajectory, irrespective of whether or not new climate policies are adopted; the loss would be amplified if new climate policies to reach the 2 °C target of the Paris Agreement are adopted and/or if low-cost producers (some OPEC countries) maintain their level of production (‘sell out’) despite declining demand; the magnitude of the loss from SFFA may amount to a discounted global wealth loss of US$1–4 trillion; and there are clear distributional impacts, with winners (for example, net importers such as China or the EU) and losers (for example, Russia, the United States or Canada, which could see their fossil fuel industries nearly shut down), although the two effects would largely offset each other at the level of aggregate global GDP.

That’s Why They call Them Bubbles. Carbon Set for Biggest Pop in History.

June 6, 2018

Per The Guardian: Plunging prices for renewable energy and rapidly increasing investment in low-carbon technologies could leave fossil fuel companies with trillions in stranded assets and spark a global financial crisis, a new study has found.

A sudden drop in demand for fossil fuels before 2035 is likely, according to the study, given the current global investments and economic advantages in a low-carbon transition.

The existence of a “carbon bubble” – assets in fossil fuels that are currently overvalued because, in the medium and long-term, the world will have to drastically reduce greenhouse gas emissions – has long been proposed by academics, activists and investors. The new study, published on Monday in the journal Nature Climate Change, shows that a sharp slump in the value of fossil fuels would cause this bubble to burst, and posits that such a slump is likely before 2035 based on current patterns of energy use.

Crucially, the findings suggest that a rapid decline in fossil fuel demand is no longer dependent on stronger policies and actions from governments around the world. Instead, the authors’ detailed simulations found the demand drop would take place even if major nations undertake no new climate policies, or reverse some previous commitments.

That is because advances in technologies for energy efficiency and renewable power, and the accompanying drop in their price, have made low-carbon energy much more economically and technically attractive.

Dr Jean-François Mercure, the lead author, from Radboud and Cambridge universities, told the Guardian: “This is happening already – we have observed the data and made projections from there. With more policies from governments, this would happen faster. But without strong [climate] policies, it is already happening. To some degree at least you can’t stop it. But if people stop putting funds now in fossil fuels, they may at least limit their losses.”

By moving to a lower-carbon footing, companies and investors could take advantage of the transition that is occurring, rather than trying to fight the growing trend. Mercure said fossil fuel companies were likely to fight among each other for the remaining market, rather than have a strong impact on renewable energy businesses.

Prof Jorge Viñuales, co-author, said: “Contrary to investor expectations, the stranding of fossil fuel assets may happen even without new climate policies. Individual nations cannot avoid the situation by ignoring the Paris agreement or burying their heads in coal and tar sands.”

However, Mercure also warned that the transition was happening too slowly to stave off the worst effects of climate change. Although the trajectory towards a low-carbon economy would continue, to keep within 2C above pre-industrial levels – the limit set under the Paris agreement – would require much stronger government action and new policies.

That could also help investors by pointing the way to deflation of the carbon bubble before they make new investments in fossil fuel assets.

The paper supports the view of some policy and investment experts that economics and technology are now driving action on climate change, where before impetus was all from policymakers. Former UN climate chief Christiana Figueres told the Guardian, a year after Donald Trump announced the withdrawal of the US from the Paris agreement: “There is a big difference between the economics of climate change and the politics of climate change. Is Trump going to stop that advance [by businesses towards low-carbon technologies]? I don’t think so.”

Frédéric Samama, of Europe’s biggest asset manager Amundi, also believes investors have reached a “tipping point”, in relation to taking action on greenhouse gases through their portfolio management. He told Bloomberg last month that “until recently, the question” of climate change was “not on their radar screen”.

Bloomberg:

The world’s deepest-pocketed investors are starting to take climate change seriously, according to Amundi SA.

“We are really observing a tipping point among the institutional investors on climate change,” said Frederic Samama, co-head of institutional clients at the Paris-based firm. “Until recently, that question was not on their radar screen. It’s changing, and it’s changing super fast.”

Risks from global warming range from damage to physical assets from extreme weather to falling prices on fossil fuel-related assets, as the world moves away from burning coal and oil. Bank of England governor Mark Carney has repeatedly warned that these risks are not priced in adequately and that investors may have exposure to a “climate Minsky moment” if they don’t take action.

Amundi’s remarks hold weight because it has 1.4 trillion euros ($1.6 trillion) under management, making it the largest asset manager in Europe. It runs the world’s largest green bond fund with the International Finance Corp. and is planning to deploy $2 billion into emerging markets. Mainstream investors are beginning to recognize both the threats and opportunities coming from climate-related issues, Samama said.

“If we have this major shift required in terms of how we manage the planet, for sure it will impact the asset prices,” he said. “Can we evaluate the automakers without taking into account the new bans of diesel cars? Can we evaluate the fossil fuel industry without taking into account the risks of regulation related to the drop of the price of renewable energy?”

Nature Climate Change – Macroeconomic Impact of Stranded Fossil Fuel Assets:

Several major economies rely heavily on fossil fuel production and exports, yet current low-carbon technology diffusion, energy efficiency and climate policy may be substantially reducing global demand for fossil fuels1,2,3,4. This trend is inconsistent with observed investment in new fossil fuel ventures1,2, which could become stranded as a result. Here, we use an integrated global economy–environment simulation model to study the macroeconomic impact of stranded fossil fuel assets (SFFA). Our analysis suggests that part of the SFFA would occur as a result of an already ongoing technological trajectory, irrespective of whether or not new climate policies are adopted; the loss would be amplified if new climate policies to reach the 2 °C target of the Paris Agreement are adopted and/or if low-cost producers (some OPEC countries) maintain their level of production (‘sell out’) despite declining demand; the magnitude of the loss from SFFA may amount to a discounted global wealth loss of US$1–4 trillion; and there are clear distributional impacts, with winners (for example, net importers such as China or the EU) and losers (for example, Russia, the United States or Canada, which could see their fossil fuel industries nearly shut down), although the two effects would largely offset each other at the level of aggregate global GDP.

Forbes:

Some of the world’s biggest investors have called on global leaders to scale up their climate change ambitions, increase investment in the switch to a low-carbon economy and help companies to reduce their climate risks.

The call comes as a new report reveals that the G7 nations – the U.S., France, Germany, Canada, Italy, Japan and the U.K. – are still spending at least $100 billion subsidizing fossil fuels even though they have pledged to end such subsidies by 2025 .

Some 288 investors with more than $26 trillion in assets under management have written to the leaders of the G7 nations ahead of their summit in Canada this week, stating that “the global shift to clean energy is under way, but much more needs to be done by governments to accelerate the low carbon transition and to improve the resilience of our economy, society and the financial system to climate risks .”

“We are concerned that the implementation of the Paris Agreement is currently falling short of the agreed goal of ‘holding the increase in the global average temperature to well below 2-degrees Celsius above pre-industrial levels.’” they added.

The investors, which include Allianz Global Investors, Aviva Investors, DWS, HSBC Global Asset Management, Nomura Asset Management, Australian Super, and Calpers, say that they are doing their part by making significant investments into low-carbon assets, incorporating climate change scenarios and climate risk management into their investment processes and engaging with the largest greenhouse gas emitters

Water supply and sanitation in the Palestinian territories

Water supply and sanitation in the Palestinian territories

Of all the conflicts affecting the MENA region, that of the Israel – Palestinian one could possibly be the most enduring.   Water supply and sanitation in the Palestinian territories are characterized by severe water shortage and are highly influenced by the Israeli occupation. The water resources of Palestine are fully controlled by Israel and the division of groundwater is subject to provisions in the Oslo II Accord .

, Professor of Water Security, University of East Anglia and, Founder, Conflict Medicine Program, American University of Beirut are the authors of this article that we republished here with our compliments.

Gaza has often been invaded for its water. Every army leaving or entering the Sinai desert, whether Babylonians, Alexander the Great, the Ottomans, or the British, has sought relief there. But today the water of Gaza highlights a toxic situation that is spiralling out of control.

A combination of repeated Israeli attacks and the sealing of its borders by Israel and Egypt, have left the territory unable to process its water or waste. Every drop of water swallowed in Gaza, like every toilet flushed or antibiotic imbibed, returns to the environment in a degraded state.

Gaza now has a toxic ‘biosphere of war’ that no one can escape

 

When a hospital toilet is flushed, for instance, it seeps untreated through the sand into the aquifer. There it joins water laced with pesticides from farms, heavy metals from industry, and salt from the ocean. It is then pumped back up by municipal or private wells, joined with a small fraction of freshwater purchased from Israel, and cycled back into people’s taps. This results in widespread contamination and undrinkable drinking water, about 90% of which exceeds the World Health Organisation (WHO) guidelines for salinity and chloride.

Incredibly, conditions are getting worse, thanks to the emergence of “superbugs”. These multi-drug resistant organisms have developed thanks to an over-prescription of antibiotics by doctors desperate to treat the victims of the seemingly endless assaults. The more injury there is, the more chance there is of re-injury. Less regular access to clean water means infections will spread faster, bugs will be stronger, more antibiotics will be prescribed – and the victims will be ever-more weakened.

The result is what has been termed a toxic ecology or “biosphere of war”, of which the noxious water cycle is just one part. A biosphere refers to the interaction of all living things with the natural resources that sustain them. The point is that sanctions, blockades and a permanent state of war affects everything that humans might require in order to thrive, as water becomes contaminated, air is polluted, soil loses its fertility and livestock succumb to diseases. People in Gaza who may have evaded bombs or sniper fire have no escape from the biosphere.

War surgeons, health anthropologists and water engineers – including ourselves – have observed this situation developing wherever protracted armed conflict or economic sanctions grind on, as with water systems in Basrah and health systems throughout Iraq or Syria. It’s now well past time to clean it up.

There is water – for some

It’s not as if there is no fresh water nearby to alleviate the situation in Gaza. Just a few hundred metres from the border are Israeli farms that use freshwater pumped from Lake Tiberias (the Sea of Galilee) to grow herbs destined for European supermarkets. As the lake is around 200km to the north and lies 200 metres below sea level, a massive amount of energy is used to pump all that water. The lake water is also fiercely contested by Lebanon, Jordan, Syria and Palestinians in the West Bank, each of which is seeking their legal entitlement of the Jordan River basin.

Gaza City on one side of the border, Israeli farms on the other.
Google Maps

Meanwhile, Israel desalinates so much seawater these days that its municipalities are turning it down. Excess desalinated water is being used to irrigate crops, and the country’s water authority is even planning to use it to refill Tiberias itself – a bizarre and irrational cycle, considering the lake water continues to be pumped the other direction into the desert. There is now so much manufactured water that some Israeli engineers can declare that “today, no one in Israel experiences water scarcity”.

But the same cannot be said for Palestinians, especially not those in Gaza. People there have resorted to various ingenious filters, boilers, or under-the-sink or neighbourhood-level desalination units to treat their water. But these sources are unregulated, often full of germs, and just another reason children are prescribed antibiotics – thus continuing the pattern of injury and re-injury. Doctors, nurses, and water maintenance crews meanwhile try to do the impossible with the minimal medical equipment at their disposal.

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The implications for all those who invest in Gaza’s repeatedly destroyed water and health projects are clear. Providing more ambulances or water tankers – the “truck and chuck” strategy – might work when conflicts are at their most acute, but they are never more than a band aid. Yes, things will get better in the short term, but soon enough Gaza will be onto the next generation of antibiotics, and dealing with teflon-coated superbugs.

Donors must instead design programmes suited to the all-pervasive and incessant biosphere of war. This means training many more doctors and nurses, providing more medicines, and infrastructure support for health and water services. More importantly, donors should build-in political “cover” to protect their investments (if not the local children), perhaps by calling for those who destroy the infrastructure to foot the bill for repairs.

The ConversationAnd there is an even bigger message for the rest of us. Our research shows that war is more than simply armies and geopolitics – it extends across entire ecosystems. If the dehumanising ideology behind the conflict was confronted, and if excess water was diverted to people rather than to lakes, then the easily avoidable repeated injuries suffered by people in Gaza would become a thing of the past. Palestinians would soon find their biosphere a whole lot healthier.

Mark Zeitoun, Professor of Water Security, University of East Anglia and Ghassan Abu Sitta, Founder, Conflict Medicine Program, American University of Beirut

This article was originally published on The Conversation. Read the original article.

Dark Corners of Weak Governance and Corruption

Dark Corners of Weak Governance and Corruption

Here is  Christine Lagarde, Managing Director of the International Monetary Fund with a fairly straightforward essay on how to fight off weak governance and corruption.in the world. It goes without saying that the IMF in its role of facilitator of anything to do with the world economy and its good performance, finds it necessary to purvey free of charge that Bright Light into the Dark Corners of Weak Governance and Corruption. The MENA region does not escape such drawbacks and the IMF in its efforts to promoting good performance amongst other things, produces these periodical reports on country by country basis. These are definitely appreciated in as well as helpful in shedding some light with a view to help show the way to better economic performance.

Shining a Bright Light into the Dark Corners of Weak Governance and Corruption

April 22, 2018

The picture above is of “Anti-corruption strategies require broader regulatory and institutional reforms (Kritchanut/iStock)”

The IMF Executive Board has just endorsed a new framework for stepping up engagement on governance and corruption in our member countries. Let me talk about why this is important and what it means for our work.

Costs of corruption

We all know that entrenched corruption is economically pernicious, undermining the ability of countries to deliver inclusive and sustainable economic growth.

The paper we have just issued presents empirical results showing that high corruption is associated with significantly lower growth, investment, FDI, and tax revenues. Sliding down from the 50th to 25th percentile in an index of corruption or governance is associated with a fall in the annual rate of growth of GDP per capita by half a percentage point or more, and a decline in the investment-to-GDP ratio by 1½–2 percentage points. Our results also show that corruption and poor governance are associated with higher inequality and lower inclusive growth.

It is not hard to understand these findings. We know that corruption weakens government’s ability to tax, and distorts spending away from valuable investments in areas like health, education, and renewable energy, and toward wasteful projects with short-term payoffs. We know that it acts as a tax on investment—or worse, because of the uncertainty about demands for future bribes. We also know that corruption causes young people to underinvest in skills and education—because getting ahead depends on who you know not what you know. We know that corruption hurts the poor, hinders economic opportunity and social mobility, undermines trust in institutions, and causes social cohesion to unravel. Corruption is a major obstacle to attaining the Sustainable Development Goals.

Stepped-up engagement

Given all of this, the IMF’s stepped-up engagement against corruption is justified and timely. Importantly, this work on corruption will be embedded in our general work that promotes good governance in key areas such as public financial management, financial sector oversight, and anti-money laundering.

This broader focus is necessary. Governance weaknesses are harmful in their own right, but they also open the door to widespread corruption. To be truly effective, anti-corruption strategies must go beyond merely throwing people in jail. They require broader regulatory and institutional reforms. At the end of the day, the most durable “cure” for corruption is strong, transparent, and accountable institutions. In the famous words of Louis Brandeis, “sunlight is said to be the best of disinfectants; electric light the most efficient policeman.”

An added benefit of this broader approach: because corruption tends to be strongly correlated with more general lapses in governance and is often hard to measure, we can use governance weaknesses to help corroborate corruption assessments.

I should point out that this is not a new topic for us. We have had a governance policy in place since 1997, and it is a good policy—our review found that its principles are the right ones. This policy calls upon us to address governance and corruption issues when they have a significant macroeconomic impact. It calls upon us to work with partner institutions, especially the World Bank, in areas of their expertise and not to interfere in politics or in individual enforcement cases.

Yet while these principles are sensible, our review found that implementation was uneven. We did not always hold members to the same standard for similar actions. Our analysis too often lacked clarity.

This is going to change. We have now adopted a framework for enhanced engagement on governance and corruption that aims for a more systematic, evenhanded, effective, and candid engagement with member countries.

As a first step, we are developing a clear and transparent methodology for assessing the nature and severity of governance weaknesses. We will be looking at a broad array of indicators—the quality of the budgetary institutions that handle taxing and spending; the soundness of financial sector oversight; the integrity of central banks; the transparency and impartiality of market regulation; the predictability of those aspects of the rule of law that are vital for economic health, especially contract enforcement; and the adequacy of frameworks to fight money laundering and terrorism financing. We will also assess the severity of corruption directly, of course.

The next step will be to assess the economic impact of these identified governance and corruption fault lines and provide country-specific policy recommendations in response. Importantly, we will consider this over a longer time horizon, given that poor governance and corruption harm the economy not just through short-term disruption, but also through slow institutional decay. For our lending programs, we will be looking at whether problems hinder the ability of countries to implement their economic reforms.

Supply side of corruption

There is one additional element. It is a basic truism that—to adapt a phrase from Milton Friedman—corruption is always and everywhere a two-handed phenomenon. The flip side of every bribe taken is a bribe given. And funds received through corruption are often funds concealed outside the country—often in the financial sectors of major capitals. It is quite possible for countries to have “clean hands” at home but “dirty hands” abroad.

To truly fight corruption, therefore, we need to address the facilitation of corrupt practices by private actors. To do this, we will be encouraging our member countries to volunteer to have their legal and institutional frameworks assessed by the Fund—to see whether they criminalize and prosecute foreign bribery and have mechanisms to stop the laundering and concealment of dirty money. I am gratified that nine countries—the entire G7 plus Austria and the Czech Republic—have already volunteered for this assessment. This is a major vote of confidence in the new framework.

Now that we have the full support of our members, we must turn to implementation. In our surveillance and in our lending programs, expect to see more assessment and discussion of governance and corruption. We will also be stepping up our capacity development in these areas, to help countries strengthen their regulatory frameworks and institutions.

Our goal here is to be candid, rigorous, transparent, and evenhanded. In turn, that gives us more credibility and allows us to do our job even better.

To hark back to Brandeis, I am confident that this stepped-up engagement will do for governance and corruption what investment in solar technology does for the environment—harness the immense power of sunlight to put the global economy on a healthier and more sustainable path. If it works as planned, there should be progressively fewer dark corners left for corruption to hide. I look forward to working closely with our member countries to make this a reality.