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Aid With Strings Attached

The G8 and the Arab World

by DAVID TRESILIAN

Paris.

Meeting in the French resort town of Deauville, the leaders of the G8 group of the world’s leading industrialised nations announced a package of measures, part of a so- called “Deauville Partnership”, designed to support democratic and free-market transitions in the Arab countries, notably Egypt and Tunisia, and to help these countries rebuild their economies.

However, commentators in the French and British press reacted to the measures by asking whether what was being offered was sufficient, the French newspaper Le Monde saying in its editorial on 27 May that not enough had been done by the G8 leaders to help the economies of the Arab countries in transition.

The amount pledged was “derisory when compared to the amount of money poured into the bottomless pit of Western military interventions in Iraq and Afghanistan,” the paper said, adding that “the assistance the Tunisians had asked for [at the G8 meeting] represents just two months of what the Americans are spending in Baghdad.”

The limited nature of what was on offer was also pointed to by the economist Joseph Stiglitz, winner of the 2001 Nobel Prize in economics, in an opinion piece published in the London Financial Times last Thursday.

Calling on the international community to do more to help both Tunisia and Egypt on the path to democratic and free-market reforms, Stiglitz said that “on its own Tunisia,” and a fortiori Egypt, “has done more to advance the cause of democracy than any of the West’s military interventions in the Middle East.”

“The US spent US$3,000 billion on a war in Iraq that gained us nothing. The return on investment for helping Tunisia [and Egypt] is likely [to be] a million times more,” he wrote.

The difference between the estimated $3,000 billion spent by the US on the war in Iraq and the G8 measures to assist the Arab countries in transition emerged at the end of the two-day summit meeting held on 26-27 May, when assistance was announced that could include more than $20 billion in international loans.

These would be made available by multilateral development banks and would be expected to benefit Egypt and Tunisia from 2011-2013. There would also be other bilateral aid provided by France, the UK, the US and other countries.

According to a “Declaration on the Arab Springs” released at the end of the meeting last Friday, the G8 leaders said that “the changes underway in the Middle East and North Africa are historic and have the potential to open the door to the kind of transformation that occurred in Central and Eastern Europe after the fall of the Berlin Wall” in 1989.

“We strongly support the aspirations of the ‘Arab Spring’… hear the voice of the citizens, support their determination for equality and stand by their legitimate call for democratic, open societies and inclusive economic modernisation.”

“In this context, multilateral development banks could provide over US$20 billion, including ?3.5 billion from the European Investment Bank (EIB), for Egypt and Tunisia for 2011-2013 in support of suitable reform efforts,” the statement said, also pointing to a new role for the European Bank for Reconstruction and Development (EBRD), founded in 1991 to assist in building free-market economies and supporting political transitions in the formerly communist countries of eastern Europe and Asia.

“We call for an appropriate regional extension of the geographic scope of the EBRD’s mandate, in order to support the transition in countries of the region which embrace multiparty democracy, pluralism and market economies,” the G8 statement said, referring in particular to Egypt and Tunisia.

This year’s G8 meeting, bringing together the leaders of France, Germany, Italy, Japan, the United Kingdom, the United States, Canada and Russia, together with the president of the European Commission, also hosted the leaders of various African countries, as well as Egyptian Prime Minister Essam Sharaf, Tunisian Prime Minister Beji Caid Al-Sebsi and former secretary-general of the Arab League Amr Moussa, as invited guests.

Also on the agenda for discussion at the summit were the Fukushima nuclear accident in Japan, the current European sovereign debt crisis, the conflict in Libya, the Iranian nuclear programme and the situation in Syria.

The G8 announcement of support for democratic and free-market reforms in the Arab countries came in tandem with calls in the press for the international community to do more to assist the transitions and announcements from the EU, France, the UK and the US of bilateral aid.

In a revision to its “European Neighbourhood Policy”, which sets out EU relations with neighbouring countries, including in the Arab world, the EU said on 25 May that it would be making funding of ?1.24 billion available to add to the ?5.7 billion earmarked for 2011-2013, as well as arranging billions more in loans through multilateral development banks.

The funding, supporting programmes in the southern Mediterranean and eastern Europe, is designed to help foster political and economic transition in countries neighbouring the EU, notably in strengthening democratic institutions, economic and social development and security cooperation.

According to President of the European Commission Jos? Manuel Barroso, the revised Policy, which must be approved by EU member states, was part of the EU response to changes in the Arab region, with enlargement commissioner Stefan F?le describing it as a “more funds for more reform” approach.

Under the Policy, EU funding would be available in return for “progress in building and consolidating democracy and respect for the rule of law. The more and the faster a country progresses in its internal reforms, the more support it will get from the EU,” F?le said.

France, the UK and the US also announced increases in their aid budgets to Arab countries implementing reforms, with France announcing that the French Development Agency would be making loans worth ?1.1 billion to Egypt and Tunisia in 2011-2013, together with assistance to the two countries of ?650 and 425 million, respectively.

Earlier, US President Barack Obama said that the US intended to forgive up to $1 billion in debt owed by Egypt and to guarantee a further $1 billion in loans. British Prime Minister David Cameron said that the UK intended to give $180 million to the region over four years, including $15 million a year to promote democracy and help build new political parties.

The Egyptian and Tunisian economies, under pressure because of falling revenues and increasing social demands, have suffered since the countries’ democratic revolutions earlier this year, notably because of falling tourism revenues and fears among international investors of political instability.

An advertising campaign signed by 200 mostly French economists and running in British and French papers last week and on the web invited the international community to “help the future of Tunisia” by investing in the country’s economy and supporting efforts to build democratic institutions.

In the light of last week’s G8 announcements, there will now be fears that such calls, referring to Egypt and Tunisia, may not be adequately heard.

David Tresilian writes for Al-Ahram Weekly, where this article originally appeared.