This piece was published by Libya.TV on June 16, 2011
Why exactly does Libya need democracy?
Everyone these days speaks about the necessity for a democratic system in post Gaddafi Libya. Most, speak of it in vague terms that make it sound as the magic pill that will solve all of Libya’s problems. Yet, much of that discussion seems to take place in the absence of what does that really means and how will this, undefined democracy, meet the needs of the country and its people.
Let me start off by stating categorically that I too believe that Libya needs a democratic system of government, if it has any hope in surviving as a country, let alone begin the hard work of solving its problems, where I want to be clear and what I want to write about is why I believe that, in the simplest possible way I know how.
So let me start by stating my first basic supposition; a democratic system of government is not an objective in itself; it is simply a means to an end. The objective is not simply having the right to vote, but the objective I have in my mind, is how best to set up a system that will allow me, as an individual citizen, to live in peace and security with the rest of my society, be able to live out my principles and participate in economic life on equitable bases, and have forums and channels that allow me to get the information I want, and speak my mind with legal protections that will not impose on me the values or will of others.
The second supposition I have in my mind is that there is a distinction between the principle value of democracy, which is the right of all people to participate freely in the management of their public affairs and institutions, and the methods we choose to do that. The first is a universal principle that transcends all times, cultures and societies; the second is subject to how each society decides to organize its public life to achieve that. How and what form a democratic systems takes, is subject to the historical developments and cultural values of each society. For example, one society can organize its politics in the form of a constitutional monarchy, another a presidential system, a third a parliamentary system, and yet a fourth a system of cantons as in Switzerland. The important thing however is to focus not so much on the type of system we set up, but that the system must meet the following three fundamental conditions.
Inclusiveness
Any democratic system worthy of the name must, as a priority, include everyone in society irrespective of ethnicity, religion, gender, political views, etc. Everyone in society must be legally included in the process without any prejudice, coercion, or exclusion. Their views and rights must be protected without any conditions or pre-requests.
The most basic measure of a viable democratic system is its ability and consistency in protecting and ensuring the rights of any minority, including even a minority of one, against the tyranny of society to force people to conform to a mythical ideal. One example of this is the right of an individual to even burn the flag of the country in public and feeling protected while doing it.
Accountability
Accountability must be built into the very structure and fabric of any credible governance framework. First, everyone in society must be held accountable before the law. No one, not a beggar and not the president, are above the law, period. If, even if once, anyone is put above the law, then it’s not a law worthy of respect at all , and we would be back on the same slippery slope that brought us to the “great leader” and the “king of kings” etc.
Second, the system of governance must also include very detailed and clear processes on how to question and hold responsible any and all public officials, with very simple and straightforward processes that allow people to file complaints and ask questions of their public representatives and servants and receive remedies.
Transparency
The only way to gain credibility in public life is through transparency. There is no other way. So a democratic system must build the principle of transparency and disclosure into its very structures as well. The public must know what the government is doing, where public money is going, how decisions are made, and why. The only exceptions to that rule must be as few as possible, and only because they relate to national security or matters that may produce more damage than public good. Even so, those exceptions must themselves be made and debated in public to decide whether they should be exempted. Here is where civil society and freedom of speech and the media is absolutely fundamental, for it ensures the people’s right to know.
In conclusion, let me say that If I leave you with one thought about this subject, I want it to be: democracy is not the goal, its simply a process that will allow us to define the goals, how we can reach them, who we want to do the work, and how we can hold them accountable. If there is any misstep in how the process is put together, then we have no hope of achieving any goals whatsoever. So if we lose this, then we would have lost everything.
Thursday, June 16, 2011
Friday, May 27, 2011
Wednesday, May 25, 2011
Leaked document shows location of $53bn of Libyan state assets
- BBC Business Editor Robert Peston's analysis of this story: http://www.bbc.co.uk/news/business-13552364
- Libyan Investment Authority funds as of June 2010 - leaked document : http://www.globalwitness.org/sites/default/files/LIA.pdf
HSBC and Goldman Sachs held $335m of Libyan state oil money
26th May 2011
London and Washington DC: HSBC and Goldman Sachs are among the key western bankers for Colonel Gaddafi’s regime, a 2010 document leaked to Global Witness appears to show. The document details the whereabouts of state oil revenues. However the Libyan people could not know where it was invested or how much it was, because banks have no obligation to disclose state assets they hold. Global Witness is now calling for new laws requiring banks and investment funds to disclose all state funds that they manage.
Global Witness asked both banks to confirm that they held funds for the state-owned Libyan Investment Authority, and whether they still hold them. They both refused, with HSBC citing client confidentiality. Numerous other banks and financial firms are listed including Societe Generale, UniCredit and the Arab Banking Corporation.
“It is completely absurd that banks like HSBC and Goldman Sachs can hide behind customer confidentiality in a case like this. These are state accounts, so the customer is effectively the Libyan people and these banks are withholding vital information from them,” said Charmian Gooch, director of Global Witness.
The Gaddafi family has significant personal control over the state funds invested in the Libyan Investment Authority. According to the Prosecutor of the International Criminal Court, “Gaddafi makes no distinction between his personal assets and the resources of the country.”
On this basis, it is essential for banking regulators to investigate whether these banks have done enough to ensure that state funds have not been diverted to the Gaddafi family’s personal benefit.
Global Witness has been leaked a draft presentation that appears to show the investment position for the Libyan Investment Authority (LIA) as of 30 June 2010, which stood at $53 billion. The information shows the diversity of Libyan assets held by major financial institutions:
* HSBC holds $292.69 million across ten accounts and Goldman Sachs has $43 million in three accounts. The funds are in U.S. dollars, British pounds, Swiss Francs, Euros and Canadian dollars.
* A much larger portion of the LIA’s deposits – $19 billion – are held in Libyan and Middle Eastern banks, including the Central Bank of Libya, the Arab Banking Corporation and the British Arab Commercial Bank.
* Almost $4 billion of the LIA’s funds are held in structured products with banks, hedge funds and private firms such as Societe Generale ($1 billion), JP Morgan ($171 million) and OCH-ZIFF ($329 million).
* The LIA owns billions of dollars of shares in household name companies such as General Electric, BP, Vivendi and Deutsche Telekom.
Global Witness believes there are two actions required from governments, beyond the sanctions that have already been imposed.
The first is that banks and investment houses must be required by law to disclose state funds that they manage. This would cost nothing and would allow citizens to see that state revenue is not being stolen by corrupt leaders. This fits a growing international norm on transparency of national assets. Oil and mining companies are now required, as a condition of listing on the New York Stock Exchange, to disclose payments they make to governments, allowing people of natural-resource rich states to know what their government is earning.
The second is that banking regulators must do a thorough investigation to ensure that banks holding Libya’s state funds have done appropriate checks – known as due diligence – to prevent transfers from state funds to accounts personally controlled by Gaddafi and his cronies.
“We are calling on others with additional information to go public on Libya’s other assets too or to tell us where to find them. It’s the money of the Libyan people and they deserve to know where it is,” said Ms. Gooch.
HSBC said that it had strong anti-money laundering and anti-corruption procedures in place across all of its businesses.
/Ends
Notes to editors:
1.HSBC’s U.S. division is currently under investigation for possible violations of anti-money laundering rules. Media reports have suggested that HSBC may be fined up to $1billion for not doing enough to curb the flow of dirty money.
2.In a dictatorship where one individual, or a small cabal, exercises almost complete power over the state, there is a very thin dividing line between state and personal investments. Funds may look like they belong to the state but are actually under the effective personal control of a ruler who has captured the state.
3.In the report Undue Diligence we revealed how $3 billion of Turkmenistan’s gas income was at Deutsche Bank in Frankfurt under the effective personal control of then-president Niyazov. Deutsche Bank and the German regulator, BaFin, brushed off our concerns saying these were ‘state accounts’. However we had been told by a former chairman of the Central Bank that this money was treated by Niyazov as his ‘personal pocket money’.
4.Global Witness is also calling for:
* national registries that list the ultimate owner or controller of companies and trusts. Corrupt politicians hide their identity, and therefore their assets, behind complex webs of front companies and legal structures. This can make it very difficult for banks, or law enforcement, to find out who actually controls assets.
* if a bank cannot get its senior politician customers to explain their wealth, then it should turn down the money. Senior officials should be able to explain how their assets were earned legitimately, especially if there is a significant difference between their official salary and their actual wealth. If they cannot explain there should be a presumption that that their funds are the proceeds of corruption. This concept of “illicit enrichment” is already recognised in international treaties such as the United Nations and the Inter American conventions against corruption.
5. ICC comment on Gaddafi wealth: http://tinyurl.com/ICCGaddafi
Contacts:
London:
Robert Palmer on +44 (0)20 7492 5860 or +44 (0)7545 645 406
Andrea Pattison on +44 (0)20 7492 5858 or +44 (0)7970 103 083
Oliver Courtney on +44 (0)20 7492 5848 or +44 (0)7815 731 889
Washington: Stefanie Ostfeld on +1 202 621 6674 or +1 202 577 5858
Hong Kong: Gavin Hayman on +44 (0)7843 058756
Tuesday, May 24, 2011
PLANNING FOR POST-WAR LIBYA
Background: This is a commentary issued today on the future of Libya by Foreign Reports Inc. , one of Washington DC's oldest political analysis firms.
May 24, 2011
PLANNING FOR POST-WAR LIBYA
Addressing reporters in London yesterday with her British counterpart, Foreign Secretary William Hague, Secretary of State Hillary Clinton spoke of a “new Libya” that is ready to move forward.
“We do believe that time is working against Qaddafi, that he cannot reestablish control over the country. The opposition has organized a legitimate and credible interim council that is committed to democratic principles. Their military forces are improving. And when Qaddafi inevitably leaves, a new Libya stands ready to move forward,” Secretary Clinton said.
After she spoke, NATO staged its heaviest bombing raids yet against Qaddafi command centers in Tripoli. French Defense Minister Gerard Longuet said France was deploying its Tigre attack helicopters, while British Armed Forces Minister Nick Harvey told the Parliament that the UK was considering committing its Apache helicopters. Opposition MPs complained that these moves amounted to “mission creep” and that the NATO operation is now seeking to overthrow Qaddafi rather than simply protect civilians.
Never Too Early
No one can say how long Qaddafi can last, especially if he is hiding among his Qaddaf al-Dam tribal supporters in the southern desert areas. But it is never too early to begin planning for post-war Libya, both in terms of reconstruction and assisting in the establishment of viable political institutions.
For the Obama Administration, the U.S. experience in Iraq and Afghanistan has contributed to its decision not to play a leading military role in NATO’s Libyan campaign. But certainly the U.S. experience in Iraq became exponentially more difficult and costly than the invasion itself because of a lack of clear post-war planning.
The Obama Administration doesn’t have to do its own intensive post-war planning to make a “new Libya” stand ready to move forward. On the reconstruction side, the institutional expertise on post-war planning resides in the World Bank, established in 1944, originally as the International Bank for Reconstruction and Development for post-war Europe and Japan. The Bank will not advocate a role for itself in Libya, but will take on the task willingly if its shareholders so direct. It played a key role in assisting post-Communist Eastern European countries emerge into functioning market economies.
At some point, even with Qaddafi holed up in some desert redoubt, it is likely that the government structure in Tripoli will collapse from within. The current opposition based in Benghazi is likely then to have a legitimate claim to govern the vast majority of Libyan territory and population and thus qualify as the legitimate successor government, entitled to control the assets of the Qaddafi government which have been frozen in the U.S. and elsewhere.
Financial Resources
The U.S. has frozen some $33 billion in Libyan assets, out of a world-wide total estimated as high as $165 billion. Custody of that amount of money would challenge the integrity of any new, fledgling government. The World Bank has handled many a fund of that size with an enviable record of integrity and efficiency.
The UN’s History in Libya
When the U.S., Britain, and France took over control of the Italian colony of Libya after routing Rommel’s army in 1943 as occupying powers, they turned to the United Nations in the post-war period to work with a large swathe of prominent Libyans to form a new constitution, which was eventually hammered out before Libya became an independent state at the end of 1951 under a UN Resolution.
Unless there is a role for the UN as an impartial mediator and as an advocate for the creation of new and stable political institutions, the baser forms of human nature may well be at work among the various leaders of the current Transitional Council as they jostle for personal power. It may be popular in some quarters to malign the UN and its bureaucracy, but helping a fledgling government set up lasting and judiciously-framed institutions is one thing it does know how to do, without the inherently mercantile instincts of individual EU states who might seek to stake a claim to “mentor” the new Libya in proportion to their contribution to the NATO campaign.
Regional Side-Effects
One ancillary benefit of getting post-war Libya right, rather than wrong, is the beneficial effect success would bring to its Tunisian and Egyptian neighbors—two countries suffering from widespread unemployment. Before fighting broke out in February, there were more than 1.5 million Egyptian workers in Libya. U.S. proposals for debt forgiveness for Egypt or incentives for private investment there will not come close to making a significant difference for Egypt’s now thoroughly endangered economy; job opportunities, new exports and commercial contacts for Egyptians in Libya would.
The perils of getting post-war Libya wrong abound, with the most extreme case of Libya becoming a failed state like Somalia on the Mediterranean.
Getting post-war Libya right will not be rocket science. In their darkest hours, opposition leaders found true friends in the GCC and in the U.S. Qatar has been their most outspoken champion. When they asked Kuwait for a loan of $300 million, they were given a $500 million grant. Saudi Arabia used its clout in the Arab League to make the NATO mission politically possible. The UAE has been stalwart.
The institutional frameworks that the World Bank and the UN can provide to the “new Libya” exist and are ready to be tapped. All it will take is some prudent post-war planning.
May 24, 2011
PLANNING FOR POST-WAR LIBYA
Addressing reporters in London yesterday with her British counterpart, Foreign Secretary William Hague, Secretary of State Hillary Clinton spoke of a “new Libya” that is ready to move forward.
“We do believe that time is working against Qaddafi, that he cannot reestablish control over the country. The opposition has organized a legitimate and credible interim council that is committed to democratic principles. Their military forces are improving. And when Qaddafi inevitably leaves, a new Libya stands ready to move forward,” Secretary Clinton said.
After she spoke, NATO staged its heaviest bombing raids yet against Qaddafi command centers in Tripoli. French Defense Minister Gerard Longuet said France was deploying its Tigre attack helicopters, while British Armed Forces Minister Nick Harvey told the Parliament that the UK was considering committing its Apache helicopters. Opposition MPs complained that these moves amounted to “mission creep” and that the NATO operation is now seeking to overthrow Qaddafi rather than simply protect civilians.
Never Too Early
No one can say how long Qaddafi can last, especially if he is hiding among his Qaddaf al-Dam tribal supporters in the southern desert areas. But it is never too early to begin planning for post-war Libya, both in terms of reconstruction and assisting in the establishment of viable political institutions.
For the Obama Administration, the U.S. experience in Iraq and Afghanistan has contributed to its decision not to play a leading military role in NATO’s Libyan campaign. But certainly the U.S. experience in Iraq became exponentially more difficult and costly than the invasion itself because of a lack of clear post-war planning.
The Obama Administration doesn’t have to do its own intensive post-war planning to make a “new Libya” stand ready to move forward. On the reconstruction side, the institutional expertise on post-war planning resides in the World Bank, established in 1944, originally as the International Bank for Reconstruction and Development for post-war Europe and Japan. The Bank will not advocate a role for itself in Libya, but will take on the task willingly if its shareholders so direct. It played a key role in assisting post-Communist Eastern European countries emerge into functioning market economies.
At some point, even with Qaddafi holed up in some desert redoubt, it is likely that the government structure in Tripoli will collapse from within. The current opposition based in Benghazi is likely then to have a legitimate claim to govern the vast majority of Libyan territory and population and thus qualify as the legitimate successor government, entitled to control the assets of the Qaddafi government which have been frozen in the U.S. and elsewhere.
Financial Resources
The U.S. has frozen some $33 billion in Libyan assets, out of a world-wide total estimated as high as $165 billion. Custody of that amount of money would challenge the integrity of any new, fledgling government. The World Bank has handled many a fund of that size with an enviable record of integrity and efficiency.
The UN’s History in Libya
When the U.S., Britain, and France took over control of the Italian colony of Libya after routing Rommel’s army in 1943 as occupying powers, they turned to the United Nations in the post-war period to work with a large swathe of prominent Libyans to form a new constitution, which was eventually hammered out before Libya became an independent state at the end of 1951 under a UN Resolution.
Unless there is a role for the UN as an impartial mediator and as an advocate for the creation of new and stable political institutions, the baser forms of human nature may well be at work among the various leaders of the current Transitional Council as they jostle for personal power. It may be popular in some quarters to malign the UN and its bureaucracy, but helping a fledgling government set up lasting and judiciously-framed institutions is one thing it does know how to do, without the inherently mercantile instincts of individual EU states who might seek to stake a claim to “mentor” the new Libya in proportion to their contribution to the NATO campaign.
Regional Side-Effects
One ancillary benefit of getting post-war Libya right, rather than wrong, is the beneficial effect success would bring to its Tunisian and Egyptian neighbors—two countries suffering from widespread unemployment. Before fighting broke out in February, there were more than 1.5 million Egyptian workers in Libya. U.S. proposals for debt forgiveness for Egypt or incentives for private investment there will not come close to making a significant difference for Egypt’s now thoroughly endangered economy; job opportunities, new exports and commercial contacts for Egyptians in Libya would.
The perils of getting post-war Libya wrong abound, with the most extreme case of Libya becoming a failed state like Somalia on the Mediterranean.
Getting post-war Libya right will not be rocket science. In their darkest hours, opposition leaders found true friends in the GCC and in the U.S. Qatar has been their most outspoken champion. When they asked Kuwait for a loan of $300 million, they were given a $500 million grant. Saudi Arabia used its clout in the Arab League to make the NATO mission politically possible. The UAE has been stalwart.
The institutional frameworks that the World Bank and the UN can provide to the “new Libya” exist and are ready to be tapped. All it will take is some prudent post-war planning.
Thursday, May 19, 2011
Deja Vu
This is an Op-Ed I wrote back in December 2008
New Gaddafi-West ties to cost Libya dearly
There is little doubt the reintegration of Libya into the international community does not seem to address fundamental problems plaguing the country.
- By Hafed Al Ghwell, Special to Gulf News
- Published: 00:41 December 2, 2008
Image Credit: Illustration by Nino Jose Heredia/Gulf News
The past year has seen a rehabilitation of Libya in the eyes of the international community, capped by a September meeting between US Secretary of State Condoleezza Rice and Libyan leader Muammar Gaddafi in Libya, and fuelled by billions of dollars in compensation to American victims of Gaddafi-sponsored acts of terrorism.
By granting compensation to the victims, and accepting responsibility for the downing of Pan Am Flight 103 over Lockerbie, Scotland, and the 1986 bombing of a West Berlin nightclub, Libya has mostly succeeded in its efforts toward establishing friendly bilateral relations with the US and a greater reintegration into the international community.
The Libyan rapprochement with the West comes after Gaddafi's 2003 decision to scrap the country's embryonic chemical and nuclear weapons development programmes, and in the context of high oil prices, which are driving renewed Western interest in investing in Libyan oil field exploration and development.
High unemployment rates
Ironically, the Bush administration, which has made endless public statements of its commitment to democratic reform in the Arab world, views the rapprochement with Libya as its most significant foreign policy achievement and a model for other countries, contrary to all available evidence to support such hopes.
But while Libya may be presenting a less "roguish" face to the world, life within Libya becomes increasingly precarious and desperate for the average Libyan.
And as the West grants Gaddafi its seal of approval as a reward for "good behaviour", the stability of Libyan society is brought further into question as the country continues to decay.
Unemployment is widely estimated at or close to 30 per cent, one of the worst unemployment figures in the world. Whereas record revenues have profited most oil-producing states, few Libyans have seen any direct benefits.
There is also deep resentment at the heavy-handed presence of Gaddafi's clan in key positions throughout the security and economic structures.
Marginalised both politically and economically, the Libyan people are growing increasingly restive as the country continues to be plagued with endemic corruption, political repression, economic stagnation, dilapidated infrastructure, semi-collapsed public administration, and a stifling culture of bureaucracy.
Most of the country's well-educated citizens are either already outside the country or clamouring to secure jobs and visas to go abroad.
To add insult to injury, the country recently ranked 126 in the 2008 Corruption Perceptions Index issued by Transparency International, and 160 in the Reporters without Borders Press Freedom Index for 2008, at the tail end of the worldwide index.
Demonstration
And it is getting worse. The Libyan society appears to be starting to fracture with regional, ethnic and tribal tensions. Only two weeks ago, Libya experienced more political violence.
In the province of Kufrah, 11 people perished in clashes between Toubou tribesmen and the security forces, with violence reportedly spilling over into Benghazi, the country's second largest city.
Families of about 1,200 political prisoners who perished in an infamous massacre at the Abu Sleem political prison in the late 90s also staged a rare public demonstration demanding information about their loved ones and threatening to resort to international courts to address their grievances.
Meanwhile, the cases of scores of Libyan political prisoners are being championed by Libyan dissidents abroad and by human rights organisations.
Gaddafi has finally publicly admitted the shortcomings of his infamous system of rule by committee, where committees are composed of subgroups and report to other agencies.
He recently announced plans to abolish the entire government with the exceptions of foreign affairs, the security apparatuses and the petroleum sector.
Gaddafi asked Libyans in a recently televised "debate" with his ministers, to prepare themselves to educate their own children at home, and go abroad for health services, as both the health and education ministries will be abolished at the beginning of 2009.
Meanwhile, his son Saif - despite his questionable capabilities and recent public vows to stay out of politics - is being touted in the West as Gaddafi's heir-apparent. Over the past few years, Saif has been issuing endless promises to Western media regarding political and economic reforms, but these are yet to materialise.
Needless to say, Libyans appear to be confused about the direction in which their country is heading and disheartened about the prospects for any future peaceful reform or improvements.
Gaddafi continues to experiment with the country's future, as he has done for the past 40 years. Most Libyans know that what the country really needs is not more grandiose and unworkable schemes, but a simple return to political legitimacy and normality.
It is now very clear that the rehabilitation of Gaddafi by the West came at the expense of neglecting Libya's dismal human rights record and serious internal problems for the sake of short term questionable economic gains.
There is little doubt the reintegration of Libya into the international community does not seem to address fundamental problems plaguing the country, namely, the legitimacy, configuration and effectiveness of its governance structure.
Libya appears to be caught between overall stagnation and total chaos. Ultimately, unless it is encouraged or pressured to undertake a serious and credible process of internal reform and national reconciliation, the country will drift quickly towards becoming a security nightmare for the same West that is now ignoring its decay.
The country risks becoming another Somalia on the shores of the Mediterranean when Gaddafi finally leaves the scene.
Hafed Al Ghwell is an American-Libyan writer based in Washington DC.
Wednesday, May 18, 2011
Towards a better Libya
Although much of our attention is at present focused on the political dimension of the events unfolding in Libya, the future of the country will most certainly be shaped not so much by what is happening now as by what happens next.
While the government will change, and Gaddafi will fall, the underlining fundamental economic and social issues and internal challenges that have led Libya to this moment have not yet changed. It is only through new governance structures and a new social contract that Libya can seize the moment and the opportunity that this historical juncture offers.
It is governance, in the broad and sometimes vague sense of the term, which is really at the heart of the recent events sweeping much of the Arab World, Libya included. These momentous events can be traced to three fundamental pillars of what is called “Governance:” 1.) rules and restraints, 2.) voice and social accountability, and 3.) transparency and openness in governing.
In essence, governance provides the rules and process that organize the political, economic, and social aspects of life in any given society. It represents the general rules that members of society have collectively agreed to rely upon to manage public relationships and institutions in a transparent, equitable, and inclusive way. From getting a driver’s license in Tripoli toreceiving health care in Ben-Ghazi, the relationship of citizens to their public institutions manifests itself in almost every situation. That implicit “social contract” underlies how individuals and groups interact with and through their governments to each other, society and the world at large.
The challenge for a new government and people throughout Libya now, as they embark on a promising future, is how to organize and develop interactions that are fair and productive and to minimize the ones that are frustrating and wasteful — as they move toward “good” governance where authority is exercised in ways that respect the integrity, rights, and needs of everyone within the society.
What is good governance?
First, a good governance framework is inclusive, maintaining the right set of mechanisms to define and to protect the basic rights of everyone, while at the same time providing remedies and recourse guaranteed by a rule of law. Second, good governance incorporates representation, a notion as old as the first caliphs. Representation, when translated into governance, means that those selected to act on behalf of people are answerable to the people for their failures and credited for their successes. In short, they are accountable to the people. Third, good governance requires knowledge and information upon which accountability to the people can be based—and so “transparency” within governance mechanisms is absolutely essential.
Improving the inclusiveness and accountability of governance mechanisms in the new Libya can help in three ways. It will: 1.) reduce the scope for persistently arbitrary or distorted policies; 2.) improve the delivery of public services to businesses and citizens that will consequently improve productivity and social responsibility; and, 3.) improve bureaucratic performance and thus reduce the uncertainties and costs of doing business.
Economic research shows conclusively that good governance has a major impact on the economic life of a society. Ensuring public accountability of politicians and bureaucrats has been shown to contribute toward effective implementation of economic policies conducive to growth. Transparency and contestability, key principles in terms of accountability, in addition to inclusiveness in the governance process, are essential checks against an emerging leadership and policies that may favor less-efficient economic activities. Indeed, in the medium term, the transition to a better governance framework has the potential to significantly boost economic growth and raise living standards in Libya.
With greater inclusiveness, accountability and transparency in governance, nations remove key constraints to their economic growth and steer capital and human resources more effectively toward productive uses while reducing unproductive rent-seeking behavior. It follows too that good governance mechanisms must include the participation of civil society, including a free media and independent academic institutions , and ensure vibrant public debate on the effects of government policies -- a process that helps countries to minimize persistent policy distortions.
Better governance also makes it easier to start new businesses and to run and expand existing ones. For example, accountable and capable bureaucracies help lower transaction costs (for entry, operation, and exit). Furthermore, transparency and inclusiveness reduce the information asymmetries between business and governments, and this in turn reduces uncertainties and unpredictability in the application of government rules and regulations.
Businesses rely upon and operate in a commercial environment that depends on the satisfactory, timely, and equitable delivery of key public goods and on efficient and equitable enforcement of necessary public regulations. Including the participation of business, labor, and consumer interests in defining new priorities for public services and monitoring how well governments perform those services is key to providing the proper environment. Equally as important are accountability mechanisms that help keep officials, administrators, or other providers of public services honest and able.
Whether men or women, young or old, street vendors, public sector workers, college graduates or promising entrepreneurs, those marching and fighting in the streets of Libyan cities are voicing the simple and universal demand for equal treatment, freedom to choose their government, greater voice in their country’s affairs, credible ways to hold their government accountable, and the opportunity to participate in the process by which they are governed. They want to impact their own economic and social lives. How far they go in achieving these noble goals will certainly reveal what kind of future Libya will have.
While the government will change, and Gaddafi will fall, the underlining fundamental economic and social issues and internal challenges that have led Libya to this moment have not yet changed. It is only through new governance structures and a new social contract that Libya can seize the moment and the opportunity that this historical juncture offers.
It is governance, in the broad and sometimes vague sense of the term, which is really at the heart of the recent events sweeping much of the Arab World, Libya included. These momentous events can be traced to three fundamental pillars of what is called “Governance:” 1.) rules and restraints, 2.) voice and social accountability, and 3.) transparency and openness in governing.
In essence, governance provides the rules and process that organize the political, economic, and social aspects of life in any given society. It represents the general rules that members of society have collectively agreed to rely upon to manage public relationships and institutions in a transparent, equitable, and inclusive way. From getting a driver’s license in Tripoli toreceiving health care in Ben-Ghazi, the relationship of citizens to their public institutions manifests itself in almost every situation. That implicit “social contract” underlies how individuals and groups interact with and through their governments to each other, society and the world at large.
The challenge for a new government and people throughout Libya now, as they embark on a promising future, is how to organize and develop interactions that are fair and productive and to minimize the ones that are frustrating and wasteful — as they move toward “good” governance where authority is exercised in ways that respect the integrity, rights, and needs of everyone within the society.
What is good governance?
First, a good governance framework is inclusive, maintaining the right set of mechanisms to define and to protect the basic rights of everyone, while at the same time providing remedies and recourse guaranteed by a rule of law. Second, good governance incorporates representation, a notion as old as the first caliphs. Representation, when translated into governance, means that those selected to act on behalf of people are answerable to the people for their failures and credited for their successes. In short, they are accountable to the people. Third, good governance requires knowledge and information upon which accountability to the people can be based—and so “transparency” within governance mechanisms is absolutely essential.
Improving the inclusiveness and accountability of governance mechanisms in the new Libya can help in three ways. It will: 1.) reduce the scope for persistently arbitrary or distorted policies; 2.) improve the delivery of public services to businesses and citizens that will consequently improve productivity and social responsibility; and, 3.) improve bureaucratic performance and thus reduce the uncertainties and costs of doing business.
Economic research shows conclusively that good governance has a major impact on the economic life of a society. Ensuring public accountability of politicians and bureaucrats has been shown to contribute toward effective implementation of economic policies conducive to growth. Transparency and contestability, key principles in terms of accountability, in addition to inclusiveness in the governance process, are essential checks against an emerging leadership and policies that may favor less-efficient economic activities. Indeed, in the medium term, the transition to a better governance framework has the potential to significantly boost economic growth and raise living standards in Libya.
With greater inclusiveness, accountability and transparency in governance, nations remove key constraints to their economic growth and steer capital and human resources more effectively toward productive uses while reducing unproductive rent-seeking behavior. It follows too that good governance mechanisms must include the participation of civil society, including a free media and independent academic institutions , and ensure vibrant public debate on the effects of government policies -- a process that helps countries to minimize persistent policy distortions.
Better governance also makes it easier to start new businesses and to run and expand existing ones. For example, accountable and capable bureaucracies help lower transaction costs (for entry, operation, and exit). Furthermore, transparency and inclusiveness reduce the information asymmetries between business and governments, and this in turn reduces uncertainties and unpredictability in the application of government rules and regulations.
Businesses rely upon and operate in a commercial environment that depends on the satisfactory, timely, and equitable delivery of key public goods and on efficient and equitable enforcement of necessary public regulations. Including the participation of business, labor, and consumer interests in defining new priorities for public services and monitoring how well governments perform those services is key to providing the proper environment. Equally as important are accountability mechanisms that help keep officials, administrators, or other providers of public services honest and able.
Whether men or women, young or old, street vendors, public sector workers, college graduates or promising entrepreneurs, those marching and fighting in the streets of Libyan cities are voicing the simple and universal demand for equal treatment, freedom to choose their government, greater voice in their country’s affairs, credible ways to hold their government accountable, and the opportunity to participate in the process by which they are governed. They want to impact their own economic and social lives. How far they go in achieving these noble goals will certainly reveal what kind of future Libya will have.
Sunday, May 15, 2011
The New Economic Prospects Of The Arab World
The public engagement emerging today in several Arab countries offer an opportunity for the people in the region o take their destiny in their hands, voice their desires and aspirations, formulate the strategies to achieve them and carry out the kind of reforms needed to overhaul the development paradigm in their countries and unlock their full creative potential.
Going forward, participation and accountability will be necessary preconditions for corrective measures to be applied when economic and social policies do not achieve the desired results. Regardless of the path each country may take, because each element of the social contract is part of a coherent whole, reforms of the political, economic and social system have to be supported as an integrated, cohesive whole, reassessed in a continuous manner, and sequenced appropriately.
The recent developments of early 2011 in Tunisia, Egypt, Libya and Syria are a wake-up call for governments not only in the Middle East and North Africa, but also throughout the world. They also offer an opportunity to rebuild the relationship between state institutions and the citizens they are expected to serve.
With the opportunities and risks facing much of the Arab World in mind, I believe the region will need the support of the international community around four key areas to ensure a better future for its citizens: 1) Increasing transparency, social accountability, and citizen participation, to create more accountable and responsive states that serve citizens; 2) Increasing social and economic inclusion, in particular of youth and women, and of poor people in economically-disadvantaged regions; 3) Creating jobs for the unemployed and underemployed, by taking short-term actions that support job creation in the medium and long-term; 4) Accelerating economic growth through policies for a more dynamic, open, and competitive private sector that supports individual initiative and entrepreneurship, and creates more and better jobs.
Increasing transparency, social accountability, and citizen participation:
Actionable governance indices, such as Global Integrity, indicate that the region lags behind other parts of the world on many governance dimensions. A better governance architecture will help provide legitimacy to emerging governments, while providing the citizenry and civil society with the means to understand and evaluate government services.
More transparency will require that governments disclose information on key operations, including national budgets and their execution, economic and social data, information on government processes and decisions (for instance, public procurement). This increased openness would be complemented with enhanced rules to reduce conflict of interests of public and elected officials, strengthened internal control mechanisms, and a greater role for (and independence of) Supreme Audit Institutions. There is also greater scope for corporate governance reforms that increase disclosure, business ethics and the use of international reporting and compliance standards.
Increasing social and economic inclusion:
Unlike many regions of the developing world, Middle Eastern countries have long had redistributive policies through subsidies and public employment programs. However, public discontent in the regions has been less about income poverty. One of the words most frequently heard from young people demonstrating in region was the word “dignity”. It is first and foremost about exclusion from the political process. But it is also about exclusion from social and economic opportunities, from an ability to contribute to society and to earn a living – not through handouts – but through jobs that make use of individual effort, creativity, and education, or through access to land and credit to help create or grow a small business.
Social and economic exclusion in the Arab World is significant, and has many facets. It affects young people, women, religious and ethnic minorities, and poor people in urban and rural areas. Young people face increasingly limited job opportunities and are increasingly unable to sustain an independent livelihood. And supporting social inclusion of disaffected youth will take more than offering public jobs to excluded groups. Governments in the region will need to offer youth a diverse range of positive outlets for their energy and aspirations that go beyond work and marriage, but include political and economic freedoms. The energy of young people could also be channeled to enhancing government accountability. In addition, there are community-based projects in the new technologies, infrastructure, the arts, sports, or the environment, that could help direct the efforts of young people to the improvement of their own societies.
Women especially face even greater difficulties in economic and in some countries social participation. Gender equality matters for development—improvements in gender equality can generate gains in economic efficiency and improvements in other development outcomes. It also has consequences for the quality and representativeness of the institutions a society develops, and developing these institutions is more critical for the region today than it ever was – it is critical that women be part of transition governments, help shape new constitutions, and participate in the political process of the Region’s new regimes. Some of these impediments to a fuller inclusion of women in the economy and society may take time to address. But some countries in the Region - Morocco, Tunisia, Jordan, and Egypt - are further ahead than others.
Creating jobs:
With relatively high rates of unemployment around 10 percent and youth unemployment at 24 percent, approximately 48 million jobs will have to be created in the coming decade in the Arab World; even more if low labor participation rates are to rise to levels of other regions. Only a dynamic and growing private sector can create high quality jobs at a rate that keeps pace with this growing and increasingly young population. However, the private sector in the region does not exhibit the sort of dynamism found in high-growth economies. Regional economies are dominated by uncompetitive markets, the regional business environment is lagging in some areas and restrictive labor regulations have increased the costs of hiring labor and reduced the competitiveness of the private sector by increasing labor costs. On the other hand, the labor force does not have the skills the private sector needs, and labor market institutions are ineffective in matching labor demand to supply. Public sector jobs offer generous benefits, hence encouraging educated individuals to queue for them, creating distortions in the market and contributing to long unemployment spells.
Accelerating growth:
Before the uprisings, the region’s GDP growth was projected to return to the pre-global economic crisis levels (4.8 percent) by 2011-12. Recent developments have now reduced 2011’s growth prospects, especially for those countries affected directly by the turmoil. In the short run, avoiding a sharp growth decline is the first priority. Growth rates for oil producing countries may raise due to high oil prices, but for oil importers and countries directly affected by disturbances, there could be a sharp decline in 2011, which will place further stress on the population. In addition, the growth slowdown and fiscal and balance of payments pressures will increase risk premium and financing costs, especially for those countries that entered the crisis with already large imbalances.
If growth and the employment response to growth remain close to the ones experienced during the past decade, the region will add about 4.8 million jobs a year, or 48 million between 2011 and 2020. To reduce unemployment and employ the millions of nonparticipating MENA people, job creation will need to be faster and higher. If growth accelerates to 6 percent a year, it could produce double the number of jobs relative to 1999-2009. And if the capital intensity of growth (which is high in many MENA countries due to energy subsidies) declines, growth would generate even more jobs.
To accelerate job creation and reduce unemployment, economic growth will need to speed up to rates observed in East Asia and other high-performing emerging economies. The growth pattern will also need to change, to absorb more labor. Key medium-term reforms should include: a) reduction in distortions introduced by energy subsidies; b) establishing a level playing field for all firms and individuals, for incumbents and those politically connected, and for new entrants and those previously excluded; and c) trade reforms to make markets truly contestable – in particular in the labor-intensive services sectors, to allow the region to become more integrated regionally, and with the global economy - to tap into new markets and to take advantage of its location.
Regional integration could also provide a powerful policy anchor to consolidate the Arab transitions. Such an approach has proven successful in other regions in times of transformation (e.g., Eastern Europe post-1989, Balkans post- 1995). In today’s Arab world, such regional integration would entail greater convergence of regional institutions, policies, and regulations toward those of the EU and other developed countries, and the further integration of the Arab countries among themselves. Regional integration through trade, investment, and migration has the potential to unleash productivity gains in the Arab World.
In conclusion, let me say that how and at what pace recent events will transform the region is still unknown. It is likely this will be a long process, with some countries transitioning into a new social contract faster and in more extensive ways than others, but the international community with its global knowledge and financial support, can ensure that the region will be better placed to get the most out of the promising opportunities, while avoiding much of the risks. Regardless, recent events have a historic significance – they have unleashed a process that, over time, may transform the political and economic landscape in the Arab World – and translate into a brighter, more equitable, and far more sustainable future for its people and the World.
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