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Not a Happy New Year for All

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As many of us prepare to take a break to celebrate the new year, things may be different for so many people around the world. The Ammeri family in Tunisia will end 2010 in mourning and sadness. Their 18-year old son Mohamed is no longer with them, dead after being allegedly shot by the anti-riot police in Menzel Bouzaiene during this past weekend. At the same time, in neighboring Algeria, riots broke out in Diar Echems, Oued Ouchayah and Baraki near the capital where thousands have been protesting about the misery of their housing conditions and a relocation program gone arye. And so as we close the year, North Africa’s economic gains and growing money reserves seem to serve no clear purpose for the general public and the average citizen. Discontent is widespread and authorities continue to miss the point. Their longer-term survival, historical legacies and the way history will judge them will be linked directly to the performance of the economy under their watch, not just in terms of GDP growth measurements and daily statistics that the IMF likes to rehash but in terms of improving basic living conditions of those they govern.

The riots in Tunisia and Algeria, and they might as well be in Morocco, Libya, Egypt and across most of the Arab world are reflective of policies that have not worked and still do not work. In Tunisia, this deadly weekend, which no local newspaper covered in an objective manner, and referred to by authorities as “isolated incidents”, it was about jobs and unemployment. The Tunisian people are simply fed up with the lack of decent jobs while they are told every day that the national economy is growing smoothly. Officially, Tunisia boasted a 14.7% unemployment rate in 2010, up 4.6% from 2009. While we understand why unemployment increased in 2010 as we can blame the weak European economy for consuming less Tunisian goods, it is very depressing to see that for those under the age of 30, it is a stunning 30%. This means that nearly one out of three young Tunisians is out of job, financially broke, depressed, without clear prospect and told that the economy is rising and everyone is doing well. 

 

So what should the Tunisian leadership do?  Well, first it has to acknowledge that, like any normal country around the world, including the most developed economies, nothing is perfect. To do so means that people should be allowed to express their views, opinions and discontent without fearing retaliation. It is a sign of maturity when a nation accepts criticism and when its leaders accept responsibility.

 

Apart from the political aspects that Tunisia, its regime and its people will have to face some day in their future, economic policy has now to focus urgently on job creation. The most affected groups in this context are university graduates and highly educated folks. As their country continues to focus on a low-wage export-oriented economy, very little progress will be made to deal with their own job prospects. A new paradigm shift has to occur in economic growth, one that allows the establishment of value creating employment above and beyond servicing tourists, producing inexpensive garments, and manufacturing electrical widgets to complement Europe. But value creation of this sort will require a more mature and open minded authority, one that allows its people to think outside of the box and hold its own opinion.   Yet today, there is very little incentive for business people and entrepreneurs to create wealth and jobs because as The Los Angeles Times observes “the business environment in Tunisia offers little protection for investors -- especially local ones -- due to the absence of transparency and the rule of law. In addition, small- and medium-size institutions suffer from limited funding opportunities. Both of these factors limit initiative and restrain private-sector investment, hurting job creation.” Despite sustained improvements in its ranking in the list of ‘Doing Business’, Tunisia’s 55th position is only a relative figure. The ranking may mean nothing after all. 


Algeria also had its share of social discontent this year-end. Riots over housing broke out in neighborhoods that were targeted to benefit from a new housing relocation program. Fearing that the provincial government will once again forget about their fate, the residents of the decrepit Palmiers housing complex took to the streets, blocking the Oued Ouchayah tunnel and confronting anti-riot troops. The very construction of the Oued Ouchayah tunnel was the reason why the buildings’ structural integrity in the ‘Palmiers’ is at a severe risk.
 


Despite promises from the Wali (provincial governor), the residents of the Palmiers insist that nothing will be done. They use their past experience, when promises were made but never fulfilled as a reason for their skepticism.
 


The reaction and feelings of the inhabitants of Palmiers housing complex are hardly an “isolated case,” as the Tunisian authorities put it to characterize their own crisis. Residents of Diar Echems and in Diar El-Baraka, in Baraki also rose to express their discontent. In Diar El-Baraka, confrontations between gangs of youth and police escalated over the weekend to the point that roads linking Sidi-Moussa to Baraki and to Larbaa closed to traffic. The residents of Diar El-Baraka for their part are complaining that they are not included in the regional government’s relocation program this year to deal with sub-standard housing. A quick flash back to a few years ago and one would recall that Baraki was a place that the former GIA terrorist organization used to up its profile amid a highly angry population. This time, the security forces learned their lesson and avoided using teargas. Orders were given to avoid an escalation of tension.

This housing relocation program this year is targeting 10,000 households in and around the capital Algiers. The program has been running without transparency, adding more fuel to the drama that is unfolding there. The complaining parties have been raising the issue of transparency in the process and question who is actually being relocated and benefitting from the program and who is not.

The housing situation in Algeria is as complex and disturbing as the unemployment crisis there. Both are source of stress and tension among the millions of people who feel sidelined. While the solution to this problem seems to be an easy one, fixing it will require an unusual level of leadership. One of the problems plaguing Algeria in relations to these riots is the widespread corruption in the administration. Assigning houses for families is the job that hundreds of people are involved in and dozens of administrations are in charge, from low-level municipal offices, all the way to special departments at the Wilaya’s level (provincial government). In most cases, the entire administrative process is useless and full of corruption. Corruption thrives in this environment and bribery is the name of the game.  Families wanting to relocate often have to resort to draconian bribery measures to see their files move forward. This is not how an economy is run.

What should Algeria do to deal with these problems?  The problem of housing is due to the demand and supply equation. The needs for housing are massive and construction is not keeping up. Part of the problem can be solved if Algeria’s broad economic model makes a substantial change. Instead of relying on cumbersome administrative obstacle, Algeria must dismantle its bureaucratic system and allow companies to invest in real estate development. The banking sector also must play its part in financing housing programs. But as long as real estate developers face a corrupt administration, no progress can be achieved. It takes a stunning 150 days to obtain a building permit. It takes a full month before a phone connection is established. Just for construction, the number of administrative procedures is 22, compared to 15.8 among advanced economies.  To build a basic warehouse, Algerian builders under a 240 days of a bureaucratic ordeal while the cost of doing business continues to pile up. Those are simple examples of the Kafkaien world entrepreneurs face and we know without entrepreneurs, there will be no businesses, no job creation, and no economic growth.

Until the political leadership in Algiers decides to change course and tackle the country’s bad administrative practices and corruption in the system, progress will likely remain an illusive target.  Same for Tunisia, Morocco and all others in the region.

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