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Ensuring a Stronger and Fairer Global Recovery

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Mohamed A. El-Erian writes that ensuring a Stronger and Fairer Global Recovery is required for a better and more satisfactory tomorrow. The two ginormous economies of the World would lead it that way. Here is what he says about that.

Ensuring a Stronger and Fairer Global Recovery

2 April 2021

Although tough trade-offs are sometimes unavoidable, there is a way for policymakers to maintain a robust global economic recovery in 2021 and beyond while simultaneously pulling up disadvantaged countries, groups, and regions. But it will require both national and international policy adaptations.

CAMBRIDGE – An old joke about tricky trade-offs asks you to imagine your worst enemy driving over a cliff in your brand-new car. Would you be happy about the demise of your enemy or sad about the destruction of your car?

For many, the shape of this year’s hoped-for and much-needed global economic recovery poses a similar dilemma. Absent a revamp of both national policies and international coordination, the significant pickup in growth expected in 2021 will be very uneven, both across and within countries. With that comes a host of risks that could make growth in subsequent years less robust than it can and should be.

Based on current information, I expect rapid growth in China and the United States to drive a global expansion of 6% or more this year, compared to a 3.5% contraction in 2020. But while Europe should exit its double-dip recession, the recovery there will likely be more subdued. Parts of the emerging world are in an even tougher position.

Much of this divergence, both actual and anticipated, stems from variations in one or more of five factors. Controlling COVID-19 infections, including the spread of new coronavirus variants, is clearly crucial. So is distributing and administering vaccines (which includes securing supplies, overcoming institutional obstacles, and ensuring public uptake). A third factor is financial resilience, which in some developing countries involves preemptively managing difficulties from the recent debt surge. Then come the quality and flexibility of policymaking, and finally whatever is left in the reservoirs of social capital and human resilience.

The bigger the differences between and within countries, the greater the challenges to the sustainability of this year’s recovery. This reflects a broad range of health, economic, financial, and socio-political factors.

In a recent commentary, I explained why more uniform global progress on COVID-19 vaccination is important even for countries whose national immunization programs are far ahead of the pack. Without universal progress, leading vaccinators face a difficult choice between risking the importation of new variants from abroad and running a fortress economy with governments, households, and firms adopting a bunker-like mindset.

Uneven economic recoveries deprive individual countries of the tailwind of synchronized expansion, in which simultaneous output and income growth fuels a virtuous cycle of generalized economic well-being. They also increase the risks of trade and investment protectionism, as well as disruptions to supply chains.

Then there is the financial angle. Buoyant US growth, together with higher inflation expectations, has pushed market interest rates higher, with spillovers for the rest of the world. And there is more to come.

European Central Bank officials have already complained about “undue tightening” of financial conditions in the eurozone. Rising interest rates could also undermine the dominant paradigm in financial markets – namely, investors’ high confidence in ample, predictable, and effective liquidity injections by systemically important central banks, which has encouraged many to venture well beyond their natural habitat, taking considerable if not excessive and irresponsible risks. In the short term, high liquidity has pushed cheap funding to many countries and companies. But sudden reversals in fund flows, as well as the growing risk of cumulative market accidents and policy mistakes, could cause severe disruptions.

Finally, uneven economic recovery risks aggravating the income, wealth, and opportunity gaps that the COVID-19 crisis has already widened enormously. The greater the inequality, particularly with respect to opportunity, the sharper the sense of alienation and marginalization, and the more likely political polarization will impede good and timely policymaking.

But, whereas the old joke hinges on the unavoidability of tough trade-offs, there is a middle way for the global economy in 2021 and beyond – one that maintains a robust recovery and simultaneously lifts disadvantaged countries, groups, and regions. This requires both national and international policy adaptations.

National policies need to accelerate reforms that combine economic relief with measures to foster much more inclusive growth. This is not just about improving human productivity (through labor reskilling, education reforms, and better childcare) and the productivity of capital and technology (through major upgrades to infrastructure and coverage). To build back better and fairer, policymakers must now also consider climate resilience as a critical input for more comprehensive decision-making.Sign up for our weekly newsletter, PS on Sunday

Global policy alignment also is vital. The world is fortunate to have benefited initially from correlated (as opposed to coordinated) national policies in response to the COVID-19 crisis, with the vast majority of countries opting upfront for an all-in, whatever-it-takes, whole-of-government approach. But without coordination, policy stances will increasingly diverge, as less robust economies confront additional external headwinds at a time of declining aid flows, incomplete debt relief, and hesitant foreign direct investment.

With the US and China leading a significant pickup in growth, the global economy has an opportunity to spring out of a pandemic shock that has harmed many people and, in some cases, erased a decade of progress on poverty reduction and other important socio-economic objectives. But without policy adaptations at home and internationally, this rebound could be so uneven that it prematurely exhausts the prolonged period of faster and much more inclusive and sustainable growth that the global economy so desperately needs.

MOHAMED A. EL-ERIAN, President of Queens’ College, University of Cambridge, is a former chairman of US President Barack Obama’s Global Development Council. He was named one of Foreign Policy’s Top 100 Global Thinkers four years running. He is the author of two New York Times bestsellers, including most recently The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse.

THE LINE, a Linear development of Smart Cities

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Saudi Arabia unveils THE LINE a linear development of smart cities connected without cars as reported by DesignBoom seems to be a significant step out of the fossil fuels grip on any mode of transport but only in this corner of the country.

Saudi Arabia unveils THE LINE, a linear development of smart cities connected without cars

Saudi Arabia has unveiled plans for THE LINE, a 170 kilometer (106 mile) belt of communities connected without the need for cars or roads. described as ‘a revolution in urban living’, the project has been put forward as a blueprint for how people can co-exist in harmony with the planet. THE LINE will be completely free of cars and streets, with residents given access to nature and all of their daily needs within a walking distance of five minutes. furthermore, the team behind the project says that the linear development of hyper-connected AI-enabled communities will be powered by 100% clean energy.

all images and video courtesy of NEOM

Located in NEOM, linking the coast of the red sea with the mountains and upper valleys of the north-west of Saudi Arabia, THE LINE was announced by his royal highness Mohammed bin Salman, crown prince and chairman of the NEOM company board of directors. ‘By 2050, one billion people will have to relocate due to rising CO2 emissions and sea levels,’ says his royal highness. ‘90% of people breathe polluted air. why should we sacrifice nature for the sake of development? Why should seven million people die every year because of pollution? why should we lose one million people every year due to traffic accidents? and why should we accept wasting years of our lives commuting? therefore, we need to transform the concept of a conventional city into that of a futuristic one.’

image by gary cummins

Although walkability will define life on THE LINE, with all essential daily services within a short walk, ultra-high-speed transit and autonomous mobility solutions will make travel easier and give residents the opportunity to reclaim time to spend on health and well-being. It is expected that no journey will take longer than 20 minutes. the communities themselves will be powered by artificial intelligence and will continuously learn in order to ‘make life easier’ for both residents and businesses. It is estimated that 90% of available data will be harnessed to enhance infrastructure capabilities. from an environmental perspective, THE LINE will comprise carbon-positive urban developments powered by 100% clean energy.

NEOM is a region in northwest Saudi Arabia on the Red Sea being built from the ground up as a ‘living laboratory’. Eventually the location, comprising towns and cities, ports and enterprise zones, research centers, sports and entertainment venues, and tourist destinations, will be the home and workplace to more than a million residents from around the world. It is hoped that THE LINE will create 380,000 new jobs, spur economic diversification, and contribute SAR 180bn ($48bn USD) to domestic GDP by 2030. construction of THE LINE will get underway in early 2021.

Corruption and Predation in Exercising Power

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Corruption and Predation in Exercising Power: Algeria and Iraq as Case Studies by Nahla Chahal, Professor and researcher of political Sociology, Editor in Chief, Assafir Al Arabi.


All throughout 2020, Assafir al Arabi conducted a study on corruption as one of the pillars of power, just as important as repression, impoverishment, and despair.
For such exercise, we chose Algeria and Iraq as case studies, hoping to extend our research to include other countries.
This work will appear in the Books of Assafir al Arabi in three languages, Arabic, French, and English, and their online versions.


Ahmed Al Soudani – Iraq

The following studies seek to examine corruption in Algeria and Iraq. They do not tackle its manifestation as bribes or looted public funds, but rather as a major governance mechanism, an essential part of its structure and operations.

Corruption is no self-treatable symptom; it cannot cure itself nor can its tailored arrangements; rather, it is channelled to empower a ruler(s), to sustain and perpetuate their power and hegemony. It could be more effective than oppression; takes on various shapes and forms; attacks society by taming it into submission, talks people out of pursuing change, and impoverishes them.

Corruption infests everything and partners with many people to various extents. Alternately, it asks for their complicity, or their acceptance thereof, at the very least, to simplify their lives. It remunerates certain social strata in particular, which happen to be fused with the ruling powers, for matching ideological considerations at times, and tribal-sectarian affiliations at others.

Numerous studies tackle corruption as a question indicative of imprudent governance, lack of transparency, collapsed mechanisms of oversight and accountability, or faded rule of law. The question of corruption has been widely contextualised in theory and through international standards outlined by organisations like the World Bank, the International Monetary Fund, and Transparency International. Those focused on nepotism, theft, and lining influential people’s pockets; they proposed measures to protect whistle blowers, enhanced access to information, made way for civil society, and instilled social accountability; all of which have contributed to the creation of an extensive useful database.

But to focus on those alone would be limiting, as they capture neither dynamics nor functions of corruption. Certainly, all such aspects of corruption must be interconnected somehow, given meaning and rendered a real “configuration”. The studies presented here precisely seek to examine such hypothesis and identify the circumstances that make corruption flourish.

There is, of course, a direct relationship between rampant corruption and failed national liberation –or its defeat– for getting rid of older colonialism is no complete realisation of that end – liberation. Massive privatisations also accompanied such failure and opened up new doors for corruption.
Furthermore, real decision-making mechanisms may be seen hiding behind decision-making formalities, whether in ministerial cabinets or parliamentary buildings. Interchangeably, it hides behind decrees. Namely, corrupt practices take legal cover.

In his paper on Algeria, “Corruption as a Configuration of Power,” Daho Djerbal (1)  argues that corruption is deemed institutionalised not only when widespread, but also when organised on the basis of socio-economic clientelist networks entrenched within the State apparatus, then disseminated into society through alternating intermediaries. It emerged fiercest, he says, when the State monopolised economy – in both capitalist and socialist paradigms.

Corruption is a configuration of economic rent which began as a system of economic and political regulation, whereby relations between State and its institutions, enterprises and their partners, civil society and its organisations, are all subject, by hook or crook, to rent-seeking logic instated to allocate all national resources (human, natural, financial, technical, and organisational), develop them, and distribute their generated revenues. Corruption thus became a “rite of passage” to accessing numerous public services.

As for decrees, Djerbal considers them as means for elected assemblies and democratically appointed authorities to avoid discussing major topics at hand. Those are tools invented to ensure wider reproduction of this system of new profits, to render the executive branch as sole party in charge of economic evaluation, and to arbitrage between conflicted interests for the sake of increasing revenues and systematise their redistribution. He also considers corruption and democracy as interlinked. As such, the emergence of “pragmatic practices” assumed by the authorities rely on a system of “remunerations, gift exchange, the fragmentation of spheres, places, and actors who determine what is legal and illegal, moral and immoral, legitimate and illegitimate…”

To illustrate his reflections, he gives a number of real-life examples from Algeria and analyses exposed “scandals”, the logic behind their trials, and the verdicts reached against their protagonists.

In investigating corruption in Algeria, Rachid Sidi Boumedine (2)  wonders about what could be defined as corruption. He notes that one culturally distinguishes between corruption and bribes, commonly called “tchippa” or “qahwa,” that is, money ordinary citizens pay to buy access to services (mundane, occasionally) or any other goods, though already granted by virtue of law.
One feature of a clientelist system is embodied in excessive authorised violations, starting from the highest ranks of the hierarchy, which simultaneously places the lower ranks at the mercy of executive circles, who could, in turn, punish the former for violation of the written law, if there need be.

Boumedine also notes how rentier networks function “internally”, like a clan (a family, village, affiliated community). As such, familiar arrangements of gift-exchange and mutual donations -characterised by their binding and impactful nature- create a favoured system of rights and obligations in society. Such principles consolidate a clientelist system by creating, nourishing, and sustaining reciprocal obligations among its members. He also claims that the system in Algeria has become neo-patrimonial.

This configuration of looting and corruption thus draws upon social acceptance for sustenance. As such, at least in part, it is not considered as theft carried out at the expense of the larger public.
Such ideological design –which legitimises looting, whereby the latter is an act directed against an anonymous, undefined, long-hated state after all– thus becomes a gateway to a new social paradigm. He illustrates the question through describing those recurring handouts to the “poor”, or housing opportunities delivered in accordance with ever-contested lists – fashioned along surreptitious criteria. These operations further plunge their beneficiaries into that recognised mire of a clearly unjust system. It is a system that benefits whoever knows their way around maintaining good relations with network agents, ensuring access to those lists.

In their cowritten article reviewed by writer Omar Aljaffal (3), researchers Mohsin Ahmad Ali (4) and Abdul Rahman Al-Mashhadani (5)  consider how the 2003 US occupation of Iraq –which toppled the political regime, dismantled the foundations of the state, reformulating them in accordance with US visions and under the administration of the “American civil governor of Iraq”, Paul Bremer– resulted in the transformation of corruption from a manageable and resistible phenomenon into a system protected by laws and legislations. It was thus turned into a daily practice protected by force of weapons, media, platforms, and religious fatwas.

The writers see the destruction of the public sector in the monopolisation of secure jobs by the ruling power and its parties. Those jobs are thus used as a card to purchase voter power in parliamentarian elections, whereby parties promise their supporters and clans jobs in return for their electoral vote. Subsequently, the number of government employees would reach 4.5 million, as opposed to 880 thousand employees in 2003. The two researchers claim that corruption developed and transformed into an “acceptable” social phenomenon after 2003, accompanied by a political shift towards a market economy led by political parties that landed with the occupier and/or emerged after 2003. Those parties have sectarian and racist agendas. Those parties ratified regulations and laws that furthered their interests, such as the “Jihad military service” – for people who had established organisations of armed resistance against Saddam Hussein’s regime and for “political prisoners”. As such, we do not stand before one type of corruption only (which manifests in bribery, among other illegal activity), but also before corruption protected by a legal framework that includes a larger range of different economic activities, subsequently rendering the country’s riches into material up for grabs to those in power and control, inside and outside Iraq. Between 2003 and 2018, financial crimes hit unprecedented records while financial waste surpassed $350 billion. The two researchers also affirm a close connection between intensified and aggravated corruption and external factors that instigate and encourage it. Many cases of corruption are thus entwined with external objectives abroad. Their article tackles manifestations of corruption throughout Iraq and its sectors, as well as those tools used by the ruling power to perpetuate its rule and those it uses to appease society.

Overall, research on corruption faces various challenges, some of which are obstructive indeed. Those include lack of published data, prohibited access to documents, lack of documentation in the first place, mistrust in researchers, and the potential harm that threatens the latter should their research be published. Additionally, research faces challenges that pertain to researchers themselves, from sticking to one familiar methodology they are prone to reproduce, to the scarcity of institutions capable of embracing and supporting them, or lack thereof, to competing over whatever little is available, all the way to declining intellectual standards and knowledge in general, and so on.

Ultimately, the endeavour we undertake here goes with an unexhausted obsession with searching and trying. It questions the way existing powers rule our countries. Along with the contributing researchers, Assafir Al-Arabi thus hopes to have tackled some of the aspects that could answer such a fundamental question.

****

Translated from Arabic by Yasmine el Haj

______________

1- Daho Djerbal is a historian. He teaches contemporary history at the University of Algiers 2. Besides his extensive research on economic and social history, he studies the relationship between history and memory. He has been the director of Naqd publication, a review of social studies and critique, since 1993.
2- Rachid Sidi Boumediene is both scientist and sociologist. He published a number of books and articles throughout his career as academic and consultant in both Algeria and abroad.
3- Iraqi poet and writer. He recently worked on a project that analysed Basrah’s local government in Iraq, as part of a “conflict resolution studies program” at the London School of Economics and Political Science (LSE). He received the Mostafa Husseini Prize for young journalists in 2017.
4- Professor of political economy at the University of Basrah.
5- Senior lecturer at Al Iraqia University, specialised

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Scope of Growth for the GCC’s B2B E-Commerce

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E-commerce in the MENA’s Gulf took off despite certain difficulties to the point where Gulf Business‘ article titled Explainer: What is the scope of growth for the GCC’s B2B E-commerce industry? sustains that

The pandemic has helped boost digital marketplaces in the region, opines Muhammad Chbib, CEO at Tradeling.

7 November 2020

The pandemic has propelled the use of e-commerce in the region and globally. What are the key trends you have seen?
The most significant trend is the growth of homegrown capabilities in e-commerce in the region. Globally, while e-commerce has been recording strong growth – accelerated no doubt by the pandemic – the region has witnessed a transformational growth in the evolution of the digital economy. Not only have our homegrown companies demonstrated strong resolve to meet the needs of the people and support them, we have seen a tremendous amount of entrepreneurship – with new startups entering the market and building their own niche.

The second trend is more consumers warming up to the possibilities offered by e-commerce. While digital commerce was gaining momentum, one of the factors that has stymied its growth in the region is the relatively lower credit card penetration in some markets. There have also been typical concerns associated with conducting everyday business online. However, one thing the pandemic has brought about is the adoption of digital payments and the increased confidence of consumers to shop online and conduct e-commerce transactions.

In the B2B e-commerce space, how high is the penetration in the GCC market? Has it grown significantly this year?
While B2B e-commerce was evolving at a slower pace compared to consumer-oriented digital business, this year has witnessed a real transformation. I believe it is a case of supply and demand. What matters is that in the new reality, business customers too want to access products and services easily, quickly and efficiently. We see a growth in the B2B marketplace – here in the UAE – and growing enquiries from across the GCC.

Which are the verticals within the sector where you see most scope for growth?
It is really a matter of bringing more options to the customer, whatever the vertical. Customers like to shop around and feel they get value for money and exemplary service. But it is also a matter of sourcing new products and services that aren’t in the region yet.

For those entering the digital B2B industry, what are the main challenges?
The main challenges are finding the right talent with expertise and insights into the B2B sector, which is a different terrain compared to B2C e-commerce. An in-depth understanding of the global market is essential in addition to knowledge of the trading dynamics. You must be flexible and agile to overcome any unprecedented situation. It is also a matter of understanding the customer – the B2B customer is very different from the B2C customer.

Our priority is making the customer journey seamless, taking away their pain points and streamlining processes to ensure efficiencies that save them time and money.

Tradeling launched in April, in the midst of the lockdown – how was your experience? Do you have any immediate plans to expand?
We created Tradeling during the pandemic to connect regional and global suppliers to MENA-based business demand. Today, we have close to 400 suppliers from over 25 countries with gross merchandising value increasing from zero to a high two-digit million figure in just three months.

The key to overcoming the challenges was to enhance market confidence and we took decisive steps in this regard. Today, we have gone from a team of 40 to nearly 100 people and we continue to hire.

From logistics to financing support to ensuring a fully secure payment gateway, we are the first of our kind B2B platform across the region. This is our USP and this integrated approach to business has enabled us to address the challenges.

Looking ahead, what is the future of digital marketplaces in the region?
Digital marketplaces constitute the future of retail and in the new reality, they will record a stronger rate of growth compared to brick-and-mortar retail. But the key for success is to define your own unique niche for the marketplace; increasingly, we see online aggregators trying to capitalise on the opportunity, which will only lead to market fragmentation. What we need is bold, innovative ideas that will help accelerate the momentum of e-commerce growth in the region.COVID-19DIGITAL MARKETPLACEE-COMMERCEGCCTRADELING

Digital Democracy vs Techno-Authoritarianism

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DemDigest of October 7, 2020, posted Digital democracy vs techno-authoritarianism as an ‘Existential crisis’ for Chinese firms

The spread of China’s “techno-authoritarianism,” its pursuit of the “innovation advantage,” and its incompatibility with the liberal democratic model is the focus of a new report. The underlying dynamics and tensions between markets, non-state actors and governments are compelling governments to pursue strategic alliances and partnerships, and the inherent ideological differences between the Chinese system and those of open market, liberal democracies will influence outcomes, argues analyst Alex Capri.

The linkage of technology to fundamental ideological values has become a defining issue in the global technology landscape. The authoritarian use of data and artificial intelligence (AI) to conduct censorship, surveillance and mass monitoring of populations is in direct conflict with democratic standards regarding privacy and freedom of expression, he writes for the Hinrich Foundation: 

Beijing’s imposition of the national security law in Hong Kong, as well as its internment of ethnic Muslim minorities in China’s western Xinjiang autonomous region, were just several of the latest provocations causing European policymakers to rethink relations with China. Thus, for Beijing, it has become increasingly difficult to find sympathy in Europe regarding Washington’s 
campaign to crush Huawei….New partnerships, including the Global Partnership on Artificial Intelligence* (GPAI) and the G7 AI Initiative, that are designed to guide the liberal and transparent development of AI, stand in contrast to China’s export of techno-authoritarianism.

Coalition of the willing?

The Clean Networks program, that seeks to expunge Chinese technology from carrier networks, data storage, mobile apps, cloud networks and undersea cables, has created an existential crisis for Chinese companies, which  are increasingly viewed as de facto proxies of the Chinese Communist Party (CCP), Capri adds. In the broader context of a US-China technology cold war, Chinese companies’ linkage to Beijing has relegated them to the status of malign actors.

A question that has begun to circulate in trade policy circles is: could a coalition of willing nations form a new global trade institution with standards that require open market principles and democratic ideals? RTWT

*The subject of a recent report from the NED’s International Forum.

In “Artificial Intelligence and Democratic Norms,” the fourth in the  “Sharp Power and Democratic Resilience” series from the International Forum for Democratic Studies, Nicholas Wright explores how to establish democratically accountable rules and norms that harness the benefits of artificial intelligence-related technologies, without infringing on fundamental rights and creating technological affordances that could facilitate authoritarian concentration of power.