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at Brookings On the Brink: Preventing Economic Collapse and Promoting Inclusive Growth in Egypt and Tunisia By Hafez Ghanem and Salman Shaikh The Brookings Project on U.S. Relations with the Islamic World U.S.-Islamic World Forum Papers 2013 November 2013 STEERING For the tenth annual U.S.-Islamic World interact with each other. This year’s work- COMMITTEE Forum, we returned once again to the city ing groups included: Rethinking the “Red MARTIN INDYK of Doha. The Forum, co-convened an- Line”: The Intersection of Free Speech, (on leave) nually by the Brookings Project on U.S. Religious Freedom, and Social Change; Vice President Relations with the Islamic World and the On the Brink: Avoiding Economic Col- and Director Foreign Policy State of Qatar, is the premier international lapse and Promoting Inclusive Growth in gathering of leaders in government, civil Egypt and Tunisia; Diplomacy and Reli- TAMARA COFMAN society, academia, business, religion, and gion: Seeking Common Interests and En- WITTES Senior Fellow the media to discuss the most pressing is- gagement in a Dynamic World; and Ad- and Director sues facing the United States and global vancing Women’s Rights in Post-Conflict Saban Center for Muslim communities. States: A Focus on Afghanistan, Egypt, Middle East Policy and Libya. WILLIAM Each year, the Forum features a variety of MCCANTS platforms for thoughtful discussion and The opinions reflected in the papers and Fellow and Director constructive engagement, including tele- any recommendations contained therein Project on U.S. Relations with the vised plenary sessions with prominent in- are solely the views of the authors and Islamic World ternational figures addressing broad issues do not necessarily represent the views of of global importance; sessions focused on the participants of the working groups BRUCE RIEDEL Senior Fellow a particular theme led by experts and poli- or the Brookings Institution. All of the Saban Center for cymakers; and working groups that bring working group papers will be available Middle East Policy together practitioners to develop partner- on our website. ships and policy recommendations. The SALMAN SHAIKH Fellow and Director 2013 Forum continued its strong record We would like to take this opportunity to Brookings of success. Over three days together, we thank the State of Qatar for its partner- Doha Center assessed the impact of the significant ship and vision in convening the Forum SHIBLEY TELHAMI transitions underway in Afghanistan and with us. In particular, we thank H.E. Nonresident Pakistan, examined the economic chal- Sheikh Ahmed bin Mohammed bin Jabr Senior Fellow lenges still looming in the aftermath of the Al-Thani, the Minister’s Assistant for In- Saban Center for Middle East Policy Arab Spring in Egypt and throughout the ternational Cooperation Affairs and the region, and evaluated the regional effects Chairman of the Permanent Committee and impact of the crisis in Syria. We also for Organizing Conferences; and H.E. explored how art functions as a vehicle for Ambassador Mohammed Abdullah Mu- political expression and accountability, and tib Al-Rumaihi for their collective sup- we examined how the events of the past port and dedication to the U.S. Islamic decade in the Middle East have helped to World Forum and the Project on U.S. shape Arab identity. For detailed proceed- Relations with the Islamic World. ings of the Forum, including photographs, video coverage, and transcripts, please visit Sincerely, our website at http://www.brookings.edu/ about/projects/islamic-world. Each of the four working groups this year Dr. William F. McCants focused on a different theme, highlight- Fellow and Director ing the multiple ways in which the United Project on U.S. Relations with the States and global Muslim communities Islamic World Abstract Conveners: Hafez Ghanem and Salman Shaikh conomic frustration and anger helped fuel the Arab revolutions – but after two years, Egypt and Tunisia are facing an increase in Ethe fiscal and balance of payments deficits, a decline in economic growth, and a rise in unemployment. It seems clear, therefore, that economic recovery should be a top priority for the new leadership in Tunisia and Egypt, as well as for the international community, which has a stake in a successful tran- sition to democracy. The Arab revolutions provide an opportunity for the international community, particularly the United States, to revise its policies in support of Arab countries with a greater focus on supporting democracy, human rights, and in- clusive economic growth. This roundtable brought together economists and political activists from Egypt and Tunisia, as well as experts from bilateral and multilateral donor agencies to focus on three broad questions: What should governments and donors do to achieve macro-financial stabilization and avoid economic collapse? What measures can be taken to increase economic opportunities for youth and other disadvantaged groups, and to en- courage job creation? Can we identify some “quick wins” in the area of good governance that could support inclusive and sustainable growth, particu- larly corruption control? Authors Hafez Ghanem Salman Shaikh United States Qatar Hafez Ghanem is a Senior Fellow in the Global Salman Shaikh is the Director of the Brookings Economy and Development program at the Brook- Doha Center and a Fellow at the Saban Center for ings Institution. He leads the Arab Economies Middle East Policy at Brookings. He worked with project, with a focus on the impact of political the United Nations for nearly a decade, primarily transition on Arab economic development. He has on Middle East policy, as the special assistant to the worked in over 21 countries in Africa, Europe, the UN Special Coordinator for the Middle East Peace Middle East and North Africa, and Central and Process and as Political Adviser to the UN Secretary South East Asia. Prior to joining Brookings, Gha- General’s Personal Representative for Lebanon dur- nem worked at the Food and Agriculture Organiza- ing the 2006 war. He also served as the Director tion (FAO) of the United Nations as the assistant for Policy and Research in the Office of Her High- director general responsible for the Economic and ness Sheikha Mozah Bint Nasser Al-Missned, the Social Development Department. Before joining Consort of the Emir of Qatar, where he led a team FAO, he spent 24 years on the staff of the World of research analysts dedicated to advising on policy Bank, where he started as a research economist, and options and the initiatives of Her Highness. Shaikh then served as a senior economist in West Africa and earned his M.A. in International Relations from later South Asia. In 1995, he moved to Europe and Canterbury University and his B.A. in Politics and Central Asia where he was sector leader for Public Economics from Loughborough University. Economics and Trade Policy. In 2000, he returned to Africa as country director for Madagascar, Co- moros, and Mauritius and Seychelles. In 2004, he became country director for Nigeria, where he led a multinational team of more than 100 professionals, managing the Bank’s loan portfolio of some USD 1.5 billion. He holds a Ph.D. in Economics from the University of California, Davis. Table of Contents 1. On the brink: Preventing economic collapse and promoting inclusive growth in Egypt and Tunisia 4. Introduction 6. The Looming Economic Crisis 13. Policy Priorities: Stabilization, Jobs and Fighting Corruption 19. Support From the International Community 21. Reflections of the Working Group 24. About the Brookings Project on U.S. Relations with the Islamic World 25. The Saban Center for Middle East Policy 1 On the brink: Preventing economic collapse and promoting inclusive growth in Egypt and Tunisia n June 9-11, 2013, participants in the from the political process. They argued that the Islamic World Forum convened a work- Brotherhood was not willing to listen to the op- ing group on Egypt and Tunisia that position and was not interested in forging con- Obrought together economists and political activ- sensus around major national issues. Although ists from Egypt and Tunisia, as well as experts those political grievances may be real, it is un- from bilateral and multilateral donor agencies. likely that Tamarod would have been able to mo- Participants in the working group agreed that bilize millions of Egyptians had the economy worsening economic conditions posed a threat been doing well. Polls show that 65 percent of to democratic transitions in Egypt and Tunisia. Egyptians felt that their standard of living had Most participants also stressed the importance declined since President Morsi came to office. of achieving some level of political consensus in About the same number (64 percent) believed order to build new democratic institutions and that corruption had increased since the 2011 rev- implement much needed economic reforms. The olution. Many of those who joined the Tamarod political and the economic, they said, cannot be demonstrations on June 30, 2013, did so because separated, and a failure to address polarization they were suffering from unemployment, rising in Egyptian and Tunisian society was threatening prices, and shortages of key necessities.1 both democracy and economic development. On August 14, 2013 Egyptian security forces The ouster of President Muhammad Morsi on moved to clear two pro-Morsi sit-ins in Cairo. July 3, 2013 – three weeks after the working Hundreds were killed. Armed clashes broke out group meetings – underlines the importance of across the country, with more victims. In the both consensus building and economic growth immediate aftermath of the crackdown, Coptic for the success of democratic transition. The churches, Christian schools, police stations, and Tamarod (or “Rebel”) movement, which led the government offices were attacked, apparently by anti-Morsi demonstrations, was started by revo- angry Brotherhood sympathizers (although the lutionary youth who felt that President Morsi group blamed security forces).

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