We're waiting for our third panelist, she's stuck in traffic and should be here shortly. We have, hopefully, when she arrives, three speakers. The first is Kinda Mohammedia. Kinda is an expert in macroeconomic policies in the Arab world. She's senior policy advisor to the Arab NGO Network for Development based in Beirut. It is a network including NGOs and CSOs in 11 countries in the MENA, focusing on development issues. She's currently based at the South Center in Geneva, where she is researching investment policies and treaties, including a comparative analysis of IMF agreements in Morocco, Tunisia, Egypt, Jordan, and Yemen. And she's also focusing on trade agreements between the EU, GCC, and the Arab world. She holds an LLM in International and European Economic Law and a master's degree from the University of California, Los Angeles, in public affairs. Yes, so, and then our second panelist who will be arriving shortly is Mahinor El-Badrawi. She's a researcher at the Egyptian Center for Economic and Social Rights, is a new organization dedicated to research litigation and advocacy organization around economic and social rights. It was founded by Khalid Ali, the former Egyptian presidential candidate in the 2012 race, the youngest candidate who is focusing on social justice issues. Mahinor leads the Center's International Financial Institutions Monitoring and Foreign Debt Unit and has done, conducted quite a bit of research on the Freedom and Justice Party's economic platform or proposed one and the IMF negotiations. Faisal Atani is a visiting fellow with the Rafi Career Center for the Middle East. He is an analyst focusing on economic development and political economy in the Arab world. Before joining the Atlantic Council, he worked as a political and economic risk analysis advising governments, corporations and international organizations on regional developments. He holds an MA in International Economics and Strategic Studies from the Johns Hopkins University School of Advanced International Studies and a certificate in public policy from Georgetown University and a BA in Business from the American University of Beirut. Kinda is going to start us off with some comments on the current economic challenges in the region and IMF engagements. Mahinor will focus on Egypt and IMF negotiations and then Faisal will help draw us out to the broader themes and issues facing the political and economic intersections and the reforms going on in the current post-revolution climate in the region, focusing on Jordan and Egypt as examples, but again helping us to look broadly at how politics interact with these issues. And then we will open for questions and answers. We have, Mike needs to be turned on. I think just wait a few minutes because we're getting Mahinor mic'd. But I just want to add actually at this point that we did invite someone from the IMF to join the panel, but the IMF was unable to send someone at short notice. Kinda and Mahinor as a delegation from the region, civil society delegation has met with the IMF and has been engaged this past week in the IMF World Bank meetings. So perhaps in the question and answer we can also discuss a bit about what you've heard from them on the issues that you'll raise. So Mike, Kinda's mic needs to be unmuted. Is it ready? Yeah? Yeah. Okay. Great. Good morning. Sorry. Don't worry. Welcome. Mahinor. So as Leila have introduced the Arab NGO Network for Development where I am engaged is a platform of civil society organizations from 11 Arab countries. Our office is based in Beirut but we work on economic and social policies and rights across the Arab region. So one of the major issues we focus on is to try to understand the economic problematic that have underpinned the revolutions and people's uprisings that we have seen since 2011. And what I would like to do in the few minutes I have as an introduction today is to try to highlight our diagnosis of this problematic and what it means for our way forward. Because definitely we see that there is no chance for a sustainability of economic practice in the, I mean democratic practice in the Arab region without putting at the center of this process economic and social justice and redressing inequalities that underpin the economic model that have been established during the last two decades. So in this regard if you look back two to three decades in terms of the major economic trends across different Arab countries in the region and I want to highlight that definitely there are differences between the countries of the region. For sure not only between the Gulf countries and the oil exporting countries and the others but also across the other middle income countries. But still you can see certain trends which have cut across different big economies in the region. One of the major trends is the regress in the productive capacities in the Arab region specifically the decline in the manufacturing capacities and in the contribution of the agricultural sector and a shift towards the low added value services sector. This have been associated with also a period where we have seen a certain level of economic growth achieved in the region around five to six percent in many years but also along with that there was a decline in job generation capacities and decent job generation capacities that were able to absorb the skilled labor in the region and also there was a regress in wages the depression of wages as a percentage of national income. This we see reflects and underpins the economic and social violations in the previous decades in the region because it is in a way reflecting how the citizen was marginalized and as an economic player and as a contributor to the gross cycle in the Arab region. So these you have seen like manufacturing capacities you have seen significant consistent regressive trends in Egypt in Morocco in Tunisia so these are not only country specific. In the same time you can see that the investments in the region and their allocation have been over concentrated in sectors that are low in terms of employment generation. You can see that between 2003 and 2010 two-thirds of the investments attracted in the region and and here we need to say that compared to other developing regions the Arab region was not high in terms of attracting investment but the investments that were attracted were concentrated in the real estate and the mining sector. So this also is another trend that we focus on. So overall you can see that there has been a trend where productive projects and developmental projects in general were marginalized and you have seen the economy being organized around a macroeconomic framework that prioritized an expedited process of trade liberalization investment liberalization and deregulation privatization dismantling of state owned enterprises and borrowing. So borrowing thus associated with an increase of the debt carried by these countries and this is why today we see countries like Egypt allocating more than 25% of their national incomes to debt servicing. This is significant in terms of shifting the priority of allocation of national funds from the national citizen challenges and developmental challenges whether they are education, whether they are wages, whether they are health to paying a debt which not necessarily was allocated or borrowed based on a transparent citizenship, citizen led process which served the citizen who is now paying for that from their taxes. So this trend we see our core to our understanding of what led us to see people uprising in the region and thus it should be central to our understanding and design of the ways forward. So in that term we are very cautious when we hear that now the main challenge in the region is stabilization of the economies based on a model that was established before the revolution. Why? Because we do not see that stabilization should be only focused about stabilizing the balance of payment situation of these countries their debt servicing situation or their inflation levels for example. We see the stabilization of these economies in a much more broader sense. We see it as a challenge to stabilize the real economy in these countries meaning the reverse in the declining trends into productive capacities and stabilizing the advancement of productive capacities, stabilizing the employment generation capacities in these countries. So we see a much broader understanding of how these economies should be revived and stabilized compared to the notion of stabilization that we hear from international financial institutions and other international organizations being involved in the region. So this was one of the main things that we were trying to highlight in our discussions that Layla alluded to with IMF staff but also with other civil society organizations and policy activists and policy persons who work in DC on foreign policy towards the Middle East and on engagement with the developmental question in the Arab countries. So overall this is what we see as the main challenge and for us we see that the interventions of international financial institutions as currently designed they carry with them significant threats to the policy space of governments in the region. And when we talk about governments we talk with a longer term perspective based on a democratic process where governments will have to turn over and thus we need to protect and safeguard the policy space of current and future governments to use policy tools they have including economic policy tools like macroeconomic policies, fiscal and monetary taxation policies, trade and investment in a way that contributes to reversing these trends that I have tried to describe. And this is why we were in our comparative analysis for example on the IMF loans either now being implemented in the region or the IMF loan agreements that are being negotiated with Tunisia and Egypt we try to unpack where the kind of conditionality that is associated with these loans would contradict with our quest to safeguard the policy space for governments in the region. So I will leave it at this and maybe we can go in more details in the question and answer. Thanks. Before you arrived I introduced your background so if you can tell us a little bit about reflecting on what Kinda said how does that play out in Egypt in terms of the specifics of the economy. Great. So we do take on at the Egyptian Center for Economic and Social Rights the question of the IMF and the IMF economic reform policies that come with any loan. We do take this on from an economic and social rights perspective because of the evident interplay of the proposed reforms to the lives of every Egyptian citizen to the average Egyptian citizen. So I will just start by outlining the story of when the IMF came to Egypt and what sort of proposed economic reforms that were brought on then we move on to what are they how or how they are implied today in the actual policy and economic and social policy of the state and the proposed or what we call for as alternatives to the problems that those specific recommended reforms are causing. So with Mubarak toppled in February 2011 we have an IMF team negotiating assistance financial assistance assistance to Egypt on the 26th of October of the same year. They were they were there on a visit from the 26th or the 3rd of November and I think it was official Lipton saying that the IMF is ready to support to give financial assistance to help stabilize the economy of Egypt and promote for structural economic reforms that would aspire or help fit into the aspirations of the people after the revolution. So it sounds very nice and the proposed loan was up until the president Morsi comes into power a loan of three billion dollars. However after after we had a president for the obvious causes of having stability in the country the economic situation allows. So the loan will be increased from three to four point eight billion. However little that the IMF team loan IMF team know or even maybe the Egyptian government that this loan will actually be working against the stability the political and economic stability in the country. So up until November we did not we had no idea as Egyptian civil society as the average Egyptian as to what terms of negotiations on the loan are happening. We we just knew that the that the loan has been increased. It's now four point eight B and but we had we had no idea what sort of even economic plan economic what was the national economic plan upon which this loan is coming on to what sorts of negotiations were happening. And we did not really know that until we actually civil society had to raise a case a case on transparency asking in the higher administrative court asking for the terms and the negotiate of the negotiations of the loan to be revealed and asking the government to give to the public the economic reform plan that it actually gave to the IMF and we knew this from the IMF website. So this is how we know that there is actually an economic national plan upon which the loan is being discussed so we asked to see it. So when we when we actually got the the national plan what we found in it was something very surprising it was very contradictory to what is being sold by international financial institutions as the nature of the financing to the Arab countries in transition that they actually fulfill the homegrown reform plans that are taken on by the by the governments and that there are there is no direct there is there are no direct recommendations and this is what also the government was saying that there are no recommendations by international financial institutions. It is what the government really sees as the reform plan for the country and for the people that when we looked at the economic plan that was released in November 2012 we found it that to exactly mirror the IMF recommendations that were made to the Mubarak government under the article for staff consultation report of the IMF and what and what the recommendations back then said is that in order to increase the state revenues there needs to be an immediate and full-fledged application of the VAT taxes value added taxation to broaden the tax base and to cut on subsidies or resist any pressures to of public spending on on subsidies and the need for subsidies reform and not only this it's also called for the resumption of the privatization processes and encouraging PPP development models. And this is and those are exactly the reform plans that came in November and under which the they are they are now tied with the IMF loan to Egypt. What we find in reality is there was a lot of disagreement as to what those policies had. So the reforms were supposed to take place on the average Egyptian as well as the businessmen and the investor. So on subsidies on subsidies reform there was supposed not to it wasn't it was supposed to not only be lifted from the household gas the butane gas cylinders but also it was supposed to be lifted from heavy industries in a way that would result to a 30 percent increase on heavy energy use and heavy industries use of energy and the taxation was supposed to also be implemented on business transactions and on capital gains but what happened in reality is that none of those took place what actually took place was the increase or the removal of the subsidies from the household gases that has raised to one hundred and fifty percent from three to eight pounds and the tax reforms led into the removal of tax breaks or tax exemptions on basic food on on fuel on on flour and sugar and other basic basic food products that used to have tax breaks. And now in line with what kinder was saying the rationale for what for counseling what was initially part of the part of the reform taxing capital gains was actually not to scare away the investor. So the government came out on on the 7th of April with the prime minister of Egypt to say oh we cannot implement those because we don't want to scare away the investor. But what we'll actually what we're actually seeing and what we're saying also is that well the framework the and the policies of investments today in Egypt they do not live up to what people want. They do not sustain a real developmental model along with was also the rhetoric that the government is using for the for the IMF loan albite those the reform policies that of the burden of which falls largely on the average Egyptian and the poor is to attract investments that once we have an IMF loan it would be like a seal of approval not only to other loans but also to give insurance to investor that Egypt is an economically sustainable place to invest. But if we look at the the legislative framework for investment that was amended after the revolution exactly to allow the sorts of investments on was actually very counterproductive and it it features into the past cycle of doing away with the real economy and productive economic models that kind of was talking about. So SCAF the Security Council of Armed Forces issued when they were the when it had the legislative power before having a president in the two years interim period after the revolution issued a law called law number four year 2012 and what it does is that it gives immunity to investor from undergoing or from going into any court process processes when there are suspicions or disputes on corruption or money or so forth and instead of going into court the investor shall go into a reconciliation committee within the respective within the respective ministry with which he had the initial contract the initial investment contract more lots of the times when it comes to investing with the government the type of PPP that is being now pushed forward as a development led model and this is very problematic not only because it attracts the different the wrong type of investor but it's also problematic because it's stopping the taking back of the Egyptians of their wasted assets over the last two decades of irresponsible privatization like Kinda was speaking about and the deterioration of the real economy. An example of this is that there is so Egypt is really famous for textiles right like textile industry and used to export a lot and so forth so there was one then this is just one example a factory in Mahalla and it's a textile factory called Ghazal-e-Shbeen. This factory used to house 20,000 workers and they used to produce very we used to have a very productive businesses and work and so forth and it was sold it was privately it was it was sold to a private investor it was privatized in with a contract that was later on seen as a corrupt contract that devalues the value of this factory and also it has done away I mean the investor that bought it was was a was an Indian competitor that actually done away with the with the factory now it only houses two and a half thousand workers and it does not produce anything significant significantly close to to what it used to produce before so with this with this corrupt with this with this anti-developmental policy and legislative framework in our countries the sort of investor that will we actually be calling for what we're actually inviting is the investor that will reproduce the cycle of weakening the any any any chance for real economic for real economic development for for the people okay I will I will stop here I mean I'm speaking for so long and maybe later on we can talk about alternatives to the question thank you I'd like to stop by thanking Leila and the new America Foundation for having me here and for all of you for attending I was telling kinder right now that it's great to see the policy discourse moving beyond this pure security issues and political Islam to actually how these countries are going to be grown and governed I don't want to talk too much about the economic merit of this or that IFI proposed policy I think the real question in the longer run is how viable are these proposals in the political context of the Arabs the Arab transition countries and to to answer that I want to explore two countries in particular can you just talk a little bit about what proposals your some of the sort of neoliberal economic reforms the subsidy reforms and physical reforms privatization and we'll have you I want to explore the cases of Egypt and Jordan not because they're the only challenged countries but because I sometimes find case studies are especially useful more so than generalizations and also because Egypt and Jordan happen to be going through both things that are common across many other Arab countries economically but also because they also have particular interesting political context that highlight the challenges of reform and through this I hope to demonstrate how really how fiendishly difficult it is for these governments to reform their economies but at the same time preserve a modicum of political and social stability without undoing their entire orders in the case of Egypt of course as you've highlighted we're aware of the serious economic crisis growing need for external aid and we know that the IMF has driven driven reforms through with subsidy reforms and taxation reductions and what have you but clearly I think in the case of Egypt the economic agenda is being held hostage by the political one to a large extent due to a series of mistakes by the Muslim Brotherhood but also I think due to the political culture in Egypt right now and Egypt's own experience with liberalization reforms through the 1990s and early 2000s for those reasons I think the government will actually find it very difficult to undergo the sort of meaningful developmental reforms firstly because I think there's been a lot of distrust and resentment built against the Muslim Brotherhood which tends to sort of magnify any any political opposition to this or that particular economic policy is now tenfold because the Muslim Brotherhood is proposing it I think there are also electoral considerations at play it seems like the Brotherhood is the government in general has been trying to postpone these difficult reforms until October which of course is when parliamentary elections are in Egypt are scheduled I spoke very briefly about the bad experience of Egypt with liberalization in the 1990s and early 2000s and I realize this is a qualified liberalization but nonetheless this is what the perception of it is amongst the public and finally I want to say something critical about the way the Brotherhood has handled this which is that their own behavior has fostered a sort of disillusionment with the political process in Egypt and I think sort of poisoned the policy discourse there and of course what's happening is the opposition has been opposing these reforms for political reasons which is obviously not unique to Egypt that's a worldwide phenomenon but opposing something for political reasons is one thing and resorting so quickly to street protests violence and coercion and disruption is something else and it shows a level of distrust that's gone beyond simple opposition politics I think it's interesting that the opposition amidst these IMF negotiations accused the Muslim Brotherhood of not consulting with them when they were when they were talking to the IMF of course if a government has a legitimate mandate to govern it doesn't need to consult with the opposition before it for crafts and economic reform program but I think this shows not only that this or that policy may not be valid but actually that people don't think that the government has a right to make these decisions on their behalf to begin with which is a bit more problematic so in light of this it looks like these these reforms are going to be put off as long as they can as long as there is external Arab financial support that will help Egypt go through this sort of temporary phase until elections decide the political balance the case of Jordan is a bit different Jordan has been faced with a number of sort of unlucky external shocks that have combined with its own political structures to make things very difficult for the monarchy the reforms at play here are some of the same ones we've seen in Egypt attacks reforms subsidy reforms the liberalization of trade as well as a sort of push for transparency and the corruption which has been there are very I mean certainly not consistently applied in the case of Jordan but also the economy is vulnerable in a different way than Egypt's and partly this is because of Jordan's heavy dependence on financial aid externally also its heavy dependence on imports from Egypt would have been which have been disrupted I'm talking about energy imports in particular and finally of course there is the crisis in Syria which is displaced hundreds of thousands of refugees into Jordan place the significant financial burden on the state but I think at the heart of Jordan's dilemma and what's so constraining about its situation is the political elite in Jordan is not it's not the same as the economic elite and in fact the two are quite hostile to one another sometimes the economic elite tends to be drawn from a middle class based on a man the capital and it's predominantly logic stand actually at least Palestinian was Jordan's population is majority Palestinian whereas the security forces and the political or tribal basis of the regime stability is the Bedouin or tribal or East Bank or population based outside the city and what they see is that these reforms that have been carried out over the past couple of decades have disproportionately benefited the economic Palestinian elite close to the king and his and his wife Queen Rania who's also happens to be Palestinian and so this is basically undermined some of the support that the monarchies traditionally been able to take for granted from from the tribal groups so far has been a particularly the king not the monarchy but that could change so by pursuing these sort of economic reforms the monarchy risks actually destabilizing its contract if you will with with its own base of support and therefore the entire polity late last year when the government moved to lift some subsidies of basic goods this led to a number of protests in sort of tribal hinterlands that pitted these protesters against what are Bedouin dominated security forces which is very uncomfortable position for the monarchy to be in and not sustainable I would argue and even relatively uncontroversial things like the pursuit of anti-corruption drives or more transparency that would actually endanger these sort of patronage networks between the monarchy and the tribes and the economic elite and everybody really on whom the monarchy depends we've seen from our experience that when Arab regimes are forced to choose between difficult economic reforms that would be good for the economy in the long run arguably or political reforms or sort of political stability rather in the status quo whenever they've been able to choose the status quo they've done it because they have to keep their policies together at the end of the day and this is where the GCC has played a role as a sort of lender of first resort to these to these states but really I'm just skimming very much the surface complex political economies of these countries just to highlight really how difficult the situation facing these regimes are regardless of how critical we are of them and the IMF and it seems to me that IFIs in order to sort of enrich their understanding of what's going on in these countries is they're going to have to grapple with these very complex political issues I'm not sure they have the mandate the resources or the inclination to do that may perhaps rightly so but it's still an issue worth highlighting but I think the two takeaway lessons here are first of all regardless of the merit of a policy you can't implement economic reforms without a strong social contract and political mandate whatever the case and second of all that the availability of the sort of very flush golf money that displaces these sort of international support organizations or IFIs offers these regimes an easy out of sorts that lets them postpone or indefinitely procrastinate these difficult economic decisions and with that I'll leave it to Leila and all of you yeah I think it was an interesting way to end I mean there's I think you know and working on these issues a bit in the past three years since the revolution started you know there there is a difference between perhaps the policies being proposed by international financial institutions for instance the ending of fuel subsidies is that necessarily a bad harmful policy for the countries and and are the people upset about it because of the actual substance of the policy or is it the context in which these reforms would be pursued lack of transparency lack of communication you know upset and by by those that have benefited from these subsidies who are said to be the elite generally speaking is it the failure of these governments really to put forward a platform that shows that the cost of ending the subsidies will not be absorbed by the poor and and I would note here that the IMF has indicated in its negotiations with Egypt that it wants to see fuel subsidies replaced with better targeted social protections for vulnerable groups and so I would just pose the question to all of you is it the substance of the policies that are the problem or is it the the environment in which they are being pursued and have been pursued in over the past decade and now and I and the second question I want to put forward to the panel is that when I'm particularly to kinder and my in or I'm I'm sympathetic to the idea that countries have to build their own independent economic capacities and and get away from dependency on foreign investment perhaps or for foreign foreign borrowing in particular but but is your isn't your idea and your critique more relevant to the long term given the very severe financial crisis that Egypt and other countries are facing in terms of their huge budget deficits aren't these loans important for staving off crisis in the immediate term but looking long term we can we can incorporate your policies or your your your critiques you know how do they relate to the immediate term sure please okay is my voice good yeah okay so what definitely I would say that the challenge is a longer term challenge for sure but also the the challenge we are facing today is not a result of the mobilizations and the revolutions of 2011 and the decline of international reserves for example that these countries have or that they were not able to sustain tourism or they were not able to attract investment from 2011 today this is not something that we witnessed after the revolution or as a result of the lack of security and stabilization afterwards this is an accumulation of years and years of a deliberate design of policies in a way of economic policies in a way that led to a decay in the ability of these economies to sustain the and to address the economic and developmental challenges of millions and millions of people in these countries so this is not this is one issue we need to take into consideration the second issue is the intervention of international financial institutions is not of only short-term implications these kind of loans and the design of the policies and conditions that come with them have generational implications because they first of all design the current macroeconomic policies with a very short-term vision so they focus on inflation stabilization and balance of payment stabilization and overall austerity measures which not necessarily allow the governments and the people today to start building the blocks for a longer term shift so this will actually limit their ability to transition in the medium and longer term in addition it comes with structural policy reforms that will necessarily have longer term implications not only short-term implications specifically when there is intervention by international financial institutions in advancing recommendations on trade and investment policy design in these countries because these are longer term implications the third thing we need to take into consideration is that these loans are debts that these citizens and these countries will have to pay okay this is the reality but the question is what are these debts being used for because all countries have debts but the question and the core of the issue is are they being used to block a hole in debt servicing or are they being used to design the way out of the economic decay that we have arrived at after 20 30 years of deliberate economic policy design in a way that did not help the people of this region so I think these are three critical questions that we need to put at the center of addressing any kind of loan agreement and a short answer to your question in terms about the substance of the reforms or the way they are done definitely the substance of the reform and the austerity nature of the reform being proposed now is not useful specifically in a transition period and in a period where people are passing through a significant destabilizing process of their economic and social situation but this we need as well to take into consideration in addition to the nature of the negotiations and the transparency and the engagement of designing these agreements okay Mahira can you tell us what would be the alternative then to respond to the very severe financial crises facing a country like Egypt okay where its foreign currency reserves are depleting and where its budget deficit is skyrocketing correct so one of the alternatives is would actually be to do a real reform so not to actually include to ignore the reforms of that are already being proposed taxation and subsidies but to do them on a more effective way that would put the burden on those who have more capital actually to give in order to raise state revenues which are the investors and the businessmen and those who have more but for example so progressive taxation is one of one of the alternatives and a real progressive tax taxation so the income taxes in Egypt how do they go now they go so from 5 to 20,000 pounds income per year are taxed 10% from 30 to 45,000 are taxed 15% from 45 to 1 million Egyptian pounds per year tax 20% and 1 million up there they're taxed 25% that's it so we so you see the progressive taxation actually happening on the lower income of the people the lower income citizen and not the high income citizen so what sort of reform says this from 1 million up the skies the limit and 24% is already very low yeah so a real progressive and effective progressive taxation would be something a non-fixed corporate tax is something else the corporate tax now on Egypt is 25% fixed regardless to what size the what size the corporate or the or the enterprise is there are no breaks to medium-sized enterprises they pay as much as a as a billion billions dollars makings enterprises another so those are like structural alternatives other alternatives was actually be recovering the stolen assets of the country and this sounds like a flirtatious fun idea out of Revolutionary Tahrir Square but in reality it is real and it is not so long term because instead of negotiating such a reform from the from the 26th of November 2011 until today the government could have actually proceeded to recover either Mubarak's assets which are the people's assets this is why the people don't have money because corrupt elite have the money instead of them because there is money has to either be for the people or for the corrupt elite Libya has done this for example and Libya was in a very similar and even a more dire circumstances and then Egypt it did recover some of Gaddafi's family's assets frozen in Switzerland and where and why not and it's actually lending Egypt today it just landed last month landed either two billion dollars yeah so this is this is one thing that we could have used this time to to to work on but there is no political will so a question is like why is there no political will and and and how to mobilize it another alternative would be the actually the and this is something that the EU actually has said on the 2nd of April's resolution when they cancelled the finances to Egypt they alluded to recovery of the stolen assets but another thing it would be the the riches of the countries inside so parts of the devaluation of the state owned assets so let's just do away with the idea of who should be running those enterprises state owned enterprises being private or public sector that's fine we don't have to adopt a certain economic ideology but even when they're giving to public sector they're giving to public sector with their real values so the real value of those assets are there are now being negotiated negotiated negotiated to a lower value in reconciliations committees they should be up for the real values in court so this is this is something as one example just one example is a state land that was you that was sold to Kuwaiti investor of Kharafi holding company is worth in reconciliation eight billion dollars this is just one example so there are alternatives on structural reforms and also outside of it you're saying that they negotiated it for less than it's worth the way it was sold it was sold for way less it was sold for a ridiculous price something like 200 Egyptian pounds per fed down don't know how much acres is the fed down but anyway it's very little it's like piasters per square meters like 30 piasters per square meter for being supposedly reclamation lands and what's not there are a lot of details to it but the reconciliation is for eight billion so the actual the actual price in outside that reconciliation process would be much more I thought you had comment yeah I mean not not much I I agree that you know immediately imposing all these austerity measures could be destabilizing but I think the issue for me is more that maybe I'm taking this for granted wrongly but I think eventually these countries will have to open up their economies and make them more efficient I think it'll be a painful process I don't think it's something that can be done today but I think that what the governments should be doing is preparing the way in order to be able to do it eventually because their other models have failed to deliver sustainable growth to their to their populations I think their experimentation with privatization and liberalization and what have you in the 90s and 2000s was obviously distorted I mean this is not you can't measure the merits of the policies based on their own experiment with it because it was you know more or less cronyism not much not much liberalization but I think what's worrying me is not so much that they're going to pursue destabilizing economic policies but that there doesn't seem to be any intention or recognition of their obligation for them to start building these social political orders explaining to their populations why this has to be done why it's difficult and giving people a sort of sense that this this economic reform is going to be inclusive the process will be inclusive and will hurt everybody to a certain extent but I think what's happening here is you've you're seeing these very fragile brittle political orders colliding with this very tough economic reality and as a result they're they don't have the options they would have had governed better and this is particularly saddening with the in the in the case of the brotherhood because I mean this is something that was built after a popular revolution the monarchy if ever enough that's been alone for a long time the structural deficits have been there for a long time but in Egypt it's it's disappointing that that the ability to forge a political consensus is so weak so let's open it for questions uh please identify yourself yeah that's a mic I'm Mustanser Barma from the it's on okay Mustanser Barma from the American Chamber of Commerce in Egypt and I've got a question for each of the three panelists if I may so Faisal firstly you were talking a bit about the external financing that's coming in from some of the Egypt's neighbors like Qatar and Libya more recently you do you think these countries should keep offering these you know band-aids to to Egypt and keep stringing them along until maybe the parliamentary elections if they do happen in October or you know or is there a more pressing need for you know reform you know before then you seem to suggest that maybe the you know we're waiting for the political mandate so you know will that mandate come after the elections and also I'm curious what the motives are of you know Qatar and and Libya and maybe you can shed some light on that you know personally I don't think there's any free lunch so you know maybe you can help with that and uh and you know is there a role that the you know the rest of the international community can play in that dynamic between you know especially from the US as it's something that can be done between the you know with the Egypt and the Gulf relations and so Mohinor I was curious about your remarks about the you know privatizations and and you know it's a current you know I completely agree with you that they were you know a lot of missteps taken in the privatization process of the 90s and you know you're feeling repercussions today at the same time I think you know businesses you know you might run the risk of scaring off investors when you have court cases that are you know being resolved in a way that are asking certain companies to rehire x thousand workers you know from the private sectors perspective they were making companies more efficient and trimming down and you know I agree in this you know in the Mahala case you gave okay you know that you they effectively shut it down so that's different but I'm thinking of you know a cement company for example CEMEX you know recently they were ordered to rehire 2,000 of their 3,000 workers and you know return their their cement plant to the state so maybe you can touch on sort of that a little bit and and lastly for for kinder I really enjoyed how you sort of set the scene and you know I agree with you as well they've been you know decades of sort of mismanaged policies and it's not just something that's happened over the last two years you identified some trends in the beginning the shift from sort of high skilled to low skilled workforce and also investment being focused on less labor intensive industries if I understood you correctly I just was curious if you had any reasons for why those those trends were were happening over time can you give us your organizational affiliation yeah the American Chamber of Commerce in Egypt so okay thank you go ahead you know there's quite a few questions there so let's go uh yeah oh uh one of the things that's it uh to the question of uh should this sort of support from the GCC four countries like Egypt and Jordan continue uh I mean it's easy for me to say no it shouldn't but uh the truth is that in Egypt in particular uh it seems like the political process the political situation and the fact that Egypt is quote unquote too big to fail uh has forced somebody to come in and plug this gap one of which is the IFIs who are coming with their own sort of economic baggage and social baggage but the GCC countries tend to favor sort of put the political status quo over anything else and not all of them Saudi Arabia hasn't been as friendly to the Egyptians but you know Qatar sees a chance to exert regional influence and cement that's ties with the brotherhood which has been a regional strategy politically certainly there's uh I mean yes they should continue it if the option is total social and economic collapse in Egypt uh should they be doing it for the reasons they're doing it and with such in such a non-transparent and inefficient way the truth is their motives are mostly mostly political not economic Qatar certainly doesn't need much from Egypt and even if they did get some investments or contracts or what have you I mean this is not enough to inform their strategy I think these decisions in the GCC countries are taken in a very central very narrow way by a number of people within a family or policy elite who decide that this is these are the people we have to support now and you know it's not a central bank decision it's not a treasury decision it's not a technocratic decision it's a political one so I would argue that the reasons is being done is encouraging just sort of creating this moral hazard in Egypt in Jordan I think it's a bit different because I don't really see many other options for Jordan Jordan is a poor country with in a very unlucky situation and very few resources so absent years of structural reform in a totally different model I don't see that it has much choice to be honest with you now there are political and even security implications of Gulf support for for Jordan but I'm not going to go into that now it involves this war in Syria and and what have you will the mandate in Egypt arise after elections in in October or whenever they're held I think the way it's going now no no it won't that's that's the short answer with all the negative implications that that brings what can the U.S. do I think the U.S. could do one of two things either exert some influence through the GCC on the process on this sort of external financing process in as much as they can and they do have quite a bit of influence over the GCC countries to be fair and so try to tie some of these some of this support to particularly economic pledges of economic reforms perhaps cautious ones but I think more importantly political ones as well and this is where U.S. and GCC interests might not overlap as much as they usually do and other than that of course they can't step in and provide their own financing but you know that puts also some questions of the but the mandate of the IFIs and how it relates to American influence and relationships with their brotherhood so that has its own that has its own complications. Okay can you can you sort of respond secondly yeah okay so thank you for your question what went wrong well in my opinion the the the main problem was that the economic decisions were taken in a way that was not aligned with the developmental levels that these countries were at so what you've seen is more a trend to align with a mainstream economic orthodoxy that was ruling the world and still ruling the world without an assessment of what would work and what would not based on the developmental level of the productive sectors and the various developmental challenges in in the region so I would definitely highlight the structural adjustment policies of the 80s and 90s which if you look at the structural transformation of these economies in the region during that period you can see the definite turning points that have underpinned the trends that I described so what we are saying is that these countries have not only suffered from crony capitalism but they actually suffered from a lack of ability to align the design of a trade investment and finance and other policies that plugged these economies in the global economy which is a necessity but they did it in the wrong way they did it in an expedited way that did not align with their specific needs so you saw them losing competitiveness and not definitely climbing up the ladder of industrialization and competitiveness at the regional and the global level so I think our discussion should be much more focused on the sequencing of the use of policies of trade and investment and liberalization and not necessarily a blanket discussion on we need to liberalize more we need to sign more investment and free trade agreements and all that and here I would actually caution like caution against addressing reforms in an open way because we need to see a much more nuanced approach that addresses the needs of the countries short and longer term what the US could do I'm not sure US conditionality on the way of the use of alternative financing at the regional level would be useful the currently the Gulf financing is not done in the best way but a conditionality on external financing to these countries is not the thing that we need actually we need an alternative financing that gives a breathing space for these countries and this is the way forward the US can look into that cancellation and here I want to highlight that Egypt's debt to the US is mostly in the wheat imports of Egypt from the US while the Egypt was self-sufficient in wheat before structural adjustment and before the reforms of the agricultural policies and sector of the 80s so this is significant to see that these reforms did not work for the macroeconomic strengthening and stabilization of these countries in these days thank you so on the position of the investor and how it feels like when the investor has to come after a few months of signing a contract to actually pay more on and more and more well it's it's not what I was saying was not necessarily against private investment or private lead development although I have lots of reservations on it was it was actually on the investor buying if they want to buy state owned assets for its real value so if the investor doesn't want to be shocked a few months after his buying and maybe he should go on with an already correct value contract so it's unfortunate that that the investor has to face this but the devaluation was already unfortunate before to the money that belongs to the people really the state owned enterprises are people's capital not states or I mean not governments and then you have to see if we come with this mentality of what belongs to the government and what belongs to people there is there is something to it on the idea of of hiring back laborers and what and what sorts of and the investor the the example that you have mentioned you've correctly noted another example where in the the the Ghazlish bin were sacked and did not only affect the workers but also the production of a sector that in which Egypt used to have lots of revenues from exports its style but also when when it comes to to workers I think it depends on what sorts of investment models and background do we adopt do we adopt investment for investment investment and investors or investments for the people and for the specific condition of a country at a given point in time so now you hear part of the global discourse on investment in Egypt before but also most strongly after the revolution is that investments should create or should be should revolve around job creation so when you have this as a model and then you have investments that do not that have low low job creation capacities or in fact not just job creation but does away with the labor that already does produces something or or not is is something to stick into consideration depends on which model and purpose of investment you have and it's also related to how you negotiate your wto terms in there how much protectionism do you have how much egyptians do you need to have an investment investment package and and what not so i think it's it this this comes from the realization of the specific moment in time where egypt economy stands and what do you need to to do for a developmental state and developmental oriented investment okay let's take three questions we have one up front um thank you for this uh debate uh my my name is marine ben avid and i'm founder of the arab governance institute and wrote extensively on the imf loan in tunisia and uh i'm thankful for the american a new american foundation for this debate because we didn't have any debate in tunisia even if we ask it for so a new american foundation did it and um well i just would add something uh about what you said uh and then uh go through the some geopolitical uh challenges through this loan can you be brief yeah we have 15 minutes left for discussion all right so um all these measures are taken to increase would be increasing inequalities in tunisia and uh about the subsidies it's it's nine 9.2 percent of of poor people are getting you know benefits from this from these subsidies and it's normal because 89 percent in tunisia are middle class are considered as middle class so it will impoverish the middle class we will create inequalities and you know uh the problem is that the union of labor and parties are not standing against that and they have been sold a lemon with increase small increases in wages and like negotiation and all that so this is the the saddest part of the story now about us as us is the first sponsor of the imf us treasury is the first sponsor of the imf i don't think us is doing good things for for for tunisians us tunisians and egyptians as by the way the same same process that went i mean the same process that imf adopted in both countries the same ways and uh so they designed the public policies and just give it to to to the government who signed it so anyways the us treasury is not helping tunisians because they aspire it for unemployment which they cannot get with the austerity plan we all know that any development we cannot make it when it's a austerity plan because for the same reason that we can cut spending cutting spending that means no no jobs for a while and um and the us treasury which our um ministry of uh secretary state of treasury met yesterday the us secretary uh secretary state of treasury so uh the us treasury is not helping the development of tunisia and i think there is a need to put hands on economies in tunisia and egypt first for a main reason for mainly geopolitical reasons so when i control the economy of a country through the debt i can control all this you know the military i can i can put my military uh interest economic interest and political interest and in egypt it's more complicated there is a lot of you know u.s defense is really afraid of the crisis in in in swiss canal in tunisia it's you know thank you so do you have a question so yeah i'm launching the debate on the geopolitical uh aspect of these aspect of is agreements and relations agreements if they share if you share my same opinion about that okay thank you um in in the back uh very back and then hi my name is uh ithar kathatni i'm a freelance journalist from egypt um i apologize i came a little late so maybe mic on oh can you hear me yep okay um so maybe you've discussed this um but i've been working a lot on the subsidies and the fiscal reforms that the imf has been demanding and i wanted to get your opinion if you think that these are realistic considering you know the for fuel for for bread even i worked a lot on bread how how realistic are these reforms if they're actually all implemented on impacting the egyptians in the short term and will they actually be able to allow egyptians to live considering almost half of them live either under or right above the poverty line to actually implement them without having you know a kind of last time we had a president who tried to remove subsidies on bread that didn't go so well yes that didn't go so well you had a very very big riots so would it be similar if that happened now okay and on the front here uh shadi mctoye from american university um as kinda you mentioned so these critiques and challenges to imf policies are not new i'm just wondering if um there's more space opened up for the two of you to make these critiques since the arab spring are you being heard more um is the human rights framework internationally more applicable uh i know internally uh social and economic rights are are big but internationally it's always been marginalized is that changing is your voice being heard okay thanks faisal can you address the geopolitical question yeah i i i guess the short answer is that well yes of course of course the u.s via international financial institutions wants to gets to exercise leverage over the countries that it helps uh i think the same thing applies of course for gcc or any other form of international support but i guess that's just sort of the way of the world right i mean whoever's going to come in and and bail out these countries or cover their their debt financing needs or help them push off reform for another year or two are going to have their own set of conditions i would argue that at least with the imf we know what those are and uh and they're available and openly debated in a forum and uh and within the government hopefully uh the gcc ones much less so uh but uh you know i i don't i don't think it's avoidable and i don't think it's either gcc or the ims role to sort of develop a plan of economic growth and and reform and uh you know social new social contract for these countries i'm not experts about these institutions but that doesn't strike me as their mandate they have a narrow one uh they provide financial assistance and these are the things they they request be put in place in order to their money lenders at the end of the day and they can't go around you know taking the lead on massive economic reform agendas it's not their responsibility or their or their expertise this is this is the responsibility of governments and in this respect these governments have failed uh the monarchy for its own reasons many of which are historic uh the current egyptian one i would argue from its own fault i'd be less forgiving of that uh but again i just want to sort of bring back the discussion just keep in mind what it is these guys are supposed to do these organizations or what it is they're not that's it but when you do when you when you look at the let's say in egypt the tendency to to give benefits or devalue property in favor of a foreign investor or you take a loan from the gcc or you engage in the conditionality it does create an imbalance where the countries of the region are beholden to um the external partners it reinforces a hegemonic uh relationship of course between between the west and the gcc and the and the rest the levant in north africa well something like you know privatizing state assets at ridiculously low prices is i think just very much a part of the domestic political and economic calculus if you have the right connections and your friends with the right minister or the right minister's son what have you are going to have access to these very lucrative underpriced assets uh with respect to the the sort of geopolitical i mean yes no it's certainly unpleasant right and it's worrying but these countries are you know weak uh almost broke uh and uh they've been dependent on these powers for a long time particularly in the case of jordan but not not only jordan not not at all uh i think it's to be expected that the gcc will try to exert that sort of influence particularly as that's the only influence tool they have uh they don't they're not military powers uh they don't have large populations their tool internationally and regionally is is the purse is money and uh you know that's to their credit when they use it to achieve economic and political stability and i guess it runs against them when they don't do that but again i just think i just started arguing for a little bit of sobriety and realism when it comes to expectations from foreign powers that they always come with screens attached and that's why you need to do what you have to do to to decrease the dependence but in the short one that's not an option okay can do it can you address the process question i think is very important more space and more well from where we sit our assessment is that specifically in terms of the international financial institutions i think you were asking there has been more uh of uh attempt to repackage the same old policy prescriptions under more declaratory positions that link these policy prescriptions to employment talk about employment about social protection and about transition overall so because in the court what we have when if we are monitoring the reports coming out from international financial institutions like the IMF before the global crisis 2008 after before the revolutions in the region 2010 2011 and after you have a consistent trend of similar macroeconomic policy recommendations and structural policy recommendations in the area of trade and investment but you also see a significant lack and here this is one of the main questions we were trying to pause in our meetings is that when you claim that these policy prescriptions are going to lead to more employment support at the longer level you need to back them up with assessments and numbers and this is not being provided by institutions like the IMF and others it's much more shorter term assessments that they provide and also through our monitoring we are diagnosing and we are finding significant contradictions as well between the objectives that they declare the short-term objectives like balance of payment stabilization and like with the structural policy advice that they give in terms of liberalization of trade and investment and here one example in one minute Jordan you explained why Jordan is taking the loan now it is external stress due to the oil prices and this oil market in the loan agreement and in the reports that came before and after there is significant push for more trade liberalization with the european union and with other countries whereas Jordan capacity to produce and export is limited when you open your economy while you have limited capacity to export you will fall into balance of payments problems in the medium and long term so they you find actually recommendations that will lead Jordan to go later on afterwards into more that more balance of payment stress and thus more need for loans and support and financial assistance from the IMF so it's a vicious circle and we need to break it well I don't think this is the indicator even if you meet you get like smiles and statements that I totally agree with you in this small room but when I sign as a director or a deputy director of the department focusing on the region on the report I am not ready to put the opinion that I declare in a small room in this report so there is no point you know institutionally there is no change you see more people more friendly more like listening to you I don't think this will make the court change we need an institutional change on the policy advice and this is we are not seeing well in Egypt though you have a very active opposition that has has entered positions on the issue of IMF negotiations so would you say then there is more opportunity now post-revolution to assert opinions on these issues I don't I mean it might come as a reaction to a certain political moment in time but it's not as a kind of said institutional and it's not it's not real in that sense because then none of these were happening before the subsidies reforms were actually on the ground and people were out in in rage the there were no discussions when when the IMF visited in in in August nor in November nor in February okay we'll take one more question we did discuss quite a bit the issue of the subsidies and you had a question Lisa hi my name is maher kheer I'm a political economy blogger and I was at the World Bank IMF meetings as well so I just wanted to get two questions one this is more directed to my nor you outlined what the tax brackets were what do you see as a like as a thought experiment what what would you propose what are the right rates for the different income level groups that you described and also based on your research this is all for all of you there's a lot of discussion on what the IMF proposed and what their intention was but do does any of your research look at who the players for the IMF team were did they have any other affiliations with some of the investment groups and other institutions that kind of have this revolving door issue I know it's a controversial point if you don't feel comfortable answering it on record that's fine but that I think that's something that we don't talk about a lot that there's this criticism all the time that the IMF doesn't consider the local needs of the people but often sometimes the IMF teams have people from the local environment so where does that play okay so the the tax breaks should really be broken differently so you could either break them into two or three brackets with more with more progress progressive aspects on those who make more and less obviously on those because when you say progressive tax rate that means that the more it doesn't impact them as much so if you can verify your use of what means by progressive no well what I mean by progressive is that the the more the more you make the more you pay so it goes up am I misusing this so do you tax the rich more than you yeah progresses up so right now it's not progressive the way it's progressing up is on the those who make less of an income per year it progresses from those who make a higher tax rate up until one progressive proportionate proportionately all the the progressive ways on those who make lesser and from one million up there is no progressive taxation also a similar debate that we're having here yes okay so shall we do you want to take a stab at the other question oh no let's see in terms of who's involved in the negotiation curiosity I actually know I'm not aware that that there that the IMF agenda itself has been compromised in Egypt due to members of its dedication who are in rent-seeking positions or something of that sort but no I would actually ask you the same question but perhaps afterwards I'd like to know more about that because that's certainly that's certainly relevant if that's the case can do do you have any thoughts on who the IMF is engaging I mean I know that the conversations they've expressed that they are trying to broaden their engagement to the extent that they can although they have some institutional limitations because they're a treaty-based organization they must negotiate with states but as a NGO network I mean do you have an opinion on one of the things that we who we say is that we understand they are treaty-based they negotiate with with the member countries but also they establish a certain policy opinion and direction on a lot of issues whether it's subsidy reform whether it's structural trade reform or investment reform these are opinions that are nurtured inside the institution and the institution exports through its political influence as a main economic and financial institution globally so we engage with them on their staff opinion that is reflected in the reports and that staff sign on because I think confining the discussion here allows us also to address their policy direction and the recommendations that they advance as a policy staffer so it's a very challenging discussion because there's so many leeways in the answers that we get from them that they can isolate themselves from being held accountable to a certain position so we are also trying to understand how to maneuver as well our positions vis-à-vis these responses so it's a it's a process okay well thanks everyone for coming out early this morning and please feel free to approach the panelists for questions should you have more thank you