2003
Globalisation and trade: challenges for the Arab World
Ziad Abdel Samad
Arab NGO Network for Development.
The world is
facing many political, economic, social and environmental crises. It is facing
threats of war and destruction and witnessing almost global militarization.
Toward the end of the last millennium, the World Trade Organisation (WTO) was
established while the influence of international financial institutions (the
World Bank and International Monetary Fund) increased in developing countries
and in those in economic transition (especially in Eastern Europe and the former
Soviet Republics). These institutions and their policies shape all economic and
social policies as well as development strategies.
The power
and influence of the international financial institutions and the WTO and the
rising dominance of the multinational trade agreements led to the imposition of
structural adjustment programmes; economic liberalisation; reduction of public
expenditure on social services; privatisation of public administration; and the
increased role and influence of the private sector in strategy formulations and
implementations. These factors also caused countries to deviate from
international agreements and conventions on human rights, poverty eradication,
unemployment, environmental protection and social marginalisation policies.
The Arab
region and the challenge of globalisation
Threats to
overthrow the Iraqi regime are increasing. The war on Afghanistan has not yet
achieved its final goals, and there are expectations that it will widen into
financial, economic and cultural realms and involve other countries and regions
under the excuse of fighting terrorism. This war is coupled with a serious
undermining of human rights, liberties, and democracy on the national and
international levels. It is also paralleled by one of the rare current models of
foreign direct colonial settlement taking place in Palestine and parts of Syrian
and Lebanese territories.
The
“militarization of globalisation” and the fight against terrorism
Dramatic
international developments point to a trend of “the militarization of
globalisation,” which can be considered a radical outcome of the failure of
globalisation and traditional economic policies to secure social and economic
equity. These developments are also indicative of a strong desire to strengthen
direct control over the world’s cultural, economic and intellectual resources by
neoliberal hegemonic powers.
Middle East
civil societies, individually and collectively, have condemned the September 11
terrorist attacks on innocent civilians in the United States; they are convinced
that terrorism is an illegitimate means to settle legitimate quests for social
justice and fair international systems. The current war on Afghanistan, however,
goes beyond a simple reaction to these attacks. The war is an international plan
launched to reinforce the international dominance of some multilateral economic
and industrial interests.
The war
currently launched has a number of labels and justifications, including
ideological, political and even racist names. It splits the world into
pro-American and anti-American/pro-terrorism poles. The war was called a “Third
World War against terrorism” in the National Security Strategy presented to the
American Congress. Such terms stir up clashes between peoples and ignite
fanatical reactions. This is worsened by the prevailing globalisation trends
that have been associated with sweeping poverty, marginalisation and a widening
of the gap between the North and the South and between the rich and poor. The
trends are also associated with the prevalence of double standards in
international relations, particularly in the Arab region. While Israel, the only
State having nuclear arms in the region, is breaching human rights and all the
United Nations’ resolutions and conventions, the US insists on launching a war
against Iraq, only because the latter is capable of manufacturing strategic
weapons and is unable to respect democracy, human rights or social equity.
The
Palestinian cause and the Israeli occupation
These latest
military events are taking place in parallel with increasing Israeli aggressions
against the Palestinian people and leadership. Israeli violence is based on weak
justifications that revoke Palestinians’ desire to sustain the democratic
development that is their right. State violence can be seen in the systematic
relocating of Palestinians and the misappropriation of their lands, which seems
to be a major goal of the recent Israeli government. At the same time, Israeli
occupation of Arab territories in Palestine, Lebanon and Syria continues. The
Palestinians are still deprived of freedom, self-determination, and the right to
return to their territories. They are also denied the right to build an
independent State, within a context of clear and unlimited American protection
of and support to Israel.
Stability,
peace, and the opportunities for social and economic development in the Middle
East will not materialise unless the Israeli occupation ends and settlements are
completely dismantled. Solid national rights for the Palestinians must be
ensured, namely the rights to return to their lands, to self-determination, and
to build an independent State on Palestinian territories according to
international laws.
The
threat of a war against Iraq
The ongoing
suffering of the Iraqi people is the result of the double siege exerted by the
Iraqi dictatorship and totalitarian regime on the one side, and the unjust
embargo imposed by the international community on the other. The foreign
military presence in the Gulf, the continuous threats of war and the abolition
of the Iraqi political system, despite the submission of the Iraqi regime to the
UN Security Council Resolution 1441, and the popular and official international
and Arab opposition, all constitute a serious threat to international stability
and peace and an obstacle to socio-economic development in the region.
In this
context, the war in Afghanistan and elsewhere in the name of the war against
terrorism, the threats of war against Iraq, the occupation and the increasing
Israeli aggression in Palestine are tangible expressions of the militarization
of globalisation which is not only an Arab concern, but a challenge that all the
world is facing. Thus, it implies the creation of a world alliance against the
war preventing humanity from its catastrophic results.
Democracy
and human rights
While Arab
peoples reject all forms of violation of sovereignty, independence and
self-determination, and particularly all kinds of foreign military presence in
the Arab nations, a fanatical religious response should not be an alternative to
the governing systems. Strengthening democracy and popular participation, the
respect of human rights, and social justice are all necessary conditions to
overcome the challenges faced by the Arab populations.
Under these
conditions, international reports and studies, such as the latest Arab Human
Development Report published early in 2002 by the United Nations Development
Programme (UNDP), underscore the fact that the freedom, democracy and human
rights indicators of Arab countries are among the worst in the world.
The
development challenges in the region and the international trade system
Instead of
approving practical measures that reduce the gap between the North and the
South, and endorsing policies to alleviate poverty and unemployment, the
tendency of Arab state policies is to link development to trade liberalisation
and to relate multilateral agreements on environmental, socio-economic and
cultural rights to WTO agreements. Crucial issues, such as indebtedness,
official development aid, sovereignty, and participation centre on trade
liberalisation, encouragement of foreign direct investment, the substitution of
multilateral conventions and agreements with bilateral commercial agreements and
partnerships with the business sector and trans-national corporations.
The current
international trade system revolves around the concept of market access. Trade
negotiations and conflict resolutions are expected to secure countries’
commitment to guaranteeing mutual access to markets. Open markets are expected
to lead to sound developmental principles. The international trade system is
still based on increasing the trade and capital volatility of goods and
services, instead of searching for commercial arrangements to secure countries’
development.
In order to
establish a fair trade system, two prerequisites need to materialise. The first
is a global economic environment that allows developing countries to use trade
as a means for development instead of an end in itself. The second is a way out
of the current trade system crisis that resulted from keeping developing
countries away from decision-making mechanisms and exposing them to
inappropriate financial and economic policies.
The argument
relating trade liberalisation to economic growth is invalid theoretically and
empirically, especially since trade is highly sensitive to external factors,
local capabilities, and human resources. There is no evidence to prove that the
removal of trade barriers would necessarily lead to improved economic
performance. International experiences confirm that the actual conditions and
regulations enforced by the WTO are very costly and beyond the means of many
Arab countries.
Appropriate characteristics of a world trade system
Trade is not
in itself an objective; it is a means to achieve local and international
sustainable, equitable and balanced development—human development. It is
therefore necessary to reconsider the inaccurate paradigm that relates trade
liberalisation to development, poverty eradication, and the improvement of
peoples’ lives.
An ideal
international trade system would be a balanced economic framework that takes
into consideration the huge differences in productive, industrial and commercial
capacities of developing and developed countries. It would consider the domestic
features that differentiate each country from others without applying one
formula to all countries. The global trade system needs to re-assess its
objectives and mechanisms, so as not to lead developing countries to incur
deficits that ultimately lead to debt traps.
Privatisation of services
The ideas
derived from the Washington Consensus had a huge impact on the economic reforms
of many developing countries. The way these countries interpreted these ideas,
however, and how they chose to implement them, varied significantly. The
applications and consequences of liberalisation and privatisation policies as
analysed by eight Arab countries
are the core of the following discussion.
Before
discussing the common trends found in the experiences of these countries, it is
important to note that there are some differences from country to country in the
impact of liberalisation and privatisation policies. The effects differ
according to the position of each country in the international financial market
(such as being members of the WTO, or Gulf Co-operation Council or EUROMED),
the nature of the economic system (strong state interference, institutionalised
liberalisation or economic transition) and the date of application of
liberalisation policies. Furthermore, there are noted differences in the
political systems of each country in terms of judiciary, electoral and
association laws and also their institutional regard to political parties. The
institutional structure of each country determines the public participation in
the decision-making process of liberalisation and privatisation.
Liberalisation and privatisation policies: characteristics and applications
A common
trend noted in the design of liberalisation and privatisation policies is the
absence of a unified and strategic vision of policies. Indeed, liberalisation
and privatisation policies are observed differently in each sector and each
privatisation case is treated differently. It is perceived that the service and
non-productive sectors (such as real estate) are more subject to liberalisation
regulations than the industrial sector (for example, in Egypt and Morocco); the
lucrative service sector is often the first to be auctioned off.
Another
trend is viewed in governments accepting double standards when establishing
economic partnerships with regional organisations such as EUROMED. Although they
promote the GATT agreement, such organisations still exercise protection on the
free transfer of labour, local agricultural production and the textile industry,
thus establishing differential benefits after closing such agreements (as in
Egypt).
Furthermore,
it is noted that through the process of liberalisation of economies and
privatisation of public assets, the State is increasingly institutionalising its
disengagement from the public sectors (Egypt, Morocco). This goes hand in hand
with a systematic re-questioning of the universal entitlement to state services
such as education and health.
The
application of these policies lacks consistency and uniformity as the conditions
and the beneficiaries of the privatisation deals are not made clear to the
public (Bahrain, Tunisia). In this regard, corruption could also be mentioned,
which can derail the whole process and lead to the misuse of revenues.
Furthermore, some countries have reversed policies from public auctioning to
nationalisation and back to auctioning, which causes international institutions
to mistrust the local economies and diminishes their interest in the auctioned
public assets (Lebanon).
The main
goals of the privatisation policies are to sell off public assets to activate
the economic cycle and to ensure growth. However, the paradox of such policies
is the incapacity of the State to recreate jobs in the growing job market due to
its increasing disengagement from the economic sphere and its loss of control of
its most lucrative sectors.
A trend
common to most privatisation policies is their inability or unwillingness to
include local civil societies in the decision-making process. This is best
perceived in the lack of transparency noted in the closing of the privatisation
deals, as well as in structural political problems (lack of democracy, lack of
adequate organisation and mobilisation) that impede the development of critical
voices and the presentation of alternatives to privatisation (Palestine,
Bahrain, Jordan).
Observed
consequences
The effects
of liberalisation and privatisation are not yet fully apparent on national
levels. While initial statistics on the direct results of the application of
such policies are obvious, a long-term assessment on the results is not clear.
This is mainly due to the relatively recent application of the policies, whose
effects will be perceived only in the future. It is worth mentioning that
privatisation is taking place under the pressure of budgetary deficits that
require immediate cash flows. This leads to random privatisation without even
evaluating feasibility. Moreover, most of the privatised sectors were
rehabilitated and restructured in order to be profitable before being sold. The
absence of general strategic remarks on the effects of these policies is related
to the inability of the local civil societies and NGOs to monitor the
privatisation process and acquire reliable data.
While it is
hoped that privatisation will inject foreign currencies into local budgets, the
first noted direct consequence of these policies is the increase in budget
deficits due to the decrease in revenues (Lebanon, Tunisia, Egypt, and Jordan).
The decrease in the budget revenues is attributed to the full application of the
GATT agreement that exempts general transactions and customary tariffs from
taxes (Egypt, Morocco). In some cases, these revenues were replaced by a new tax
system such as the Value Added Tax, which has heavy social impact on the
population.
Privatisation or economic growth does not necessarily mean social improvement or
sustained social development. The prevalence of the profit motive in the
privatisation process exerts a pressure to increase the profit margins and
decrease salaries. The decrease in salaries directly affects the living
standards of the middle and lower classes that are more sensitive to the
increases in the cost of health and education, which are now private or
semi-private services in some countries (Lebanon, Tunisia, Morocco).
Another
consequence of the liberalisation and privatisation policies is the inability of
the public sector to compete with foreign institutions due to the structural
problems encountered by this sector in terms of capital inflow, efficiency, and
service provision. Examples of this would be the tourism and service sectors in
Egypt, which are suffering from severe competitive disadvantages with
international organisations that benefit from experience, planning and an
abundance of cash. This leads to the loss of shares of the local public services
in the local markets, which directly sets them out of the economic sphere
(Egypt, Morocco, Bahrain, and Lebanon).
The
participation of women in the Arab workforce is still weak, but it is improving,
with a few exceptions (Sudan). The negative effect of privatisation on the
participation of women in the country's workforce is quite evident. This is due
to the necessity of shrinking the number of employees in the hope of improving
efficiency. The correlation between number of employees and general efficiency
is not always valid, especially when other variables (like appointment on basis
of political affiliation rather than merit) affect the productivity of workers.
Nevertheless, in aiming at eliminating surplus labour, privatisation policies
that tackle especially the health and education sectors, where women are
predominant, affect women directly and unfairly. Women are the first to be laid
off in crisis times, mainly because of cultural reasons that ascribe to women
specific gender roles (Tunisia, Morocco).
Another
noted consequence of privatisation is its negative effect on the environment.
Due to the growing disengagement of the State from the economic spheres, it is
less able to enforce laws that protect the environment. Moreover, due to the
increasing absolute poverty levels (90% in Sudan), the population is forced to
look for alternative means of survival, usually at the expense of environmental
sustainability.
Some
country-specific models of privatisation and liberalisation
This year’s
Palestinian Social Watch report states that the political debate on
privatisation is currently on hold as a result of that country’s unique
dependence on either private or public sources for the provision of basic
services such as health and water. Because of the historical absence and chronic
inability of the State to provide services for the population, Palestinians rely
on foreign NGOs for provision of health-related services and on the Israeli
government for the provision of water for sanitation and irrigation.
Internal
strife has a direct effect on the privatisation pattern of some countries, like
Sudan. The federal government of Sudan started liberalisation and privatisation
as early as the 1970s. Although the country was meeting its deadlines for debt
servicing, international financial institutions like the World Bank and the
International Monetary Fund were being prevented from insuring debt service
rescaling and alleviations due to external political and economic vetoes against
the Sudanese ruling regime. The negative effects of international sanctions
coupled with negative consequences of privatisation were only worsened by
internal civil strife that increased extreme poverty to alarming levels.
Towards
an international alliance against war and an alternative globalisation
In light of
this complex reality and the dangerous geopolitical changes the region is
facing, there is a need for Arab civil society organisations, through social
movements and NGOs, to play a role in political decision-making and monitoring
national policies leading to more liberalised economies and services. They have
to struggle in order to achieve social justice based on the respect of human
rights, democracy, participation, the autonomy of the judiciary system and
institutions, and the protection of the environment.
The major
consequence of privatisation and the inadequate, inconsistent and opaque
transfer of ownership to private sector programmes is the increase of people's
suffering. Accordingly, a re-formulation of national policies based on
transparency and accountability is needed. Civil society organisations should be
strengthened and democratic systems should be established to ensure that
ownership is not transferred to parties closely related to the governing
officials, and that revenues are not misused.
In addition,
the relationships between NGOs, social movements, and civil societies of the
North and those in the Arab Countries should be reinforced. Strong and sound
regional alliances with large international organisations are needed based on a
clear understanding of liberal globalisation and its threats. This should be
coupled with a vision of the possible alternatives set by popular coalitions.
Efforts
should be made to build a different world where peace, justice, freedom and
democracy rule.
Another Arab
World is still possible.
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