The West is key in MENA future

The turmoil in the Middle East and Africa (MENA) region, which began with riots in Algeria and Tunisia in December 2010, has been unprecedented in its scope.

Of the 17 countries in the region, most have experienced protest. At least five governments, including those of Egypt and Tunisia have been sacked, three countries are facing violent unrest or involved in civil war, and thousands of civilians and members of the security forces have been killed. In at least two countries: Libya, where British forces are engaged, and Bahrain, where Saudi Arabian security forces are involved, foreign troops have come to the rescue.

Amid this turmoil, Israel had looked a sea of tranquillity. But recent stirrings among Hamas in Gaza have seen the IDF in action. Resentment of entrenched, klepto-capitalist dynasties and the desire for an end to repression has clearly been a driver of the unrest.

New media - in which Israel so excels - has played a key role in events with mobile telecommunications, as well as social network sites proving key sources of information for would-be protesters.

But at its core, what has been happening in the MENA region, is economic in its origins, although it may be manifesting itself in tribal and sectarian ways. The generational gap between the better-educated younger people and ageing leaderships has created conditions for instability. The long-standing resentment of corruption, together with high levels of joblessness, brought bitterness to the fore.

In the recent past, the regimes of the region have sought to buy their way out of trouble through fiscal stimulus. This is being tried in Kuwait and Saudi Arabia. The indications are that it may not be enough. The roots of the revolutionary spirit look too deep to be curtailed and many experts are comparing the events across the MENA to those in Eastern Europe after the fall of the Berlin Wall.

What has been happening is economic in its origins

The transition from authoritarianism to democracy and freedom is seldom smooth. The upheaval across MENA could have far greater long-term economic consequences than the triple tragedy of earthquake, tsunami and nuclear meltdown in Japan. Globally higher oil prices, trading in the range $115-$120 a barrel, are impacting on almost every economy. And because of both the MENA turmoil and fears about a nuclear future as a result of events in Japan, the price of liquid natural gas has been climbing sharply. China recently agreed a long-term natural gas deal with Australia at a record-breaking price.

For Israel, with its newly discovered gas field off the country's North-Western shores, this could be another unexpected bonanza. The higher oil and gas prices also mean that MENA will be better able to survive the present upheaval better than other parts of the world. Every time the oil prices rise, so do their surpluses which allows governments to increase spending to offset the loss of private sector growth.

Saudi Arabia has sought to buy its way out of trouble with a $130 billion stimulus programme. But countries in the region can only bribe the population to keep off the streets for so long. In the case of Saudi, unemployment is running at double-digit levels among 18-25-year-olds. This was the same kind of explosive mix which ignited Tunisia and Egypt. And with some 40 per cent of Saudi Arabia's population under the age of 15, the demographic pressures are likely to get worse.

The short-term response, particularly in the oil-rich Gulf states, has been for the governments to spend their way out of trouble. That however, can only work temporarily. It increases the size of already bloated government sectors.

What is really needed is a more vibrant wealth-developing sector which creates the millions of jobs required to soak up the disaffected younger populations. This will be particularly important in populous countries such as Egypt. It is absolutely clear that the centrally-controlled, monolithic political structures which have dominated MENA economies in the post second world war era can no longer resist the march of technology, modernism and economic freedom. The West will have a critical role in setting the region back on the right path as it did in Eastern Europe. That may yet require a kind of Marshall Plan, which directs resources to the right places rather than allows them to build up in the coffers of a few privileged elites.

Alex Brummer is City Editor of the Daily Mail

    Last updated: 11:20am, April 28 2011