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What’s At Stake in Lebanon’s Survival?

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 Speculation continues to swirl around ‘what’s next?’ after Prime Minister Hariri’s return to Lebanon and the ongoing discussions among key players in and outside Lebanon. So it may be worthwhile to take stock of what’s at stake if Lebanon, as imperfectly as it operates, would become a failed state, i.e. looks more like Libya without even a modicum of central government authority and returns to a civil war with outside parties holding their contests for regional power inside Lebanon.

Of course the first question is survival as what? The status quo is certainly untenable with Hezbollah acting as a state within a state, Parliament divided among those who support an independent and secure country and those who welcome outside intervention, and those reluctant to stand for fear of losing their piece of the pie that is Lebanon. Add to that over 2 million refugees of uncertain status and the price of stability becomes astronomical.

Lebanon has never been a fully free and independent country, capable of defending its territory and preserving its institutions. But it certainly has been more free than it is today. Its survival depended on balancing the interests of national and regional players, whose agendas, often in competition, usually benefited from Lebanon’s role as a dynamic center of culture, business, tourism, and political discourse.

In broad terms, most analysts draw a direct line between Black September in Jordan, pushing Palestinian forces in exile to Lebanon, whose state within a state status precipitated the civil war and birthed Hezbollah, resulting in continuous and blatant foreign meddling that characterizes the current political morass. No wonder I go silent when asked to explain “what’s going on over there?”

The consequences of destruction and disabling 

Those who care about Lebanon want a free, independent, secure, and stable country that enjoys territorial integrity and a functioning government providing adequate services to its people. Yet, none of these qualities are assured in the current context where very little is certain except obscure outcomes. But we can point to what is on the doorstep if the regional competitions between Sunni, Shia, and Israel are not resolved without destroying Lebanon as collateral damage.

A failed state in Lebanon brought about by willful acts or unintended consequences of regional powers will have catastrophic outcomes – none of which support US interests or those of Israel, America’s primary ally in the region. To note only a few:

  • Instability along Israel’s northern border, which will require Israeli boots on the ground – an occupation army will yield no good outcomes over time.
  • War against Lebanon will make Christians, the backbone of the country’s social, economic, and cultural integrity, targets of opportunity for militias looking for scapegoats.
  • Lebanon which represents, one of the few successful bulwarks against radical Islam in the region, will be lost.
  • And the destruction and occupation of Lebanon will exert enormous pressure on our other ally, Jordan, which is also threatened by Syria and Iran.

The US cannot give a blank check to Israel to defend itself/attack Hezbollah as a proxy for Syria and Iran without considering consequences to America’s own safety and security, and its relations in the region. Consequences in the US of Lebanon’s failure cannot be overlooked. Heightened tension and warfare in the region will ratchet up domestic threats to the US, seen as the enabler of Israel’s disregard for Lebanese and Muslim lives.

Nor can the US stand by while Gulf Arab countries hammer Lebanon over the reality of Hezbollah’s paramount position in the government. Among the many unanswered questions emerging from the current crisis with Saudi Arabia are the many ways in which the Kingdom can undermine Lebanon through economic means, such as withholding funds from the Central Bank, cutting Lebanese imports, or deporting Lebanese workers or limiting their remittances, which are so crucial to Beirut’s budget.

To diminish the threat of state failure in Lebanon, the target of Saudi ire, Hezbollah, must decide if it is a Lebanese party or Iran’s proxy. It cannot be both. An accommodation, outlined in previous agreements and resolutions, to resolve its military status, now that its political role is demarcated, is central to returning Lebanon to a neutral position of disassociation that is its historical role. It is the ultimate win-win for the region.

Tough Love Economic News Requires Array of Strategies

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Jordanians are chattering about how the interim government is facing a number of difficult choices, none of which are of its own making. There is painful medicine for Jordanians in the prescription agreed with the IMF this past week, and people felt it immediately in prices paid for energy and power. No one argues that Jordan needs to take immediate steps to stop its slide into even lower growth, and there is little disagreement among leading Jordanian economists about how to move forward. However, medium and long term reforms will not do much to alleviate the pressure felt by consumers.

This is the dilemma facing oil producers and non-oil producers alike: How to bring about long-needed reforms that will ameliorate inadequate planning and decision-making by past leadership. One approach is HRH Mohammed bin Salman – high visibility, high energy, let’s take on entrenched interests approach while continuing to coddle citizens, which Saudi Arabia can afford to do.

On the other, there are Jordan and Morocco, balancing competing economic interests among potentially volatile political constituencies. Their way forward is constrained by internal and external factors that are not easily controlled. Morocco is in a more favorable neighborhood that encourages FDI and a more stable domestic political structure. Jordan faces both short and long-term challenges that are intertwined with all of their neighbors.

An article in The Jordan Times on the reaction to the IMF  tough love agreement noted, “This means there are more hard times ahead for Jordanians…the targets set by the government seem too difficult to achieve within the framework and the time schedule agreed on with the IMF.” The government is in a quandary inherited from the previous administration. With a public debt equal to 93% of the country’s gross domestic product, “and the stubborn problems of poverty and unemployment,” former finance minister Mohammad Abu Hammour blamed the fact that “There have been no real economic reforms over the past years in Jordan. Reforms should have been incremental, because they cannot be done overnight.”

The former minister said that the situation is already gloomy as exports dropped by 10% in 2015, foreign direct investments declined by 35%, and “unemployment rose to the unprecedented 14.2% mark.”

While Arab countries face similar dilemmas – a demographic bulge, inadequate education resulting in a mismatch between education and employment, and stagnant to slowing growth, the political dynamics of each country require avoiding a single remedy formula.

In Saudi Arabia the focus is on economic restructuring to promote jobs for men and women and soak up all those Saudis who are being educated abroad since there are few excellent universities in the Kingdom. This, of course, does not resolve the issue of those young people who are not university bound but still want jobs.

Jordan is different. It has no sovereign funds to bridge its economy to a brighter tomorrow. It hosts hundreds of thousands of refugees that have absorbed any spare capacity to deliver services. And it has to rely on infusions of foreign funds and loans to maintain its operations.

jordan flagSo what should Jordan’s government do? Given the obstacles of growing an economy burdened by providing services to citizens and refugees, here are three paths to follow, each with its own consequences. First, Jordan needs to cut government spending – always tough when there are so many vested interests in the current system. Secondly, Jordan needs to move more proactively to create a more business-friendly environment, promoting transparency, reducing corruption, and building public-private partnerships focused on short to medium term results.

One area that needs more emphasis is on convincing wealthy Jordanians at home and abroad to make significant job-creating investments in their country. Real estate aside, there must be more productive sectors for Jordanian, and Moroccan investors. Jordan and Morocco have wealthy citizens that could contribute to the country’s growth if they were incentivized properly. Investment capital is notoriously risk averse so this will take the most persuasive power of both monarchs.

Local investment funds, properly incentivized, can be quite powerful in the near term for targeting job growth for unemployed university graduates as well as those in the vocational/technical skills groups. When under- and unemployed youth believe that they can get jobs with wages for more than basic necessities, they will take advantage of many programs available to equip them for jobs in commerce and industry…but they must see a way forward.

Jordanian economist Hosam Ayesh summed it up best when he said “Increasing prices of water and electricity as of next year will push up the prices of many commodities. Citizens are always asked to tighten the belt, but shortly, there will be no belt to tighten.” Long days ahead.

From Here to Where and Mostly not There Yet

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From time to time, pundits in and outside the Arab world take on momentous themes and begin the process of analyzing, synthesizing, and opining so thoroughly that readers may begin to believe that these issues resonate with Arab masses. Such is the recent imbroglio about the legacy of the Sykes-Picot agreement.

I’m in Jordan, having just passed through National Independence Day, the 100th Anniversary of the Great Arab Revolt, the anniversary of King Abdullah’s coronation, the dissolution of the Lower House of Parliament and upcoming elections, and several notable birthdays. There is little or no public interest in discussing Sykes-Picot even though it is in many ways directly linked to Sherif Hussein bin Ali’s move to overthrow Ottoman rule. What is on their minds is the same agenda since the Arab Uprisings emerged in late 2010 – economic opportunity, personal dignity enshrined in human and civil rights protections, government and private sector accountability, and derivatives from these core issues.

As my friend Rami Khouri has argued, there is plenty of blame to go around as to why the Arab world, which once had once of the highest education rates in the developing world, has gone astray in terms of its human, social, and economic development. He writes, “So by all means let us recall Sykes-Picot and its consequent tumultuous century, but let us also summon honesty and integrity in analyzing all the regional and global factors that have led to today’s horror shows of stunted, staggered and shattered Arab statehood. We did this to ourselves, to be sure, but not only by ourselves; we had considerable assistance from many others in the region and the world. This was one of the world’s first global joint ventures in deviant political behavior.”

I have talked to dozens of people here about “who to blame” for the current state of disarray. Beyond half-hearted references to the Israel-Palestine conflict, respondents mentioned economic issues, transparency in public and private sector transactions, and political accountability as the common obstacles that eroding Arab countries today…themes consistent with the Arab Uprisings. Regardless of their positions on Syrian refugees, a very complex topic in Jordan, the bottom line is that Arabs I spoke with from Egypt, Morocco, Lebanon, and Jordan look at the governance in their countries and the region as sources of the most significant obstacles to development.

Their responses varied from a country’s inability to stand up to external pressures, inability to agree on internal priorities in a consistent program, weak institutions, meddling by neighboring troublemakers that siphons off needed domestic investments, weak and corrupt government institutions that should protect citizens, to the deeply held feelings that nothing can be done anyway.

jordan flagJordan is a test case worth assessing. With its access to its Syrian and Iraqi markets greatly diminished by road closures caused by Daesh, Jordan is suffering mightily. Saudi Arabia has negotiated a new investment agreement and there are ongoing negotiations with the EU that could boost exports. But months are passing, refugee numbers are increasing, personal savings are dwindling, and costs are building across the board. Citizens are troubled by the opaqueness of their futures as the economic situation continues to decline and political solutions seem like more words on paper. International donors are pouring hundreds of millions of dollars into Jordan but the lower and middle socio-economic classes do not have a sense that prosperity is any nearer. Much of the funding is directed toward increasing employment for Jordanians and Syrian refugees but any significant change in the next year is elusive.

Without open borders and greater market access, significant direct foreign and national investments in Jordan will not find opportunities for projects to generate the hundreds of thousands of jobs needed in the coming years. Looking across the region, a similar profile emerges – lack of stability in Lebanon, reduced growth expectations in the GCC and Algeria, continuing security pressures on Tunisia and Morocco, and Egypt’s reluctance to open public space to competition in business and ideas, not to mention chaos in Syria, Iraq, and Yemen, make the glimmer of a silver lining even more remote.

None of these conditions can be attributed either directly or indirectly to the false legacy of Sykes-Picot. Without a new social contract among a country’s citizens and with their governments, one based on mutual respect and shared commitments to resolve common challenges, prospects will remain difficult to divine, even as the pundits continue to blame others for the Arab present.

 

[Photo property of  Irregularwars.blogspot.com]

Expanding the Utility of Entrepreneurship in Jordan

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My first training assignment in Jordan was with the AMIR 2 project in 2002. The emphasis at the time was on the ITC sector and its applications from e-government to health care, transportation, education, and communications, among others. Being an entrepreneur then was thought possible due to the low cost of entry and relatively easy access to Internet marketing. Startups focused more on obtaining needed broadband and programming equipment than investors with deep pockets. Jordan was a pioneer in building the IT sector and spreading it throughout the region.

Today, the emphasis on entrepreneurship continues to be a constant message to young people. Yet times have changed, and we need to rethink whether or not conditions are still favorable to entrepreneurs and whether or not they can create the jobs needed to offset some of the country’s employment needs.

Successful entrepreneurs exist because of three sets of factors. The first is a supportive eco-system: infrastructure, financing, available human resources, market access, positive regulatory environment, and an opportunity-driven marketplace. The second set focuses on scale of opportunity and the competition: entrepreneurs make profits, reinvest in their companies, attract new financing, and survive in a competitive environment driving more growth.

These two groups of factors characterized Jordan’s early IT successes but eventually led companies to set up facilities abroad, mostly in the Gulf, since Jordan could not keep up with incentives offered elsewhere. Today, the third set, related to sustainability, is difficult to achieve in Jordan since the IT market is largely saturated by local and foreign firms, leaving an uncertain future growth in the technology sectors. Workforce demand, reflecting Jordan’s growing population, no longer favors university graduates and engineers but has many opportunities for those who can wed technology with more technical and vocational skills in services, manufacturing, assembly, and productive sectors.

Women can play a key role through skills and technology

Women can play a key role through skills and technology

So a useful question is “Can Jordan, with its well-developed human IT capacity, power non-IT based employment?” Yes, if one sees IT as a tool and enabler for driving non-high technology entrepreneurship. The key is empowering human capital to use IT for achieving market access for newly configured products, aggregating services for rapid, customer-centered delivery, and improving traditional manufacturing and production operations. IT in the hands of semi-skilled yet aware vocational and technical skilled labor can be used for setting up plumbing and HVAC service companies, home health care and maintenance services, as well as catering and hospitality services, among opportunities. All can become efficient and profitable using IT tools, and it is a very rich area for marrying entrepreneurial skills with talented labor.

As importantly, entrepreneurs using IT solutions can provide numerous training and education programs to integrate and improve the quality of the workforce, either for their own staff or for employers committed to making investments in people and processes. Using IT to grow companies that blend university and vocational graduates to enhance service delivery or improve manufacturing processes is a good starting point for a new brand of entrepreneurs.

Another area of great promise where IT can facilitate job placement and a road to entrepreneurship is certification for skills acquired through experience. There are numerous European models that use hands-on testing aided by technology assessments to measure the competence of workers who lack high literacy levels. Certification programs are especially critical in a country like Jordan where more than 60% of the workforce is in the informal sector and the small member companies of the Chambers of Commerce and Industry, some 70,000 firms, have five or less employees.

Entrepreneurs can figure out how to drive this competency-based training and work with micro and small enterprises (MSEs) to develop strategies for upgrading and providing more predictability to their marketing and production. This will strengthen the middle stratum of businesses, growing the SME contribution to GDP. And this brings us back to the original set of conditions for successful entrepreneurship – an eco-system that is user friendly.

Bottom line – Jordan has to rethink and recalibrate what it means by entrepreneurship and motivate the unemployed and underemployed university graduates to utilize their IT skills to develop solutions with MSEs to relaunch the lower 90% of the Jordanian economy. This partnership would redefine entrepreneurship beyond high tech applications and instead bring IT back to its roots as a facilitator for growth through more efficient processes.

Entrepreneurship cannot be viewed solely as the preserve of the brilliant and the educated. It is the achievement of aspirations through a combination of luck, timing, passion, and workable ideas. Jordan needs some great ideas now, and bringing together those with IT skills and others with hands-on talents to provide solutions utilizing vocational and technical jobs and processes can only benefit the country as a whole.