Building democracy in the empire of oil: Arab economies in the Spring

The Tunisian Tourism Board's post-Jasmine revolution ad campaigns evoke a new, dark sense of humor.

They say Tunisia is nothing but ruins, reads one poster, featured on busses across Europe. In the background, ancient ruins slowly crumble in Carthage, Tunisia's ancient Roman city.

Fear has been identified as the main issue facing European tourists in choosing Tunisia as a travel destination, due to the post-revolutionary perception on security and country stability, said the woman behind the new posters, Syrine Cherif, managing director of Memac Ogilvy Label, the Tunis-based branch of an international advertising giant, contracted by the Tourism Board.

Cherif says her advertisements address prospective tourists' concerns with a sense of humor.

Commissioning provocative posters is one of the Tunisian interim government's many frantic measures to resuscitate its languishing tourism industry, once the bread and butter of the small North African economy. But without a stable government and with war raging in next-door Libya, Tunisian tourism is in peril.

A post-Bouazizi Breakdown

Tunisia's other sectors are ailing as well.

The Spring has had a huge impact on foreign exchange earnings and employment, said Elliot Abrams, Tunisia expert and senior fellow for Middle Eastern Studies at the Council on Foreign Relations in Washington D.C..

Expressing that strong economies are a necessary basis for the successful democratization of the post-Jasmine Arab world, Abrams cited an example from a similar situation, on the other side of the Atlantic.

Latin America's Spring or turn from military juntas to democracy failed where people concluded it had brought them no economic improvement, he said.

Democracy is at risk if democracy does not produce.

The Arab spring's tidal wave of popular movements has swept away tyrannical regimes in Tunisia and Egypt, two and three decades old, respectively.

But that tidalwave has also sunk the North African nations' budgets, as floods of protestors demand public spending on higher minimum wages and social benefits.

Tunisia's real GDP is expected to contract by 1.5 percent this year, and its budget deficit is expected to amount to as much as 4.5 percent of GDP, according to a report published by the Institute of International Finance (IIF) in Washington D.C.. That will undoubtedly frustrate the 14.5 percent of Tunisians the Institute predicts will face unemployment this year, a 1.5 percent increase from a 2010 under the more stable-- albeit repressive-- Ben Ali regime.

And it was partially true what they say-- Tunisia IS partially in ruins after factories and other infrastructural foundations for production and the introduction of foreign direct investment (FDI) were burned to the ground in the Tunisian people's fight against autocracy.

In Egypt, the Arab world's second revolutionary trailblazer, the situation is much worse. Just under 12 percent of the population is unemployed, in an almost 2 percent rise from the previous year under ousted Egyptian dictator Hosni Mubarak, and the Arab Republic's real GDP is expected to decline by nearly double the amount of Tunisia's, with the budget deficit amounting to nearly 10 percent of GDP.

In the ultimate of Catch-22s, Tunisia and Egypt will need to establish good government and anti-corruption measures, in order to attract foreign direct investment-- in order to secure the growth of good government.

The IIF's Deputy Director of the Africa and Middle East Department, Garbis Iradian, has more faith that Tunisia will bounce back faster than Egypt, the most populous nation in the Arab world.

I think I am more hopeful for Tunisia to put things in place, Iradian said, The population in Tunisia is more homogenous. In Egypt you have so many different groups of people to bring together.

Oil floats

In the flailing economies of the Arab spring, analysts are finding that in both the Arab world economies and in nature, oil floats.

With the exception of Libya and Yemen, the universal demand for natural energy to fuel economies from China to the United States are ensuring that the oil industry will not only come out of the Spring unscathed, but more profitable than ever.

The aggregate real GDP for all the oil-exporting Gulf Cooperation Council (GCC) countries is expected to rise 1.4 percent, according to IIF figures, while the aggregate real GDP oil-importing Arab nations are expected to decline by a whopping 4.9 percent.

Libyan oil made up roughly two percent of the entire world's oil production before Colonel Moammar Gaddafi waged an all-out war against his administration's opposition.

Now, that foreign capital has been diverted to Gulfi oil companies.

Compounded by higher oil prices and production, the growth rates of small oil-producing nations in the Arab Gulf like Qatar are expected to double this year.

But booming oil economies don't always mean happy citizens.

Despite Saudi Arabia's vast oil reserves-- comprising 13 percent of the world's total oil production-- Saudi Arabia's unemployment rate has hovered around 10 percent in the past couple of years, according to Saudi bank estimates.

Also, many analysts in the Arab world hold that pegging the collective Arab world economy to the oil trade is a fool's bargain.

Dependence on Arab oil has frustrated the progress of Arab history and allowed oil-rich countries to fund conservative, nay reactionary, religious ideologies around the world, said As'ad AbuKhalil, Arab-American political commentator who has written widely on the subject of oil in the Middle East for his much acclaimed Web site, The Angry Arab news service.

Building foundations

Offering Saudi Arabia's King Abdullah advice on how to appease a potentially restive population without depending heavily on oil, the IIF's Iradian suggested that the Saudi kingdom increase public spending to decrease joblessness and relax laws that he says make Saudi Arabia a very rigid society.

And as for countries like Tunisia and Egypt, without any oil to act as a lifesaver to their sinking economies, there are a series of international aid packages headed their way from countries like the United States, hoping that the money will stabilize the two nations. And hoping beyond hope that those two nations will act as a model for the rest of the embattled Middle East.

But Arab economists say foreign aid might hurt more than it will help.

I strongly feel that democracy models need to be locally grown and locally supported. A really large and underplayed factor in why a large portion of Arab audiences are disengaged from political involvement is low morale and feelings of indifference -- we do not feel that many policies directly affect us or take us into consideration, said Hazami Barmada, Co-Founder and CEO of Al-Mubadarah: Arab Empowerment Initiative, an independent international NGO devoted to developing a global platform for Arab development.

A thorough needs-assessment needs to be conducted prior to budgets being allocated internationally based on assumptions of local needs. Sadly to date, many international development packages represent the select interests of a few -- they either target high-end innovation or micro-finance, both of which are leaving out the vast majority that operate between these two extremes..

The CFR's Elliot Abrams offered a solution to the problem of establishing strong economic foundations for democracy in Egypt and Tunisia, sans aid packages.

The countries that did the best [at establishing the economic foundations for a foundling democracy] were those that changed the most toward an open economy and free markets-- places like Chile and Estonia, he said.

Doing this is very hard, but the only reliable way forward.