The Tharwa Review

Taking steps forward: economic and political fronts

Mara Rudman

BETHLEHEM—For those who have long advocated for improvement on movement and access issues, the Palestine Investment Conference experience illustrates Israeli capabilities on the positive side of the ledger. The Palestine Investment Conference in Bethlehem, held May 21st-23rd, turned out to be the milestone its sponsors had promised. For those who recognise the mutual Palestinian, Israeli, US and regional interests served by the establishment of a sustainable, functioning Palestinian state alongside Israel as soon as possible, it was a glass half full. The conference brought together local, regional and international investors, and demonstrated the potential for economic development and security cooperation necessary for political progress.

I attended last week's conference with low expectations. Palestinian and Israeli friends and colleagues had warned me for months in advance: Prime Minister Salaam Fayyad was doing this only because the Americans had pushed him, and the conference would be an embarrassment; it could never come together in time. He was being set up for failure, said some Palestinian colleagues. Others cautioned that those who did want to come from Arab countries would have too difficult a time with Israeli travel restrictions at Ben-Gurion Airport or the Allenby Bridge, a main border crossing from Jordan—difficulties that would be compounded by the hassles from Israeli Defense Forces (IDF) soldiers at checkpoints that would await them if they were admitted.

One thing evident from this pre-conference pessimism is that Israelis and Palestinians share far more than they like to acknowledge, including a need to insulate themselves from too many harsh realities with protective layers of cynicism.

Catch 22

The political effects of rising prices 1/3
an interview with Leila Farsakh

BI: What kind of effect will rising food prices have on Palestinian society?

Farsakh: Rising food prices will have major effects on the Palestinian economy. The first way we're noticing it is with inflation. Inflation in Gaza has increased by 4.6 percent and in the West Bank by around two percent. People are already complaining about oil prices, which is one factor that affects food prices, and we know today that 36 percent of Palestinians are food insecure. That increase in prices is just going to increase demand for food aid.

So if you combine the fact that you have poverty at around 65 percent, which means that 65 percent of the population are living under two dollars a day, and all predictions are that food prices are going to double, that means two things: the international community will have to increase its aid and this aid will go mostly on food security. If the predictions are right, food insecurity will double and that's a significant amount.

The second is how to alleviate this food insecurity: is it going to be with cash, which then can raise inflation, or food, which will create unemployment. So we are in a catch 22 situation that can only aggravate the political and economic catastrophe we are living.

Egypt: social unrest and deteriorating politics

The political effects of rising prices 2/3
Amr Hamzawy

In diverse Arab countries such as Morocco, Egypt and Jordan, a burgeoning social crisis caused by out-of-control global inflationary pressures, a crippled welfare system and persisting high levels of poverty and unemployment is further complicated by a broader political deterioration. Taken together, the simultaneous trajectories of social unrest and deteriorating politics call into question the prospects of stability in those countries.

Over the past two years, Egypt has come to be a case in point for the dangers inherent in that kind of development. On April 6, 2008 a number of civil society organizations including independent unions, syndicates and networks of young activists--some of whom belong to political parties--organized a national strike day to express their frustration with deteriorating social and economic conditions. Although government security forces contained the strike in most Egyptian cities, they could not stop workers in state-owned industrial complexes in Mahalla, a city in northern Egypt, from orchestrating massive demonstrations. There were numerous reports of violent confrontations and clashes between thousands of protesters and security forces that went on for two days.

Workers' strikes have become frequent in Egypt. Hundreds of strikes and protests have been carried out over the past two years, but none escalated to the levels witnessed in early April. The primary demand of workers has been to link their wages to commodity price levels. Inflation has been a problem for many years in Egypt, settling at around eight percent in late 2007, according to the International Monetary Fund. Earlier in March, unanticipated shortages of subsidized bread caused considerable popular agitation, prompting President Husni Mubarak to instruct army bakeries to boost their production.

The fallout from rising prices in Jordan

The political effects of rising prices 3/3
Yusuf Mansur

Jordan's enduring dilemma of the dual challenge of endemic high poverty and unemployment rates is joined by a third equally dangerous contingent, inflation, especially as global food prices rise. The political impact and reactions to this third test of the political-economic environment are hard to gauge.
Ordinary Jordanians have become numb to the double-digit poverty and unemployment rates (around 14 percent each). These rates have hovered steady over the last decade without any marked improvement. Hence, there is a settled realization in the Jordanian psyche that little can be done. Past and present promises of improvement and a departure from what has sadly become recognized as the status quo quickly hit the receptacle of unfulfilled dreams and soon became forgotten. The frequent changes of guard, the similarity of promises from one cabinet to the next and their dismal achievements have helped douse the possibility of emergence from the catacomb of policy ineffectiveness. Blame, played like a broken record, is fashionably but quietly heaped upon those that preceded the incumbents.

Inflation, however, is a new phenomenon and a challenge that increases the severity of the other two. The consumer price index rose by almost 11 percent in the first quarter and an inflation rate of 10 percent is expected for 2008. Not only are prices too high in Jordan, which according to some sources is the region's most globalized economy, but the price increase is due to rising food and energy prices, thus severely impacting the poor. Moreover, in a country where income has not grown while income disparities have, inflation erodes the purchasing power of all. Since inflation is mainly in food prices, low income groups, the poor and the unemployed will be further immiserized at a time when the majority of the people have not benefited from the fruits of the economic growth of the past four years. As in the rest of the world, the gap between rich and poor has risen in Jordan.

KARABAKH'S ENERGY CRUNCH

Government unveils long-term energy plans, but public is angered by rising gas prices.
By Lusine Musaelian in Stepanakert

Raisa Gabrielian, who lives in Stepanakert, the capital of Nagorny Karabakh, tries not to think about next winter. Her monthly salary of 65,000 drams, or 210 dollars, is the only income for her family of four. Now that the price of gas is going up, she says, the money will only cover basic household expenses.

From June 4, the price of gas in Nagorny Karabakh will rise from 59 to 84 US cents per cubic metre. Although the government of the unrecognised republic is planning to diversify its energy sources to make the region less reliant on gas imported from Armenia, the steep price hike will hurt the population in the short term. For ordinary consumers, gas will now cost nearly three times as much as in Armenia.

Artsakhgaz, the region's gas supplier, announced the price rise on May 1, but failed to inform the Nagorny Karabakh government commission that regulates public utilities.

The director of Artsakhgaz, Maksim Mirzoyan, told IWPR that the price increase was a result of the ending of government subsidies - a process that parallels what the authorities in Armenia have done - rather than because of the international price of gas.

After Artsakhgaz's announcement, taxi-drivers in the local capital Stepanakert, who run their cars on compressed natural gas, raised fares from 100 to 120 drams per kilometre, with the minimum cost of a ride going from 500 to 600 drams.

PRICE RISES BEGIN TO BITE IN ARMENIA

New president and government damaged by steep price hikes.
By Naira Melkumian in Yerevan

Armenia's new government is on the defensive following a 40 per cent rise in the price of gas which will hit consumers hard.

The new price, 27 US cents per cubic metre compared with the previous 19 cents, is the result of an end to two years of government subsidies, and together with rising food costs, is hurting the poorest members of society.

Sixty-seven-year-old grandmother Hasmik falls into this vulnerable category. Every morning, she sweeps the streets outside local shops in the capital Yerevan, so as to earn the money she needs to supplement her meagre pension.

"Ah, my girl, when they put up my pension at the start of the year I was very happy that I was getting 15,000 drams [around 50 dollars] rather than 9,350 drams," she told IWPR's contributor. "But then food got more expensive, and now they say the price of gas is going up. Next it will be electricity and water.

"No one needs me - my children aren't helping any more, nor is the government, so that's why I'm sweeping the streets to support myself. But when winter comes, all my money will go on heating."

Hasmik lowered her grey head and carried on sweeping.

GOVERNMENT RAISES WAGES AS PRICES ROCKET

Economists are torn over whether the Syrian government’s decision to increase public sector salaries by 25 per cent will be cancelled out by soaring fuel prices, which jumped shortly after the raises were announced.

Finance Minister Mohammad al-Hussein told the state-run SANA news agency on May 3 that the government was allocating 58 billion Syrian lira, just over one billion US dollars, for the pay rises, which will benefit more than two million employees as well as retired public sector and military employeees. The private sector will be unaffected.

The government also said it was raising the legal minimum wage, which also applies to the private sector, from 5,000 to 6,250 lira a month, or from 100 to 125 dollars.

The raises were intended to offset rising food and oil costs, which have hit Syrians’ pockets. The price of crude is hovering around 120 dollars a barrel, and the government recently cut subsidies on heating oil and fuel.

However, as soon as the pay rises were made public, petrol prices jumped from 145 to 250 lira (2.90 to five dollars) a litre. Subsidised fuel oil – available only in a set quota for each household under a recent change to the rules – now costs nine rather than seven lira (18 instead of 14 cents), while on the open market it is selling for about 25 lira a litre.

Bus fares in and around Damascus were increased from five to eight lira on May 4.

Rateb al-Shallah, head of the Federation of Chambers of Commerce, told SANA that the pay rises would improve the standard of living of people on low incomes and would offset the rising prices.

“The salaries came just in time,” he said.

Deputy trade and economy minister Ghassan Eid agreed, telling SANA that the raises “will close the gap between prices and wages”.

A Japanese viewpoint

The Middle East in an Asian century 1/4
Kentaro Hirayama

During the oil crisis that followed the Yom Kippur War in 1973, Japan's government spokesman Susumu Nikaido announced in the clearest way possible Japan's firm commitment to UN Security Council resolutions 242 and 338 and acknowledged the Palestinians' political rights. The event was reported as reflecting Japan's heavy dependence on Middle East oil and gas--then 70 percent of its needs; now 90 percent.

This was and still is one of the main motives for the frequent "pro-Arab" stance of Japanese governments regarding the Arab-Israel conflict. But there are other factors as well.

One is that Japan has her own occupied territories, the southern half of the Kuril Archipelago northeast of Hokkaido, an area the size of Lebanon. These islands were occupied illegally by Soviet forces in the very last days of World War II in the Pacific. The resulting dispute has been the core factor hindering a peace treaty between Japan and the Soviet Union/Russia. Japan believes in the inadmissibility of the acquisition of territory by force and expects Russia--the same Russia that has been urging Israel to return occupied Arab territories--to behave accordingly. In a way, the West Bank and Kuril islands are linked in the Japanese mind.

An Indian perspective

The Middle East in an Asian century 2/4
Jasjit Singh

Nearly a decade of the 21st century has passed and we need to ask a basic question: will this century be like that last, the most violent in human history, or will mankind change? Paradoxically, the Middle East might hold the key--even though the region itself lacks the power to make the changes, ambitions notwithstanding, and the "great" powers (new and old) will continue to act to shape the future. Three mega-trends need to be considered in this context.

First, a shift in global power balances (the second in a hundred years) will shape the overall landscape in which we are going to live. While it is obvious that the model that would suit the world best is a non-polarized, polycentric and non-hegemonic one, the cruel reality is of a clear trend toward polarization, where there appears to be little effort to transcend national interests in favor of human interests. The end of the Cold War--which maintained peace in the Euro-Atlantic region with horrendously destructive militarization and was fought out in vicious wars across the rest of the world--has opened up unlimited opportunities to redirect global energies toward a century different from the last. But the United Nations, for example, always hobbled by the polarization of the Cold War, miserably failed to provide any conceptual direction toward a better world and further marginalized itself in the process. The UN may be further reduced in effectiveness before it gets reformed sufficiently to be more representative.

It may still be possible to stall if not prevent this polarization--especially since polarization is expanding beyond national interests to social, religious, cultural and ideological dimensions while terrorism employing the most modern tools is proliferating. And tragically, the Middle East has become a major hub for this process of polarization, which extends all the way to Indian border regions and threatens to expand beyond. In India we have tried hard to follow the concepts of tolerance, multiculturalism and an "inclusive society". But for these to expand requires a global non-polarized environment.

China's energy security

The Middle East in an Asian century 4/4
Weiming Zhao

Energy consumption in China is growing as fast as the rapidly growing Chinese economy. China has changed from a net oil exporter to a net oil importer. In recent years, 40 to 50 percent of the oil that China consumes is imported. Of that 60 percent comes from the Middle East. Saudi Arabia, Iran, Qatar and Sudan are the main suppliers.

Therefore China has a significant interest in the Middle East, and any changes in the situation there will affect China's energy security. It is only natural for energy factors to play a role in China's policy toward the Middle East. Although China's opposition to the Iraq war and to the use of force to resolve the Iranian nuclear issue is not purely based on considerations of energy security, this is a key factor. In a word, energy diplomacy constitutes an important part of China's diplomacy.

Similarly, energy security is also regarded as a strategically significant part of China's national security. China's energy security strategy comprises a number of requirements, of which the first is to increase domestic oil production. At the end of March last year, China announced that a new oil field with an estimated reserve of 2200 million barrels had been found in Bohai Bay. The daily output of this field is expected to reach 200,000 barrels in three years. At present, the oil yielded in China satisfies about 50 percent of domestic need; in future, China's oil self-sufficiency rate should remain no lower than the present level.