Follow the money

Samir Aita writes:

The reasons for the Arab spring go deeper than immediate demands for freedom and democracy. The protesters want to end the political economy and the authoritarian regimes in place since the 1970s.

Monarchies in the Arab world have been absolute, and life-long presidents (with hereditary office) ruled the republics, because they created a supreme power above both state and post-independence institutions. They set up and controlled their own security services to ensure that their powers would endure; the services escaped parliamentary or government supervision, and their members could reprimand a minister and impose decisions. It costs money to run such services, and the clientelist networks of one-party states. The funds derive not from public budgets, as do those for the police and the army, but from different sources of revenue. (The New York Times recently reported that Muammar Gaddafi had demanded in 2009 that oil firms operating in Libya should contribute to the $1.5bn he had promised to pay in compensation for the Lockerbie terrorist murders – or lose their licences. Many paid. And Gaddafi’s immediate cash holdings of billions of dollars are thought to be funding his mercenaries and supporters to defend him.)

After the spectacular 1973 rise in crude oil prices, Middle Eastern revenues increased considerably. Through the distribution circuits, and in collusion with major multinationals, part of the revenue went direct to the coffers of the royal or “republican” families instead of to the state. Nor was oil their only source of revenue. After there were no more commissions on major public contracts, civil and military, because of budget deficits and structural adjustments, new opportunities arose. In the 1990s there were mobile telephone network launches, and the first major privatisations of public services, with public-private partnerships and build-operate-transfer (BOT) contracts. Mobile networks had massive margins, especially at the start when better-off clients were prepared to pay high prices. The major multinational operators, influential businessmen and governments fought to capture the income. (There is evidence for this in the legal dispute over Djezzy, the Algerian branch of the Egyptian operator Orascom, and the Algerian military, and in a previous dispute between Orascom and Syria’s Syriatel, which happened just as the first large Arab multinationals emerged.)

The globalisation of Arab economies and the demands of the International Monetary Fund – supported by the European Commission for the Mediterranean countries – tightened the regimes’ hold on the economy, especially after the oil price crash of 1986. The ensuing decline in public investment and weakening of the governmental regulatory role ensured that the major multinationals held monopolies or oligopolies in exchange for sharing revenue with the powers-that-be. The senior management of the global corporations knew exactly where major decisions were taken and who the imposed local partners were for any new investment: the Trabelsi and Materi families in Tunisia, the Ezz and Sawires in Egypt, the Makhlouf in Syria, Hariri in Lebanon. The Sawires sold their shares in Orascom-Mobinil to France Telecom and offloaded their cement holdings before the Egyptian revolution. Najib Mikati, who had sold Investcom to the South African group MTN, is currently in charge of appointing the new government in Lebanon.

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