Marek Dabrowski

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• Marek Dabrowski
• What can Arab countries learn from
  thepost-communist transition?

Presentation prepared for the Annual
International HSE Conference, Moscow, April 2,
2013
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Plan of presentation

• Papers origins and geographical coverage
• Similarities and differences between Arab
  socialism and Soviet-type socialism
• In political sphere
• In economic sphere
• Differences in transition agendas
• Long-term development challenges
• What kind of lessons can be learned?

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Papers origin

• One of the outputs of the EU FP7 funded project
  on Prospective Analysis for the Mediterranean
  Region (MEDPRO) WP5 on Economic development,
  trade and investment but based on earlier (2007)
  work
• Published as CASE Network E-Brief No. 9/2012 and
  MEDPRO Commentary No. 1/ May 2012

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Geographical coverage

• Countries of the former Soviet block (CEE FSU)
  vs. Arab republican regimes that emerged
  (1950s-1960s), as a result of military coups or
  anti-colonial resistance and considered
  themselves as socialist
• The latter include Tunisia, Egypt, Libya, Yemen,
  Syria, Iraq and Algeria
• Jordan, Lebanon and Morocco do not represent
  socialist past but affected by the Arab Spring

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Similarities between Arab socialism and
Soviet-type socialism - politics

• Dictatorship/ hegemony of one political party
  (lack of democracy and political pluralism)
• Manipulated election processes
• Political dependence of the judiciary
• The excessive power of the army, security
  agencies and police
• Censorship, tight administrative control of
  grass-roots citizen initiatives
• Massive violations of human rights organised
  repression of certain social, political, ethnic
  or sectarian groups
• However, similar characteristics of the
  authoritarian regimes in other regions (Asia,
  Africa, Latin America) communism was not unique
  in this respect

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Similarities between Arab socialism and
Soviet-type socialism - economy

• Dominance of politics and ideology over economic
  criteria
• Price controls, subsidies, price distortions
  (especially food and energy)
• Key role of public ownership, political/ party/
  military/ security nominations for managerial
  positions
• Autarky, import-substitution industrialization,
  protectionism
• Burden of military/security spending
• Social employment in public sector
• Some of these characteristics present in
  non-socialist Arab countries

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Where Arab socialist economies differed from
Soviet-type economies?

• Greater role of private sector (agriculture,
  trade, services, small and medium size
  manufacturing)
• Private ownership never condemned and market
  institutions/ legal infrastructure largely in
  place
• Less distorted prices, less acute shortage of
  basic goods
• Higher income and wealth inequalities
• Less acute macroeconomic disequilibria
• Less over-industrialization and less structural
  distortions
• More economic openness and more contacts with the
  West (economic relations, education, personal
  contacts)

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Arab reforms since 1980s - triggers

• Sharp decline in oil prices in mid-1980s
• End of Soviet support (end of 1980s)
• Reforms in CEE/FSU, China, India and other
  developing countries
• Pressure of the IFIs, US, EU etc.
• Ineffectiveness of the previous model
• Interest of elites to enrich themselves
• Seeking macroeconomic and social stability

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Arab reforms since 1980s major steps

• Less price control, cutting subsidies
• Towards unified exchange rate
• Tighter fiscal and monetary policies
• Trade liberalization (unilateral, WTO, FTA with
  the EU, US, within the region)
• Greater role of private investment, including FDI
• Privatization (also with foreign participation)
• Financial sector reform, opening stock exchanges

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Agenda of Arab transition

• Major political challenge building stable
  liberal democracy
• Economic challenges less dramatic comparing to
  CEE/FSU in 1990s but
• Post-conflict reconstruction (especially Libya
  and Syria)
• Avoiding populism (subsidies, reversing
  privatization, witch hunting)
• Continuation of previous reforms in more fair and
  transparent way
• Addressing fundamental development challenges
• Major difference with the CEE (but not with FSU)
  absence of European anchor

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Socio-economic challenges in Arab world

• Low-to-medium-level of GDP per capita (apart from
  Gulf monarchies)
• High population growth
• Low education level (including continuous
  illiteracy)
• Gender discrimination
• High unemployment, especially among women and
  youth
• Poor business and investment climate
• Remaining trade protectionism (tariffs, NTBs,
  LGI)
• Poor infrastructure
• Unsolved political conflicts between neighbors

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Lessons to be learned

• Post-communist experience, especially of CEE not
  so relevant for Arab countries (more similarities
  with FSU) but some general lessons remain useful
• Democratisation may prompt economic reform, but
  no automatic guarantees. Populist democracies are
  usually self-destroying
• Timing and speed of reform do not miss political
  window of opportunity when is open, time works
  against reformers, reforms should be
  comprehensive
• The role of external support (EU, US, IFIs, Gulf
  countries). However, reforms serve countrys own
  benefit and cannot be used as the bargaining chip
  in negotiations with donors. Building the
  domestic pro-reform constituency is a key