Rethinking The Arab Spring - A Road Map For G20-UN Support - Geopolicity - October 2011

RE-THINKING THE ARAB SPRING: A ROADMAP FOR G20/UN SUPPORT?
GeopolicityInc.(2011) i
Contents:

RE-THINKING THE
ARAB SPRING
& ROADMAP FOR G20/UN SUPPORT?

Supporting Political, Security and Socio-economic Transition Across the Arab Realm

October 2011

geopol i ci t y
ExpertsinManagingComplexTransition
GeopolicityInc.(2011) ii
CONTENTS:
CONTENTS: ................................................................................................................................. ii
TABLES: ................................................................................................................................. iii
CHARTS: ................................................................................................................................. iii
EXECUTIVESUMMARY................................................................................................................... v
-AboutThisReport ................................................................................................................ vi
-ReportHeadlines:................................................................................................................. vi
1: THEUPRISINGINCONTEXT...................................................................................................... 1
2: LEADINGDRIVERSOFCHANGE ................................................................................................. 3
3: COUNTRIESINTURMOIL ......................................................................................................... 8
-Egypt.................................................................................................................................... 11
-Algeria ................................................................................................................................. 12
-Libya .................................................................................................................................... 14
-Morocco .............................................................................................................................. 17
-Tunisia ................................................................................................................................. 19
-Jordan.................................................................................................................................. 20
-Syria..................................................................................................................................... 22
-Bahrain ................................................................................................................................ 24
-Oman................................................................................................................................... 26
-SaudiArabia ........................................................................................................................ 28
-Yemen.................................................................................................................................. 30
-ImpactonOtherRegionalHotspots.................................................................................... 32
Iraq ....................................................................................................................... 32
Lebanon................................................................................................................ 33
Sudan.................................................................................................................... 34
Israel/OccupiedPalestinianTerritories ................................................................ 35
4: COSTINGTHEARABSPRINGWINNERS&LOSERS..................................................................... 38
-Methodology....................................................................................................................... 38
-TheAccrualofCostsandBenefitsoftheArabSpring......................................................... 39
-CountriesLosingMostwithFewWinners........................................................................... 39
-CountriesLosingonAggregatewithManyWinners ........................................................... 39
-CountriesWinningonAggregatewithManyWinners........................................................ 40
5: LONG-TERMOPPORTUNITIES................................................................................................. 42
6: COUNTRYTRANSITIONPRIORITIES .......................................................................................... 45
7: STRATEGICROADMAPANDG20/UNSUPPORTOPTIONS ............................................................ 50
-SecuringtheMedium-TermPicture: ................................................................................... 50
-StrategicEntryPoints: ......................................................................................................... 50
-InstitutionalPartnerships.................................................................................................... 53
-FinancingOptions: .............................................................................................................. 54
8: CONCLUSION-THEVIEWFROMHERE ..................................................................................... 55

GeopolicityInc.(2011) iii
TABLES:
Table1CorruptionPerceptionsIndexRanking .......................................................................... 9
Table2EgyptNationalStatisticsataGlance.......................................................................... 12
Table3AlgeriaNationalStatisticsataGlance........................................................................ 13
Table4LibyaNationalStatisticsataGlance .......................................................................... 15
Table5MoroccoNationalStatisticsataGlance .................................................................... 17
Table6TunisiaNationalStatisticsataGlance ....................................................................... 19
Table7JordanNationalStatisticsataGlance........................................................................ 21
Table8SyriaNationalStatisticsataGlance........................................................................... 23
Table9BahrainNationalStatisticsataGlance ...................................................................... 25
Table10OmanNationalStatisticsataGlance......................................................................... 26
Table11SaudiArabiaNationalStatisticsataGlance .............................................................. 29
Table12YemenNationalStatisticsataGlance ....................................................................... 31
Table13EconomicImpact(%GDP) ............................................................................................ 40
Table14ImpactonGDP(BillionUS$,2011) ............................................................................... 41
Table15ImpactonFiscalBalance(billionUS$,2011) ................................................................ 41
Table16FrameworkofPossibleCountry-BasedCorrectiveMeasures....................................... 46
CHARTS:
Chart1Voice&Accountability.................................................................................................. 10
Chart2GovernmentEffectiveness ........................................................................................... 10
ABBREVIATIONS & ACRONYMS:

bn Billion
CPI CorruptionsPerceptionsIndex
EU EuropeanUnion
G20 Groupof20
G7 Groupof7
GCC GulfCooperationCouncil
GDP GrossDomesticProduct
HDI HumanDevelopmentIndex
IMF InternationalMonetaryFund
MoF MinistryofFinance
n/a NotAvailable
NATO NorthAtlanticTreatyOrganization
UN UnitedNations
UNSC UnitedNationsSecurityCouncil
WB WorldBank
FrontCoverCredits:CourtesyofGigiIbrahim(http://theangryegyptian.wordpress.com),famous
EgyptianbloggerandWikipediaCommons.
MediaCoverage:
http://www.bbc.co.uk/news/world-middle-east-15303413
http://globalpublicsquare.blogs.cnn.com/2011/10/14/the-economic-winners-and-losers-of-the-arab-spring/
http://af.reuters.com/article/worldNews/idAFTRE79D2D420111014
http://twitter.com/#!/fareedzakaria
GeopolicityInc.(2011) iv

EXECUTIVE SUMMARY

This is an independent report prepared by:

Peter Middlebrook (Co-Lead) - Claire Hajaj (Co-Lead) - Sharon Miller - Diana
Stellman - Hannah Stewart - Omar Bennamour - Fouzia Ahmed - James Lloyd

Geopolicity Offices:

UAE - BVI - USA IRELAND

info@geopolicity.com

GeopolicityInc.(2011) v
EXECUTIVE SUMMARY
Overthecourseofthepasttenmonths,theArabworldhasbeenthrownintothegreatestpan-
regional turbulence than at any other time since the 1950s. At stake in this regional gamble is
thefateofmillionsofpeoplefromNorthAfricatotheLevant,aswellasthefortunesofseveral
key ruling dynasties and massive international interestspublic as well as private. We are
witnessing a critical and profound reshaping of the Arab world psyche, potentially including in
itsrelationswithIsrael.
Only one outcome is clear: the Arab realm has a narrow window
of opportunity to transform old un-representative political
structuresandclique-dominateddistributionofoilwealth.Itisan
enormous challenge. This report argues that nothing less than
major, meaningful change across government systems,
economies and society will provide the tools to chart a viable
course.
By early 2011, most observers would have been forgiven for

thinkingthatthemisleadinglynamedArabSpringhadthelegsto
precipitate profound structural change to political, security and
socio-economic relations across the Arab realm. However, these
four distinct Arab contexts (Levant, Gulf, North Africa and Egypt)
cannotbecomparedtoEasternEuropeeitherculturallyorcontextually-andwillnotfollowthe
samehistoryofdemocratictransition.
Where overthrow has occurred, new interest groups have captured what remains a partial
reform process with uncertain ends (except for Libya whose fate still hangs in the balance). In
countries not directly affected by the uprising, it has nonetheless catalyzed modest reforms as
leaders bid to forestall discontent and open their governments to greater broad-based
representation. In addition,the Palestinian bid for full state membership at the United Nations
has become a serious complicating factor for new leaders and their international supporters.
Whatever the outcome, it is likely to prove pivotal in shaping the Arab worlds internal and
externalrelationshipsatthisfragilemoment.
Given the scale of the challenge at hand, international support has fallen way short of
expectations. The support promised by G8 at the May 2011 Deauville summit has to a large
extent not materialized; and the impact of the now US$100 billion in support through the
Breton Woods organization will, from a grassroots perspective, be trickle down at best.
Assistance is loan-based, focused on macroeconomic stabilization and limited to Libya, Egypt,
Morocco and Jordan a carrot-and-stick approach to regional stabilization.
1
The slow pace of
broadEuropeanfinancialsupportfortherangeofArabcountriesinturmoilislargelyexplained
by the following three factors: 1) the entente cordial between France and the UK over
Libyawhich has tied up resources and strained strategic focus; 2) an unprecedented fiscal
1
The G7 meeting reported that the World Bank is putting up US$10.7bn, the African Development Bank US$7.6bn,
the Islamic Development Bank US$5.0bn with the rest coming from the European Bank for Reconstruction and
Developmentandotherlenders.
Thisreportidentifiesthe
majordriversofchange
andcostsincurredso
far,alongsidea
frameworkfor
strengtheningregional
andinternational
supporttowardsa
strategicshiftin
approach;whichwecall
changing-the-channel.
Moreover,movingaway
fromoildependency
demandsastrong
privatesectorandcivil
society,andoftena
substantialforeignwork
force,alldrivers,which
demandanew
institutionalframework.
GeopolicityInc.(2011) vi
crisissweepingEuropeonthebackofadecadeofexpensivemilitarycampaignsin Afghanistan
andIraq;and,3)theabsenceofaclearroadmaptofacilitateEUandU.S.engagement.
Giventhewidespreadandongoinglossoflife(3,000inSyriaaloneaccordingtotheUNHuman
Rights Commission), it should be deeply concerning to all stakeholders that the benefits of the
uprisingremainasintangibleastheindicativesupportprovidedbytheinternationalcommunity
sofar-contributingtoregionaldestabilization
This report by Geopolicityan independent economic intelligence consultancy advising

institutions and governments worldwide and specializing in post-conflict transitionsidentifies
the major drivers of change in the Arab Spring and the economic impact so far. It aims to
provide a viable framework for strengthening international support towards a strategic shift in
approachaviewtowardschanging-the-channel.
Therisksareclear.Unlessthedriversofchangeineachcountryare
strategicallyengaged,andaregion-widesupportprogramconceived
and led by Arab states, the outcome of the uprisings will remain
unknown and could potentially be regressive. Moreover, the
international community currently needs smarter and more
regionally tailored instruments to expedite support or sufficient on-
the-groundinfluencetoleveragesustainablereforms.
Is this the opening of a new chapter of Arab history, or will these

events diminish into a footnote of an old story? Revolutions may
easily default to recidivism in the Arab governing psyche - as great
Arab historian Ibn Khaldoun describes. Yet, the opportunity for a more positive outcome has
never been greater. The Arab worldwhich has in recent years stood up and embraced
Western economic ideologyhas now reached a crossroads: adopt a regressive stance which
sacrificesreformforspecialinterests,orembracegreatertransparency,socialequityandglobal
integration. The former route is a clear dead-end street. The latter may be long and arduous
towards, as yet, unknown ends; but millions of Arabs have already set off and deserve
appropriatehelpalongtheway.
ABOUTTHISREPORT
Thisreportoutlinestherationaleforrethinkingnational,regionalandinternationalArabSpring
support and suggests alternatives to be implemented over the short, medium and longer term
byArabstatesandtheirpartners.

REPORTHEADLINES:
1. Arab Spring Costs to GDP are projected to be US$15.873 Billion for 2011: The costing
exercise undertaken by Geopolicity, based on data from the International Monetary
Fund,showsthatGDPlossesinLibya,Egypt,Tunisia,Syria,YemenandBahrainwilltotal
some US$15.873 billion in 2011 alone. The costs to Public Finance for the same
countriestotalssomeUS$18.89billionoverthesameperiod:
Therisksareclear.
Unlessthedriversof
changeineachcountry
arestrategically
engagedandaregion-
widesupportprogram
conceived,theoutcome
oftheuprisingswillbe
unknownandcould
potentiallyberegressive.
GeopolicityInc.(2011) vii
Country CoststoGDP CosttoPublicFinances:
Libya US$7.67billion US$6.49billion
Syria US$1.39billion US$4.85billion
Egypt US$4.27billion US$5.52billion
Tunisia US$2.03billion US$0.49billion
Bahrain US$0.39billion US$0.69billion
Yemen US$0.12billion US$0.86billion
Sub-Totals2 US$15.87billion US$18.89billion
2. Emerging Winners Among Wealthy Oil Producers. The overall economic Impact of the
ArabSpringismixedwithwealthyoilexporterssuchastheUAE,SaudiArabia,Qatarand
KuwaitseeingsignificantincreasesinGDPoverthesameperiod.Thesecountrieshave
forestalledmajorinternalprotestandtheireconomiesaremoreprogressiveandgrowth
oriented;
3. Impact on Public Revenues Worst in Poorest Countries. Libya, Egypt and Syria have so
farpaidthehighestpricebothhumanandeconomic.Publicrevenueshavefallentoo,
by77percentinYemenand84percentinLibya,damagingabilitytodeliverbasicand
essential services. Wealthy countries able to avoid protest and afford large public
handouts have seen a positive impact on public coffers. Revenues in Saudi Arabia and
the UAE have increased with, outside of Yemen and Libya, oil exporters being winners
andoilimporterslosers;
4. Arab LeadershipEssentialforanArabRenaissance:AnyArabRenaissancemustbeled
by the leaders of the Arab realm directly, including through the League of Arab States,
and supported by the international community, with a focus on strengthening political
freedoms and transparency over the utilization of natural resources. Leadership by the
Arab League and Gulf Cooperation Council (GCC), as well as countries spearheading
regionalchangesuchastheUAEandQatar,arekeytodevelopingacarefully-sequenced
political,securityandeconomicroadmapfortheregionasawhole.Qatar,theUAEand
Kuwait are already playing central roles, with the strategic military alliance between
Saudi Arabia and the U.S. made complicated by the need for stability first and reforms
second;
5. A Regional Road Map for a Realistic Transition: Analysis in this report suggests three
essential outcomes are most likely to assure mutual benefits: (i) stable, inclusive and
sustainableeconomiesbasedonsolidregionalintegration;(ii)resilientandaccountable
governancesystemsbalancingrightsandresponsibilities;and(iii)homegrownandopen
socio-political frameworks creating an organic democratic process. Unless a regional
road map is established around which G20/G7 can provide financial support towards
thesegoals,country-basedloansthroughtheWorldBankandIMFwillhavelittleimpact
on the reform process. Further, international loans will do no more than support
macroeconomic stabilization objectives. It will also be essential to create mechanisms
forpolicy-basedlendinginsupportofsocialtransformationgoals;
2
Summingmaynotoccurduetorounding.
GeopolicityInc.(2011) viii
6. Minimizing the Risk of Regressive Political and Security Shifts: Increasing political
freedoms in the Arab world will necessarily increase freedom to criticize Western and
Israelipolicy.Shouldthisleadtoadramaticdeteriorationofpoliticalrelationshipsonce
stable, regional security would suffer. The challenges are particularly high in Egypt,
whereMubarakstightlidonexpressionofillfeelingtowardsIsraelhasnowbeenlifted.
It will be critical for both Israel and its international supporters to take a measured
approachanddifferentiatebetweenaperhapsnecessaryoutpouringofrepressedpublic
sentiment with a real increase in risk to regional security. Reactions to the outcome of
the Palestinian application for UN membership currently being discussed at the United
Nations Security Council (UNSC) and full state recognition will be key in this regard.
While nations have a responsibility to prevent violence towards international property
and persons, a return to repressive policies would be ill conceived from a longer-term
security perspective. Any road map towards regional stabilization and peace must,
therefore,alsoinvolveaprocessofreconciliation;
7. ChangingtheWaytheUNDoesBusinessintheArabRealm:TheUnitedNations,which
is organized on a country-by-country basis without synchronized regional hubs across
agencies (the Secretariat and World Bank), lacks the institutional framework for a
regional approach and this shortfall needs to be addressed urgently. Aligning strategic
UN investments and interests with the Arab League, in coordination with G7 would
appearalogicalstartingpoint;
8. Top-to-Bottom Indicators of Success: Political freedoms, improved political

representation,greatertransparencyovertheutilizationofrevenuesfromtheextractive
industries, improving basic indicators (particularly for child health and education),
gender and press freedoms are going to be critical proxies of long term structural-
change;and,
9. Building on Regional Design for Greater Economic Diversification: Arab countries

striving to move away from oil dependency must open themselves up for business, to
foreign direct investment and often foreign workers. Strengthening the private sector
alsoaffectscapitalrightsandvoiceinrelationtonationalpolicy.
GeopolicityInc.(2011) 1
1: THE UPRISING IN CONTEXT
1. On 17 December 2010, 26 year-old
Mohamed Bouazizi set himself alight
outside a government building in Sidi
Bouzid, to protest the confiscation of his
vegetablecart.Indoingso,heinadvertently
lit the dry tinder of populist anger directed
againstrepressiveandunresponsiveancient
Arab regimes. Ten months later, the
conflagration has spread almost two
thousandmiles,acrossthedesertsofNorth
Africa to the oil-soaked Gulf Kingdoms and
shores of the Levant. Three deeply
ingrained autocracies have been summarily
decapitated, several proud royal dynasties
have been forced into new and humiliating
postures of conciliation and three violent
internal conflicts are still playing outone
with NATO intervention and another with a
UNResolutionrampingupthestakes.
2. The Arab uprisings were not foreseen

by any intelligence agency, and the scale
and speed of the chain reaction caught
world leaders entirely off guard. Arab-
Western relations since 2001 had been
locked into a fear-based retreat that no
diplomacy seemed able to reverse. Exactly
one decade later, the Arab world
image/view is unexpectedly being
transformed from within, by a well-
televised, populist demand for liberty,
dignityandsocialjustice.
3. The Arab Spring, as it has been coined,

seems perfectly designed for the Internet
age.Itappearstobepropagatedbyayoung
and modernized demographic group, using
global social networks like Facebook,
Twitter and YouTube to spread the
message. It also resonates deeply with a
Western psyche raised on narratives of
foundational struggle for freedom - both in
America and more recently in Europe (thus
the erroneous Prague Spring parallel
appearing so swiftly in popular usage).
Politicians and people alike are transfixed
by what appears to be a domino effect of
emerging democratic consciousness in a
formerly mysterious and conservative
society.Whilethisnarrativeiscompelling,it
isalsomisleadingfor3significantreasons:
First, it presumes a culturally

homogenous protest movement within the
Arab world, as was the case for the fall of
communism.EventhetermArabworldis
a reductive misnomer in this setting. At
leastfourseparateregionsareatplayhere,
each with their own distinct regional and
internal politics: North Africa, the Levant,
theGulfandEgypt(aspecialcaseduetoits
size, history, cultural mix and geography).
We are witnessing not one, but several
uprisings, driven by different political and
economic factors within each country. The
aspirations of the young Google executive
in Cairo, the enemies of the Alawi tribe in
Hama and the subsistence farmer outside
Sanaa are not comparable. Each shares
perhapsonlyadaringsenseofpossibility.
Second, the personal liberty

narrative suggests that the root causes of
these revolts are clearbut they are not.
Despite much analysis, it has not been
possible to characterize these uprisings
excepttosaythattheyarehighlyfluidwith
uncertain outcomes. They are not, for
example, the inter-tribal battles of the
1920s and 30s or the hegemonistic Middle
Eastern proxy-conflicts of post-World War
II. They are very far from a Nasser-esque
pan-Arabmovement,spurredbyonemans
vision and political maneuvering. They are
not a faith-based crusade and they are not
rooted in a single political agenda (anti-
Zionist sentiment hitherto being the one
defining common cause of the Arab world).
In their political intelligence, pan-regional
infectiousness and raw-staying power, such
uprisingsintheArabworldhaveneverbeen
seen. Therein lies their greatest potential
andrisks.
Third, we lack a common language

to define what protesters seem to want.
Democracy, human rights, secular social
justice, civic engagement are modern
republican concepts that translate one way
amongsecularliberalsandanotherinhighly
religious and tribal societies. Arab society
can boast some of the worlds greatest and
most progressive thinkers, but has not
produced any indigenous institutional
template for secular republicanism and no
example of democracy that has not been
transplanted (Iraq) or mired in conflict
(Israel,Lebanon).InEgypt,forexample,the
young and sophisticated lead actors of the
revolution, who have a Western-influenced
belief in the power of civil society, may be
using terminology that has little practical
meaningtothelargesupportingcastofthe
culturally-conservativepoor.
4. There is only one, self-evident

certainty: global interests are hugely
investedintheendresultoftheseuprisings.
Not just in the crude sense of material
concerns, but rather in the potential
contribution that a revitalized Arab world
could make to global commerce, security
and political maturity of other nations.
Enormous financial gambles are already
being made on outcomesover US$1.4
billionspentonOperationUnifiedProtector
in Libya, as well as a further US$1.3 billion
pledged in support to the Transitional
Council and over US$20 billion to support
TunisiaandEgyptstransitionalprocess.
5. But as events reach a turning point,

these gambles look ever more uncertain.
Tunisia and Egypts roll of the democracy
dice has left many players dissatisfied, and
Egyptselectionslooksettotakeplaceinan
unprepared political climate following only
minor constitutional tweaks. Endgames in
Libya, Yemen and Syria are unclear beyond
the bloody stalemate now setting in. It
remains to be seen whether Bahrain and
Saudis royal dynasties can cooperate to
fund their way out of trouble. Without
renewed energy and direction, the Arab
spring could yet fizzle out as the summer
heatcoolsacrosstheArabworld,struggling
to deliver genuine political change
expressedingovernmentaccountabilityand
publicparticipationindecision-making.
6. Today, the dilemmas posed across

these radically different contexts look
remarkably similar. The old regimes still
clinging onto power must decide whether
to entrench, bend or find a dignified and
financially acceptable exit. The successful
revolutionaries must decide how quickly to
push newly won but fragile institutions
towards democracy, while ensuring
economic growth and pre-revolution
security. In turn, the international
community must seek to carefully calibrate
support; implying a detailed understanding
of the binding constraints to endogenous
transformation;whichhasbeenlacking.
7. Just as the Arab world has no ready

template for democracy, the international
community has no useful Arab world
framework within which to answer such
complex questions. A historic engagement
model that de-prioritizes true democratic
expression in favor of pro-Western stability
isshortsightedatbest.
8. The analysis in this report suggests a

more nuanced engagement model is
possibleand,indeed,essentialtotransform
these events from mere regime changes
into genuine social revolutions. It explores
the key change agents within the various
contexts,aswellasthesocio-economicand
political factors defining their operating
trajectory. It also proposes the best entry
points for regional, UN and G20 support in
the challenging but promising months and
yearsahead.Whiletherearenoutopiason
the horizon, this uncertain growing season
mayyetbearfruit.
2: LEADING DRIVERS OF CHANGE

9. THE CONTEXT OF CHANGE: There is a
long road between riot and revolution, as
Arab history has repeatedly proven. Many
Hama residents will be experiencing a
worrying sense of dj v as tanks stalk
through their city, recalling the bloody
sequel to the Sunni
Islamist uprising of 1981
delivered by Hafez and
Rifat Assad, the current
Presidents father and
uncle. Likewise, the Kefaya movement in
Egypt tried and failed to capitalize on
national outrage when President Mubarak
claimed 86 percent of the vote in the
countrysfirstmulti-partyelectionsin2005.
The crackdowns succeeded, the rallies
simplypeteredout,andthepromisedmass
campaign of civil disobedience never
materialized.Sowhatisdifferenttoday?
10. It is impossible to spotlight the exact

tipping point for events in each Arab
Spring country. And yet, it is arguable that
a confluence of certain factors has made
them possibleand also made healthy
outcomesmorelikelyforsomethanothers.
11. The actors in todays protests are not

new, but their context has changed
profoundly since the turn of the century.
Staggering internal socio-economic
disparities, widespread under-education
(particularly for minorities), corruption,
special-interest hold on trade commodities,
repressionoffreedomofspeechandanall-
pervasive and anti-populist security
apparatusthese injustices have been
simmering with millions of Arabs for
decadespast.
12. However, surprising elements have

appeared within the last five years, giving
localized rage a much broader channel and
adding both momentum and direction. An
internet-fuelled jump in social connectivity
has accelerated information networks,
creating and propagating communities of
ideas.Extremefluctuationsinoilpricespost
2006from stratospherically high to rock
bottomlowactedto
inflate and then stifle
local economies,
increasing middle
class and lower
quintile restlessness. Cross-fertilization of
social values has been increasing between
young Arabs and liberal democracies
(largely within the arts and IT sectors, but,
arguably, also boosted by President Barak
Obamas Cairo agenda, as part of the post-
Iraq outreach process). Finallyand
controversiallya modernized template for
middle-class political protest in an Islamic
society was provided by the 2009 Green
Revolution.
13. These factors may have been

instrumental for Egypt and even Tunisia
(where the state had become the
equivalent of loathed colonialist masters);
however, the spillover of protest into
Bahrain, Libya, Syria and Yemen has
unlocked less encouraging sectarian and
tribal rivalries. These now threaten to
submerge genuine governance and
economicgrievances.
14. Unfortunately, the local templates for

change available to Arab would-be
revolutionariesarelargelyrecidivist.Thefall
of communism parallel, emphasized by the
Prague Spring association, is false. This is
not Eastern Europe, which (for better or
worse) had a culturally similar, stable,
successful and welcoming example of free-
market capitalism on its doorstep in 1989.
TurkeyisthenearestequivalenttotheArab
WhatIwantisforthekidsonthestreet
towinandtheGoogleguytobecome
PresidentPresidentBarackObama
world,buttherearelong-standinghistorical
tensionscomplicatingthatrelationship.
15. In short, there is no

combination of events or
influence that could see
the kids on the street...
win and an energetic
young democracy quickly
emerge. Still, some
agents of change are
actively looking for
inspiration in new
modelswhile some
would be content to
simplyseepowershift,or
elseensurenomovement
at all. It follows that the struggle between
these various elements, and the sensitivity
of international support mechanisms
engaging them, will be the primary factor
determiningoutcomes.
16. KEYAGENTSOFCHANGE:Therangeof
actors in the Arab uprising is most usefully
divided into three typesmodernist,
recidivistandblocking:
MODERNIZING AGENTS: The initial

spark for the Arab uprisings emerged from
within the nearly 90 million of young Arabs
under the age of 30, who account for well
overhalftheregionspopulation(thisfigure
rises to two-thirds in Egypt and three
quarters in Yemen). This group is also
among the regions most economically
stressed.Youthunemploymentaverages18
percent in the Gulf, 23 percent in the
Levant (excluding Israel), 31 percent in
North Africa and 25 percent in Egypt. Arab
youth has reaped the greatest social and
economic benefits from the rise in IT-led
formsofnetworking.Italsohasthemostto
gain from open, diversified economies and
a dynamic cross-cultural discourse; and the
most to lose from corruption and arrogant
state controls. Young people, particularly
from the educated middle classes, have
articulated the political soul of the Arab
protests. They have shown a new kind of
anti-tribal social alliance in the call for
political rights above even economic
changea modern
interpretation of the
ancient Arab concept
of asabiyya, or social
consciousness
which asks a major
restructuring of
arthritic state
mechanics, along
more accountable,
liberal and
participatorylines.
In Tunisia, Egypt,
Libya and Yemen the initial groundswell of
youth protest was buoyed by key defectors
fromwithinthegovernmentandthearmed
forces. Whatever interplay of realpolitik
and ethnic loyalties factored in each
decision,theengagementofsuchkeypillars
of state in transition to a less authoritarian
form of government is encouraging. The
relationship between security forces,
government and population in the Arab
world has always been extremely fraught.
Indeed,armiesandpolicehavebeenlargely
viewed as instruments of state control,
ready to defend state apparatus with lethal
force. Determined resistance from Egypts
patrician army, for example, could easily
have turned Tarhir Square into Tiananmen.
Bysidingwithaprotestmovement,security
personnel not only enable it to grow but
offer a preview of a more just population-
state-securityequationpostfacto.
Largely cooperative opposition movements

in Tunisia, Egypt, Libya and even Syria have
strengthened the potential for this
equation, opening the door for eventual
transitiontoaworkabledemocracy.Viewed
realistically,thesealliancesaremarriagesof
conveniencea sine qua non of vital
international funds and political
recognition. Opposition groups do not
TheinitialsparkfortheArabuprisings
emergedfromwithinthenearly90
millionofyoungArabsundertheageof
30,whoaccountforwelloverhalfthe
regionspopulationandthisfigurerises
totwo-thirdsinEgyptandthreequarters
inYemen.YoungArabsareamongthe
regionsmosteconomicallystressed.
Youthunemploymentaverages18
percentintheGulf,23percentinthe
Levant(excludingIsrael),31percentin
NorthAfricaand25percentinEgypt.
naturally default to viable political parties
once revolutions are over, and a certain
amount of jockeying for position is
inevitableperhaps
even healthy. However,
support by Turkey, the
Libya Contact Group
and other international
players to create space
for a discussion of
common goals,
cooperative structures
and timing among these fragile coalitions
isat the very leasta necessary and
positive start. Helping those coalitions
deliver political change, while keeping the
lights on and engine of state running, is a
criticalnextstep.
Akeydriverofallthesedifferentfactionsis
the potential for greater economic
integrationanddiversification,startingwith
a fairer transfer of public revenues. Many
Arab countriesincluding those relatively
untouched by the recent uprisingsare
characterized by high unemployment rates
and weak, unequal delivery of public
services. Economies are generally highly
centralized and commodity-based, and
where they are diversified (as with Syria),
special interest groups hold the revenue
purse strings. The dominant theories of
governance, whether Islamic monarchial or
Islamized socialism, have led to a public
sector squeeze-out of all but informal
family-sized enterprise. The poorest
members of society joining the middle
classes on the street are expressing their
exhaustion with this modus operandi and
demanding the chance to express more of
theirsocio-economicpotential.
RECIDIVIST AGENTS: In the flux of

politicalandsocialprotest,regimesarealso
facing the re-emergence of tribal and
sectarianrivalsseeingopportunitiestoshift
long-held power balances. The difference
between haves and have-nots in the
Arabworldcanalltooeasilybedescribedin
ethnic, tribal and sectarian terms
explaining in part the weary cycle of
repression and regime
change. The royal
Khalifa Sunnis face-off
against disenfranchised
Shia in Bahrain has
been painted as a
sectarian stability issue
justifying the
intervention of the Gulf
CooperationCouncil.Shiftingtriballoyalties
have massively complicated the Libyan
opposition movement and its military
campaign, leaving the rebels stuck in three
non-contiguous strongholds and
threatening to split the country along lines
determined by family loyalties. The use of
Alawite-only militias in Syria is playing into
an old dynamic of tribal caste-systems and
rivalries,whilethebillionaireAl-Ahmarsare
suddenly leading the fight against the
billionaireSalehsinYemenswater-stressed
and economically collapsed capital. Should
the struggles of these nations be re-framed
under such narrow terms, it would gravely
underminetheirlong-termprognosis.
Market constriction among a disaffected

lower quintile also presents a risk of
recidivism, fuelling anger, blame and
unrealistic change expectations among the
poorest.IncomegapsintheArabworldare
substantial. Of all the countries affected by
protests only Bahrain makes the top 50 of
theHumanDevelopmentIndex2010,which
compares the level of equitable
development in states. When compared to
the degree of wealth corralled by the
leadership of these states and their family
interests, the scale of social injustice
becomes very clear. Already there is
evidence in Egypt that Salafists and other
social conservatives are working within
these disenchanted communities to build
support bases outside the formal political
system.
Marketconstrictionamongadisaffected
lowerquintilealsopresentsariskof
recidivism,fuellinganger,blameand
unrealisticchangeexpectationsamong
thepoorest.IncomegapsintheArab
worldaresubstantial.
BLOCKING AGENTS: While

individual Arab nations have been hit by
unparalleled turbulence, Arab cooperative
structuresnotably the Gulf Cooperation
Council(ledinessencebySaudiArabia)and
theArabLeaguehavebeeneithersilentor
leveraging in favor of the status quo.
Criticism of blatant violations of human
rights and
humanitarian law in
Syria and Libya has
been late in coming
and, when eventually
delivered, weak in
tone. Saudi Arabia has
proved itself a harbor
for beleaguered
dictators, while
pouring nearly US$5,000 per capita into its
own social programs in an effort to stall
internal dissent. It also lent the support of
the GCC to Bahrain in quelling its own
unrest. Some trepidation on the part of
these weighty establishment bulwarks is
understandable; however, their position
represents a grave opportunity cost, not
just for Arab protesters but also for still
stable governments wishing to introduce
reasonable reforms, and for the long-term
economicdynamismoftheregion.TheArab
world suffers without a credible forum in
which to project new thinking, as opposed
to simply protecting patrician interests.
Would-be Arab world interlocutors, such as
the G20, are equally blocked in developing
sensible regional approaches. It is time to
rethink the purpose and function of these
forums if they are to remain relevant and
usefultoafutureArabagenda.
EconomicAgency:Theharshrealityfor
much of the Arab world, particularly
countries that are heavily oil
dependent, is that economic
diversification demands strong foreign
direct investment, a more integrated
global economic approach, often-
significant non-national residents and
thereforeasofterforeignpolicy.
17. OLDWALLS-NEWPAINT:Whatwould
a viable future Arab agenda look like,
considering the different forces struggling
to shape it? The past may hold some
interesting lessons. Since Ottoman times,
Arab governance structures have moved in
ever-decreasing circlesresembling the
dynastic cycle
described by historian
Ibn Khaldoun of social
uprising, demand-based
governance,
complacency and
corruption and, finally,
regime overthrow
again.
18. It is certainly possible to see this cycle

atworkinthecurrentuprisings.TheAssads
themselves are members of a once-
oppressed minority tribe that successfully
toppled a military dictatorship on a
platform of socialist reforms. Arab
monarchies in the Gulf and in Jordan have
worked hard to project a feudal right to
rule equating with stability and prosperity
for their peoples, but are feeling the sands
of public opinion begin to shift beneath
them.
19. Can these countries now shift to a

differentpathonewherechangedoesnot
depend on upheaval but is built within
governance systems? The answer is yes,
but only if the transition process is allowed
to be indigenous in structure, temporarily
unstable in its infancy and de-linked from
pro-Westernagendas.
20. International interests in Arab

governancehavebeenslowtoacknowledge
that most G20 legislative, jurisprudence,
civic and financial systems do not bear
comparisontotheequivalentArabsystems.
The latter have been developed over
millennia and are rooted in Islamic law, as
Itisalsocriticaltoacceptthatopening
greaterfreedoms,includingfreedomsof
expression,meansthat,occasionally,
newgovernmentsandWestern
interlocutorswillhearthingstheydonot
like.Democracydoesnotautomatically
meanliberalism,orpro-Westernism.
well as Islamic norms and values (while at
least 2 million Arabs are not Muslim, Islam
has had predominant influence on Arab-
world governance traditions). Free market
capitalism,asinterpretedintheWest,does
not translate neatly into Islamic economic
systems, with their prohibition against riba
(traditional debt structures). And while
human rights, freedom of speech and the
dignityofmenandwomenareenshrinedin
Islamist thinking, they are not based on
secularcivilallegiancesbutonperceptionof
religious,familyandtribaldutieswithinthe
broader framework of the Umma (a
communityofbelievers).
21. It follows that an effective transition

process cannot simply cobble new
governance thinking onto old structures or,
at worst, dismantle them in addition to
expellingthecurrentcaretakers.Todoso
usuallyintheinterestofspeed,securityand
former regime cleansingrisks an Iraq-
style collapse of credibility, as well as an
explosion in capacity-substitution and
stabilization costs. The new or reformed
leadership of old nations should be looking
instead to root more open systems in
traditionswithwhichsocietiesalreadyhave
somelevelofcomfortandexperience.
22. It is also critical to accept that opening

greater freedoms, including freedoms of
expression, means that, occasionally, new
governmentsandWesterninterlocutorswill
hear things they do not like. Democracy
does not automatically mean liberalism, or
pro-Western. While Western sympathies
resonate so much more naturally with the
rebels than rulers, many of these old
regimes have greater investment in
realpolitik and pro-Western dialogue than
themovementsseekingtounseatthem.
23. New leaders may wish to benefit from

economic integration without having to
agree with every Western dictate on
regional affairs. Managing change
expectations on all sides will need to be
done the Arab way schwaye schwaye
(slowlyslowly).

24. The social uprising across the Arab

realm has left few countries untouched,
with progress towards real structural
transformation either yet to begin or left
very much in the balance. Currently, direct
costs significantly outweigh short-term
benefits, with losses due to a production
downturn reaching billions of U.S. dollars.
Moreover, government failure to entertain
the demands of civil society has diverted
public revenues away from capital
investmentwhich is growth, revenue and
employment inducing- towards recurrent
spending- which is not. When the direct
costs of production losses and additional
security and law and order spending are
calculated, the price tag of political turmoil
willhaveinmanycaseslong-termstructural
effectsongrowthandemployment.
25. On the other side, if newly elected

Governments and transitional authorities
rise to meet the challenges of increased
accountability and transparency, then the
long term impacts of the uprising will likely
be replaced by the positive impact of more
representative societies and stronger social
equityandaccountabilityideals;particularly
vis--vis the demands of the youth. Egypt,
TunisiaandLibyahaveseenlargelynational
level uprisings to displace entrenched
autocratic leaders and it would appear to
be impossible for Assad in Syria to survive,
given the contingent risks of international
tradeembargosandlossoflegitimacyinthe
eyesofthegeneralpopulace.ThatIraqhas
notbeenseriouslyaffectedisalsoofnote.
26. The logical choice of an accountable

and transparent government would be to
understand the causes of public descent
and open up dialogue, and this is a key
lesson for Egypt, Libya, Tunisia and Syria in
particularbecause people matter.
Examples of more open dialogue and wider
public participation can already be seen in
somepartsoftheregion.IntheUnitedArab
Emirates for example, steps have been
taken towards greater representation with
an historic parliamentary election resulting
in the election of 20 new members to the
FederalNationalCouncilon24
th
September
2011 and an encouraging voter turnout
from an electoral college of 130,000,
includingahighratioofwomenvoters.This
move in the UAE is set in the context of a
country whose government has in many
ways already become an economic model
for the surrounding states, whilst
accommodating massive social change
during the course of economic
diversification.
27. ThesamecanbesaidofQatar.InSyria,
however, government crack-down against
the uprising is regressive in all regards,
either securing the eventual collapse of
Governmentasaresultoflostlegitimacyor
greater state controls, which undermine
liberalist ideals and equality. So what are
theheadlines:
Tunisia, Egypt and Libya have

overthrown autocratic leaders
amounting to the most significant
transformationoftheArabrealmsince
the 1950s. Mubarak is standing trial
and could face the death penalty, and
Qadhafisregimehasjustfallen;
The Government of Syria, whilst still

strong in many ways, has undermined
its legitimacy in the eyes of its citizens
and the international community.
Progressive hardening against groups
opposed to Assads rule will plant the
seeds of eventual overthrow. This will
haveaprofoundeffectonLebanonand
Israel;
3: COUNTRIES IN TURMOIL
Saudi Arabia provided a hand out to
the civilian population amounting to
[US$30 billion] although real structural
reformsremaintobeputinplace;
Israel, Palestine, Jordan and Iraq have
all been affected by the ensuing
regionalpoliticaltransformation.Inthe
case of Israel and Palestine the
implications of shifting regional
political alliances are likely to be
profound and the result of the
Palestinian campaign for full state
membershipoftheUNwillsignificantly
affect the regional and wider
internationalbalance.
28. This section provides a country-by-

country summary of the key characteristics
of change in the countries affected by the
uprising, around which a framework of
supportive measures can be considered by
the newly-established authorities and
international community. To provide a
governancecontextfortheanalysis,various
governance indicators are provided below,
alongside useful cross-national
comparators. These indicators, many of
which are not widely accepted by the
sovereign states in question, do, however,
indicate the need for major voice and
accountability, and government
effectivenessreformstobeundertaken.
29. Corruption, both state capture and

petty corruption, substantially shape public
opinionandassuchgiventhelowranking
ofmanyArabstatesbasedontheresultsof
Transparency Internationals perceptions
indeximproving voice and accountability,
government effectiveness and corruption
must be central to any long term reform
program. Table 1 below ranks Yemen,
Libya, Syria, Algeria and Egypt as the most
corrupt countries in the region, in marked
contrasttotheUAEandQatarforexample.
Table1 CorruptionPerceptionsIndexRanking3
Country 2008 2009 2010 CorruptionTrend
Yemen 141 154 146
Libya 126 130 146
Syria 147 126 127
Algeria 92 111 105
Egypt 115 111 98
Morocco 80 89 85
Tunisia 62 65 59
Jordan 47 49 50
Saudi 80 63 50
Bahrain 43 46 48
Oman 41 39 41
Israel 33 32 30
UAE 35 30 28
France 23 24 25
UK 16 17 20
Qatar 28 22 19
Source:TransparencyInternational(2010)
3
TheCorruptionPerceptionsIndex(CPI)ranksmorethan150countriesintermsofperceivedlevelsofcorruption,as
determined by expert assessments and opinion surveys. Countries are ranked from 1 to 176 with 1 being the least
corruptand176beingthemostcorrupt.
30. Chart 1 provides voice and
accountability rankings for all Arab Spring
Countries,withIsrael,FranceandtheUKas
useful comparators. Chart 2 provides a
similar ranking for Government
Effectiveness,whichmustbeseenasacore
measure of reform given the
unemployment and service delivery
requirements of many of the countries
highlighted by this study.
CHART1VOICE&ACCOUNTABILITY
CHART2GOVERNMENTEFFECTIVENESS

EGYPT
31. STATE OF PLAY: The attack on the Israeli
Embassy in Cairo by Egyptian protesters,
leadingtotheevacuationofembassy
staff, raised tensions and may
exacerbate divided opinion over
Israel within Egypt. Over the past
eight months, the Supreme Council
of the Armed Forces has focused
oninorderofpriority:(i)maintainingrule
of law and the basic functions of state; (ii)
overseeing a limited constitutional revision
processinpreparationforgeneralelections;
and (iii) holding previous regime members
accountable for crimes alleged during and
prior to the February uprising. However,
recurring episodes of popular unrest
indicate impatience with the pace and
direction of reforms. Former President
Mubaraks National Democratic Party has
been dissolved by court order, in parallel
with a reshuffle of ministerial posts. The
state of emergency introduced in 1967 and
extended every 3 years since 1981 is to be
lifted prior to parliamentary and
presidential elections controversially
scheduled for later this year. In August,
trials of senior government officials,
including former President Mubarak,
commencedfurther aggravating socio-
political divisions. With the interim
government and Army maintaining control,
further economic reform and liberalization
will be sacrificed in the short term, in favor
ofeconomicandpoliticalstabilization.
32. TRIGGERS & DRIVERS OF UNREST: Rising

unemployment, particularly among youth,
widespread social inequality and a growing
resentment of all-pervasive and heavy-
handed internal security have left Egypt
with a pyramid of socio-economic
grievances;theformerPresidentprojected
a quasi pharonic status during his four-
term, thirty year rule, but his political and
economic achievements for Egypt were
finally eclipsed by middle-class anger at
crony capitalism, blocking equal
opportunity, lack of political
accountability and often vicious
repressionofdissent.
33. COSTSSOFAR:TheSpringstorm
resulted in severe disruption of economic
activities, closure of bank and stock
exchanges, currency depreciation, collapse
ofthevitaltourismsectorandastandstillin
foreign direct investment. As a result,
Egypts growth in 2011 is forecast at just
1.22 percent. An official reserve loss of
US$9billionandsocialspendingincreaseof
25 percent has widened the fiscal deficit.
Aftermonthsofrevoltsandregimechange,
the cost of the revolution to the Egyptian
economyishigharoundUS$4.27billionin
totalequating to approximately 4.2
percent of GDP. The cost to the fiscal
balance is also significant, at approximately
US$5.521bn.Increasedwageandsalariesof
civil servants and tax breaks have cost
between US$710-914 million (until April
2011) in a total increase of US$5.446bn of
public expenditures, compared to a
decrease of public revenues by US$75
millionfor2011.
34. MAJOR RISKS & OPPORTUNITIES: Risks:

short-term attempts to alleviate cost-of-
living woes for the poorest may affect the
supply/demand chain for basic needs. In
particular, diesel shortages (affecting
agricultural production and foodstuff
prices) are likely as increased subsidies on
petroleumproductsstimulateconsumption.
Withinthepoliticalrealm,sectarianconflict
in Cairo and in rural areas is likely to
polarize public opinion, undermining the
outcome of the elections and progress on
transition. Opportunities: effective
democratization in Egypt will allow for
market liberalization, which will offer a
model for transition elsewhere and allow
for reversal of political rhetoric in states
where autocratic regimes still hold on to
power.
Table2EgyptNationalStatisticsataGlance
2008 2009 2010 2011

GDP(US$Billion) 162.435 188.608 218,466 231,111
GDPPerCapita(US$) 2,160 2,455 22,788 2,892
GeneralDebt(%GDP) 74.7 75.6 73.8 74.9
Population(million) 75.2 76.8 78.33 79.90
UrbanPopulation(%) 42.72 42.76 - -
UnemploymentRate(%) 8.9 9.4 9.2 9.7
CPIInflation(%) 18.3 11.7 11.6 11.8
HDIRank 0.608 0.614 0.620 -
GiniCoefficient 32.1 32.1 32.1 -
35. FUTURE CHANGE AGENTS: (i) the Coalition

of the Youth of the Revolution; (ii) the
Supreme Council of the Armed Forces; (iii)
established and emerging secular and
Islamistfactionsand(iv)externalinterests.
36. CRITICAL FACTORS & LIKELY SCENARIOS:

Premature elections will disadvantage
emerging opposition movements from
establishing electoral bases, favoring old
unpopular structures and resulting in de-
legitimized leadership. Legalization of
formerly outlawed religious factions (the
MuslimBrotherhood)andtheemergenceof
new radical Islamist parties (Salafis) signal
revival of political Islam as a challenge to
Egypts new and untested management
structures.
37. ENTRY POINTS FOR G20/UN SUPPORT:

Financing the deficit is a priority for
international support. Egypts financing gap
is projected to reach up to US$12 billion in
Fiscal-Year2011/12.Effortsshouldbemade
towards supporting a grass-roots
maturation of social democratic thinking,
increasing intra-regional trade and
refocusing towards wider and emerging
internationalmarkets.
ALGERIA
38. STATEOFPLAY:Eventsanddevelopments
across the border in neighboring
Libya have been a source of concern
for the Algerian leadership, but the
threat of uprising in Algeria remains
relatively low, despite public
discontent and political disaffection.
President Bouteflika successfully
discouraged the waves of violence, self-
immolationsandindustrialactionthrougha
large-scale, assertive but largely peaceful
deployment of the police force in urban
centres. Public opinion has been placated
by the promise of a democratic reform
process kicked off by a
Presidential decision on 15 April,
to include constitutional revision.
This process is moving slowly but
steadily. In July, President
Bouteflika was presented with
findings from a cross-party consultation
process on democratization. Following this,
the regime has pledged to develop an
online forum to promote public debate
(named the Nabni, to build) thatalong
with civil society and a series of regional
and local conferences for
developmentshould inform a full-scale
reform roadmap. A number of reports
suggestthatColonelMuammarGaddafihas
soughtrefugeinAlgeriabutanofficialoffer
ofsanctuaryfromtheAlgerianleadershipis
highly unlikely given Algerias strategic
political and economic ties to Europe, USA
and GCC. Nevertheless, Algeria has not yet
recognized Libyas National Transitional
Council.
39. TRIGGERS & DRIVERS OF UNREST: Unrest

echoedtheplightofadistressedpopulation
faced with unemployment, a housing crisis
and soaring food prices. Algerias economic
profile is still blighted by decisions taken in
the wake of independence in 1962, which
introduced an oil-funded socialism,
including planned economic development,
collectivized agriculture and naturalization
of oil production. Collapse of oil prices in
the 1980s resulted in severe economic
austerity, and a failed democratization
process under Chadli Benjedid led to a
brutal civil war and a state of emergency
that remains in place today. President
Abdelaziz Bouteflikas rule since 1999
capitalized on soaring oil prices and FDI to
projectstabilizationandgrowthinAlgeria
buthisadministrationhasnotmitigatedthe
impact of the global economic turndown
and rising cost of living on an increasingly
poorpopulation.
Table3AlgeriaNationalStatisticsataGlance
2008 2009 2010 2011
GDP(US$Billion) 170.228 139.763 160.270 192.384
GDPPerCapita(US$) 4,939 3,924 4,435 5,245
GeneralDebt(%GDP) 8.2 10.4 10.2 10.1
CPIInflation(%) 4.9 5.7 4.3 5
HDIRank 0.667 0.671 0.677 -
40. COSTSSOFAR:ThetotalcostoftheArab
Spring to the Algerian economy is
estimated at around US$1.4 bn for 2011,
constituting approximately 1.7 percent of
the initial GDP forecast for that year
(estimated in October 2010). As one of the
major OPEC members (around 1 300 tb/d
for oil), Algeria has benefited from the
growthofworldoilpricesandhasincreased
its revenues by US$9.6 bn. However, a
relative decrease in investments in non-oil
sectors, and inflation of imported
production has led to increased strain on
thepublicpurseincludingatemporarytax
exemption on basic food stuffs such as
sugar and oil, at a cost of around US$257
million (up to April 2011). Total
expenditures are, however, expected to
decrease by US$802 million, explained by
spending cuts and policy reform. Where
human costs are concerned, Algerias Arab
Spring has resulted in a total of 3 fatalities
and1,900injuries.
41. MAJOR RISKS & OPPORTUNITIES: Risks: The

reform agenda has not yet played out, and
a weak or delayed process could easily
spark further public protest against
President Bouteflika. Internal insecurity
could be a key factor in derailing a reform
process, particularly should further attacks
byAlQaedaintheMaghreb(AQM)provide
justificationforamoreauthoritariansystem
dominated by security forces, rather than
by constituencies interests. Opportunities:
The new consultation process offers an
opportunity for higher public participation
in decision-making. The need to tackle
youth unemployment could also encourage
economic diversification beyond oil
dependency and towards enlargement of
higheremploymentgeneratingsectors.
42. FUTURE CHANGE AGENTS: (i) President

Abdelaziz Bouteflika; (ii) Key opposition
groups, particularly the Socialist Forces
FrontandNationalCoordinationforChange
andDemocracy;(iii)Civilsociety.

Fragmentation of Algerias population,
explaining the sporadic and disorganized
natureoftheunrest,islikelytobeexploited
by the current leadership in defining the
scopeofconstitutional,economicandsocial
reforms. Increasing AQM threat could also
be used to preserve the old status quo and
securemilitarystrongholds.

Political and institutional support for the
promised constitutional reform,
decentralization and electoral processes. A
cohesive civil society base must be built to
ensure political changes are sustainable. A
cross-sectoral employment generation
strategy is critical, encompassing reforms
linkingeducationandtheprivatesector.
LIBYA
45. STATE OF PLAY: The combined military

and political efforts of Colonel Qadhafis
internal and international foes
struggled for months to dislodge
him; however, regime decapitation
swiftly followed once NATO-backed
rebel forces made the long-awaited
breakthrough into Tripoli. Qadhafi is
no longer in power and on October 3
rd
Libyas Transitional Council announced a

new cabinet. Libyan Rebel forces have now
taken control of much of the country, with
small pockets of resistance in Sirte
Qadhafis birthplace. Colonel Qadhafis
whereabouts remains unclear, amidst
conflicting reports that he remains in
southern Libya, or that he has fled to
Algeria, Niger, or headed for Burkina Faso.
UK-led recognition, resourcing and
grooming of the National Transitional
Council (NTC), plus the most aggressive
NATOoperationsincetheBalkanwars,was
instrumental in swinging the balance in
favor of the Libyan opposition movement
despite its uncertain capabilities. However,
with Qadhafi still at large and capable of
prolonging a chaotic power-struggle,
stabilization and rule of law will
remain profound challenges.
Whatever the outcome in Sirte
and other regime strongholds,
the NTC faces a long-term
struggle to convince tribal
leaders (particularly in western Libya) and
ethnic separatists of its right to rule.
Capacity to mount an authoritative
governance process will depend on
strengthening tribal allegiances and
brokeringpoliticallypalatablesupportdeals
with its international backers, as well as oil
companies. The NTC Chairman, Mustafa
AbdelJalil,hasdismissedtheentirecabinet
over the July assassination of army
commander General Abdel-Fatah Younes.
Arrest warrants from the International
Criminal Court for Colonel Qadhafi, his son
and the head of military intelligence, are
stilloutstanding.

46. TRIGGERS & DRIVERS OF UNREST: Initially
sparked by a delay in a public housing
scheme, the Libyan civil war has become
dominatedbythefigureofColonelQadhafi
and his role as either a cruel dictator or
maligned defender of tribal traditions,
depending on ones position within a
widening internal schism. While Qadhafis
death or departure would be a game-
changingevent,itwoulddolittleornothing
tohealthedeepriftinLibyasuniquesocial
structure. Colonel Qadhafi had held power
since the 1969 military coup, and hasin
over 40 yearstransformed Libya into a
bizarre mirror of his personal ideology (as
envisaged in the Green Book of 1977). The
Libyanjamahiriya,orrepublicofthepeople,
is a combination a fully-centralized power
supported by decentralized tribal
structures. Public protests in Benghazi,
starting in February 2011, were driven by
youth- brought up entirely in Qadhafis
world yet denied opportunity- led by long-
standing enemies of the regime. Qadhafis
response with disproportionate lethal force
catalyzed dormant protest elsewhere,
providing grounds for international
intervention (UN Security Council (UNSC)l
Resolution 1973 establishing a no-fly zone,
as well as embargos, travel bans and asset
freezing), as well as hope from political
opposition groups that their ambitions
wouldatlastreceiveappropriatesupport.
Table4LibyaNationalStatisticsataGlance
2008 2009 2010 2011
GDP(US$Billion) 88.888 60.239 74.232 n/a
GDPPerCapita(US$) 14,114 9,371 11,314 n/a
GeneralDebt(%GDP) -73.104 -108.412 -94.908 -
Population(million) 6.298 6.428 6.561 -
UnemploymentRate(%) - - - -
CPIInflation(%) 10.4 5 4.5 3.5
HDIRank 0.744 0.749 0.755 -
GiniCoefficient n/a n/a n/a n/a
47. COSTS SO FAR: The conflict in Libya has

halted economic activity in the country,
with an estimated cost to GDP of US$7.67
billion, equalling approximately 28.17
percent of GDP. More than 740,000 people
have fled Libya since the start of the
conflict, losses of mismanaged assets have
allegedly reached up to US$2 billion, and
severedisruptioninthehydrocarbonsector
(accountingforover70percentofGDPand
over90percentofexportsandgovernment
revenue) has devastated the economy.
Domestic production has fallen as a result
of the oil sector crisis; and a lack of foreign
workers, low local consumption, and
decreased purchasing power have all
produced significant negative impacts on
Libyas economy. Furthermore, the fiscal
balance has deteriorated as a consequence
ofmilitary,socialandelectionexpenditures
as well as decreasing oil revenues and
declining investment in the country. As a
result of the ongoing conflict, it is not
possible to cost all the material losses
including the damage done to Libyas
infrastructure. However, costs to public
revenues in the region of US$21.54 billion
have been offset by a decrease in public
expenditures due to absence of
governance. The total cost to the fiscal
balance stands at US$6.485 billion,
approximately 28.84 percent of GDP.
According to Spokesman Mahmoud
Shammam, the National Transition Council
needsUS$3billion,torecoverthebudget.

Downward oil production and export
trajectory will further contract Libyas
economy, resorting to higher oil export
prices to offset the price tag of a widening
fiscaldeficit.Itwilltakeanestimated3to6
months to repair oil infrastructure and
restore supply lines, with a further 3
months required before production can
resume.
4
Food and commodity prices will
surge, accelerating poverty levels.
Prolonged civil war or an uncertain
oppositionvictoryposesasignificantthreat
of territorial disintegration of the state,
splitting into an anti-regime East and pro-
Qadhafi West. Among the many challenges
todisentanglingLibyasuniquedefactoand
de jure governance structures, Imazighen
(Berber) separatism is a key threat to an
emerging democratic process.
Opportunities: The momentum of change
presents an opportunity to eliminate a
decades-long legacy of dictatorship and
poor governance and to introduce radical
changes to economic policy, achieving
diversification from oil overdependence,
enhancing liberalization and trimming the
public sector. The independence of the
Central Bank of Benghazi, in the aftermath
of protest, offers opportunities for
stabilizing the fiscal environment and
stimulatingtheinvestmentclimate.
49. FUTURE CHANGE AGENTS: (i) Mustafa

Abdul Jalil, Mahmoud Jibril and the
Transitional National Council; (ii) Defecting
Qadhafi personnel; (iii) young men 18-35
(born under Qadhafi) in key hubs of
Benghazi, Tripoli, Mistrata and Sirte
(Qadhafis tribal seat); (iv) Pro-Qadhafi
tribes, particularly the Warfalla tribe and
others in Zawarah, as well as the
discontented Obeidi tribe affiliated to NTC;
(v) AU; (vi) International Contact Group on
Libya.
4
WoodMackenzieEnergyConsultancyreferencedby
EconomistIntelligenceUnit,August22,2011
50. CRITICAL FACTORS & LIKELY SCENARIOS: A

negotiated deal between pro- and anti-
regime camps has proved elusive despite
therealityofNTCdominationinTripoliand
nationwide. This makes Colonel Qadhafis
elimination or decease central to de-
escalatingviolenceoverthelong-term.Pro-
Qadhafi factions will provide all possible
support to him, even as an agitator of an
NTC-led governmentprolonging the
engagementdilemmaofWesternbackers
looking to secure stabilization with the
lightest possible footprint. Alternative
forms of peacekeeping support, including
from Arab League members, may become
necessary.
51. ENTRY POINTS FOR G20/UN SUPPORT: A

pragmatic nation-building strategy will be
criticalincluding outreach to Qadhafi
loyalists and a slow restructuring of Libyas
complex, ideology-driven and labyrinthine
institutional structures. The planed
elections, now being overseen by the
transitional cabinet, and rapid
establishment of political architecture will
be vital to meeting medium term
stabilization objectives. Priority is to
develop a politically sensitive engagement
between emerging governance structures
to create financing for public welfare
projects, generate employment and create
a trust to buffer state finances.
Diversificationiscriticaltoamoreequitable
future for Libyas population.
MOROCCO
52. STATE OF PLAY: Moroccos political

situation is likely to remain comparatively
stable over the course of the next few
years, however, wider regional events
particularly in Tunisia and Egypt
may fuel continued unrest and
populardiscontent.
53. Minor public unrest has

precipitated a moderate reform
process, led by Moroccos politically astute
monarch Mohammed VI. A revised text of
the constitution drafted through a multi-
party process and presented by the King
was approved by popular referendum on 1
July 2011. The revisions received a 98
percent yes vote, with a turnout of 73
percent.Thereformedconstitutionalmodel
vests broader powers in the Prime Minister
and the elected government, improves civil
liberties and establishes equality of the
sexes. Swift action to address public
concernshasstrengthenedthelegitimacyof
the current structure but Morocco is not
out of the woods; further demands were
raised at a mass protest on 10 July, lead by
theso-calledFebruary20Movement,which
has yet to demonstrate any significant
capacity to convene sustained protest at a
national level. Moreover, a weak
parliament, and the continued grip on
power maintained by King Mohammed VI
and his advisers are likely to cause
Moroccans to turn increasingly
towardsIslamicorganizationsand
charities.
54. TRIGGERS & DRIVERS OF UNREST:

The wave of regional unrest has
fuelled a dormant resentment over a
restrictive political and economic system,
joblessness and perceived inequality, and
denial of freedoms. Unlike some regional
neighbors, Moroccos current regime made
pre-uprising attempts to forestall an
unhappy populace. Upon inheriting the
throne from his father in July 1999,
Mohammed VI made changes to the
institutional, political and socio-economic
fabric of the kingdom. Broader freedoms
havebeengrantedtowomenandthepress.
The economy has marked an average
annual GDP growth of around 5 percent
between 2000 and 2009, paralleled with
surge in FDI and infrastructure
development. However, even at a
decreased poverty level, education and
youthunemploymentremainproblematic.
Table5MoroccoNationalStatisticsataGlance
2008 2009 2010 2011
GDP(US$Billion) 88.879 91.374 103.482 100.323
GDPPerCapita(US$) 2,850 2,899 3,248 3,116
GeneralDebt(%GDP) 48.2 47.7 49.9 52.8
Population(million)
31,177 31,514 31,851 32,187
UrbanPopulation(%) 56.02 56.36
UnemploymentRate(%) 9.6 9.1 9.o 9.1
CPIInflation(%) 4.2 1.8 2.2 2.6
HDIRank 0.556 0.562 0.567 -
55. COSTS SO FAR: The Moroccan uprising
hasbeenacomparativebargaininviewof
theongoingcalamityatothercornersofthe
Arab Realm. With political stability
relativelyunchallenged,MoroccosFDI-and
export-based economy (the phosphate,
textileandagriculturalsectors,inparticular)
has remained largely intact.The cost of the
protests to the Moroccan economy is nil,
with weak positive impact on GDP
estimatedatUS$18million,equaltoaround
0.02 percent of GDP. However, the
Moroccan government has increased its
expenditures (US$3,482 billion) despite a
lower rise of public revenues (US$282
million), inferring a total cost of
approximately US$3.2 billion to the fiscal
balance. Political and social uncertainties
inside Morocco have marginally affected
investments (through FDI inflows) and
tourism sector activity, and the impact of
higher oil prices on imported products,
which, unlike the cases of Jordan and
Lebanon, are not compensated for by
remittances from the Gulf, have been felt
across the country. A number of these
impacts have, however, been offset by
relatively high growth in the agriculture
sector, and while Morocco has experienced
a sharp increase in public expenditures
(US$1.588billion)thisspendinghasassisted
in maintaining social stability with the
introduction of subsidies on food and
petroleum products as well as social
transfers. Public and government restraint
havelimitedthehumancost:exceptingfour
self-immolations and a few injuries, no
casualtieshavebeenreported.
56. MAJOR RISKS & OPPORTUNITIES: Risks: The

reform process has yet to yield tangible,
street-level resultspotentially testing
publicpatience.Extremistgroups,operating
underground, can make use of uncertainty
for high-profile attacks or low-profile
support-building. Opportunities: The Arab
Springhasopenedawindowofopportunity
for transition towards a parliamentary
monarchy and economic development,
based on the principles of transparency,
accountability, social justice and wealth
repartition. Major development indicators
have been on the rise and are expected to
improve with GCCs recent decision to
considerMoroccoformembership.
57. FUTURE CHANGE AGENTS: (i) King

Mohammed VI; (ii) Politically empowered
population, including women, under the
newconstitution;(iii)theGCC.
58. CRITICAL FACTORS & LIKELY SCENARIOS:King

MohammedVIhasnotbeenatargetforthe
unrest; hence, he is likely to retain high
level of popularity, especially in view of
recent constitutional amendments.
However,futureunrestcannotbeexcluded
as royal power over governance
appointments security, religious and
cabinet-hasnotbeencompromised.

GOVERNANCE: Long-term political support en
route to democratization of the
monarchicalsystem.Employabilitycouldbe
boosted through improvement of the
education system. Support for more
accessibleandadequatebasicandessential
services.

TUNISIA
60. STATE OF PLAY: The first

domino in the chain of Arab
uprisings has seen a mixed
result: successful ousting
(dubbedtheJasmineRevolution)
of a hated leader, former
President Zine El Abidine Ben Ali, but little
relaxation of tight regime controls. As of
July, the Interim President and Speaker of
Parliament, Foued Mebazaa, has
indefinitely extended the state of
emergency introduced upon former
President Ben Alis flight from power in
January 2011. Elections for the National
Constituent Assembly (to assume oversight
of political transition and rewrite the
constitution in view of fairer electoral law)
have been deferred to 23 October and
parliamentaryandpresidentialelectionsare
expected in 2012. Much uncertainty still
persists, indicated by ongoingalthough
small scalepublic protest events, and
economicgrowthcouldsufferfurtherinthe
unpredictable climate which is
set to increase in the lead up to
elections.
61. TRIGGERS&DRIVERSOFUNREST:
Tunisia seemed, on the surface,
to be a healthy example of
secular, modernist, free-market statehood;
however, repeated demonstrations of
authoritarian contempt for the needs of
ordinarypeoplefusedifbrieflyadivided
society into genuine rage. Mohamed
Bouazizis desperate act of self-immolation
in Sidi Bouzid on 17 December 2010,
resonated with a public deeply humiliated
by repeated human rights violations and
corruption. Ben Alis rule since 1987, taking
up the reins and goals of the post-
colonialist Bourguiba presidency (1956-
1987) was seen as a betrayal of the dream
of independence. Self-rule and a diverse,
open economy had not protected Tunisians
fromrisingyouthunemployment,highcosts
of living for the poor and the indignity of
abusebyauthorityfigures.
Table6TunisiaNationalStatisticsataGlance
2008 2009 2010 2011
GDP(US$Billion) 44.878 43.523 44.290 46.623
GDPPerCapita(US$) 4,345 4,170 4,200 4,375
GeneralDebt(%GDP) 43.3 42.9 40.4 42.8
CPIInflation(%) 5 3.7 4.8 5
HDIRank 0.671 0.677 0.683 -
62. COSTS SO FAR: The cost of Arab Spring

uprisingstoTunisiaisestimatedat US$2.03
billion, amounting to roughly 5.22 percent
of GDP. Revolution in Tunisia, and the
Libyan conflict have produced serious
negative impacts on a number of sectors
including tourism, mining, and phosphate
and fishing production, as well as levels of
investment and inflow of remittances. In
response to the protests, the Tunisian
government increased its expenditures
(US$746 million), throwing the fiscal
balance of track by an estimated US$489
million. In terms of human cost, Tunisias
uprising led to approximately 100 deaths
andmanymoreinjuries.

Internal political fragmentation could
crystallize in lack of consensus over a new
constitution, potential boycott of elections
andcollisionbetweenthearmedforcesand
former administration. Expansion of
Islamist factions (with Ennahda generating
an electoral constituency base of 20
percent) is likely to compromise recent
political gains, civil and political rights.
Opportunities: Successful democratization
and liberalization (political and economic),
willofferthecriticalleveragefortransitions
elsewhere.

64. FUTURE CHANGE AGENTS: (i) Transitional
Authority and armed forces; (ii) UGTT and
PDP (iii) Trade Unions; (iv) Islamist
movements and the Congress for the
Republic (CPR) amongst other opposition
factions.
65. CRITICAL FACTORS & LIKELY SCENARIOS: A

representativedemocracycouldevolve.Yet
deferralofelectionshastriggeredalevelof
politicaluncertainty,alongwithasignificant
degree of insecurity. A tenuous, weak
government or a potential collapse of
confidence in the transition is a distinct
possibility. The worst-case scenario is a
militarycouperodingtheobjectivesofthe
revolution.

Significant international support is
necessary to offset Tunisias fiscal and
balance-of-paymentslossesandcushionthe
impact on the employment-fertile tourism
sector.Investmentineducationiscriticalto
boostemploymentamongsttheyouth.
JORDAN
STATE OF PLAY: Violent public protest against

corruption in Ammans poorest quarters
has catalyzed some regime compromises
namely (i) an investigation by the Anti-
Corruption Commission into several
headline-making cases; (ii) a
reshuffle of senior government
officials; and (iii) a National
Dialogue Committee to seek
compromise between the ruling
elite and the opposition on
revising the political system and
reforming a highly unpopular and
discriminatory electoral law. Tensions
remain palpable, but any major change to
the status quo is extremely unlikely.
Presenting the possibility of new tensions,
however, is the evacuation of almost all
stafffromtheIsraeliembassyinAmmanon
15 September amidst planned protests and
growing anti-Israel sentiment, catalyzed by
recent events in Cairo. This comes at an
unpredictable diplomatic period for Israel
and its allies. These new developments and
the Kings approach to relations with Israel
moving forward may exacerbate divides
andtensionsinJordan.

Surging oil and food prices, high
taxation, tension between
displaced foreigners (Iraqis and
Palestinians) and Jordanian
nationalsandunsustainablelevels
of unemployment are putting Jordanians
under extreme pressure. Corruption is
perceived to be endemic, bureaucracy all-
consuming and government largely
unaccountable. Jordans progressive youth
are also frustrated by a schizophrenic
government ideology that seeks to present
amodernfrontwhileplacatingconservative
tribal ideologies. King Abdullah remains,
ironically, very popular particularly among
the middle classeshaving continued his
fathers push towards trade liberalization
through inter alia WTO membership and
associate status at the European Union.
However, conservative forces are finding
Jordan an increasingly fertile field as
governmentsubsidiesfailtokeeppacewith
a rising cost of living for the poor, and as
Jordan remains diplomatically wedded to a
pro-Westernagenda.
Table7JordanNationalStatisticsataGlance
2008 2009 2010 2011
GDP(US$Billion) 22706 25.113 27.527 29.964
GDPPerCapita(US$) 3,881 4,199 4,449 4,788
GeneralDebt(%GDP) 58.4 61.8 61.4 62.8
CPIInflation(%) 9.6 2.7 5.8 5.2
HDIRank 0.673 0.677 0.683 -
68. COSTS SO FAR: The unrest has translated

intoconsumerpriceinflationandablowon
government fiscal and account balances. At
the bloom of the Arab Spring (10 January-
14 April), the Kingdoms equity markers
registered a fall of 11 percent. Foreign
direct investment and tourismthe latter
accounting for nearly 14 percent of GDP
have declined significantly. Nevertheless,
thecostoftheArabSpringontheJordanian
economy is low relative to that of other
Arab countries, with an approximate cost
totaling US$28 million, which equates to
0.20 percent of GPD. However, in addition
to the negative impacts on tourism, trade
anddirectinvestment,risingcostsofenergy
sparked by temporary interruption of gas
deliveries from Egypt and increasing oil
prices have exacerbated the economic
strain.Counteringthesecosts,however,are
the high prices of phosphate and iron ore,
which have continued to benefit Jordan,
and the increase in remittances from Gulf
countries. In addition, public expenditures
(US$1.178 million) decided by the
government to boost consumption and
keep social peace have added to Jordans
relative stability. Such measures include
social protection policies, tax cuts on fuel
and foodstuffs, additional subsidies and
increasedcivilservicesalariesandpensions.
When compared to a small rise in public
revenues of US$972 million, this public
expenditure does not present significant
economic implications for the Jordanian
economy.
69. MAJOR RISKS & OPPORTUNITIES: Risks: If

regional unrest continues, Jordan will find
itself bearing an impossible burden of
chronically high oil prices and rising fiscal
deficits.ParalleledwitheventualFDIcapital
outflows, the Arab Spring could leave
Jordan short of cash for financing higher
public expectations. Recent boost in food
and oil subsides risks pushing the overall
budget deficit to 6.8 percent of GDP
(increasing the cost of preexisting subsidies
by 2.1 percent of GDP). Opportunities: A
private-sector economic council has been
established to identify strategies and
policiesforencouragingprivateinvestment.
70. FUTURE CHANGE AGENTS: (i) large

Palestinian Diaspora (ii) low to middle-class
poor youth; (iii) the Islamic Action Front
(IAF); (iv) King Abdullah II and Queen
Ranias role in leading meaningful policy
andinstitutionalchanges.

71. CRITICAL FACTORS & LIKELY SCENARIOS:King
Abdullah must at all costs retain the
countrys cherished status as a peaceful
haven for business and diplomacy within
the Levant. However, implementing and
financing reforms will be a major challenge
to public coffers. Solutions will be
preferred that combine graduated political
compromise for poor and middle-class
Jordanians with monitoring of foreign
elements seeking to capitalize on
disaffection. King Abdullahs management
ofrelationswithIsraelwillalsobekey.

Substantial foreign support will be needed
to finance the widening deficit, to liberate
more national funds for basic services.
Long-term public expenditure shocks could
becushionedthroughbetter-targetedsocial
protectionmechanisms.
SYRIA
73. STATE OF PLAY: Operations led by the

Syrian armed forces intensified during the
month of Ramadan resulting in significant
civilian casualties. Continuing its
crackdown on dissent, Syrian
tanks attacked the town of al-
Rastan in the central province of
Homs overnight on 25
th
September. The Syrian

government remains defiant and
unyielding in confronting the protracted
civil unrest, portrayed by the State as acts
of terrorism. Mounting international
condemnation and diplomatic efforts by
allies such as Turkey and Russia, amongst
others, have failed to contain ongoing
arrests and armed offensives against
civilians. Major GCC states have withdrawn
their ambassadors from the country. The
U.S. and Europe imposed sanctions on
Assadstopofficials;however,international
consensushasnotcoalescedintoaSecurity
Council Resolution (as with Libya), with a
draft UNSC resolution rejected by both
Russia and China. Countering Lebanons
statement disassociating itself from UNSC
criticisms of Syria, Saudi Arabia provided a
strong Arab voice in condemning Assad
andcallingforhimtostepaside.
74. Assads moves to implement a reform
process have been repeatedly dismissed by
opposition leaders as gamesmanshipa
faade to quell dissent. A two-day meeting
between the Baath party and the
opposition initiated by the Syrian
governmenton10-11Julywasboycottedby
major opposition leaders. A
PartiesLawwaspassedinAugust,
allowingforpoliticalpartiestobe
set up alongside the leading
Baath faction. Military action in
Hama and elsewhere is ongoing,
and the international dilemma as
to how best support the opposition
movementremainsasdeepasever.
75. TRIGGERS & DRIVERS OF UNREST: Syria

represents one of the bloodiest
consequences of the Arab Spring. Unrest
has been propelled by: (i) popular
discontent over falling living standards; (ii)
economic constriction due to oil shortages
in a largely rent-based economy; (iii) and
systemically breached freedoms and
repression by an authoritarian regime and
its feared security apparatus. Violence
precipitated by the alleged torture and
murder of an adolescent boy by Syrias
mukhabarat (mlitary intelligence) has
reopenedoldsectarianandtribalrivalriesin
a country known for its peaceful inter-
religious coexistence. Initially demanding
the end of a State of Emergency in place
since 1963, the revolt now seeks to
overthrow the Assad Alawite dynasty,
established by President Hafez El Assads
whoupon his death in 2000amended
the Constitution to allow his son Bashar Al
Assad to take office by referendum. Under
both Hafez and Bashars rule, Syria has
become increasingly ostracized in the
international community due to
rapprochement with Iran and Hizballah, as
wellasallegationsovertheassassinationof
LebanesePrimeMinister,RafikHariri.
Table8SyriaNationalStatisticsataGlance
2008 2009 2010 2011
GDP(US$Billion) 52.573 53.908 59.330 68.336
GDPPerCapita(US$) 2,676 2,678 2,877 3,234
GeneralDebt(%GDP) 38.2 31.2 27.5 24.3
CPIInflation(%) 15.2 2.5 5 5
HDIRank 0.584 0.586 0.589 -
76. COSTS SO FAR: As of October 2011, the

civiliandeathtollsincethebeginningofthe
upheavals is estimated at nearly 2,900,
according to UN Human Rights Office.
Continuing offensives by Assads armed
forces increase this number by the day.
Thousands of injured, unlawfully arrested
and displaced persons add to the human
cost. The outcome of the Syrian protests
remains highly uncertain, though early
estimations indicate a total cost to the
Syrian economy of approximately US$6.074
billion (equal to 4.52 percent of GDP). The
drop in tourism, the decrease in public
investment and FDI inflows, and the
introduction of international economic
sanctions (oil exports in particular) have
severelyaffectedSyriaseconomy,resulting
in a forecasted GDP growth of -2 percent.
However, the economic costs to Syria are
limited by a sustained high level of exports
to and remittances from the Gulf, self-
sufficiency where oil is concerned allowing
Syria to partially avoid the increase of oil
prices,andgrowthintheagriculturesector.
77. In response to the protests, the Syrian

regime has introduced a number of social
measures designed to appease Syrias
increasingly frustrated and disaffected
society. Such measures include cash
transfers, civil service wage increases,
improvinghealthservicesandtaxbreakson
some food products, leading to an increase
of public expenditures by US$18.907 billion
in2011.Thisexpendituresituationhasbeen
worsened by a decrease in public revenues
in the region of US$2.317 billion (1.72
percent of GDP). In the short term,
increasing military costs and falling public
revenues will have an important impact on
the political stability of Syria implying a
US$21.22billioncosttothefiscalbalance.

Assads determination to remain in power
and a potential failure to integrate the
opposition into the reform consultation
process (as signaled by July developments)
risks escalating the unrest into an all-out
civil or inter-ethnic war with further
economic and social costs, and pressure on
Syrias peripheral allies. The potential for
bitter and protracted sectarian strife, even
intheeventofregimechange,isveryrealif
Syrias internal and external influencers
succeed in reframing the conflict in these
terms.Opportunities:Thecurrentstalemate
and sudden Saudi Arabian and GCC
condemnation could leave the Syrian
leadership with no opportunity but to
realignitsinterestsandpoliticalplatform,in
view of adequate decentralization,
repartitionofwealthandeconomicgrowth.
Recent consultation initiatives signal an
opportunitytointroducemoreinclusiveand
transparentdecision-making.
79. MAIN CHANGE AGENTS: (i) President

Bashar Al Assad; (ii) Baath party; (iii)
Opposition crystallized in new political
factions as authorized by the new Party
Law; (iv) Iran, Saudi Arabia, Turkey and
Russia.

President Al Assad looks unlikely to be
shiftedintheshorttermunlesskeyAlawite
militarycommandersdefect,furtherstalling
an overdue conciliation and transformation
process. Rejection of Assads initial offer to
opennationaldialogueonreformssuggests
that reaching consensus with the
opposition would be difficult and
opportunities for reform could be missed.
Irans underground channel of hardware
and intelligence to Assad will prolong his
rulewithoutstrengtheninghisposition,and
further destabilize the country. Saudi
Arabias recent condemnation of Syrian
leadership will reshuffle the regional
balance,includingallegiancesvis--visIran.
81. ENTRY POINTS FOR G20/UN SUPPORT: The

priority must be to leave the door open for
influence on both government and
opposition forces, to allow a viable exit
strategy for Assad or at least a platform for
compromise. Apart from containing
disproportionate force against civilians,
supportcouldfocusonimprovingthesocio-
economic balance sheet in Syria, most
urgently through employment generation
and economic growth. Specific focus areas
should include: (i) development of the
agricultural sector (high olive oil potential)
and (ii) the tourism sector (mostly
infrastructural); as well as (iii) enabling the
growthofprivateeconomicactivity.
BAHRAIN
82. STATE OF PLAY: Having been caught off-

guard by the rapid progression of mostly
Shiaa public protests, the ruling Al-Khalifa
family has succeeded in
smothering most public dissent
(with the assistance of the
Peninsular Shield Force). Further
sporadic rallies have taken place
since the lifting of the
emergency law on 1 June 2011, but have
not gained national momentum. The
government introduced a National
Dialogue but the withdrawal of the main
opposition group al-Wefaq National Islamic
Societyin early July has seriously
undermined the Dialogues credibility. In
addition, trials of those arrested since
Februarycontinuebehindcloseddoors.The
government crackdown has led to calls for
removaloftheKingandPrimeMinisterand
sparked public criticism of Bahrains human
rightsrecordfromtheU.S.
83. TRIGGERS&DRIVERSOFUNREST:
Bahrains majority Shia
population is politically,
economically and socially
marginalized, resulting in
grievances that are sources of constant
tension. Political representation is unequal
between sects; most ministerial posts are
appropriated by the Sunni ruling family.
Bahrain is also struggling to combat rising
unemployment, adding to frustrations and
unrest. The current trials of protestors and
perceived non-combatants (particularly
doctors)arrestedduringtherecentuprising
have provoked outrage. The uprisings can
alsobeviewedaspartofalongersequence
of political and social unrest, following the
1990s Intifada between the emirate
government and opposition movements
that resulted in approximately 40 deaths. A
referendum in February 2001 reinstated
constitutional rule and opened politics to
minority parties including Islamist groups
and human rights campaigners. However,
progress could not mask widespread social
inequity, and current crackdowns will sow
theseedsforfutureconflict.
Table9BahrainNationalStatisticsataGlance
2008 2009 2010 2011
GDP(US$Billion) 28.416 19.314 22.656 26.484
GDPPerCapita(US$) 6,074 4,698 4,591 4640.535
GeneralDebt(%GDP) 14.6 25.4 32.0 24.8
UrbanPopulation(%) 88.52 88.56
CPIInflation(%)
5.1 2.8 2 2.7
HDIRank 0.809 0.798 0.801 -
84. COSTS SO FAR: Bahrains economy has

suffered significantly. The Economist
Intelligence Unit (EIU) forecasts growth of
just 2.4 percent (compared to nearly 4
percentin2010),largelyduetotheimpacts
oftheuprisingonthefinancialsector.Esam
Fakhro, (Head of the Bahrain Chamber of
CommerceandIndustry)estimatesthatthe
cost of unrest in early 2011 to Bahrain
standsatUS$1.5bn-2bninlostGDP.
5
85. However, once oil prices and

production increases are included, the
overall cost of Bahrains uprisings to the
national economy in 2011 thus far is
comparatively low, totaling approximately
US$391 million (around 2.77 percent of
GDP in 2011). This is explained in part by
Bahrains significant and stable oil sector
production, contributing around 30 percent
of GDP. Given the dominance of the oil
sectorinthenationaleconomy,Bahrainhas
been able to limit impact on the fiscal
balance, with public revenues in fact
increasingbyUS$1.378billion,(around9.77
percent of GDP). However, public
expenditure has also increased in recent
months by approximately US$2.077 billion.
5
Economic Intelligence Unit (Aug 12, 2011) referring
toremarksquotedinLondon-basedAsharqal-Awsat.
This increase is due in part to government
cashtransfersofUS$2,660toeachfamilyin
an attempt to compensate for declines in
the banking, retail and toursim sectors, as
well as failed government efforts to
diversify the economy. These measures
were intended, at a societal level, to
increase employment opportunities,
prosperityandlivingstandardsforBahrians
inhabitants.
86. MAJORRISKS&OPPORTUNITIES:Risks:
Unrest will damage Bahrains reputation as
afinancialhub.Theoutcomeofthetrialsof
arrested protestors could exacerbate
unrest. Association of the uprising with
BahrainsShiascouldincreasesectarianism.
Opportunities: While expectations are low,
the National Dialogue could mark the
beginnings of reform and greater political
participation. Relocation of the
headquarters of the European Islamic
Investment Bank from London to Bahrain is
a positive step towards financial
stabilization.
87. FUTURE CHANGE AGENTS: (i) The Khalifa

family hold the key to reform; (ii) Regional
actors including Iran and Saudi Arabia; (iii)
Regional economic developments are also
pivotal.

Political unrest in Bahrain will continue,
withlittlehopeofmeaningfulreforminthe
nearfuture.Failuretoaddressgrievancesof
Bahrains society will exacerbate existing
tensions, and the National Dialogue
introduced in July is unlikely to lead to any
significant change. Political unrest will
impact negatively on foreign investment,
leading investors to shift operations
elsewhere. Bahrain will focus on economic
diversification away from oil in order to
addresssocialandeconomicgrievances.

Encouraging foreign investors to return to
or set up in Bahrain is criticalas is reform
to the current subsidy system. Given
Bahrains growing debt burden, G20
supportispivotalfordevelopmentprojects,
infrastructure and debt re-financing. This
willcomplementBahrainsreceiptofhalfof
a US$20 billion GCC fund for housing and
infrastructure. Political reform is key to
address discrimination against Bahrains
Shia population, improving employment
and services. International efforts to
stabilizewiderregionaltensionswillalsobe
an important factor, particularly vis--vis
Iran.
OMAN
90. STATE OF PLAY: The Omani
administration has mitigated social unrest
that peaked in February 2011 through a
stick and carrot approachdeployment of
armed forces matched with a
riseinminimumwage.Therehas
been little overt criticism of the
Omans Sultan Qaboos; rather,
protests have been directed
against ministers and powerful
businessmen. Ministers implicated in
corruption have been dismissed, which has
lead to restructuring of certain organs of
the state. The Council of Oman is expected
to absorb legislative and audit powers,
amendments yet to be entered into the
Basic Law. The Financial Affairs and Energy
ResourcesCouncilshavebeenrestructured.
Participants in Februarys Green March
were largely members of a fast-growing
young population frustrated by excessive
state control over the media and restricted
freedom of expression. Unemployment and
growing inequality have fed
demand for a more open system
ofgovernanceinoneoftheGulfs
most hidebound pillars. Oman
wasoneofthefoundingstatesof
the GCC in 1981, after pursuing
an ambitious economic liberalization and
modernization strategy that did not extend
to the political system. A non-participatory
political structure, ruled by decree in the
absence of a legislature and political
parties,remainsinplacetodate.
Table10OmanNationalStatisticsataGlance
2008 2009 2010 2011
GDP(US$) 60.568 46.861 55.62 66.048
GDPPerCapita(US$) 21,747 16,255 18,656 21,421
GeneralDebt(%GDP) 5.1 8.0 5.9 4.1
Table10OmanNationalStatisticsataGlance
CPIInflation(%)
7.8 3.4 3.4 3.3
HDIRank n/a n/a n/a n/a
92. COSTS SO FAR: Omans economy has

been partly safeguarded by a strong
hydrocarbon sector and higher oil prices.
However, the economic cost of the Arab
SpringtoOmanisrelativelyhigh(US$1.087
billion) amounting to approximately 1.25
percent of GDP, with protests and
moderate unrest detrimentally affecting
investment, tourism and economic
diversification. In response to protests, the
Omani government adopted important
social measures including the creation of
jobs,increasingtheminimumwage,andthe
introduction of a monthly unemployment
benefit of US$390, amongst others. These
measuresresultedincostsofapproximately
US$1.157 billion (about 3.54 percent of
GDP),which,inturn,haveplacedlong-term
fiscal pressure on the state. Volatile oil and
gas export prices and the recent downturn
in domestic oil production may not support
such expenditures for long, and gas
shortages have resulted in delay and
cancelation of major industrial projects.
However, Oman has been able to take
advantage of high public revenue increases
intheregionofUS$5.397billion.Intermsof
human costs, at least two fatalities have
beenreported,amidstforcefulremovaland
incarceration (without charge) of hundreds
ofdemonstrators.

Sultan Qaboos bin Said al-Saids exclusive
rule is at the core of future instability.
Growing uncertainty over the upcoming
succession of the throne could trigger a
second wave of unrest with substantial
impact on FDI, the private sector and
tourism. Recent gains towards
diversification and employment generation
could be lost. The security crisis in Yemen
could inflict a refugee influx and increase
the threat of penetration of al-Qaida in the
Arabian Peninsula (AQAP). Opportunities:
Should political reforms manifest, the
tourism sector has the potential to
contribute towards diversification of
revenue. Recent rapprochement with India
will allow for increase in non-oil exports.
Expanding non-oil industries will create
more stable sources of employment and
allowformoreinclusiveeconomicgrowth.
94. FUTURE CHANGE AGENTS: (i) Sultan

Qaboos bin Said al-Said, enjoying popular
support; (ii) New generation of politically
activeyouth.
95. CRITICAL FACTORS & LIKELY SCENARIOS: The

reform process underway is unlikely to
meet public expectationsparticularly
towards employment generationleading
toagradualbutsporadicescalationinsocial
unrest focused around key moments in
Omans political calendar, stressing the
economy. Regime change, however, is very
unlikely.
96. ENTRY POINTS FOR G20/UN SUPPORT: The
G20 could most usefully focus on
encouraging economic diversification for
employment, through creating an enabling
environment for expansion of businesses
andmoreopencompetition.Gasshortages
should be addressed as a major constraint
togrowth.

97. STATE OF PLAY: The Arab Spring reached
Saudi Arabia in March 2011, but an initial
flurry of demonstrations were
bannedonthepretextthatthreats
to national security and stability
will not be tolerated. The present
political and security situation is
relatively stable but the regime is,
at root, extremely vulnerable due to high
levels of unemployment, unease at pro-
Western economic links and widespread
infiltration by extremist groups provoking
disproportionate security expenditures to
maintain the status quo. This unease will
likely be exacerbated during a fragile
process of succession. King Abdullah bin
Abdel-Aziz al-Saud acted fast to forestall
unrest by pledging an estimated US$100
billiontoincreasepublicwagesandwelfare
benefits,aswellasfortheintroductionofa
house-buildingprogram.Minorgovernment
reshuffles have taken place, though the
Cabinet remains in its pre-Spring format.
Party politics remain illegal. The second
municipal elections are scheduled to take
placeon22September2011.
6
98. Renewed Saudi-Iranian cooperation is

also a new possibility following positive
dialogue emanating from Iranian and Saudi
foreign ministers. In addition to Bahrain, a
number of other regional challenges
largelysectarianinnatureconfrontboth
regimes, which may deem co-operation
mutuallybeneficial.
99. TRIGGERS & DRIVERS OF UNREST: Saudi

Arabiaisperhapsthemostpolarizedsociety
in the Middle Easta hugely influential
bastion of conservatism in the heartland of
Islam, run by absolute monarchs who
6
In2010,SaudiArabiawasawardedthelargestarms
dealinUShistory,totalingUS$60billion.
project themselves as caretakers of
tradition, whilst pursuing a pro-Western
economic agenda and exuberant
lifestyles. A founding member of
GCCandOPEC,SaudiArabia,asan
economic powerhouse, defines
the direction of economic growth
throughout the Middle East.
However, lack of economic diversification
and human rights repression at home has
opened the door to grassroots rather than
extremistdisaffection.
100. COSTS SO FAR: The Arab uprisingand

events in Libya in particularhave boosted
Saudi GDP by US$5.019 billion. In addition,
public revenues have been boosted by
US$60.93 billion through the increase of oil
prices and increased Saudi oil production.
As a result of internal troubles, the Saudi
authorities have also embarked on a huge
social spending program, which will cover
construction of accommodation, increasing
civil servant wages and wider public
investments. This cost equals US$37.83
billionapproximately15.6percentofGDP.
101. In response to social demands, the

government has indefinitely extended the
15 percent inflation allowance for state
employees (phased over the past three
years). The cost of this and other measures
isexpectedtoreach25percentofGDPover
several years. The current trend of
increasing fiscal surplus on the back of
booming crude production (raised by 0.40
barrels a day December-February) hinders
the expansion of the non-oil sector,
trimming stable job sources. Furthermore,
unpopular intervention in Bahrain has cost
Saudisomeregionalcredibility.
SAUDIARABIA
Given the financial commitments made by
the Saudi regime to placate public opinion,
oil price volatility presents major risks to
stability. Current fiscal surplus projections
are highly fallible, based on a surge in oil
price and decline in output amongst other
oil exporters. Any surplus could be
momentary and gains may fail to offset
increased long-term government spending
(US$130 billion), risking budget deficit. The
private sector will be set back under the
Saudization" program, envisaging
preferential employment for Saudi
nationals. Saudi militants currently
operating in deteriorating Yemen could
returntofermentunrest.

103. Opportunities Current fiscal surplus
could be injected into high employment
generating industries such as tourism and
manufacturing. Increased employment
opportunities can contribute to expanding
the non-oil sector, offering opportunities
forfurtherdiversification.
104. FUTURECHANGEAGENTS:(i)KingAbdullah
bin Abdel-Aziz al-Saud and his Cabinet; (ii)
Politicallyactive,economicallydeprivedand
socially discriminated women and youth;
(iii)Islamicfactions.

Comprehensive political and social reforms
will be resisted by conservative senior
officials and the Saudi clerical
establishment. Remobilization of protests
is less likely than further underground
fracturing of state security. Intervention in
Yemen might be considered to offset
potential spillover threat from that conflict.
The process and outcome succession may
provecritical.

Unemployment could be offset through
encouraging growth in non-oil industries.
Further efforts could focus on generating
political consensus on womens
enfranchisement, as well as achieving
broaderpoliticalandeconomicequality.
Table11SaudiArabiaNationalStatisticsataGlance
2008 2009 2010 2011
GDP(US$Billion) 476.941 376.268 443.691 578.566
GDPPerCapita(US$) 19,156 14,744 16,995 21,685
GeneralDebt(%GDP) 13.2 16.0 10.8 8.3
Population(Million) 24.897 25.519 26.106 26.680
CPIInflation(%) 9 4.9 5.4 6.6
HDIRank 0.746 0.748 0.752 -
YEMEN
107. STATE OF PLAY: Three months after

survivinganassassinationattempt,Yemens
President Ali Abdullah Saleh returned to
Sanaa at dawn on 23
rd
September 2011.
Despite calling for a truce and
ceasefire, Salehs return raises
real fears of full-blown civil war.
Following Saleh's return,
protests in Change Square,
Sanaa were marred by violence
as protesters were caught in
clashes between the army and dissident
soldiers. While the death toll remain
unconfirmed, some reports indicate
upwardsof40casualtiesacrossthecity.
108. Yemensbrutalconflicthasteeteredon
the edge of regime decapitation since
President Saleh fled the country to Saudi
ArabiainJune.Hisdecisiontobackoutofa
GCC brokered peace plan intensified
confrontation between security forces and
Hashid anti-regime tribesmen. However,
Salehhasnowagreedtoreturntothetable,
with a recent announcement that he has
authorized Abdrahbuh Mansur Hadi
Yemensvice-presidenttosignaGulfArab
initiative paving the way for transfer of
power.Thisannouncementcamesoonafter
thousands of protestors stormed Sanaas
main university on 17
th
September, calling
for an end to the current regime. However,
it may be too late to prevent a de facto
fracturing of Yemen. The death of the
Chairman of the Shoura Council and Saleh
ally, Abdulazziz Abdulghani, has sparked a
fresh wave of protests and clashes with
loyalists to Sadiq Al-Ahmar. Islamist
militantshavetakencontrolofthetownsof
Zinjibar, Jaar and Shuqrah in the Abyan
governorate, accelerating displacement
levels and constraining a humanitarian
response.
109. TRIGGERS & DRIVERS OF UNREST: The

regionsmostextremeexamplesofpoverty,
weak service delivery and inequity can be
found in Yemen, stressing an already
fragmented national identity
fused from two formerly
conflicting entities. With heat
applied by regional unrest,
frustrationfinallyboiledoverinto
demands for political pluralism
and an overdue leadership
change. Ali Abdullah Salehs presidency
from 1990 has been propped up through
consecutiveelectionsby quidproquotribal
support. The collapse of this deal has
added internal power struggles to a mix of
socio-economic malaise, local insurgencies
and externally aided extremist movements.
Militants have taken advantage of Yemens
weak central authority since anti-
governmentprotestsbeganinJanuary,with
militant bases dominant in Yemens
southernprovincesandsomeeasternareas.
Of particular concern to the U.S. and other
Western governments is the presence and
potential role of Al Qaeda in Yemen if
regimecollapseresultsinapowervacuum.
110. COSTS SO FAR: The ongoing conflict has

negatively affected the economy, devaluing
the Yemeni Riyal and leading to substantial
surge of commodity prices. A significant
portion of the population has been pushed
below the poverty line (estimated to reach
15 percent in the near-term if the Riyal
continuestoweaken).Aparallelfuelcrisisis
hurting the private sector. Distribution of
waterandfood,aswellasaccesstomedical
aidhasbeendisrupted.Fuelshortageshave
also led to security incidents. Amidst
conflicting reports, some sources indicate
that the cost of transporting goods to
market has risen by up to 60 percent,
resulting in a significant rise in the price of staples such as flour and sugar.
Table12YemenNationalStatisticsataGlance
2008 2009 2010 2011
GDP(US$Billion) 26,909 25,131 31,273 38,255
GDPPerCapita(US$) 1,171 1,060 1,281 1,522
GeneralDebt(%GDP) 36.4 49.9 40.6 42.0
UnemploymentRate(%) 15 - - -
CPIInflation(%) 19 3.7 9.8 8.9
HDIRank 0.424 0.431 0.439 -
GiniCoefficient 37.7 37.7 37.7 n/a
111. Yemen has suffered significantly as a

result of internal troubles, with a total cost
to the economy estimated at US$121
million, equal to 6.33 percent GDP. This
comes despite high remittances from the
Gulf. Serious ongoing conflict has affected
public and private investment in Yemen,
halting the process of economic
diversification, and production in the
servicesandhydrocarbonsectorshasfallen.
Social measures were introduced by the
Government, such as bonuses and
allowances to civil servants, and exemption
from tuition fees for students, but public
expenditure is forecasted to reduce by
US$630 million, (equal to 32.89 percent
GDP) due to current weak governance.
Furthermore, the cost to public revenues
will be extremely high (estimated at
US$1.488 billion) producing a significant
negative impact on the fiscal balance
translatingtoapproximatelyUS$858million
(44.87percentofGDP).

Soaring inflation is a threat due to sharp
increase in food and gas prices, as supply
has been severely disrupted. Further
decrease in oil output, offset by higher
import of refined oil, could shrink
government revenue, widen the fiscal
deficit and contract real GDP. A rule-of-law
vacuum upon any regime change could
produce a destructive environment
amongst the military echelons, offering
opportunities for terrorist infiltration into
the political realm. Opportunities: Current
political momentum allows for overcoming
an underdeveloped and largely cash-based
economy. Further public revenue could be
generated through Yemens first liquefied
naturalgasproject.
113. FUTURECHANGEAGENTS:(i)Heavilyarmed
tribes; (ii) Hamid al-Ahmar, allegedly
financing the opposition and aspiring to
leadership; (iii) Republican Guard; (iv)
Islamic factions; (v) increased Al-Qaeda
involvement; (vi) GCC and Saudi Arabia in
particular, given its significant influence
overYemenskeyactors.

President Salehs decision to reconsider a
peace deal is unlikely to quell unrest, with
elements of the revolt now outside his or
the Hashed tribes control. Attempted
secessions are possible. Next steps may be
shaped by a compromise administration
includingelementsofthearmedforcesand
Hashedtribeelements.However,President
Salehs insistence that his son should
remain in the next government provides
littleoptimismforasmoothtransition.

Defusing the political, security and
humanitarian crisis is the most urgent
priority for international support.
Substantial foreign assistance is crucial to
avoid a catastrophic economic crisis, which
risks delegitimizing all engines of state and
potentiallyextendingextremistpoliticaland
territorialinfluence.
IMPACTONOTHERREGIONALHOTSPOTS
IRAQ
116. Iraqisatapivotaltimeinwhatstillisa
post-war phase of development, despite it
approaching the ninth
anniversary of Saddam Husseins
downfall. Iraq continues to be
plagued by violence perpetrated
by a range of groups including
Al-Qaeda in Iraq. August proved
to be the bloodiest month in a
year, with an estimated 395 civilian deaths
accordingtoIraqBodyCount(IBC).
7
117. The balance of power within Nouri El

Malikis coalition government, unable to
take shape for eight months because of
wrangling, is extremely delicate; its
relations with neighbors Syria, Iran, Turkey,
Jordan and Kuwait even more so. Iraq does
not have an investment in the preservation
of regimes currently under pressure. In
particular, relationships with the Syrian
Baathist government have been
deteriorating for the past two years, and
theburdenofexternallydisplacedIraqishas
beenafactoraggravatingtensionsinJordan
andSyria.Butinstabilityinitsneighborhood
isalreadyhavingaprofoundeffectonIraqs
public-political dialogue. There are major
question marks over the entire state
apparatus and its ability to deliver
accountability, adequate public services,
economic and physical security. While the
issuesatplayherestretchfarbeyondrevolt
against autocracy, the regional turmoil is
adding fuel to the fire and increasing the
7
IBCreferencedinEconomicIntelligenceUnitcountry
page,September12,2011
political stakes for Iraq as it struggles to
buildafunctioningstate.
118. To date, popular unrest has

induced a number of high-level
political resignations,
widespread arrests and dozens
of fatalities. The absence of a
government for eight months
hassignificantlydecreasedcapitalspending.
Mounting public demands for employment
generation have refocused public
investment in labor-intensive but low-
productivity sectors, such as agriculture.
Deeply wedded to an oil-only revenue
model, Iraqs current surge of oil profits is
decreasing momentum to seek more
inclusive sources of economic growth, to
generate sustainable employment for the
rapidlygrowinglaborforceanddevelopthe
financialsystem.Withoutreliablewaterand
electricity, living standards and enterprise
both suffer dramatically. Insecurity is still a
consistent factor in Iraqs inability to
express its potential; frequent attacks on
strategic targets in Baghdad and
assassination attempts targeting key
political figures have tested the capacity of
Iraqi security forces to sustain stability post
U.S.withdrawal.
119. The outcome of Prime Minister Nouri

al-Malikis 100-day reform, aimed at the
dismissal of nonperforming ministers, is
overdue. The current uprisings also offer
some surprising opportunities for Iraq. A
significant reform agenda in Syria, Jordan
and the Gulf may open both political
dialogue and possibilities for economic
integration. Models for translating oil
revenue into non-oil economic growth-
improving education, stimulating
businesses and employment-resourceful
industriescouldalsobeshared.
120. COSTS SO FAR:Giventheenvironmentof

political,economicandsocialinstabilitythat
has gripped Iraq since 2003, separating the
economic cost implications of the recent
Arab Spring from pre-existing costs is a
difficult task. However, it is possible to
identify and partially explain a number of
recent developments in the Iraqi economy
in the context of regional consequences of
the Arab Spring, particularly relating to oil
prices, investments, remittances and trade.
The contribution of Iraqs oil sector to
national GDP has increased sharply during
the uprisings across the region, caused
primarily by an increase in oil production
andprice(estimatedatUS$11.1billiontotal
increase of public revenues) in light of the
Libyan crisis. Government expenditure on
public investments, social reforms and the
security sector, totalling around US$12.99
bn, have been offset by these benefits.
However, rising political instability, both in
Iraq and across the MENA region, has
prevented the development of Iraqs non-
oil sectors, with investment and
remittances disrupted and in some cases
halted, and deterioration in terms of trade
withneighboringcountries,sparkedbyhigh
prices of imports. Nevertheless, Iraqs
forecastGDPgrowthremainsataround9.6
percent , despite an Arab Spring cost to
Iraqs GDP estimated at US$, 1.329 bn,
(approximately3.37percentofGDP).
LEBANON
121. LebanonhasahighstakeinArabSpring
outcomes, particularly in Syria. In June
2011,anewgovernmentwasformedunder
Prime Minister Najib Mikati, however
cabinetdeadlockinAugustoverthepassing
ofanenergyinvestmentplanhas
already highlighted government
fragility. The balance of power
between the March 8th and
March 14th blocs has shifted,
with significant increases in the
representation of the latter dominated by
pro-Syrian and Shia representatives.
Hizballah currently risks losing its crucial
Syrian ally, which would perhaps compel
Iran to fill the gap and heighten tensions
with Israel. The aftermath of the Special
TribunalforLebanon(STL)intothekillingof
formerprimeminister,Rafiqal-Hariri,could
polarizepoliticalandsectariandivides,with
thepossibilityofviolence.
122. Increasing Lebanese interests over the

last decade in the Gulf has been shaken by
the Bahrain and Oman uprisings.
Confidence in the economy is low, exports
are low, and the construction, services and
tourism industries upon which
the Lebanese economy reliesas
well as remittancesare at the
mercyofregionaldevelopments.
123. While the Arab Spring has

expressed itself in Lebanon through elite
reshuffling rather than popular unrest, the
political scene is likely to remain tense and
divided. This will, in turn, inhibit economic
growth. Political unrest and lack of
confidence in the economy mean that GDP
growth in Lebanon will be slow. The EIU
forecastsrealGDPtogrowbyanaverageof
2.5 percent for the year 2011-2012
compared with an average of 8 percent for
thepreviousyear.
124. Lebanon desperately needs a stable

source of economic support particularly if
intervention from Iran or Saudi Arabia is to
be avoided. Efforts to redress the socio-
economic inequities that mirror sectarian
divides could play a key role in cooling
sectarian tensions. Addressing these
tensionsattheregionallevel,particularlyin
the Gulf, is also important given the
emergence of new international alliances
defineddirectly or indirectlyby religious
sect. Lebanons neighbors remain, as ever,
vitaltoLebanonsstability.
125. COSTS SO FAR: While avoiding major

protests, Lebanon has been negatively
impactedbytheArabSpringsweepingthe
region. The reason for this stems
predominantly from Lebanons open
economy,whichishighlydependentonthe
regionalpoliticalandeconomicclimate,and
particularly that of neighboring Syria. The
overall cost of the Arab Spring to Lebanon
has not been estimated but the cost to
public revenues is around US$932 million,
including around US$146 million for tax
breaks, with the remainder caused by a
decrease in construction activity. Main
contributing factors that have impacted
upon Lebanons economy as a result of the
Arab Spring include: (i) deterioration of
regional trade caused in part by the Syrian
conflict, (ii) high energy prices due to
temporary interruption of gas deliveries
from Egypt, (iii) increase of the cost of
imported products caused by the high oil
prices (though partially offset by the
increase of inflow remittances from Gulf
countries), (iv) low tourism sector activity,
mainly fromotherArab countries, and (v) a
dropinFDIinflow.
SUDAN
126. Sudan has been relatively cushioned

from events in the Middle East and North
Africa due to its own major internal
struggles; however, dormant anti-
government sentiment in the North has
been awakened and President Omar Bashir
hasbeenobligedtoannouncehewouldnot
stand for a new term. South Sudans
independence on 9 June 2011, following a
98.8 percent referendum vote in favor of
separation,hasleftkeyborder,oilanddebt
issues unaddressed and reignited clashes.
TheUNInterimSecurityForcehasdeployed
in disputed Abyei to prevent a military
takeover by either side. Fighting increased
in South Kordofan and Blue Nile state
(although a ceasefire in Kordofan is now in
effect). Border disputes, oil and debt will
remain ongoing tension between the North
andSouthfortheforeseeablefuture.
127. The Government of South Sudan

(GOSS) and the National Congress Party
(NCP) are faced with opposition, internal
disunity and tribal conflict. Internal
fragmentationwithinSouthSudanisalsoat
risk with Sudan People's Liberation
Movement (SPLM) struggling to manage
tribal conflict and militias. The NCP and
SPLM have made little progress towards
post-secession arrangements, though
Chinas Foreign Minister has offered China
to mediate. Such mediation could become
necessary should relations between North
andSouthdeteriorate.
128. Despite its own larger issues at stake,

Sudan remains vulnerable to an uprising
particularly in the North. Economically,
investment is low and real GDP growth is
expected to drop from an estimated 5.2
percent in 2010 to an average of 4.2
percent in the coming months. Should
discontent with al-Bashirs regime in the
North fuel a major opposition drive, results
forregionalstabilitycouldgoeitherway.A
new way of thinking in Khartoum could
ease tensions in Darfur, as well as the
South,orsparkincreasednationalismanda
hardening of attitudes. Both North and
South Sudan need support to prevent an
Arab Spring spilloverthrough bolstering
the accountability and credibility of their
governance structures, promoting
transparency, and addressing tribal, ethnic
and economic grievances. International
actors have a key role to play to address
tensions over economic interdependencies,
the disputed province of Abyei, and border
demarcation. Support may also be required
ineconomicdiversificationawayfromoil.
129. COSTS SO FAR: It could be argued that

Sudans economy has been significantly
affected by the Arab Spring if the partition
of the North and the South is viewed
through the Arab Spring lens. The costs to
Sudans GDP are estimated at US$1,047
billion, with a total cost to revenues
standing at US$374 million.
ISRAEL/OCCUPIEDPALESTINIANTERRITORIES
130. A view of recent events from

Jerusalem,theWestBankorGazahaslikely
beenbothperplexingandalarming.Leaders
in all three areas are triply exposed to
potential fallout(i), from unpredictable
shifts in regional and international
allegiances; (ii) from the diversion of G8
resources previously channeled to their
political causes, (iii) from protest spillover
into their own constituencies, and most
recently (iv) the Palestinian campaign for
membershipandUNstaterecognition.
131. ISRAEL:Israelisinaparticularquandary.
Well aware that a democratic model in
former Arab autocracies does not
necessarily augur well for neighborhood
relations, Israel has been stumped on how
and whether to welcome emerging events
inEgypt,SyriaandtheGulf.Regimechange
in Egypt and developments on Israels
periphery have already required
reconfiguration of national security
priorities. Egypts embargo on Gaza has
been lifted and the blockage of the Rafah
border crossingthe sole border bypassing
Israelhasbeenreopenedintheaftermath
of the crackdown on Mubaraks regime,
unleashing potential arms smuggling into
the Hamas-administered Palestinian
territory.
132. Protests on Israels northern borders
with Syria and Lebanon are also offshoots
of the Arab uprisingas Assad attempts a
diversionfromthebleedingstreetsofSyria.
Of all the possible outcomes in Syria, none
look very promising for Israel's current
leadership. Regime change in Damascus is
unlikely to improve relationships across the
GolanHeights.AndwhiletheKnessetwould
bedelightedwithanyscenariohurtingIran,
it is far from clear that a Sunni-dominated
or chaotic Syria would be a true body blow
to Ahmedinejad and the Supreme Council.
Iran would lose a key ally in Assad, but it
would also gain space to assume some of
Syrias influence elsewhere; moreover, an
unstable Syria might provide greater scope
for agitation on Israels border. Balancing
these threats against the known devil of
Assad, it is easy to understand why
Netanyahu took so long to join the
international clamor for Assads departure.
Israel has also experienced a weakening in
relationship with two key allies. Israeli
relationswithTurkeyreachedanewlow,as
Turkey expelled the Israeli ambassador in
response to Israeli refusal to apologize for
the Gaza flotilla incident. Additionally,
relations with Egypt look uncertain as the
Egyptian population expressed their anger
at Israel through the storming of the Israeli
embassy in Cairo, following the shooting of
threeEgyptiansoldiersbyIsraelitroops.
133. Aside from these regional woes,

Netanyahus Likud coalition is also
extremely vulnerable at home. It has failed
todelivervictory,peaceorprosperityinany
politically palatable form. High cost of
housing and food prices have sent
thousands of middle-class Israelis onto the
streetsinanechoofregionalevents.
134. Protests on government policy are

different from revolutions across the
border;however,theyareinfluencedbythe
aura of populist success (notably in Egypt),
and play on deepening fault lines in Israeli
society.Zionism,securityandsocialequality
three foundational concepts of the State
of Israelare under pressure. Israels
polarized society is being hammered apart
bydemographicshifts,financialconstriction
andawarofattritionapparentlyimmuneto
eithercompromiseorhardlineapproaches.
Left wing opposition groups are doing all
they can to ride the wave of frustration
towards greater political influence. Likud
has pledged economic compromise to
placate political foesbut in doing so risks
alienatingcoalitionallies,particularlyYisrael
Beiteinu. This limits scope for compromises
onthePalestinianfront.
135. PALESTINIANTERRITORIES:Thoughslowoff
the mark, the Palestinian Arab Spring
caught up on May 14th-15th, with mass
demonstrations across the Palestinian
territoriesandrefugeecampsinLebanonto
commemorate the Naqba (catastrophe)
marking the creation of the Israeli state in
1948. In addition, as a welcome diversion
from its own troubles, Syria assisted
hundreds of Palestinian protestors defy
Israeli border fences and enter the Golan
Heightssomething which no Arab Army
had managed to do in 38 years.
8
When
8
The Economist, Spring for Arabs, winter for Jews,
19
th
May2011
combined, Palestinian protests along with
HizballahIsrael confrontations led to
more than 15 deaths and many more
injuries. Despite this, the Palestinian
Spring has been somewhat muted, with
threats of a third intifada failing to
materialize.
136. Where Israels policy towards the

Palestiniansisconcerned,Fatahhasmostto
lose from an inflexible Israeli posture,
including in its jockeying with Hamas. The
Cairo Agreement stipulates that elections
for the Parliament, the Presidency of the
PalestinianAuthority(PA)andthePalestine
National Council (PNC) are to take place in
October 2011. By then, Hamas position in
Gaza will be even stronger than before.
Mubarak had pursued a strategy of
containment and isolation vis--vis Hamas,
keeping them out of the peace process for
its own security and as part of its U.S.
engagementpolicy.WithEgyptspolicynow
in flux and Syria in ongoing turmoil, Hamas
is likely to benefit. A Hamas closer to Egypt
and distanced from Syria is, ironically, an
idealoutcomeforboththePalestiniansand
Israelremoving Hamas least helpful
promoters, adding some legitimacy and
perhaps catalyzing a greater maturity as a
governance force with an agenda beyond
Israel-baiting. However, as long as Israels
blockade of Gaza continues, the blame for
catastrophic governance and economic
failures will continue to fall outside,
reducing whatever pressure Hamas might
feel to move beyond its political
adolescence. Currently, Fatah is far more
exposed than Hamas to the deep economic
frustrationsofitsvoters.
137. However, the Cairo Accords are a

genuine opportunityand a concrete
outcomeofArabSpringpoliticsmanifesting
in the would-be Palestinian State. The
unevenstateofplayinCairoandDamascus

has made both Fatah and Hamas more
keenlyawareofhowtenuoustheirregional
support mechanisms are and, therefore,
how much they need each other. Peaceful
and fair elections in the Palestinian
territories would further Palestine's
capacitytoleverageatwo-statesolution.
138. Tocapitalizeonthisopportunity,Fatah
and Hamas need to move beyond key
sticking pointsrecognition of Israel and
adoption of non-violent approaches. Their
willingness to do so may depend on long-
term transitions elsewhere in the Arab
world. With nearly 2 million registered
Palestinian refugees in Jordan, and another
million split between Lebanon and Syria,
Palestinian leaders are steered by regional
winds almost more than any others. If new
administrations in key capitals, particularly
Cairo, can give Hamas as much incentive to
come to the table as it has had thus far to
stayaway,thennewpossibilitiesmayopen.
However, to bring suffering populations
along in Gaza and the West Bank will take
morethanregionalinfluence;itwillrequire
a concerted effort to alleviate economic
and human rights woes, and to convince a
weary populace that a more accountable
system of governance has their best
interests at heart. The implications of the
PalestinianbidforUNMembershipisbriefly
discussedbelow.
INFOCUS:PALESTINIANBIDFORUNMEMBERSHIP
On 28th September 2011, the United Nations Security Council (UNSC) discussed Palestines application to
becomeaUNMemberStatebeforeforwardingtheapplicationtotheUNSCCommitteeontheAdmissionof
New Members. Earlier that same week, the 15-member body held closed-door discussions regarding the
applicationofficiallysubmittedbyMahmoudAbbastoSecretary-GeneralBanKi-moonon23rdSeptember.If
the Palestinian application succeeds at the UNSC, a recommendation will then be presented to the 193-
memberUNGeneralAssembly,whereatwo-thirdsmajorityofvotingmembersisrequiredforadmissionofa
newState.
Pending a final decision, the world waits anxiously, though many are resigned to (or hopeful of) what they
perceive as a pre-defined outcome, resulting ultimately in a rejection of Palestines applicationnot least
given confirmation from the United States of its intention to veto any Palestinian statehood recognition.
However, Should the Palestinians succeed in gaining full state recognition and membership to the UN, the
implications will be significant for relations both with and between Israel, the Middle East region and the
international system as a whole. That said, a majority of UN member states (120) already recognize a
Palestinian state. In this sense, the positive impact of a yes vote on UN membership for the Palestinian
Authority will be limited and will imply few changes in terms of foreign relations. Negative impacts on the
other hand could be significant with financial penalties and restrictions imposed by the US and further
drasticmeasuresimposedbyIsrael.
InthecontextoftheArabSpring,outsideofPalestinesUNbid,recentdevelopmentsconcerningIsraeland
Palestinehavebeenwhippingupsentimentandexacerbatingpre-existinginternalandinternationaldivides
across the Middle East for months now. Angry reactions to the killing of Egyptian soldiers during an Israeli
operation along Egypts borders expressed through attacks on the Israeli Embassy in Cairo, and threats of
similaractioninJordanraisedtensions,whiledeteriorationinTurkish-Israelirelationsthreatensthebalance
ofpowerandallegiancesacrosstheregion.Notably,however,theArabrealmsreactiontoallthingsIsrael-
PalestineisexpressedmoreoftenthannotthroughangryreactionsagainstIsraelratherthansolidsupport
forthePalestinianswhenitisneededmost.ThishasremainedthecasethroughouttheArabSpringtodate,
andtheArabresponsetoPalestinesapplicationforUNmembershipregardlessoftheresultisdifficultto
predict.

139. Using data from the International

Monetary Fund (IMF) for selected
economies, we forecast that the costs of
the Arab Spring to GDP on Libya, Egypt,
Tunisia, Yemen, Bahrain and Syria currently
stands at US$15.87 billion. Our analysis
indicates that, while the region is
benefitting economically from the Arab
Spring, there will be both winners and
losers between countries and within
countries.Howwillthesecostsandbenefits
accrue between nations and what impact
may these have on the political and
economicfutureoftheregion?Largely,this
isastoryofoil,thehealthofpublicbalance
sheetsanddomestictrouble.
SUMMARYFINDINGS
140. Those countries that have taken
significant economic, social and political
risksthroughengaginginsocialstrugglewill
lose economically in the short term, with
GDP contracting significantly. Egypt, Libya
Syria, Tunisia and Yemen are projected to
lose the most. It remains to be seen
whether the short-term costs and risks of
social upheaval will be repaid with interest
by longer-term economic, social and
political dividends. The longer these
dividends take to accrue, the less incentive
there will be for other societies to take the
inherent risks associated with social
struggle.
141. Those countries that we project to

benefit in the short term from the Arab
Springsharetwocharacteristics;theyareoil
exporters and successfully suppressed
socialmovementsintheirearlystage,partly
through increased Government
expenditure. Economic and political
benefits in these countries have channeled
tothosewithpower,therebystrengthening
their position and the incentives to keep a
grip on power. Until the pay-offs accrue, to
thosecountrieswheresocialupheavalhave
taken place, the risk of social struggle
furtherspreadingintheregionislow.
METHODOLOGY
142. Costing the Arab Spring in 2011 cannot
be done precisely because many critical
economicindicatorsareunavailableandthe
situation is highly fluid. For example, the
costs of social reforms, military operations
or future elections cannot be estimated
precisely.
143. For these reasons, we assume that the

difference between the projected GDP
value for 2011 published in October 2010
and then again in September 2011 is the
best methodology to calculate the
economic impact of the Arab Spring. This is
becausetheprojectionscomefromasingle
reputable source and are made before the
uprisings broke out. These are compared
with the most recent projections available.
Weusedthesamemethodologytocostthe
impact on the fiscal balance. We then
subjected the figures to judgment to arrive
at finalized numbers. We employ real GDP
values as forecasted for 2011 by the IMFs
World Economic Outlook to account for
inflation. We assume that no other factors
thantheArabSpring,anditssecondaryand
tertiaryeffects,haveanyimpactonGDP.
4: COSTING THE ARAB SPRING

WINNERS & LOSERS
THEACCRUALOFCOSTSANDBENEFITSOFTHE
ARABSPRING
144. We project the net impact of the Arab
Spring in Libya, Egypt, Tunisia, Yemen,
Bahrain and Syria to be US$15.87 billion.
The region as a whole is projected to
benefit economically from the Arab Spring
in 2011. Some economies are projected to
be net economic losers while others net
economicwinners.Howthesenetcostsand
benefits are projected to accrue across
countries depends on country-specific
factors relating to the nature of their
individualuprisings,theresponse,andtheir
context prior to the uprisings. We split the
countrieswestudyintothreegroups:
Countries who will lose the most with

fewwinners;
Countries who will lose but where
therearesomewinners;and,
Countrieswhowillwinwherethereare
manywinners.
COUNTRIESLOSINGMOSTWITHFEWWINNERS
145. The countries projected to lose the
mostintheshorttermfromtheArabSpring
intermsofGDPEgypt,Libya,Syria.Tunisia
and Yemenhave experienced either
prolonged and/or intensive civil
disturbances and have not managed to
suppress the uprisings. In these countries
there are likely to be few net winners as
GDP is contracting significantly. However,
wins from increased public expenditures
willbeexperiencesbysomeinSyria,Tunisia
and Egypt. In Yemen and Libya public
expenditures have fallen considerably
alongside public revenues as Government
collapsed. It is in these countries that there
will be the fewest winners over the short
term.
146. The length and intensity of uprisings in

Egypt, Libya, Syria, Tunisia and Yemen
indicates the extent to which citizens are
willing to risk economic losses over the
short term in the hope of accruing pay-offs
in the future. How the economic and
political benefits accrue in these countries
and, especially, who they accrue to will be
key in determining how successful
belligerents and observers view the Arab
uprisings.Itistooearlytomakepredictions
oftheeconomicandpoliticalbenefitsofthe
Arab Spring and where these will be
channeledinEgypt,Libya,Syria,Tunisiaand
Yemen, but the longer it takes for these
benefits to accrue, the more harm
aggrievedbelligerentswillfeel.
COUNTRIESLOSINGONAGGREGATEWITHMANY
WINNERS
147. Many other countries, such as Bahrain
and Jordan, are projected to lose in terms
of GDP but will experience significant
economic benefits to some sectors and
actors. In these countries GDP projections
for 2011 have fallen slightly while public
expenditure is projected to rise
significantly. This is a result of disturbances
toproduction,expenditureandinvestment,
ascomponentsofGDP,butalsolargepublic
expenditures in the form of increased
salaries in the public sector, food subsidies
andreducedtaxesonfuel,amongothers.
148. In these countries many are projected

to win from the increases in public
expenditure. Those who will win are also
thosewiththemosttolosefromsocialand
political upheaval. Soldiers, civil servants,
car owners, urban-based upper- and
middle-incomeclasseswiththemosttolose
from the Arab Spring will see fresh
incentives not to challenge the status quo.
As a result, economic and political benefits
in these states will channel to those with
influence, thereby strengthening their
position and their incentives to keep a grip
onpower.

COUNTRIES WINNING ON AGGREGATE WITH
MANYWINNERS
Theoilrichcountriesintheregionthathave
suppressed or avoided uprisings are
projected to gain the most from the Arab
Spring. Saudi Arabias projected GDP for
2011 increased by around US$5 billion (or
2% of GDP) as a result of the Arab Spring,
whileUAEsincreasedsubstantiallyoverthe
same period. Uprisings in other oil
exporting countries, such as Yemen and
Libya, have been partly responsible for the
large increases in the price of oil and
production levels. As GDP is projected to
benefit from the uprisings of the Arab
Spring, so are the winners within the
country due to increased projected social
expenditures. Winners from these
expenditures include the construction
sector and civil servants, as well as broader
winners as a result of broader public
investments.
Table13EconomicImpact(%GDP)
Countries ImpactonGDP
ImpactonPublic
Spending
ImpactonPublic
Revenues
Algeria -1.70% -0.94% 11.28%
Bahrain -2.77% 14.73% 9.77%
Egypt -4.20% 5.36% -0.07%
Iraq -3.37% 32.93% 28.14%
Kuwait 1.41% 2.95% 27.70%
Jordan -0.20% 8.15% 6.72%
Lebanon n/a -5.76% -19.09%
Libya -28.17% -55.26% -84.10%
Mauritania 0.15% 13.12% 17.89%
Morocco 0.02% 4.23% 0.34%
Oman -3.33% 3.54% 16.52%
Qatar -3.52% 6.76% 8.89%
SaudiArabia 2.07% 15.60% 25.13%
Sudan -9.68% -14.47% -3.46%
Syria -4.52% 14.05% -1.72%
Tunisia -5.22% 1.92% 0.66%
Yemen -6.33% -32.89% -77.76%
Sources: Geopolicity staff calculations based on October 2010 and September 2011 World Economic Outlooks and
AfDBprojections(Libya).

Table14ImpactonGDP(BillionUS$,2011)
Countries ImpactonGDP
Libya -7.674
Egypt -4.27
Qatar -3.38
Tunisia -2.03
Algeria -1.44
Syria -1.388
Iraq -1.32
Oman -1.087
Lebanon n/a
Sudan -1.047
Bahrain -0.39
Yemen -0.121
Jordan -0.028
Mauritania 0.002
Morocco 0.018
Kuwait 1.000
SaudiArabia 5.019
Sources:IMF(WEO),AfDB
Table15ImpactonFiscalBalance(billionUS$,2011)
Countries Impactonpublicexpenditures Impactonpublicrevenues TotalImpactonfiscal

balance
Libya -15.05 -21.54 -6.48
Egypt 5.44 -0.075 -5.521
Syria 4.319 -0.529 -4.85
Morocco 3.48 0.28 -3.2
Iraq 12.99 11.10 -1.89
Yemen -0.63 -1.48 -0.85
Bahrain 2.0 1.3 -0.69
Tunisia 0.74 0.25 -0.48
Jordan 1.17 0.97 -0.20
Mauritania 0.17 0.24 0.06
Sudan -1.56 -0.37 1.19
Qatar 6.49 8.53 2.04
Oman 1.15 5.39 4.24
Algeria -0.8 9.6 10.41
SaudiArabia 37.83 60.93 23.09
Kuwait 2.09 19.63 17.54
Lebanon -1.83 -0.93 0.89
Sources:IMF(WEO),AfDB

149. By October 2011, the overall benefits

of the uprising remain largely intangible
and in many cases, the costs appear to
significantlyoutweigh anyimmediategains.
Future benefits are equally ephemeral.
Arabs participating in demonstrations from
Morocco to Oman are demanding quick,
visible and transparent reformsthe very
commodities that
governments struggle to
deliver well. Only
countries such as Qatar
and the UAE, both with
established long-term
national reform agendas,
have not been directly
affected by the uprisings. However, should
the Arab League and Gulf Cooperation
Council pursue strong leadership in
coordination with the wider international
community, at this most critical junction in
historythen, there remains significant
room for pragmatic optimism. Vision and
leadership for change in the Arab realm
already exists to realize this great
opportunitybut an inclusive roadmap for
the region must be foundone that
includes peace between Israel and
Palestine. Potential benefits of such a
roadmapinclude:
150. A Strategic Re-think on Peace

Consolidation: The impetus of the Arab
Spring could provide fresh incentives
towards policy change on longstanding
regional bugbears. The benefits (for US and
Israel particularly) of supporting autocratic
regimes and monarchies in the interest of
stability are no longer clear. Secondly, if
greater political voice is to be allowed
across the Arab realm, Israels policy
towards Palestine will need to soften
considerably. The key question remains,
therefore, over how best to reform the
Arab realm (from within) whilst minimizing
the risk that a rise in nationalism
undermines the complex relationship
between Israel, Egypt, Syria, Lebanon,
Jordan and of course Palestine. This is
particularlycrucialgiventhatregionalpeace
must remain the long-term agenda. On the
other side, if
autocratic voices fail
to listen to the voices
of reform, there
remains a
considerable risk (as
highlighted by the
attack on the Israeli
Embassy in Cairo) that a larger uprising
destroysanypossibilityofpeace.
151. TheRiseofGlobal-FacingYouthCulture
in Regional Politics: Arab youth has
comprehensively rejected the overall
controlframeworkthathaskeptpolitics,oil
and corruption in the hands of a few. They
represent the true potential of the Arab
Spring. International support for
macroeconomic stabilization alone will not
address the fundamental structural
problemsthatstifledthemforsolong.New
leaders and their international supporters
have a clear mandate for a reform
framework that addresses the core drivers
ofdiscontent,ataminimumencouraging:
Improvedfreedomofexpression;
Greaterstatejusticeandseparation
ofpowers:
Political rights/expression and the
right to formal, legal, political
opposition;
Greater capital equity and
utilization over national oil
revenues;
5: LONG-TERM OPPORTUNITIES
Thevisionandleadershipforchangein
theArabrealmalreadyexiststorealize
thisgreatopportunity.However,an
inclusiveroadmapfortheregionmust
befound-onethatincludespeace
betweenIsraelandPalestine.
Human rights for minority groups
andgendermainstreaming;and,
PeacebetweenIsraelandPalestine
152. How Can Long Term Benefits Be

RealizedWithoutUnderminingtheFutureof
Peace? Formal adoption of a medium- to
long-term road map is required and should
be premised on the observations that
benefits will only accrue once fundamental
changes are made to political freedoms,
economicequality,transparencyandmedia
spheresacrosstheArabrealm.Thisprocess
has already started, and the leadership of
the Arab realm has adopted viable change
models to this end, as illustrated below.
Another key driver of
reform,particularlyin
oil dependent
countries,isthedrive
for economic
diversification and
foreign direct
investment as oil
supplies slowly begin
to dry up. The
regional focus on removing the binding
constraints to growth and improving the
enabling and business environments are
essential to meet diversification objectives,
though such an approach naturally has
social and capital equity implications.
Further,withcountriessuchastheUAEand
Qatar depending heavily on a foreign work
force,asoftforeignpolicyisrequired.
The United Arab Emirates, a Federal

Presidential System, member of the GCC
and Arab League, and elective
Constitutional Monarchy, is pursuing a
relatively progressive reform agenda in the
context of the Middle East whilst also
spearheaded economic and social
diversification leaving it as one of the
wealthiest countries on earth. His Highness
ShaikhMohammadBinRashidAl-Maktoum,
Vice President and Prime Minister of the
UAE,inamessagetothenationstatedthat
taking part in the Federal National Council
(FNC) elections is a test for the people of
the UAE to exercise their rights. UAE now
playsanincreasinglycentralroleinregional
and international relations. The UAE is now
committed towards a path to establishing
more democratic institutional structures,
withwomenrepresenting46percentofthe
Electoral College, a path that regional
leadersneedtolookatverycarefully;
Qatar, an absolute monarchy,

established a Consultative Assembly and
has shown commitment to holding
legislative elections, whilst also charting a
course for economic diversification away
from oil and gas. Qatar
has been awarded the
2020FIFAWorldCup,has
one of the highest per
capita incomes in the
world, and is home to
Aljazeera, which plays a
central role in regional
and wider international
media. Like the UAE and
Lebanon,Qatarhasplayedasignificantrole
in supporting the Transitional Council in
Libya and is a member of the GCC, which,
having established a common market, is
alsoconsideringtheestablishmentofaGCC
CentralBankandcurrency.
153. So, How Can the International

CommunitySupportanArabRenaissance?A
key issue discussed here is the likelihood
that loan based support provided through
G8 will do little more than stabilize the
macro-economic situation in a small
numberoftargetstates.Itwillnotdealwith
the social crisis being faced. The UN too,
which is organized around country
programs, has no means to engage, as an
implementer, without being seen to be
partisan. So far, the little support provided
has been for government rather than non-
governmental and civil society institutions.
As such, given (i) the fiscal crisis faced by
Theregionalfocusonremovingthe
bindingconstraintstogrowthand
improvingtheenablingandbusiness
environmentsareessentialtomeet
diversificationobjectives,andsuchan
approachnaturallyhassocialandcapital
equityimplications.
the west, (ii) the fact that the Arab League
and GCC have become significant donors in
theirownright,(iii)thattheEUandUNlack
the procedures and instruments for
expedited engagement, (iv) that oil-based
states need increased foreign direct
investment to diversify their economies,
and(v)theneedforstrongArableadership,
the international community must focus its
efforts on support for socio-political
transformation and security reform first,
coordinating any support through the
reform oriented members of the Arab
LeagueandGCC.Furthermore,dealingwith
Syria, through non-covert means will be
critical to the outcome of regional peace
prospects.
6: COUNTRY TRANSITION PRIORITIES
154. Should the Arab League/GCC take the
necessary step of adopting a regional
reform road map that can be supported by
the members of the regional and
internationalcommunities,itmustconsider
political, security and socio-economic
priorities on a country-by-country basis. In
Libya for example, investments in political
infrastructure are vital for successful
transition, but macroeconomic support and
financing to kick-start the oil economy re-
build infrastructure is also required. In
Syria,anentirelydifferentreformroadmap
is required to move beyond the current
impasse and chart a course to greater
stability.
155. With the UAE, Qatar, Kuwait and

Franceforexample,nowheavilyinvolvedin
financing significant property and telecoms
investments from Egypt to Tunisia and
Libya, any road map will need to be meet
both domestic and foreign direct investor
requirement. Reforms will therefore need
to focus on strengthening property and
commercial laws whilst clamping down on
corruption. In the most corrupt countries
the weak enabling environment and often-
archaic regulatory controls undermine a
stronger private sector, and an economy
that is more globally integrated. For oil-
based economies, economic diversification
requires a more liberal economic ideology
to be accelerated, and an economy that is
open to business. Economic realitiesthe
need to spur growth and combat high
unemployment levelswill lead to a
stronger civil society, albeit predominantly
shapedbytheprivatesector.
9
9
The problems being faced by France Telecom in its
launch of Orange Tunisie and Qatar Telecoms 75
percent stake in Tunisiana are evidence of risks of
poorly regulated FDI deals. UAE based DAMAC
156. Whilst Arab realm countries need to
chart their own reform programs,
leadershipandvisioncanbestbeleveraged
from the experiences of other countries
such as the UAE and Qatar, who are
successfully navigating complex socio-
economic transitions that covers political,
security and socio-economic spheres. This
section therefore, provides an indicative
frameworkofmeasuresthatcouldformthe
foundationforsucharoadmap.
157. The following matrix provides a brief

summary of the main structural challenges
for each country and the implications for
national and international support, with
strong focus on maintaining economic
stability, strengthening legislative and
constitutional reforms to foster broad
based growth, gender and human rights
and encouraging long term economic
diversification which has become vital to
transitional success. The list is illustrative,
notexhaustive.
Propertieshavefiledaninternationalarbitrationcase
against Egyptover the development of the Festival
Cityat the International Centre for Settlement of
InvestmentDisputes.
Table16FrameworkofPossibleCountry-BasedCorrectiveMeasures
Country CoreStructuralChallenges ImplicationsforEngagement
Egypt Absenceofaclearroadmapfortransition.
Security and political vacuum stalling
recovery.
Identifying strong growth and employment
futures;
Political freedoms requiring constitutional,
lawandorderandjudicialreforms;
Strengthening the regulatory environment to
encourageprivatesectorinvestmentandFDI;
StablerelationswithIsrael.
Economicadjustmentandpoliticalliberalization.
Counter-cyclical macroeconomic policy and fiscal consolidation is key to reducing
inflationinertiaandthecostsofdisinflation.
Creating a vibrant economy to absorb the 700,000 people entering the labor market
annually, likely mean a strong focus on property rights, commercial law, commercial
creditandskillstraininganddevelopment.
Enhance competition so that markets become more contestable for domestic and
foreigninvestors,meaningapredictableandopenbusinessandtraderegime.
Creating a business environment that attracts and retains private investment and
supportssmallbusinesses.
Reforminglabormarketsandlaborlaws.
Reducingthefiscaldeficitthroughremovingsubsidies.
Ensuregreaterinvestmentininfrastructure,humancapital,andsocialprotection).
Algeria High unemployment rates (especially among
youth)andlowstandardofliving;
FDI regulations deter foreign investors and
hampergrowth;
DeclineinNon-PerformingLoans;
Volatile natural gas prices and exports linked
tooilpriceinfluxandindustrialactivity;
Lackofdiversificationofthetradablesector.
Constitutionalandenablingregulationreforms.
Encouragesustainable,diversifiedandprivateinvestment-ledgrowth.
Achievemacroeconomicstabilityandrestorefiscalprudence.
Modernize and strengthen the financial sector and improve business climate to
enhanceprivateinvestmentandemploymentgeneration.
Increasenon-hydrocarbonrevenues.
Contain public spending thought greater control of the public sector wage bill, better
targetingoftransfersandsubsidies,andprioritizationofpublicinvestmentprojects.
Achievewiderintegrationintheregionalandglobaleconomy(encourageFDI).
Enhancegovernanceandmodernizationofpublicbanks.
Libya Absence of a clear roadmap and agents
(institutions and public administration
capacity)fortransition;
Constitutional, electoral and reconciliation
processes;
Democratizationandhumanrights;
Migration (return of refugees /displaced
persons);
Establishpoliticalinstitutionsandnon-stategrowthenablingregimes;
Lift sanctions (delisting) from previous regime and provide access to frozen state
assets.
Economicadjustmentandpoliticalliberalization.
Provideemploymentopportunitiesforayoungandgrowinglaborforce.
Advancestructuralreformstosupportprivatesectordevelopment.
Implement reforms to diversify the economy and reduce the high dependence on oil
revenue.
SSR/DDR;
Largeexcessliquidityinthebankingsystem.
Investment funds outside the budget
complicatepublicexpendituremanagement.
Cast fiscal policy in a medium-term framework to minimize the impact of oil price
volatility.
Containtheincreaseincurrentspendingandensurethequalityofspending.
ImprovethegovernanceofLCBandencouragefiscalprudence.
Morocco HighlevelsofIlliteracy;
Address unemployment, poverty and
inequality;
Sustainmacroeconomicstability;
Inflatedcommodityprices;
Declining growth in the Euro zone (primary
tradingpartner);
High public expenditure (wider budget
deficit).
Reform and strengthen the education sector to enhance workforce capacity and
productivity.
Reorient, manage and rationalize expenditure to allow for improvement of education
andhealthservices.
Introduce further structural reforms, to promote inclusive economic growth,
strengthen the business environment and accelerate employment generation and
livingstandards.
Achieve macro-economic sustainability though the introduction of sound fiscal
measures.
Furtherimprovetheenablingenvironmentforprivatesectorgrowth.
Civilservicereformtoincreaseoutputandlowerexpenditurelevels.
Expansionanddiversificationofexports(beyondphosphates).
Tunisia Adopting and inclusive electoral process and
clarifytheroleoftheConstituentAssembly;
Resolve disagreements between the state,
IslamandIslamicpractice.
Politicaluncertaintyandspill-overfromLibya;
Higher and more inclusive growth and
employmentgeneration;
A regulatory environment discouraging
privatesectorinvestmentandFDI;
Economicgovernanceandtransparency;
Financialsustainability.
Navigatecomplexpoliticalandsecuritytransition.
Developeconomicandsocialrecoveryplans.
Improvegovernanceandtransparencyincludingrecoveryofstateassets.
Offset increase in current spending, whilst reorienting, managing and rationalizing
allocationofresources.
Advance structural reforms to support private investment, and encourage higher and
moreinclusivegrowth.
Stimulatetheeconomytoaccommodatethedemandofover1millionjobsinthenext
decade.
Reformthelabormarketandeducationsectortoaddressunemployment.
Substantialinvestmentininfrastructureasaprerequisiteforsustainabledevelopment.
Jordan Politicaluncertainty;
High unemployment amongst educated
youth;
Scarce natural resources, harming the
developmentoftheagricultureandindustrial
Greaterpublicsectorefficienciesnecessitatesacivilservicereformandmoderationof
thepublicsectorwagebill.
Prioritization of capital spending, including replacement of generalized subsidies with
targetedsocialprotectiontools.
Achieve fast and more inclusive growth, inclding through stimulating tourims
sectors and creating dependency on
commodityimportsandexternalgrants.
Broadbasedgrowthinvestments;
Private sector productivity and external
competitiveness.
(inversmentinifnrustructure)andtheprivatesectors(SMEssupport)asanenginefor
empoymentgeneration.
Accelerate growth through wider regional trade integration (enery and rail sectors)
andremovalofremainingtaxexemptionsoncommodities.
Further liberalization (energy and water sectors) to improve business environment,
boostingproductivityandexternalcompetitiveness.
Debtmanagement.
Syria Rigid labor market regulations impede job
creationintheformalsector;
Socialandpoliticalfreedoms;
Large numbers of refugees and internally
displacedpersons;
Prolonged stalemate between regime forces
andtheopposition;
Political stabilization, reconciliation and
publicsectorreform.
Restore security and political stability, complimented by a public administration
reform.
Facilitatepoliticaltransitiontowardsreformsandabroaderdemocratizationeffort.
Promoteinclusiveandsustainableeconomicgrowth.
Introducetargetedsocialprotectionmeasures,avoidingunaffordable/excessivepublic
spending.
Tackleunemploymentthroughrelaxationandreformoflaborlawsandintroductionof
structural reforms, creating a better enabling environment for the formal private
sector.
Bahrain High debt levels, resulting from Increased
governmentborrowing(pastyears);
Downturn in construction and financial
services,amidstlownon-oilrevenues;
Growth is anticipated below historical
averages;
Enhancement of human capital and tackling
unemployment;
Improving the provision of basic services
(health,education,housing,etc.).
Rebalance the fiscal accounts in order to accommodate reforms in the education,
health and housing sectors and generate employment opportunities (given lower
growth).
Achieve higher public savings though better targeted public investment (ex.
compensatorytransferstovulnerablehouseholds).
Seekdiversificationoftheoilrevenuebase.
Furtherstrengthendebtmanagementcapacity.
Address uncertainty in the legal and regulatory framework to improve the business
environment.
Introduce public administration reforms in view of strengthening public sector
productivity.
Fostergrowthandinvestmentthroughhigherintegrationwithregional(GCC)markets.
Oman Privatesector,non-oileconomicgrowth;
Sustainable and accelerated employment
generation to accommodate employment
needs of a young and growing population
(~43%under15yearsold);
Strong and sustainable non-hydrocarbon growth to generate employment for the
rapidlygrowingpopulation.
Enhanceproductivitythroughreformsintheeducationsector.
Address anticipated decline of hydrocarbon reserves through a multi-year budgeting
framework,fiscalprudenceandhighersavings.
A monetary policy environment constrained
byacurrencypeg;
Rapidsocialandculturalchange.
Increasetargetsubsidiestothemostvulnerable.
Strengthenthebankingsystemandmonetarypolicythroughmacro-prudentialtools.
Stimulate the private sector through higher access to finance (relaxation of interest
ratesandquantitativeceilings).
Saudi
Arabia
Provide jobs and housing for growing
population;
Improvetheenablingenvironmentforprivate
sectorgrowth;
Oilrevenueoverreliance;
A conservative clergy stalling meaningful
politicalandsocialchange;
Humanrightsandequality;
Peacefulsuccessionofpower.
Constitutionalreformandelectoralreform.
Furtherdiversifypublicrevenueandexpandthenon-oilsector.
Enable the private sector (small and medium enterprises) by accelerating access to
finance.
Stimulateemploymentgenerationthroughpublicinvestmentsthatcomplimentprivate
sectorgrowth.
Enhancetheeducationsectorinviewofhigheremployabilityandproductivity.
Furthermainstreammeaningfulreformstowardsgenderequality.
Carefullybalancesocialreformwiththeexpectationsoftheclergy.
Yemen Weakstructuresofpoliticalrepresentation;
Economiccollapseandsoaring
unemployment;
Scarcerecourses(landandwater)underlining
unrest;
Excessive fuel subsidies (about 810% of
GDP);
Risk of penetration of terrorism into the
politicalrealm;
Unreststallingreforms.
Constitutionalandelectoralreform.
Strengthenruleoflawandnationalcounterterrorismcapacity.
Publicsectorreformandstrengtheningtheprovisionofbasicservices.
Inclusiveandsustainable,privatesectordrivengrowth.
Strengthen tax policy and administration reforms to reduce reliance on the
hydrocarbonsector.
Reducefuelsubsidiesandintroducebetter-targetedsocialprotectionmechanism.
Introducereformsandregulateland/resourceownership.
7: STRATEGIC ROADMAP AND

G20/UN SUPPORT OPTIONS
SECURINGTHEMEDIUM-TERMPICTURE:
158. Thepotentialfortransformationacross
the Arab world is now higher than at any
time since the 1950s. No matter which
regimes fall and which cling to the helm,
populations have shown a far broader
vision of their future than a mere crucible
for religious ideologies, or a safe harbor for
G20 economic interests. G20 economies
have a particular responsibility to help
securethisvision:theG20containsregional
representatives and will, by necessity,
shoulder most of the burden of
international financing for transitions. A
recent G7 meeting reiterated financial
support for the transition to democracy in
Egypt, Tunisia and for the first time,
Morocco and Jordan. A total of US$38
billion in loans has been promised to these
fourcountries.
159. What would be the most promising

medium-term picture for Arab world
transition? And where could G20 and UN
interests best align in support, given that
Western and Middle Eastern political
priorities will not always (and should not
always) converge? Further, how should the
G20 and UN best work with the Arab
League and GCC countries, given the
leadershiprolebeingplayedbytheUAEand
Qatar, for example? Analysis in this report
suggests that four essential strategies to
achievethefollowingtargetsaremostlikely
toassuremutualbenefits:
Stable, inclusive and sustainable

economiesbasedonsolidregionaland
progressivelyglobalintegration;
Resilient and accountable governance
systems balancing rights and
responsibilities;
Charting a course towards long-term
economic diversification away from oil
dependency, which requires a strong
private sector and civil society and
enabling legislation to business and
capital investment rights. Arab spring
countries need to be open-for-
business;and
10
Homegrown and open socio-political

frameworks adapting the democratic
processtoArabworldpatterns.
STRATEGICENTRYPOINTS:
160. Any road map would need to take
immediate, short and long-term priorities
into consideration, be driven internally by
the Arab realm/countries themselves and
be supported by the international
community (G7/G20/UN). Should Arab
world leaders and G20 focus on these as
primarytargetsforanewpartnership,then
expertise and financing can channel
towards the following key entry points for
internationalassistance:
Economic Support: Critical shifts in

macro-economicbalanceacrosstheArab
world should be implemented based on
diversification, re-distribution,
integrationandyouthdevelopment.
a. Macroeconomic Stabilization is
vital to allow transitional
10
Foreigndirectinvestmenthasbeenbadlyhitforall
countriesembroiledinconflict,ashavecountrycredit
ratings, increasing the costs of borrowing
considerably.
governments off set production
losses which have significant
revenues and employment
implications; now and over the
medium term. Where broad-scale
infrastructure damage and
disruption of oil production has
occurred investments to not only
bounce-back but rather to
bounce-forward should be
secured. G20 fiscal stimulus
support should however be set
within a programmatic framework
to foster long term transition
objectives, with achievable
benchmarks that allow early
structuraladjustmenttotakeplace;
b. Economic Diversification is the

primary challenge in the most
sensitive economiesto encourage
greater private sector ownership,
reduce oil dependence in some
cases and promote job creation to
make space for a necessary
streamlining of bloated public
sectors. Managing the economic
transition requires various socio-
economic measures to be carefully
sequenced.Therisksthatsignificant
investments by the regional and
global communities are stymied by
weak investment and capital
protection laws also needs
attention, as evidenced by telecom
and land deals in Tunisia and Egypt
alike;
c. Re-distribution of wealth is a
parallel priority, where support is
needed to redress perceptions of
social injustice and do more to
relieve absolute poverty while
reducing strain on welfare budgets.
Redistributionofwealthwillalsobe
required to spur economic
diversification, given that an
economy of corporate giants will
fail unless small to medium
enterprises are central to side-
stream and downstream
investments;
11
d. G20 and UN Support for regional

integration is key to longer-term
politicalhealthintheMiddleEast;it
is simply not viable that an oil-
only club and private hydrocarbon
interests should dominate regional
economic cooperation.
Opportunities also exist in IT,
banking, telecoms, commodities
and other areasrequiring a more
thoughtful approach to strengthen
cooperationandmutualinvestment
mechanisms (through the banking
sector and more dynamic
relationships with international
institutions including the IMF and
the WTO). The UN is particularly
weak in the Arab realm,
underscoring the urgent need for a
review of how to move away from
traditional country-based support
programs to a more strategic
transboundaryapproachwithcloser
tiestotheArabLeagueandGCC.
e. Youth Development must also

remain a cornerstone policy over
and above more traditional
considerations; youth opportunity
(or lack thereof) has been a
significant driver of recent events.
High fertility rates and poor
education systems mean that every
year more young people will enter
job markets, ill prepared and with
poor prospects. A comprehensive
reform program must forge better
links between education and
11
Greater transparency over the management of
national oil and gas reserves, and wealth
redistribution mechanisms are also required, and the
Extractive Industry Transparency Initiative (EITI)
providesaframeworktowardssuchobjectives.
employment sectors, and look even
more fundamentally at basic
mother and child support, nutrition
andhealthcare.
Governance:Stabilityisbestguaranteed
by slowly re-orienting public sector
governance and accountability
structures, security sector reform (SSR)
and in many cases decentralized service
delivery.
a. Political, Constitutional and

Legislative Reformsforwarded
within a rights-based framework
are urgently required in many
countries studies here. Other
measures include adopting country-
based political reform road-maps,
strengthening the separation of
legislative, executive and judicial
powers, where necessary
constitutional reforms and laws that
protect domestic and foreign
investment to strengthen the
enabling environment. Moreover, if
theprivatesectoristoemergeasthe
long term driver of growth and
employmentwhich is vital for Arab
states to navigate the long term
transition away from oil
dependencypolitical, security and
legislative reforms will need to be
carefully reviewed; covering land,
capitalrightsandlaborlaws;
b. PublicWageBillsneedtobebrought
downan over-large public sector
that accounts for a disproportionate
amount of full-time formal
employment is indelibly linked to
corruption and economic
mismanagement. Rightsizing core
state economic functions by
delimiting mandates to encourage
contracting out will be key. Archaic
and often convoluted civil service
administrative systems need
modernization to re-orient towards
service, openness and performance,
andtoimprovedregulatoryoversight
of the emerging private sector.
National fiscal and expenditure
prioritieswith the national budget
set as the central tool of policywill
meanthatanyroadmapofcorrective
measures needs to be reflected in
nationalpolicyandspending;
c. Security Sector Reform is essential in

Egypt, Libya and Tunisia in particular,
as part of reconciliation and reform
effort, linking demobilization of
policeandmilitarypersonnelwithjob
creationinitiatives;
d. Basic and Essential Services: Above

all, UN agencies, funds and programs
canprovideacomprehensivesupport
to promote better service delivery.
Services are a bellwether for public
perception of and investment in
stability. Governments that promise
freedoms and reform constitutions,
but cannot keep the water and
electricity running, will not last long.
Service efficiency can mean
decentralizationbut not in every
case.Countriescanallbenefitfroma
two-phase model of public sector
modernization (scoping then
implementation, based on a sector-
by-sector approach) adapted from
examplesintransitioningcountries.
12
Socio-political: Different approaches

apply for countries experiencing regime
change and those where old power
structures remain but have shown a will
toadapt.
12
Water stress will emerge as one of the biggest
challengesofthewiderArabrealm,andalongsidethe
longtermtransitionfromoildependency,sustainable
and collaborative regional solutions will need to be
found.
a. Avoid Short-Term Promises: Where
regimes have changed, international
supporters should avoid the
temptation for overnight fixes, over-
supportandone-size-fits-allmodels
to promote a new body politic.
Politicalpartieswillnecessarilytakea
long time to mature and rushed
electionsshouldbeavoided.TheUAE
and Qatar have embarked on long-
term reform agendas, with citizens
who now boast per capita earnings
and services not seen in the rest of
the Arab world. However, a
sustainable process depends on the
widest possible participation,
including of radical groups who risk
de-railing a successful transition;
Egypt and Tunisia being good
examples. International support will
be necessary to build an open,
dynamic and multi-representational
media, causing national social
networks and local cooperative
structures to thrice as the basis for
future civil society. Financing to new
civil society groups should be
carefully balanced to allow survival
of the fittest, i.e., those genuinely
valuedbylocalpeople.
b. Leading-Change Management:
Where regimes continue in a climate
ofchange,G20andUNbodieshavea
key role to encourage a dialogue
between long-standing and new
leaders on strategies to revitalize
social frameworks and political
dialogue.
INSTITUTIONALPARTNERSHIPS
161. The key to success is good structural
management; however, the unique
architecture of many Arab Spring nations
notably Libya, Egypt and Yemenmakes it
particularly challenging to pitch the right
balance of international engagement, local
institutional leadership and regional
capacity transfer. In each country, a central
leadership body to drive change is a sine
quanonofanyinstitutionalpartnership.In-
country inter-ministerial leadership and
change advisory groups should be
encouraged, linking finance, security,
planning, major national financial
institutions and high-level leadership, in
addition to other appropriate government
offices. The change-management effort
would most usefully be led by this group;
with the UN/WB representing international
support,andmustmaintainaclearfocuson
charting a progressive triple-transition;
covering political, security and socio-
economicspheres;
162. The UN has struggled in the past to

support complex regional transition
issuesunless there is a close alignment
between the interests of the transitional
government and UN Security Council, (as
with Libya). To become a viable player, it
wouldneedsignificantnewresourcesanda
structural rethink for a successful pan-Arab
approach, given its loose and
uncoordinated Arab world structures
between the Secretariat and various
agencies, funds and programs. Learning
lessons from other contexts, the UN should
be empowered by G20 members,
particularlywherethereisalsoasubstantial
EuropeanUnionorG8presence.Theroleof
the Arab League and GCC remain an open
question, although strong leadership from
partsoftheGCChavealreadyhelpedshape
reforms in Egypt, Tunisia and Libya. Its
theoretical relevance to support new
regimes and assist the intra-regional
transfer of capacities and ideas is
unquestionable. However, its institutional
ability to move up a gear into substantive
support is untested in these new waters.
Potential strengthening of Arab League and
GCC institutions in the wake of the Arab
uprisingsto foster a region-wide
approachis an important international
agenda item, one best pushed from within
emergingArabdemocracies.
FINANCINGOPTIONS:
163. A financing model for transitioning
Arab states should ideally seek to avoid: (i)
increased debt burdens on the one hand,
and(ii)over-commitmentofpublicfinances
ontheotherparticularlyinthetemptation
to increase spending to quell dissent.
Further, given that most G20 support is
focused on achieving macro-economic
stabilization objectives, there remains a
considerableriskthatanuprising-dividend
does not accrue to those who took to the
streets; increasing the likelihood of more
structuralturbulencedown-stream.
164. The G7/G20 will be stretched to

provide much support beyond loans to
shore-up public finances. As the World
Bank, IMF and African Development Bank
donotdirectlysupportpoliticalandsecurity
transitions, G7 support could have limited
immediate impact on restructuring. Rather,
giventhecapitalwealthoftheMiddleEast,
countriesaremorelikelytoreceivesupport
from regional funds, by stepping loans that
may be positioned to support structural re-
adjustment. Countries such as Egypt and
Tunisia have already complained about
external support being slow and
insufficient. Clearly, if the international
community is to buy favor with newly
incumbent transitional authorities, visible
supportwithquickwinswillbenecessary.
165. Ultimately, any financing package must

be closely tied to strengthened Medium
Term Economic Frameworks andeven
betterto support national development
strategies. These should include significant
public co-financing, perhaps leveraging
private sector support through emerging
public private partnership models.
International donors should carefully
monitor the transaction and management
burdensthatinevitablyfollowlargeandun-
harmonized aid inflows. The best way to
coordinate a multi-national financial stake
in a democratization and reform process is
through funds co-managed by national
governments and the UN/WB, dedicated to
human rights and economic development.
Again, there are valuable lessons to be
learnedfromotherpost-conflictmodels(for
example, the International Reconstruction
Fund Facility for Iraq and the new fund
established to support the Transitional
Council in Libya). The establishment of
National Solidarity Funds and instruments
in support of transitional justice would
prove logical investments but are perhaps
complex to implement in the absence of
strong grassroots and community
structures.
166. Various co-financing options could be

considered. Countries with large oil
revenues could co-finance nationally
managed trusts dedicated to stimulation of
non-oil enterprise. In addition,
strengthening SME development and FDI in
sectors with a strong growth upside, and
within a framework of economic
diversification, will have medium and long-
term impact. This is also an opportunity for
GCCinvestorstoshowgreaterforesightand
accountabilityforconditionsintheirregion.
The moment has come for its members to
re-examinetheirinternationaldevelopment
investment modelsto date largely
unilateral, focused on poorer OIC member
states and closely linked with faith-based
causes. The GCC should also consider
reorientation towards the neighborhood,
increase participatory approaches and
become a nexus for dialogue on financing
long-term modernization in the Middle
East.

8: CONCLUSION
THEVIEWFROMHERE:
167. The international community has a
vestedinterestinsupportingtheaspirations
of millions of Arabs as they seek to shape
their future. We have already witnessed
the power of organized, cooperative,
humanist protest across two continents in
less than one year. The emergence of
progressive, open and dynamic systems
could have an even more dramatic impact
onArabworldpoliticsoverthenextdecade.
To a large extent, the need for economic
diversification away from oil will have an
openinganddiversifyingeffectanyhow.
168. Such predictions are, by their nature,

fallible. These regions do not lend
themselves well to utopian imaginings.
Impatience, poor management, misapplied
interference and economic fragility remain
real risks to the process. The adrenalin of
victory and the flood of global interest will
necessarily diminish, leaving hard
governance, economic and political choices
in their wake. These choices will determine
how Arab realm shapes its future within an
increasingly global economic and social
setting. The reforms underway in the UAE
and Qataralbeit driven by economic
imperativeprovide a luminous example
for other Arab states to follow. They show
that need-driven economic diversification
can lead to a burgeoning private sector
capable of shaping the way government
enablesgrowth.
169. The view from here may be uncertain,

but the possibilities are undeniable, and
worth striving to realize. The first challenge
will be to establish common ground for
change, both within countries at the heart
of the turbulence and with the watching
world.Thegreaterchallengewillbetoseta
cleardirectionforthelongworkahead,and
thentostaythecourse.

References:
Abbas lays out Palestine UN bid, Al Jazeera, 16th September 2011,
http://english.aljazeera.net/news/middleeast/2011/09/20119166105349125.html
BahrainCountryReport,EconomicIntelligenceUnit,June2011
Bahrain king orders fact-finding probe into protests, BBC News, 29 June 2011,
www.bbc.co.uk/news/world-middle-east-13955842
Beidas-Strom, S., and Cashin,P., Are MENA current account balances excessive?, IMF Working Paper,
August2011,www.imf.org/external/pubs/ft/wp/2011/wp11195.pdf
Corruption Perceptions Index (2008, 2009, 2010), Transparency International,

www.transparency.org/policy_research/surveys_indices/cpi/2010
Country Reports, Economist Intelligence Unit, 2011, http://www.eiu.com (a number of which are
specifiedhere)
DeBock,R.,andGijn,J.,WillNaturalGasPricesDecouplefromOilPricesacrossthePond?,IMFWorking
Paper,June2011,www.imf.org/external/pubs/ft/wp/2011/wp11143.pdf
EconomistIntelligenceUnitWebsite:www.eiu.com/public/#
Economic Transformation in MENA: Delivering on the Promise of Shared Prosperity, G-8 Summit,
Deauville,France,May27,2011,preparedbyStaffoftheInternationalMonetaryFund.
Gause III, G.F., Arab Spring: Bahrain and Saudi Arabia, United States Institute of Peace, May 9, 2011,
www.usip.org/publications/arab-spring-bahrain-and-saudi-arabia
HumanDevelopmentIndex(2008,2009,2010),UNDP,http://hdr.undp.org/en/statistics/hdi/
IBCreferencedinEconomicIntelligenceUnitIraqcountrypage,September12,2011
IMFExecutiveBoardConcludes2010ArticleIVConsultationwithAlgeria,IMFPublicInformationNotice,
January26,2011,www.imf.org/external/np/sec/pn/2011/pn1110.htm
IMF Executive Board Concludes 2010 Article IV Consultation with Lebanon, IMF Public Information
Notice,October8,2010,www.imf.org/external/np/sec/pn/2010/pn10139.htm
IMFExecutiveBoardConcludes2010ArticleIVConsultationwithOman,IMFPublicInformationNotice,
April1,2011,www.imf.org/external/np/sec/pn/2011/pn1144.htm
IMF Executive Board Concludes 2010 Article IV Consultation with the Socialist Peoples Libyan Arab
Jamahiriya, IMF Public Informational Notice, February 15, 2011,
www.imf.org/external/np/sec/pn/2011/pn1123.htm
IMF Remains Committed to Supporting Egypt, IMF Survey online, June 30, 2011
www.imf.org/external/pubs/ft/survey/so/2011/INT063011A.htm
IMF Statement on South Sudan, IMF Press Release, July 25, 2011,
www.imf.org/external/np/sec/pr/2011/pr11292.htm

Iraq,IMFProgramNote,March31,2011
www.imf.org/external/np/country/notes/iraq.htm
Islamic Republic of Mauritania, IMF Program Note, June 23, 2011,

www.imf.org/external/np/country/notes/mauritania.htm
Jordan: 2010 Article IV Consultation, IMF Country Report, September 2010,

www.imf.org/external/pubs/ft/scr/2010/cr10297.pdf
Kerr,C. & Jones,T., A Revolution Paused in Bahrain, MERIP Report Online, February 23, 2011,
www.merip.org/mero/mero022311
LebanonCountryReport,EconomicIntelligenceUnit,June2011
Moriyama, K, Inflation Inertia in Egypt and its Policy Implications, IMF Working Paper, July 2011,
www.imf.org/external/pubs/ft/wp/2011/wp11160.pdf
Naughtie, J., Will Bahrain's Arab Spring bear fruit?, BBC News, 30 May 2011,
http://news.bbc.co.uk/today/hi/today/newsid_9499000/9499462.stm
Negotiating Sudans North-South Future, Africa Briefing N7623, International Crisis Group, November
2010, www.crisisgroup.org/en/regions/africa/horn-of-africa/sudan/B76-negotiating-sudans-north-south-
future.aspx
Omestad,T.,BoustanyCallsforClearUSStrategyonLebanon,UnitedStatesInstituteofPeaceMay11,
2011,accessedat:www.usip.org/publications/boustany-calls-clear-us-strategy-lebanon
Palestine Bids for Statehood - Background: The facts behind the bid, 17th September 2011, Al Jazeera,
http://english.aljazeera.net/indepth/spotlight/unpalestine/2011/08/201182893234567545.html
Politics and Transition in the New South Sudan, Africa Report N1724, International Crisis Group, April
2011www.crisisgroup.org/en/regions/africa/horn-of-africa/sudan/172-politics-and-transition-in-the-new-
south-sudan.aspx
Popular Protests in North Africa and the Middle East (III): The Bahrain Revolt, MENA Report No.105,
InternationalCrisisGroup,April2011,
www.crisisgroup.org/en/regions/middle-east-north-africa/iran-gulf/bahrain/105-popular-protests-in-
north-africa-and-the-middle-east-iii-the-bahrain-revolt.aspx
PopularProtestinNorthAfricaandtheMiddleEast(VIII):BahrainsRockyRoadtoReform,MiddleEast
ReportN111,InternationalCrisisGroup,28July2011,
www.crisisgroup.org/en/regions/middle-east-north-africa/iran-gulf/bahrain/111-popular-protest-in-
north-africa-and-the-middle-east-viii-bahrains-rocky-road-to-reform.aspx
RegionalEconomicOutlook,IMF,October2010,
www.imf.org/external/pubs/ft/reo/2010/mcd/eng/10/mreo1024.pdf
RegionalEconomicOutlook:MiddlesEastandCentralAsia,IMF,May2011,
www.imf.org/external/pubs/ft/reo/2011/mcd/eng/pdf/mreo0411.pdf
RepublicofYemen,IMFProgramNote,September14,2011,
www.imf.org/external/np/country/notes/yemen.htm

Roudi, F., Youth Population and Employment in the Middle East and North Africa: Opportunity of
Challenge?, UN Expert Group Meeting on Adolescents, Youth had Development, Population Division
Department of Economic and Social Affairs, United Nations Secretariat New York, July 22, 2011,
www.un.org/esa/population/meetings/egm-adolescents/p06_roudi.pdf
Sirois, M.J., Lebanon Against Itself (Again) MERIP Reports Online, published February 4, 2011,
www.merip.org/mero/mero020411
SpringforArabs,winterforJews,TheEconomist,19thMay2011
SpringTide:WilltheArabrisingsyielddemocracy,dictatorshipordisorder?,EconomistIntelligenceUnit,
August2011,
www.eiu.com/public/topical_report.aspx?campaignid=arab_spring_tide_wp
Statement at the Conclusion of the 2011 Article IV Consultation Mission to Bahrain, IMF Press Release,
December13,2010,www.imf.org/external/np/sec/pr/2010/pr10486.htm
Statement at the Conclusion of the 2011 Article IV Consultation Mission to Saudi Arabia, IMF Press
Release,May31,2011,www.imf.org/external/np/sec/pr/2011/pr11205.htm
StatementbyMohammedLaksaciGovernor,Banqued'Algerie,Algeria,onbehalfofAfghanistan,Algeria,
Ghana,Iran,Morocco,Pakistan,Tunisia,IMF,April16,2011
www.imf.org/External/spring/2011/imfc/statement/eng/dza.pdf
SudanCountryReport,EconomicIntelligenceUnit,June2011
Sudan: Second Review Under the 200910 Staff-Monitored Program, IMF Country Report, April 2011,
www.imf.org/external/pubs/ft/scr/2011/cr1186.pdf
Thomas,E.,Sudan'sReferendumAmidstRevolution,MERIPReportNo.258,Spring2011
United Nations Refers Palestinian Application to UN Membership Committee, United Nations Security
Council,28thSeptember2011,www.un.org/Docs/sc/unsc_news.shtml
Waehlisch,M.,Palestine,theUN,andinternationallaw,AlJazeera,25Jul2011,accessedat:
http://english.aljazeera.net/indepth/opinion/2011/07/201172584136606884.html
WorldEconomicOutlook,IMF,April2011
www.imf.org/external/pubs/ft/weo/2011/01/pdf/text.pdf
Yacoubian,M.,TheSyrianUprisingsImpactonLebanon,UnitedStatesInstituteofPeace,May9,2011,
accessedat:http://www.usip.org/publications/the-syrian-uprising-s-impact-lebanon
YemenCountryReport,EconomicIntelligenceUnit,June2011

NotesonStatisticalData:
1. Allactual,projectedandforecastGDPfiguresaresourcedfromtheInternationalMonetaryFund.
2. AllfiguresforcorruptionaresourcedfromrelevantannualreportsfromTransparencyInternationals
CorruptionPerceptionsIndex(CPI).
3. Allfiguresforpublicspendingarefromnationalauthorities,butarereportedinUS$.
4. AllhumandevelopmentfigurescomefromtheUnitedNationsDevelopmentProgram(UNDP)Human
DevelopmentIndex(HDI),whichprovidecountry-by-countryranking.
5. GovernanceIndicatorsaresourcedfromWorldWideGovernanceIndicators,anannualreportofthe
WordBank.
6. AdjustedgrowthfuturescomefromtheIMFWorldEconomicOutlook(WEO).
7. InflationratescomefromnationalConsumerPriceIndexes.

Geopolicity nc. - Branch

P.O. Box: 90151
Dubai
United Arab Emirates (UAE)
Tel: 00971 4 447 2717
Fax: 00971 4 447 1859
Email: enquiries@geopolicity.com

Rethinking The Arab Spring - A Road Map For G20-UN Support - Geopolicity - October 2011

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Rethinking The Arab Spring - A Road Map For G20-UN Support - Geopolicity - October 2011

Uploaded by

Copyright:

Available Formats

RE-THINKING THE ARAB SPRING: A ROADMAP FOR G20/UN SUPPORT?