Tunisia and Egypt face economic challenges besides the difficulty of achieving political stability. The collapse of the previous systems of sinecure will release individual energies and initiatives, but these will go nowhere unless the new administrations find the financial resources to make up for lost time and achieve more egalitarian development. According to the first estimates from the Tunisian Central Bank and the Egyptian economics ministry, the countries will need between $20bn and $30bn over the next five years to improve their standards of living and open up regions through investment in transport, energy and technological infrastructure.
Conscious of how high the stakes are, prominent Arab and European figures (1) have supported the slogan “Invest in democracy, invest in Tunisia”, and have launched an appeal, the 200 Manifesto, calling on the West to give Tunisia financial aid. The US and EU have made plain that their coffers are empty and that, during a public debt crisis, they will not be extravagant. Although the world’s richest nations promised Tunisia and Egypt $20bn over two years at the G8 meeting in Deauville in May, this consists of loans scheduled before the revolutions. The Arab countries are hardly rushing to help their neighbours towards democracy. Despite its reserves of $150bn, Algeria has only allocated a few tens of millions of dollars to Tunisia. The EU’s plans for a Mediterranean Bank, planned since 1995, finally ended this May.
So, with the IMF and the World Bank, the principal lenders will be the European Investment Bank (EIB) — which is offering loans of $6bn between now and 2013 — and the European Bank for Reconstruction and Development (EBRD). Unlike eastern Europe after the fall of the Berlin Wall, the countries of the southern Mediterranean will not have their own bank of reconstruction and development.
In Tunis and Cairo, where there were hopes of a Marshall plan like the one that the US financed in Europe after the second world war, this has come as a great disappointment — all the more so since economists estimated that such a plan would cost the equivalent of funding the war in Iraq for two months, or 3% of the cost of German reunification in 1991 (2).
Privatisation by any other name
Unable to count on aid to meet their economic and social needs, Egypt and Tunisia have been encouraged by the IMF and World Bank to go further with market liberalisation, including seeking development money from multinationals. International lenders and western multinationals that already have a foothold in the southern Mediterranean, and want greater freedom of movement, view the option of public-private partnerships (PPPs) as a miracle solution.
Under PPPs, for a fixed period a company finances, constructs and then derives profit from a public service such as water, power or health on behalf of the state or its proxies. Even if the arrangement is temporary, it is a privatisation. International financial institutions are asking new democracies for the same as they used to demand from the previous dictators.
Since the early 1990s the IMF pressed President Hosni Mubarak of Egypt and President Zine el-Abidine Ben Ali of Tunisia for economic reforms, including the complete convertibility of their currencies, an “improvement of the business environment” — more facilities for foreign lenders — an accelerated withdrawal of the state from the economic sphere and a liberalisation of public services. Without casting doubt on their commitment to the free-market economy, these dictators were careful not to go too far along the road to market liberalisation for fear of accentuating social inequality. Will future democratically elected governments yield to calls for still greater economic liberalisation? And are PPPs really the answer?
To the business community and international institutions, PPPs seem a natural instrument for financing infrastructure development in the southern Mediterranean. Yet their implications are poorly understood. Les Echos, the French financial paper, explained: “The ever more frequent recourse to public-private partnerships still has not proved its profitability,” and quoted François Lichère, a law professor and legal consultant on PPP contracts: “The financial risk is borne by the project companies, established for that purpose, which borrow 90% of the funds. The instrument is therefore designed to work under favourable banking conditions” (3).
This calls for two qualifications. The first concerns the state of the banking sector. A PPP requires low interest rates and healthy banks. Neither of these conditions applies to Tunisia or Egypt, where many institutions have dubious debts and lack the expertise to take part in complex financial arrangements (4). The second qualification relates to the public operator’s ability to ensure that its interests — and those of the taxpayer — are being served, and that the private-sector partners are carrying out their responsibilities effectively. This means that the state, local institution or other public body must have the necessary competence and expertise to back and evaluate the PPP. In France, in a sector such as water supply, municipalities are obliged to prove they are vigilant so as not to incur additional costs and so that the terms of the contract are not flouted by the private contractor (5).
PPPs require not a strong state but a competent one, capable of working out a solid legal framework and guaranteeing that the terms of the partnership are fulfilled. Will future administrations in Egypt and Tunisia be up to this task?
If there is a middle way, an economic option that is neither headlong liberalisation nor a return to the planned economy of the past, it will not come from religious political parties. As the Egyptian economist Samir Amin showed with the Muslim Brothers, Islamism is happy to align itself with liberal, mercantilist theories and, contrary to popular belief, pays only passing attention to social issues: “The Muslim Brothers are in favour of a market-based economic system which is totally externally dependent. They belong to the compradore bourgeoisie (6). They have opposed big strikes by the working classes and the peasants’ struggles to retain ownership of their land [especially in the past decade]. So the Muslim Brothers aren’t moderates except in the sense in which they have always refused to formulate any economic or social programme (in fact, they don’t question reactionary neoliberal policies) and in which they also accept de facto submission to the demands of existing US control in the region (and world). That makes them useful allies for Washington (is there a better US ally than Saudi Arabia, the Brothers’ patron?), which has given them a certificate of democracy” (7).
There is much talk about the charity work of Islamist organisations; this overlooks the fact that they are defending a fixed order and refuse to contemplate or develop policies to reduce poverty and inequality. Political Islamism is inclined to favour neoliberal policies and oppose any redistributive policy that uses taxes, considered impious, except for zakat, the compulsory giving of a set proportion of income to charity, which is one of the five pillars of Islam. This explains why Islamists have never tried to reach an understanding with the global justice movement, which they consider a new manifestation of communism. It is reasonable to suppose that, as long as they do not threaten the basis of the democratic order, strong Islamist parties will not undertake major economic revolutions.
So Tunisia and Egypt face a search for the “third way” that the former eastern European bloc was unable to find after the fall of the Berlin Wall. Popular revolutions must not become the foundation for an all-powerful capitalism that undermines the social cohesion of Egyptian and Tunisian society. Ensuring this will have to depend on new economic policies that prioritise the social dimension and the reduction of inequality.