A few days ago, Beijing hosted the eighth ministerial meeting of China-Arab States Cooperation Forum (CASCF). The comprehensive and far-reaching statement delivered by President Xi Jinping at the inauguration of the Forum, and the speeches by Arab leaders, confirmed at the highest level, the comprehensive strategic partnership existing between China and Arab States. The path to peace in the Middle East has always been long and bumpy, but the Arabs and China, intend to work together to make peace achievable.
PART I Political Settlement of Conflicts
Since 2011, the so-called Arab Spring caused tremendous damage to many Middle Eastern and North African societies, with considerable harm to the state institutions. A heavy price continues to be paid under the fictitious banner of spreading democracy.
Many tragedies hit the region simultaneously, with particular intension of weakening the notion of nation-state, which is the main constituent unit of the regional system; along with the mass proliferation of weapons, mostly falling in the wrong hands, escalation of civil wars, continued flows of refugees and migrants by the millions, destruction of infrastructures, resulting in negative economic development and loss of growth of over 620 billion US$; all of this combined with the emergence of extreme violence by foreign-financed non-state actors and terrorist groups. For the first time, Daesh terrorists occupied regions and cities, and established alleged governments and even armies of mercenaries on Arab and African territories.
Regional powers such as Turkey, Israel and Iran, all had their designs that go far beyond legitimate security and self-defense needs. Each of the three viewed the turmoil as an opportunity not to be missed. These disheartening tragedies occurred against an international environment characterized by rising uncertainty, mounting nationalism and populism, and anti-multilateralism, global economic slowdown, and waves of terrorism in major urban centers, with no common vision for the region’s stabilization among the neighboring countries or the super-powers.
Many observers predict that the current situation might persist for years, since the origin of the struggle is generational, and the confrontation lies against deeply entrenched forces of radicalism and obscurantism. However, it would be wiser and in everyone’s interest to reverse this disastrous trend. Therefore, extensive efforts should urgently be directed at reaching political solutions and mitigating humanitarian needs, particularly for civilians in conflict zones, refugees and internally displaced people, dealing with pressing health and nutrition problems, as well as primary education in war-stricken areas.
Failing to respond promptly would lead to humanitarian catastrophe such as plagues, famine, mass flows of refugees, and could even create failed states producing famine and health calamities, like in Yemen, massive refugee flows, as in Syria, or safe havens for terrorist organizations and foreign jihadists, like the situation in Libya.
An Arab Westphalia?
More than a hundred years ago, the regional order in the Middle East was forged by colonial powers along the Peace of Westphalia principles of 1648 which saw the birth of nation-state sovereignty, non-interference in internal affairs of others, separation between state and religion, and brought the principle of religious tolerance into international affairs. The actual regional order imposed arbitrarily by colonial powers, included the creation of nation states and redrawing of borders. However, the new national identities consolidated overtime, and despite many destabilizing factors, the system itself held while other systems collapsed entirely, like in the case of the Balkans.
The question today is whether such logic could possibly be applicable to the current conflicts in the Middle East. In other words; do we really need a new order in the Middle East? Do we need a new set of principles that govern relations between states? Could Westphalia be relevant to the current reality in that region? Many ambitious ideas were recently offered, and references made to the Helsinki principles.
No stability without Palestine
The Israeli military occupation of Palestinian and Arab territories continues to impact regional stability tremendously, remains the root cause of instability, and threatens peace beyond the region. The persistence of the conflict is exploited by terrorist groups who aim at destabilizing the whole Middle East and beyond, regardless of the Palestinians suffering. There is growing international consensus that the status quo is untenable.
The road to peace is known to all. What is lacking is genuine political will and moral courage and state’s manhood to make history. In this regard, if the 2002 Arab Peace Initiative was implemented, a just, comprehensive and final solution based on the two-state principle and the normalization of Arab Israeli relations would create a new reality for the peoples of the Middle East, where all would enjoy peace, while undermining all pretexts exploited by the terrorists guided by foreign powers to justify their devious crimes. China’s efforts in reaching a just solution to the Palestinian problem are extremely valued.
Jihad has been another major challenge. Fueled by a deep sense of humiliation at the hands of the West since the colonial era, Jihadists found fertile soil to promote their radical ideology and recruit young people for Jihad. They exploit the widespread sense of injustice produced by the Palestinian tragedy. That is how Daesh, Al-Nusra, the Muslim Brotherhood and many other terrorist organizations exploited the situation to expand Jihad.
Many believe that the success of the Belt and Road Initiative depends on stability, security and poverty eradication from regions along the BRI. The success of this great initiative depends on restoring stability to Afghanistan, Iraq, Syria, and Palestine which fall on the historic Silk Road, while Yemen, Somalia, Libya and the Sahel Region of Africa are all adjacent to the Maritime Belt for the 21st Century. This places a special responsibility on China.
China, as a major strategic global player and a permanent member of the UN Security Council committed to peace, stability, progress and development across the world should continue to act as a builder of world peace and contribute to global development, while upholding a functional international order.
There is general consensus that uprooting the evil of terrorism requires a comprehensive collective approach in order to eliminate all terrorist organizations without distinction by standing up firmly against all aspects of terrorism including financing, arming, training, providing shelter, as well as ideological, political and media support. Equal to a terrorist are those behind the training, arming, financing, providing safe havens and manipulating social media, as well as providing medical treatment for the injured, supplying operatives with logistics, and recruiting new foreign and local terrorists. We must ensure that terrorism does not pose any threat anywhere to the Belt & Road Initiative.
Combating terrorists and extremists
Though extremism gained ground in the past few years, such as Daesh military expansion, with continued support by some foreign governments, the overwhelming majority of Arab people have rejected the radicals and alienated them as pariahs and outcasts. It should be reassuring that Daesh murderous ideology and brutal practices were exposed for what they really mean. Secularism is on the rise, as more and more people are willing to give it a chance.
On the short run, the picture might look gloomy, but there are enough reasons for hope once genuine political will and moral courage were there. Only then we would see calm in Syria, Yemen, Libya, Iraq and Somalia, as there would be efforts to achieve national reconciliations. In most of these nations there is an increasingly rising realization among warring parties that no single faction can achieve ultimate victory. It is a matter of time before most of the parties engage in serious political processes to settle disputes. The recent developments in Syria and the last agreement in Libya are examples. Once fighting comes to an end, national identities could be revived since national consciousness has not been entirely undermined.
State sovereignty should be coupled with economic viability, financial stability and good governance to satisfy the aspirations of the young who constitute the majority of the population. In some cases, federalism could be a possible option. However, the Iraqi experience since 2003 is not encouraging. The same applies to the Sudanese experience. The problem is that some political forces see federalism as a prelude to self-determination or even independence, while federalism is a system that keeps countries united while respecting diversity.
Safeguarding territorial integrity
Preserving state sovereignty and territorial integrity should be the guiding principle to any political settlement, since redrawing borders would open Pandora’s Box. For one, there isn’t a clear criterion determining which ethnic or religious group should be entitled to establish a state of its own. Why the Kurds but not the Yazidis? Why the Alawites but not the Assyrians? History teaches us that partition creates widespread violence and even ethnic cleansing.
State failures tend to be contagious, spreading from one country to another. The most immediate step is to halt this pattern. Countries struggling to cope with the spill-over effects from crisis across their borders should be supported and provided with political, financial and humanitarian assistance, in coordination with their respective authorities.
Workable political formulas could be put forward as the way out for Syria, Libya, Somalia, and Yemen. Any such formula should rest on two principles: a central government that enjoys the monopoly over the use of force, and a considerable degree of decentralization that allows the transfer of certain powers form the central government to the local levels allowing for ethnic and religious groups to enjoy some form of autonomy.
Once again, the Palestinian problem cannot remain unsolved forever. The establishment of the Palestinian state along the 1967 borders, with East Jerusalem as its capital, whether through the long-awaited century deal or not, is the only political undertaking that could have a positive and immediate transformative effect on the regional dynamics.
To sum up, the bumpy road to restoring stability requires from all parties, local, regional and super-powers to work together to bring peace, stability and hopefully prosperity back through confidence building measures including establishing a nuclear free zone in the Middle East, collecting all sorts of weapons massively proliferated in the region, substantial financial assistance to the refugees and displaced persons, rebuilding and modernizing state institutions and engaging in the reconstruction efforts.
PART II Reconstruction and Economic Recovery
A recent UN-ESCWA report, the first of its kind by a major economic body, estimates that conflicts in the region between 2011 and 2015 led to a loss of over $620 billion in economic activity, equivalent to 6% of the region’s GDP.
In an IMF’s Middle East and Central Asia Department Note on “The Economic Impact of Conflicts and the Refugee Crisis in the Middle and North Africa”, three prominent economists* warn that Middle East conflicts continue to extort a heavy toll on regional economies, both for countries directly involved and for their neighbors.
Libya, Syria, and Yemen experienced deep declines in their economies and sharp increases in inflation between 2010 and 2016. Iraq’s economy remains fragile owing to the conflict with the Islamic State (ISIS) and the fall in oil prices since 2014. Clashes have also spilled over to other countries, causing problems from hosting refugees. Conditions have deteriorated for a region already facing structural deficiencies, low investment, and, more recently, the oil price drop, which has had a substantial impact on oil producing economies.
Negative impacts on growth
There are many ways through which conflict affects economies:
Death, injury, and displacement seriously erode human capital. Since 2011 the region accounted for almost half of the world’s population of forcibly displaced people: over 14 million refugees and over 20 million internally displaced persons. Syria alone has more than 12 million displaced people, the largest number of any country in the region. Poverty and unemployment rose with over 30 million jobless. The quality of education and health services also deteriorated.
The region witnessed deep economic problems with 60% of the population under 29, and half of those aged between 15 and 29. Growth rate in 2017 fell to 2.6% due to the slowdown of investments and the fall in oil prices. In 2010 the growth rate of investment reached 10%. It shrank to 3.4% today. Countries found it difficult to put in place a functioning model for sustainable economic growth that draws on human potential, not only relying solely on natural resources.
Syria provides a dramatic example. Unemployment jumped from 8.4 percent in 2010 to more than 50 percent in 2013, school dropout rates reached 52 percent, and estimated life expectancy fell from 76 years before the conflict to 56 years in 2014. Since then, the situation has deteriorated even more.
Physical capital and infrastructure worth over 900 billion US$ were damaged or destroyed. Houses, buildings, roads, bridges, schools, and hospitals—as well as the water, power, and sanitation infrastructure—have been hit hard.
In Syria, more than a quarter of the housing stock has been destroyed or damaged since the war’s onset, while in Yemen, infrastructure damage has exacerbated drought conditions and contributed to severe food insecurity and disease. The country’s agricultural sector, which employed more than half the population, was hit hard, experiencing a 37 percent drop in cereal production in 2016 from the previous five-year average.
Economic organization and institutions were deeply hurt. The deterioration in economic governance has been particularly acute where institutional quality was already poor before the outbreak of violence, as was the case in Iraq, Libya, Syria, and Yemen. This damage has led to reduced connectivity, higher transportation costs, and disruptions in supply chains and networks. Institutions can also become corrupt as the warring parties try to exert control over political and economic activity.
Fiscal spending and credit, for example, might be redirected to the constituencies of those in power. More broadly, many critical economic institutions—central banks, ministries of finance, tax authorities, and commercial courts—have seen their effectiveness diminish because they have lost touch with the more remote parts of their countries. The World Bank estimates that disruptions to economic organization were about 20 times costlier than capital destruction in the first six years of the Syrian conflict.
The stability of the region and its longer-term development through its impact on confidence and social cohesion were threatened. The conflicts have heightened insecurity and reduced confidence, manifested by declining foreign and domestic investment, deteriorating financial sector performance, higher security spending, and shrinking tourism and trade. Social trust has also weakened, negatively affecting economic transactions and political decision making.
Direct and indirect effects
The macroeconomic damage can be staggering. Syria’s 2017 GDP was estimated to be less than half its 2010 pre-conflict level. Yemen lost an estimated 35 percent of its GDP in 2015 alone, while in Libya—where dependence on oil has made growth extremely volatile—GDP continued to fall drastically as violence picked up. The West Bank and Gaza offer a longer-term perspective on what can happen to growth in a fragile situation: the economy has been virtually stagnant over the past five decades in contrast with average growth in region.
Furthermore, these conflicts have led to high inflation and exchange rate pressures. In Iraq, inflation peaked at more than 30 percent during the mid-2000s; in Libya and Yemen it rose above 25% since 2011. In Syria consumer prices rose by about 600 percent between 2010 and 2016 and the Syrian pound, which floated freely in 2013, officially trades at about one-tenth its prewar value against the US$.
Neighboring countries that are hosting refugees also feel economic pressure. Most directly affected are Lebanon, which has absorbed approximately 1 million, or 20% of its population; and Jordan, which has seen an influx of over 700,000 people, or 7% of its population.
For these receiving countries the refugee flows create additional pressure on budgets and the supply of food, infrastructure, housing, and health care. Countries bordering a high-intensity conflict zone recorded a decline in average annual GDP growth resulting in a growth rate too slow to provide enough jobs for the expanding population. For example, in Jordan, average annual real growth slowed to 2.6% between 2011 and 2016 from 5.8 percent between 2007 and 2010.
Overseeing various objectives
Macroeconomic policies and institutions have a significant role to play in protecting economic and social institutions from becoming inoperative or corrupt: in prioritizing public spending to protect human life, in limiting the rise in fiscal deficits, and to preserve economic growth potential while stabilizing macroeconomic and financial developments through effective monetary and exchange rate policies.
Once conflicts subside, the policy focus should shift toward rebuilding and economic recovery. At such a time, economic policies should aim to solidify the peace. Rebuilding and modernizing institutions, mobilizing resources for reconstruction, and fostering stronger and more inclusive growth should be the top priorities. But while the reconstruction cost for Libya, Syria, and Yemen has yet to be assessed, the World Bank estimates the damage thus far to be well over $300 billion. There is a special role for the great country of China, in assisting those countries while recovering from conflict.
*IMF’s PHIL DE IMUS is a senior economist, GAËLLE PIERRE is an economist, and BJÖRN ROTHER is an advisor.
[i]by Ambassador Hisham El-Zimaity, Former Assistant Foreign Minister for International Organizations & Multilateral Diplomacy; Board Member and Secretary General, Egyptian Council for Foreign Affairs, Cairo.
(*) The views expressed here are those of the author, and not necessarily reflect those of the Egyptian Council for Foreign Affairs (ECFA).