Economic and Management Lessons from Arab Uprising

Economic and Management Lessons from Arab Uprising

Mine school principal used to say “An idle brain is the devil's workshop”.  The regime leaders in Middle East and North Africa forget this old saying. Educated young people with no job, has given rise to the popular revolt in the region over the past few months. It provides several economic lessons to draw for business managers.

Suicide by one man gave voices to millions of people. Population in particularly youths in Middle East and North Africa are inspired by Mohamed Bouazizi, a graduate and street vendor in Tunisia, who set himself ablaze after losing his livelihood to the police. Most of the countries where protest and demonstration happened such  as Tunisia,  Egypt, Libya, Algeria, Yemen, Bahrain, Jordan and Morocco and Syria have the same  characteristics of oil resource, unemployment, joblessness, high prices of food, nondemocratic - despite relatively high standards of living etc leading to disaffection among the population.  The region has made progress on a number of social indicators, such as literacy, life expectancy and access to basic services. However, its performance in indicator about asset and income inequalities, basic freedom of expression is dismal.

Many factors working together, caused Arab uprising such as

•    Income disparity among rich and poor
•   Higher education but  high rates of unemployment  among youth
•   Limited livelihoods options and social protection
•  Rise in food prices affects the lower income groups much more
•  Skill Mismatch
• an inefficient government bureaucracy, a web of red tape, inadequate infrastructure, corrupt elites, a weak public sector, 
• Autocratic political leadership and lack of redress when governments ignore citizen demands 
• Digitally-savvy youths and uncontrollable social media such as You-Tube and Twitter.

From the economic perspective, the trouble in the region is due to the rent curse. Rents are easy money or unearned wealth that flows to governments with little effort or wise government policy.  The rents come from natural resource (Oil Reserve), geography (the Suez Canal), Tourism (Pyramids) and remittances from its citizen working in other countries. The history of economic development suggests that rent-ridden countries create governments with few incentives to build strong political institutions or listen to their people.  Government need not tax its citizen to collect revenue and as citizens are not taxed, they have little incentive and no effective mechanism to hold government accountable.

Arab Uprising is contagion in terms of protests and demonstrations have spread to many countries in the region and world. The protests and demonstrations has  spreads to oil producers which lead to disruptions of oil supplies to the rest of the world affecting oil and financial market and ultimately world economy.

Now business needs to understand and forecast socio-political situation more than ever. They need to have serious discussions on socio-political issues because Demographic forces exert great socio-political pressure.  Business manager should expand their networks and contacts to get wider opinion on socio-political forces affecting business. 

One recommendation for the country leadership in the Arab and other similar countries in the world  is to create more jobs by

•        Opening up market for foreign investor;
•        Having higher economic growth rates;
•        Eliminate regulations to make it much easier to set up factories;
•        Promote private sector to absorb graduates of universities, through infrastructure development.
•        Boost the productivity of its private sector and build industries that will generate good jobs
•        Encourage entrepreneurship.
•        Education institutions need to provide skill needed for the job market
•        Promote equity-based growth strategies, social protection for all, and inclusive politics.
•        Promoting Public-Private Partnership Programs to attract private resources for infrastructure investments.
•        Continuing financial sector reforms to enhance the soundness of financial institutions and reduce bank concentration. 

The developed, emerging market economies, World Bank and other multilateral and bilateral institution has a key role to play in developing programs relating to education, infrastructure, and private sector development.  They should pursue programs that help the region "create a better environment for expanding economic opportunities and promoting democratic processes. Social policies especially social protection such as social insurance, cash transfer, health equity fund are also needed that protect all citizens from basic risks of unemployment, underemployment and ill health, and assist with the care of children and the elderly.

Reference

•       Egypt’s Rent Curse by Arvind Subramanian, February 22nd, 2011, financial Times.

•       What Will the Post-Mubarak Egyptian Economy Look Like? by Mohsin S. Khan and Svetlana Milbert, April 27th, 2011, Peterson Institute for International Economics.

•       www.wikipedia.org