The Role of Economic Opportunities in Middle East Uprisings

Jobs and Growth Can Help Maintain People’s Confidence in Slow-going Political Reforms

President Barack Obama’s speech on the Middle East today comes at a time of great challenge for the region. The youth-led uprisings present significant opportunities, but there are also risks that need to be addressed. One of the most critical is that there are elevated expectations about the pace of political change, particularly among youth, combined with unmet demands that could lead to radicalization of groups within society.

This is why it will be important for the United States—in coordination with the international community—to continue facilitating near-term economic improvements that can serve as a pressure valve for the release of frustration arising from the difficult and slow process of political reform. The United States can use existing regional models, such as a loan guarantee model that exists in the Palestinian territories, for working alongside local actors to transform the short-term changes into long-term sustainable opportunities.

The uprisings—particularly in Egypt and Tunisia—resulted largely from a lack of jobs and economic prospects as well as widespread disenfranchisement from unjust political systems. The revolutions spurred monumental changes, including Tunisian President Zine el-Abidine Ben Ali and Egyptian President Hosni Mubarak’s ouster. But the more difficult process of resolving the underlying political and economic problems is just beginning.

And opposition groups are already showing frustration with political reform. In Egypt, certain key youth groups that led the protests opposed a recent election referendum that passed, which they called “an attempt to abort revolution.” In Tunisia violence persists due to continued dissatisfaction with the transitional government.

High-impact economic changes can be implemented faster than political reform. These changes are not a permanent substitute for political change. They can, however, help mitigate frustration with the political process in the short term and give the political efforts the time and space they need to mature.

The United States can play a vital role in this respect by encouraging similar economic assistance packages from the international community, which will help Egypt, Tunisia, and other countries in the region benefit from global markets and create jobs for their citizens.

Secretary of State Hillary Clinton recently described U.S. efforts toward this goal: “As we map out a strategy for supporting transitions already underway, we know that the people of the region have not put their lives on the line just to vote once in an election. They expect democracy to deliver jobs, sweep out corruption, extend opportunities that will help them and their children take full advantage of the global economy.”

The United States is off to a strong start in both Egypt and Tunisia. It announced comprehensive economic packages that work through local institutions to create new jobs quickly. In Egypt, it announced programs such as financial backing to support local small- and medium-sized enterprise, or SME lending, insurance for Egyptian financial institutions’ distribution of letters of credit, and other programs. It announced similar assistance packages in Tunisia.

These aid packages differ greatly from traditional assistance models, which come at a significant cost to U.S. taxpayers. And the economic problems facing the United States provide greater incentives to implement these programs because they can spur sustainable growth with minimal domestic costs. The new programs apply internationally accepted financial instruments, such as loan guarantees and insurance models, to underdeveloped regional markets, thereby helping to stimulate private-sector growth, which is critical in boosting these economies and creating new jobs. They also leverage U.S. dollars to make a significant impact beyond the amount committed.

Announcing economic programs is just the first step, however. Ultimately, creating near-term opportunities and strengthening local institutions in the long term will be the key to the programs’ success. The United States can use lessons from existing models as a guide for its efforts.

One example is a Palestinian loan guarantee program developed and managed by the U.S. nonprofit Middle East Investment Initiative. The program, which uses financial guarantees from the U.S. Overseas Private Investment Corporation and Palestine Investment Fund, has facilitated more than $60 million in new SME lending and supported the creation of more than 3,500 Palestinian jobs in the short term. In the long term the program is fundamentally revamping the Palestinian banking sector by providing training and technical assistance to improve lenders and borrowers’ management and accounting practices.

The bottom line is that people need to see improvements in their day-to-day lives to maintain confidence in the political reform process. Again, economic prospects will never replace long-term political reform. But they become an important tool for maintaining support for peace and stability when implemented simultaneously with political reforms. The United States can emulate successful existing models to work with local institutions to make immediate and lasting improvements to economic systems in the region.

Ian Bomberg is a Research Associate for the National Security team at American Progress.

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