Year Later, U.S. Can Nurture Arab Spring’s Economic Roots: View

-By the Editors Jan 13, 2012-
Saturday marks one year since uprisings in the Arab world for the first time extirpated an autocrat: Tunisia’s Zine al-Abidine Ben Ali.

Tunisians will mark the anniversary by commemorating Mohamed Bouazizi, the young fruit vendor who sparked the Arab Spring when he set himself afire in front of a government office after police confiscated his cart. Today, it’s worth remembering that as much as the region’s rebellions are about the yearning for political freedom, they are also about the desire to make a decent living, unfettered by tyrants large or small.

In responding to the Arab Spring, the Obama administration appropriately promised considerable economic support to the region — especially to Egypt, the largest and most influential country attempting a transition to democracy. For a variety of reasons, this promise has yet to be fulfilled. With some of the obstacles now removed, it is important to accelerate action now.

Congressional gridlock over the U.S. budget delayed two important components of economic assistance. Only with the Dec. 23 passage of the federal omnibus spending bill did the administration get the approval it needed to follow through with planned Enterprise Funds for Egypt and Tunisia. Modeled after successful programs in Eastern Europe and the former Soviet Union, the funds will be capitalized using U.S. foreign assistance money — initially $60 million for Egypt and $20 million for Tunisia — and charged with making loans to and investments in the private sector. Now the onus is on the government to get the funds up and running.

A Debt Swap

The omnibus bill also provided the necessary authorization to make good President Barack Obama’s promise to relieve Egypt, whose economy is a shambles, of $1 billion in debt. The offer, however, is not forgiveness — a simple scratching of a line through an obligation — but rather a debt swap. Egypt doesn’t have to pay back the money. Instead, the U.S. will simply subtract $1 billion from the amount of aid it is scheduled to send to Egypt over the next three years.

What’s more, the offer is not without conditions. The U.S. expects Egypt to spend the $1 billion it would have spent servicing its debt on badly needed vocational training centers and an economic innovation center. The U.S. should stick to its guns to ensure this money is put to productive use, but it’s going to take some creative diplomacy. At the moment, negotiations over these projects have been delayed by tensions over Dec. 29 raids by Egyptian authorities on a dozen organizations, including three U.S. groups, working to support democracy.

In many ways, Egypt has proven hard to help. Its government has held up approval of plans for $1 billion in U.S. loans to finance infrastructure projects and job creation. In June, it also rejected a $3 billion International Monetary Fund loan, which the U.S. had encouraged. The country’s military rulers cited public concerns that the IMF’s requirements for economic reforms represented external meddling.

There will be another chance to get this one right. IMF officials plan to return to Cairo next week with a new offer, probably with tougher conditions, given the worsened shape of Egypt’s economy. The best advice U.S. diplomats could give the generals would be to take it, but only after laying the groundwork for public acceptance of the package by having the government propose it to the IMF rather than the other way around.

Unlocking the Aid

U.S. officials should also use their recently elevated discussions with the Muslim Brotherhood, which will dominate the newly elected Egyptian Parliament, to gently present the reasons the IMF deal is good for Egypt in the short and long term. Only the sealing of an IMF deal will unlock the large amounts of aid European and Persian Gulf countries have pledged but not yet delivered to Egypt.

The Obama administration’s plans for two major economic projects for the wider region are more or less on track. The president hopes to roll out a promised trade and investment partnership in Chicago in May at the next summit of the G8 summit, which the U.S. now chairs. Famously, the countries of the Arab world trade with one another and with the rest of the world at remarkably low levels.

The program — initially including the U.S., Morocco, Jordan, Egypt and Tunisia — is meant to facilitate trade by standardizing such things as investment regulations, border transactions and tariffs. The sooner the system is functioning and shows benefits, the sooner other Arab countries can be added to it. It will also be valuable to include the E.U. in time.

One project is already reaping benefits. Since March, the Overseas Private Investment Corporation, the U.S. government’s development finance institution, has been working with Arab banks, guaranteeing up to 70 percent of the loans they make to small businesses in the region. In less than a year, the program has committed $650 million of its $2 billion.

For too long, tyranny in the Arab world has allowed the ordinary person no voice, no choice, and few ways to eke out a living. Those were privileges to be dispensed by the dictator. Creating the freedom and means for citizens to make a dignified living is not only the best way to combat authoritarianism, it is a worthy way to honor Mohammed Bouazizi.

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