Is Fiscal Policy Procyclical in Developing Oil-Producing Countries?

A new IMF working paper by Nese Erbil "examines the cyclicality of fiscal behavior in 28 developing oil-producing countries (OPCs) during 1990-2009. After testing five fiscal measures - government expenditure, consumption, investment, non-oil revenue, and non-oil primary balance - and correcting for reverse causality between non-oil output and fiscal variables, the results suggest that all of the five fiscal variables are strongly procyclical in the full sample. Also, the results are not uniform across income groups: expenditure is procyclical in the low and middle-income countries, while it is countercyclical in the high-income countries. Fiscal policy tends to be affected by the external financing constraints in the middle- and high-income groups. However, the quality of institutions and political structure appear to be more significant for the low-income group."

Excerpts (notes excluded):

Both the neoclassical and Keynesian theories support the idea that effective fiscal policy should smooth the volatility of output during the business cycle. Barro’s (1973) ―tax-smoothing‖ hypothesis of optimal fiscal policy suggests that, for a given path of government expenditure, tax rates should be held constant over the business cycle, and the budget surplus should move in a procyclical fashion. According to the Keynesian approach, however, if the economy is in recession, policy should increase government expenditure and lower taxes to help the economy out of the recession. During economic booms, the government should save the surpluses that emerge from the operation of automatic stabilizers and, if necessary, go further with discretionary tax increases or spending cuts. As a result, fiscal policies are expected to follow countercyclical patterns through automatic stabilizers and discretionary channels. In other words, one would expect a positive correlation between changes in output and changes in the fiscal balance or a negative correlation between changes in output and changes in government expenditure.

However, empirical studies show that fiscal policies are procyclical in developing countries and in OPCs.5 They increase spending with an increase in oil revenue during an oil price boom. They are forced to reduce spending because of a revenue decline as a result of a drop in oil prices. Since, in general, these countries are not able to accumulate savings in years with high oil revenues, they can only finance deficits by cutting expenditure during revenue shortfalls. Fouad and others (2007), Abdih and others (2010), and Villafuerte and Lopez-Murphy (2010) find that oil-producing countries followed procyclical fiscal policies during the recent oil price cycle. Baldini (2005) and De Cima (2003) also present evidence for the procyclicality of fiscal policies in two oil-producing countries, Venezuela and Mexico. More recent studies, e.g. Ilzetzki and Vegh (2008), find, using instrumental variable regression, strong evidence of procyclical fiscal policy in developing countries.

Two broad arguments that have been proposed as an explanation for procyclical policies in developing counties also apply to OPCs: constraints on financing (or limited access to credit markets) and factors related to the structure of the economy ( the budget, political, power, and social structure, and weak institutions). In general, these factors are presented separately but they go together and are likely to reinforce each other. For example, weak institutions, the budget structure, or a corrupt government may hinder prudent fiscal policies, which may, in turn, affect fiscal sustainability and creditworthiness by amplifying the financing constraints.

Liquidity and borrowing constraints emerge when a developing country needs financing the most--during a downturn--and that is when it is least likely to be able to obtain it. Many countries do not have significant foreign assets or developed domestic financial markets to raise funds. When these countries face large terms of trade shocks (i.e., a sharp fall in oil prices in the case of OPCs), investors may lose confidence and be less likely to lend, because they fear that the lack of policy credibility and discipline may force the government to run up large budget deficits and to default.6 Governments in this situation will also experience recurring credit constraints in world capital markets (―sudden stops,‖ as explained in Calvo and Reinhart (2000)), which hamper their ability to conduct countercyclical policies.

Oil stabilization funds have been increasingly used by OPCs as an instrument to cope with oil revenue volatility. These funds are aimed at stabilizing budgetary revenues: when oil revenues are high, some portion of the revenue would be channeled to the stabilization fund; when oil revenues are low, the stabilization fund would finance the shortfall. However, the creation of such funds is found to have no impact on the relationship between oil export earnings and government expenditure in countries where no sound and transparent fiscal and macroeconomic policies were implemented.7 Moreover, some oil funds have operated outside existing budget systems and are often accountable to only a few political appointees. This makes such funds especially susceptible to abuse and political interference. Therefore, stabilization funds should not be regarded as a substitute for sound fiscal management.

The other argument proposed to explain the difficulty in implementing countercyclical policy focuses on procyclical government spending due to three aspects of the economy and the government: the budget structure, the weak political structure and institutions, and corruption in government.

First, developing countries run procyclical fiscal policies because of their budget structure. These countries have a few automatic stabilizers built into their budgets. As a result, government spending in developing and emerging countries displays less of a countercyclical pattern than in industrial countries. For example, Gavin and Perotti (1997) note that Latin American countries spend much less on transfers and subsidies than do richer OECD economies (24 percent of total government spending, compared with 42 percent in the industrial countries). Furthermore, most developing countries and OPCs cannot raise revenue effectively through taxes since they usually suffer from inefficient tax collection systems, owing to the low level of compliance with tax laws, insufficient political commitment, and a lack of capacity, expertise, and resources.8 Additionally, non-oil tax bases in these countries are in general very low.9

Second, weak institutions and political structure encourage multiple powerful groups in a society to attempt to grab a greater share of national wealth by demanding higher public spending on their behalf. This behavior, called the ―voracity effect‖ by Tornell and Lane (1999), results in fiscal procyclicality arising from common pool problems, whereby a positive shock to income leads to a more than proportional increase in public spending, even if the shock is expected to be temporary. This is discussed extensively in ―resource curse‖ literature as a reason for low economic growth in resource-rich countries.10 Moreover, fiscal policies are more intense in countries with political systems having multiple fiscal veto points and higher output volatility (Stein, Talvi, and Grisanti, 1998;and Talvi and Végh, 2000). Similarly, Lane (2003) and Fatas and Mihov (2001) find that countries with power dispersion are likely to experience volatile output and procyclical fiscal behavior.

Lastly, Alesina and Tabellini (2005) argue that a more corrupt government displays more procyclical fiscal policies as voters, who do not trust the government, demand higher utility when they see aggregate output rising. This behavior would be more prevalent in democracies since a corrupt government is accountable to the voters, whereas, in a dictatorship, the government would not be accountable and, even if corruption were widespread, voters could not influence fiscal policy. Alesina and Tabellini conclude that corrupt governments in democracies, rather than credit market imperfections, are the underlying cause of procyclical fiscal policy.


[...]


The results confirm that political and institutional factors, as well as financing constraints, play a role in the cyclicality of fiscal policies in the OPCs. Most of the variables on the quality of institutions and the political structure appear to be significant for the low- income group. Two of the variables are significant for the middle-income countries: the composite institution index and checks and balances. None of the institutional variables turns out to be significant for the high-income countries.21 Domestic financing constraints seem to matter for the low-income group. But fiscal policy is affected more by the external financing constraint in the middle- and high-income groups, as they may be more integrated into the global financial system than the low-income countries.

Despite their many differences, all the OPCs face volatile and unpredictable oil revenues, a situation that makes fiscal management challenging. For this reason, it is imperative for them to formulate effective countercyclical fiscal policies by which they can smooth government expenditure, decouple it from the volatile oil revenues, and prevent boom-and-bust cycles. Breaking away from a procyclical fiscal policy will enable them to sustain long-term growth and keep the safety net that the poor need. Sound fiscal policies and discipline require strong institutions, a higher-level bureaucracy, and more transparency. Strong institutions and transparency would also help reduce the ―voracity effect,‖ which, in turn, would facilitate the accumulation of financial assets and build up confidence among investors to raise funds when needed.

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IMF working paper: Iran — The Chronicles of the Subsidy Reform

A recent IMF Working Paper by staff of the Middle East and Central Asia Department, "Iran — The Chronicles of the Subsidy Reform," [1] analyses the December 2010 changes in subsidies of domestic energy and agricultural prices, which increased about 20 times, making it the first major oil-exporting country to reduce substantially implicit energy subsidies.

Their paper reviews the economic and technical issues involved in the planning and early implementation of the reform, including the transfers to households and the public relations campaign that were critical to the success of the reform. It also looks at the reform from a chronological standpoint, in particular in the final phases of the preparation. The paper concludes by an overview of the main challenges for the second phase of the reform.

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Excerpts:

On Saturday, December 18, 2010, at 9:00 p.m. Tehran time, speaking in a televised “conversation with the nation”, President Ahmadinejad announced the start of what he termed the most sweeping economic “surgery” in Iran’s modern history. Just after midnight on December 19, Iranian media began releasing announcements detailing the new price structure for liquid fuels. Within twenty-four hours, new natural gas, electricity, and water tariffs were published, and allowable ceilings for the increase in taxi and public transport tariffs followed. At the time, close to 80 percent of Iran’s population was granted unrestricted access to compensatory payments that had been deposited in specially-created bank accounts starting in October 2010.

The reform, officially referred to as Targeted Subsidies Reform, made Iran the first major energy producing and exporting country to cut drastically massive indirect subsidies to energy products and replace them with across the board energy dividend transfers to the population. It is estimated that the price increases removed close to US$50–US$60 billion dollars in annual product subsidies. By December 2011, in the first 12 months following the price increase, Iranian households will have received at least US$30 billion in freely usable cash, and another $10–$15 billion will have been advanced to enterprises to finance investment in restructuring aimed at reducing energy intensity.

[...]

Although oil and gas production has accounted for an increasingly smaller share of real GDP, oil and gas revenues remain the main source of foreign exchange earnings and fiscal revenues. The share of oil in real GDP fell from an average of 40 percent of real GDP in the 1960s to about 10½ percent in the last decade, reflecting average annual non-oil GDP growth rate of 5.7 percent compared to only 4.4 percent for oil and gas GDP. Oil and gas receipts accounted for about 72 percent of export revenues in the last decade, despite rapid non-oil export growth.  Oil and gas revenues also account for 65 percent of fiscal revenues, and are likely to remain the main source of financing for development projects in the foreseeable future notwithstanding recent efforts to diversify fiscal revenues.

Iran’s high dependence on oil export revenues has had a profound impact on its business cycle. In the most recent business cycle during 2002-2008, fiscal spending and credit growth increased at the same time as export revenues and oil prices, resulting in an overheating of the economy and a surge in inflation. The subsequent tighter monetary and fiscal policies coincided with the sharp fall in oil exports caused by the international recession of 2008-2009. As a result, inflation and output declined sharply.

Domestic energy prices have historically been set administratively in Iran, as in the majority of oil exporting countries. They were set at a level high enough to cover production costs and have been changed only occasionally. This worked well when international oil prices were relatively stable and low, and close to production costs. However, when international prices began to rise after 2002, low domestic energy prices became increasingly out of line with the market value of oil. In addition, high domestic rates of inflation and subsequent exchange rate depreciations contributed to further erode domestic energy prices vis-à-vis their international benchmarks. The March 2002 unification of exchange rates and the resulting rial depreciation also accentuated a growing disparity between domestic and international energy prices.

Increasingly cheaper energy stimulated demand, making Iran the country with the highest level of energy subsidy. Not surprisingly, domestic energy use and energy intensity in Iran, as in many other energy producing countries, increased rapidly. Cheap domestic energy prices led to a rapid increase in domestic energy consumption. As a result, Iran became one of the most energy-intensive economies in the world. The high domestic absorption of crude oil distillates, natural gas, and electricity reduced the availability of these energy products for the export market. Iranian oil energy companies were also increasingly starved of funds needed for investment since domestic energy prices were set at barely cost recovery levels. Environmental pollution and its impact on human health, as well as the time lost due to traffic congestion on Iranian roads provided additional urgency for the reform. Not surprisingly, by 2007 some analysts started questioning not only Iran’s plans to increase its oil production capacity, but also its ability to stop a decline in oil production and exports.


[...]

The Iranian authorities were clear from the outset that the main reform objective was to reduce waste and rationalize consumption. By compensating households for the energy price increases, most consumers would be better off because the higher energy price would discourage some marginal gasoline consumption, while the cash compensation would allow consumers to buy more other goods and services.

[...]

The reform would also improve social equity in the distribution of Iran’s hydrocarbon wealth. For the poor who benefited little for cheap domestic energy price, the compensation would represent a large share of their income, lifting virtually every Iranian out of poverty.  This gave the government a powerful public relations and moral argument in support of the reform.

The likely large substitution effect triggered by large price increases could provide a significant stimulus to Iran’s domestic production and further diversification efforts, particularly given the slow growth in recent years, and relatively high, double-digit unemployment. The distribution of about $30 billion in annual compensatory payments directly to the population would support domestic demand and nonenergy sector growth.  The reform was not expected to contribute to fiscal consolidation. The reform legislation, and the political debate that preceded it, ruled out using the reduction of energy subsidies to improve the country’s fiscal balance. To the contrary, Iranian reforms, including the privatization program launched in 2006, aimed at reducing the size and the role of the public sector in the economy. However, potential large savings in domestic energy use could make significant quantities of crude oil and refined products available for exports (Box 2). The revenue from such exports could support a virtuous cycle of investment in the energy sector that would add production and refining capacity and further increase exports.


References

[1]  Dominique Guillaume, Roman Zytek, and Mohammad Reza Farzin: Iran — The Chronicles of the Subsidy Reform. July 2011.

Statements by the Parti communiste des ouvriers tunisiens/حزب العمال الشيوعي التونسي‎

Statements by the Parti communiste des ouvriers tunisiens/حزب العمال الشيوعي التونسي‎
http://themoornextdoor.wordpress.com/2011/07/13/studies-i-pcot-on-foreign-affairs-i/

1. Libya

PCOT: “Statement on the military intervention in Libya”
LINK: http://www.albadil.org/spip.php?article3741
DATE: 20 March, 2011
A number of imperialist countries (France, the United States, etc.) have launched air and missile attacks on sites said to belong to Mu’amar al-Qadhafi. These attacks came after the decision of the “Security Council,” which gave the green light to initiate military operations in Libya.
The Tunisian Communist Workers’ Party is concerned that the purpose of this intervention is not the protection of the Libyan people from the oppression of Qadhafi, but instead the occupation of the country, to subjugate its people, plunder its resources and use its territory to establish military bases for the control of North Africa in order to ensure the security of the Zionist Entity and safeguard the interests of the imperialist powers in the region. France, the United States and all western countries which have launched attacks on Libya today have no interest in the triumph of the popular revolts blowing down Arab regimes, corruption and unemployment, things which long found support and backing from the colonial powers, so today we see they are quick to take the necessary precautions so as not to let things get out of hand.
The brotherly Libyan people will be able to overthrow Qadhafi, depending on their capabilities and the support of other Arab peoples (and all the revolutionary forces of the world), and are not in need foreign intervention which will only bring them more killing and destruction, as well as violations of their sovereignty and the occupation of their land and the plunder of their resources.
The Tunisian Communist Workers’ Party expresses its rejection of the military intervention and calls for their immediate halt. It also calls on all anti-imperialist forces in the Arab and Islamic world at large to move and calls on all the peoples of the world to come out in marches and demonstrations and engage in all forms of struggle in order to stop this interference.
Long live the struggle of Arab peoples for freedom, dignity and the fall of the Arab regimes and corrupt puppets. Down with the imperialist enemies of the people and the protectors of the Zionist Entity.
– The Tunisian Communist Workers’ Party, 20 March, 2011.

2. Palestine

Tunisian Union of Communist Youth: “On the Anniversary of Land Day: Let the Revolution of the Arab Peoples be a step in the direction of the liberation of Palestine”
LINK: http://www.albadil.org/spip.php?article3754
DATE: 30 March, 2011
Let the Palestinian people be revived today, the thirty-fifth anniversary of Land Day under the obnoxious Zionist occupation and under political division, which has bedeviled Palestinian ranks and prevented success in stopping the gushing of settlements, which seek to obliterate the Arab identity of Palestinians towns and villages under the mantle of “more land and fewer Arabs”. The celebration of this anniversary in these particular circumstances mark national resistance and are a reminder of the persistence of resistance in the face of this racist [regime] which does not hesitate to use the dirtiest and most arrogant methods to swallow up the Palestinian territories. There is no doubt that the return of sovereignty to the Arab peoples, especially the Tunisians, will provide strong support for the Palestinian cause after the removal Ben Ali and Mubarak, who dedicated themselves in service of the occupation and forced their people to remain silent and easily suppressed demonstrations and campaigns [against Israel] in obedience to the racist entity to provide a good “neighborhood” and faith.
The Tunisian Union of Communist Youth salutes the steadfastness of the Palestinian people, reiterates its absolute support as it has since its establishment as an advanced and progressive site for the Palestinian national cause and:

• That the unity of the Palestinian ranks, nation, resistance, democracy best answers and expresses the demands of the Palestinian reality, especially with the failure of successive governments to put an end to the barbaric and racist policy back up by the United States of America and employed by the regimes of the Arab countries;
• That the Tunisian people, on the day after their glorious revolution bear more responsibility on the basis of national and humanitarian bonds to provide support for the brotherly Palestinian people in regaining their usurped land and their right to impose their sovereignty in the context of a progressive and democratic state.

Thus it emphasizes breaking all forms of normalization with the Zionist enemy and annulling all secret treaties which the previous regime spent its time on.
It calls for all the activities of the community of activists, parties, organizations, associations and personalities toward the activation of solidarity with and to publicize the Palestinian cause and to celebrate this anniversary in a manner fitting of its symbolism.
Long live the Palestinian people.
Downfall to Zionism, imperialism and reactionary Arabs.
Long live the Tunisian Revolution supporting the brotherly Palestinian people.
Immortality to the martyrs and victory to the resistance. 
– Tunisian Union of Communist Youth. Tunis, 30 March, 2011.

3. Syria

Article by Samir Hammouda: “Syria: The Pending Dictatorship…”
LINK: http://www.albadil.org/spip.php?article3755
DATE: 1 April, 2011
The Arab masses continue to make history. Current events in Syria today developed from ideological struggle and political fact. The most notorious dictatorships, including those hide by painting themselves as “nationalist” and “resisting Zionism” also downfall by means of mass vibrations.
From its start till now the popular uprising in Syria proceeds with more than 150 martyrs and hundreds of wounded after only a few days. The martyrs and the wounded are not the result of Zionist bombing or terrorism. Instead they come from the bloody repression of the “nationalist” Syrian regime.
In that country, as in Tunisia, Egypt, Yemen, Bahrain, Algeria, Morocco and Libya events are in essence repeating by similar ways, despite different specificities in this or that country, for be sure that the catastrophe is the Arab reality and true despotism for all Arab regimes.
The uprising of the masses in Syria is the result of the same underlying social, economic and political causes which shook the pillars of dictatorship in the rest of the Arab world. Syria is also a country of poverty, unemployment, regional disparities and is penetrated by liberal capitalism. In Syria, too, there is a total absence of freedoms, suppression of the opposition for the sake of maintaining sectarianism and smashing people’s most basic political, economic and cultural rights. In Syria corruption is rampant and the minority of the local bourgeoisie holds a monopoly on the country’s economy and wealth and the control of the political police has a hold on the judiciary and the throats of the citizens.
The policies and words of the Syrian regime in the face of popular protests and its suppression and distortions are of the same version know  to Arab peoples under the despotic regimes in Tunisia, Egypt, Yemen and other countries. If Bashar al-As’ad accused his opponents of being controlled by outsiders and the public of a tendency to drift along according to foreign schemes hostile to the country’s interests this is not the best political speech since Ben Ali and Mubarak or Qadhafi and Ali Saleh. All dictatorships, whatever their ideological dress — “nationalist” or “socialist” or “Islamic” — resort to the same outdated and false arguments to justify tyranny and the depravation of the people’s liberties as is necessary for political and social emancipation. While the Syrian regime boasts of thousands at the demonstrations of its supporters its security and military apparatus massacres and tortures its opponents. But history does not run out of lessons. Yushenko was boasting thousands at his crowds before his downfall, Ben Ali bragged of two million members in his own party a few days before fleeing.
But the popular uprising in Syria increases the taste for blood and for politics and other dimensions at the local level as in the rest of the Arab world. The Syrian regime is the last in a series of regimes that embraced the Ba’th project on the basis of Arab nationalist aspirations for unity, socialism and liberation from colonialism and Zionism. In recent decades, the Syrian regimes support has been an important component in Arab power, not only on the nationalist file, but also on the leftist and Islamist ones. This was done under the banner of “nationalism” and claiming that the Syrian regime is part of the nationalist forces that stand on the front lines of confrontation with the Zionist Entity.
We have stood on many occasions against political forces urging us to overlook the dictatorial approach of this regime on the pretext of standing against the Zionist Entity and we consider this approach opportunistic, harmful and against the development of the revolutionary movement and combativeness in the Arab world and national liberation. Patriotism and resistance to colonialism and to Zionist and imperialist plans facing us cannot be in contradiction with the people’s enjoyment of their full democratic and political freedoms, or their condition at the forefront. It is true that political freedoms alone are not sufficient to realization of national aims, but the sovereignty of the Arab peoples and the revival of the Arab world and unity in the face of imperialism will not be achieved without them. Why would democracy for the Arab peoples not antagonize the Zionist Entity if this were not a threat to its very existence?! And why has America supported and still support the tyranny of Arab regimes if these do not serve its interests and objectives?! And how can our peoples achieve unity and finally dispose of the poisons of religious conflict, sectarianism, tribalism and local infighting among their parties without citizenship and equality without democracy and the triumph of citizenship and equality without conquering discrimination based on classism, sectarianism, religion, gender or ideology?!
The failure of the Syrian regime once again confirms the failure of authoritarian regimes in achieving national goals: unity and socialism and liberation from colonialism and Zionism. If bourgeois democracy is the gateway to the dismantlement of Arab dictatorships and despotic regimes then the Arab people are not doomed to merely copy them and are instead able to overcome their shortcomings and negative aspects toward  broader and greater democracy, democracy responsive to the grassroots, national political ambitions and economic and cultural rights.
No one today can predict how events in Syria will evolve, nor the depth or extent of the preparedness of the Syrian people to topple Bashar al-As’ad yet it is certain the Syrian regime will not respond to calls for political reform for it is not in its character or interest of a single Arab dictatorship to respond to the people’s demands for freedom. The regime that represses its people and harasses its opponents does have a future or a way out of crisis and collapses by its own internal rot, the laws of its own design and by the advancement of the masses, sooner or later.
– Samir Hammouda, 1 April, 2011

Cultural Analysis: Concepts and Questions / From Cultural Topography: A New Research Tool for Intelligence Analysis

Cultural Analysis: Concepts and Questions 
From Jeannie L. Johnson and Matthew T. Berrett: Cultural Topography: A New Research Tool for Intelligence Analysis. Studies in Intelligence Vol. 55, No. 2, extracts, June 2011. https://cia.gov


Identity
•Is individual identity seen as comprising one’s distinct, unique self, or is it bound up in a larger group (family, clan, tribe)?
•Does this group see itself as responsible for and capable of solving social problems? Are problems responded to with energy or left to fate?
•Which myths and national narratives compose the stories everyone knows? How do these speak about group identity?
•What is this group’s origin story? Does it inform group members of their destiny?
•What would this group list as defining traits of its national, tribal, ethnic character?
•Is one aspect of identity being overplayed, not because it is foundational for most decisions but because it is being threatened or diminished?


Values
•For the linguist, which concepts/things are described in nuanced ways (meaning that many words have been assigned to them)? Which concepts are missing from the language? (For example, the concept of “fair play” is hard to find outside of English.)
•What generates hope in this population?
•Which is viewed more highly as a communicative tool—emotion or logic? Are conversational styles which emphasize logic viewed as trustworthy?
•Is conspicuous consumption valued as a status marker? If not, what incentives exist to work hard?
•To what extent do security concerns trump liberty concerns in this society? Which parts of liberty are deemed attractive?
•Is social mobility considered a good thing, or is it deemed disruptive to a highly organized system?  Would this group fight to keep a hierarchical arrangement even if offered opportunities for egalitarianism?
•To what extent does loyalty trump economic advantage?
•Which is more value-laden for this group—“progress” or “tradition”?
•Is optimism rewarded as a character trait or is it considered naive, juvenile, and possibly dangerous?
•Which character qualities are consistently praised?
•What composes the “good life”?
•What sorts of myths, hero figures, segments of history, or identity markers does the material culture celebrate? What is revealed by the decorations in homes, modes of dress, food eaten (or not eaten), monuments respected (as opposed to those covered with graffiti), gifts given, etc.?
•In describing a proposed project, what will “impress” this audience? The project’s size? Its historical relevance? The technology used to produce it? How might new projects best be framed in order to win popular support?


NORMS

Political
•What is considered a legitimate pathway to power? How do “heroes” in film and other popular media obtain their power? Do they act as isolated individualists or in concert with others?
•“What gives a public the comfortable feeling that the way that decisions are reached and leaders are chosen is ‘right’?”
•How does the group view compromise?
•Where does “genuine” law come from? (Nature? God? A constitution? Current political institutions? Imagined, future institutions? Moral conscience? A personality from the past?)
•Is adherence to state-manufactured law admired or disdained? To what extent is state law equated with “right” and “wrong”?

Social
•Is social status in this society primarily ascribed (i.e., one is born into it) or achieved? If achieved, how so?
•What are the primary markers of a person of high rank in this society? How would you recognize him/her? Does political power or intellectual prestige rank higher than economic surplus?
•What is the process for establishing trust? How does one know when it has been achieved?
•Do people perceive their own place and the dominant hierarchy as natural?
•To what extent are subordinates responsible for their own actions?
•What do proverbs say about social expectations and the perceived pathway to success?


Economic
•What are the group’s views on work? Which types are admired? Which are disdained? What are the economic implications?
•Which economic activities are considered immoral?
•Is it considered appropriate to “master” the natural environment and bend it to one’s will?
•To what extent is the economy intertwined with kin obligations?
•What are obstacles to private property ownership?
•How does this culture group stack up when evaluated against the traits some claim are necessary for successful market economies? These can include:

• •Is there trust in the individual?
• •Are wealth and resources perceived as finite or infinite? Is the focus on “what exists” or “what does not yet exist”?
• •Is competition seen as healthy or unacceptably aggressive?
• •Is this society comfortable with a questioning mind?
• •Does the education system encourage investigative learning?
• •Are the “lesser virtues”—punctuality, job performance, tidiness, courtesy, efficiency – admired?
• •Which are emphasized—small achievements accomplished by the end of the day (preferable for market economies) or grandiose projects (the unfinished megaworks of progressresistant economies)?

•What is the “radius of trust” in this community? Is trust extended to family only? How far does it extend to strangers?
•What are prestige commodities within this community? Why? Might these serve as stronger incentives for cooperation than direct funding?
•Is risk taking admired or negatively sanctioned? How widely spread is the “harm” of individual failure (damages family honor, potentially ignites retribution cycle, etc.)?

Security
•What defines “victory” for this group in a kinetic conflict?
•What types of battlefield behavior would result in shame?
•What level of internal destruction is acceptable?
•How do accepted myths describe this group’s military history? What is its projected destiny?
•Are allies viewed as reliable, or historically treacherous? What is the resultant ethic regarding alliance loyalties?


Time/Change Orientation
•Does this group behave according to linear time? Is there a marked contrast between rural and urban regions? Do deadlines matter?
•What is the future orientation of this group? Does it see itself as capable of changing the near future? Is it deemed appropriate or laudable to make aggressive efforts to do so?
•Which time frames are referenced with strong positive emotion—past or future scenarios?
•Is there a significant gap between socioeconomic expectations and reality? (This often is a precursor of social shifts.)


Problem-Solving Devices
•What is the order of activities for solving a social problem (often called an action chain)? Does face-to-face confrontation happen first or last? Is violence used as a signal or is it an endgame?
•How do those outside of official channels of activity (i.e. women in seclusion, youth in elder-oriented cultures) play a part in problem-solving processes?
•Which is preferred—action or deep deliberation? Is this group comfortable with trial and error as a discovery method?
•Are individuals comfortable with making a wide range of personal choices? Are individual choice and accountability practiced social norms? Would the choices present in democratic and market systems be overwhelming?
•To what extent must community consensus be reached in order for a decision to go forward?


PERCEPTIVE LENS

Cognitive processes
•What sources of information yield ‘truth’? Scientific/factual processes? Dreams? Inspired authority figures?
•Are most situations set into dichotomous frames? Are they made to be black and white? How comfortable are group members with situational complexity? How patient are they in working to understand it?

Of Self
•What are the basic expectations about the future? (“Poverty becomes a greater problem the moment wealth is perceived as a definite possibility.”) How might typical aspirations within this society be charted?
•How does this group characterize/perceive its own history? Which events are highlighted? Which are omitted?
•What does this group’s history tell it about “dangerous” behaviors/circumstances for a society? (For example, Chinese—chaos, Americans—tyranny).


Of Others Generally
•How do members of this group assign intentions? What motives make the most sense to them? (If the best US intentions do not “make sense” to the host population, they will assign intentions that do. It is to our advantage to understand and then emphasize areas of cognitive congruence when embarking on joint ventures.)
•What is this group’s view on human nature? Are people generally trustworthy? Are they prone to excess and beset by vices, or are they able to regulate themselves? How are these views used for legitimating less or more government?
•How does this group obtain its information about the outside world? Which sources are considered most reliable? How are those sources biased or deficient?
•Are outsiders perceived as fundamentally different or fairly similar to group members?


Of the US Specifically 
•What are regarded by this group as US vulnerabilities?
•What does this group believe drives Americans? What do they value?
•Does this group see common ground with its American counterparts? In which areas?
•To what extent does this group believe American rhetoric matches intentions?


Cosmology (The way the world works...origin and structure of the universe)
•When explanations for events are not easily accessible, how does this group fill in the blanks?

PwC Chairman Aims to Keep Millennials Happy

PwC Chairman Aims to Keep Millennials Happy
By JAVIER ESPINOZA
WSJ, July 11, 2011
http://online.wsj.com/article/SB10001424052702303365804576434223787503598.html

When Dennis Nally started at PricewaterhouseCoopers LLP 37 years ago, the business was simpler, says the chairman of the accounting and management-consultancy. Back then nearly 80% of firm revenue stemmed from PWC audit work in the U.S.

Today, the company has 175,000 employees operating in 154 countries. And about half of PwC's global revenues derive from tax and advisory work, which includes consulting on operations, human resources and M&A, among other things.

About 18% of the firm's revenue comes from work for clients in developing markets in Asia, the Middle East, South America and Africa. Over the next five years, the company expects this to grow to 40%, as its clients become increasingly focused on emerging markets.

Recruiting and hiring, particularly in those markets, is the biggest challenge the firm and its clients are facing, says Mr. Nally. As evidence, he quotes from PwC's annual global CEO survey, released in April, in which more than 90% of the business leaders surveyed said that they are focused on making significant changes to their human-resource policies in the next 12 to 18 months.

The Wall Street Journal spoke with Mr. Nally in London where he talked about hiring and the importance of keeping the so-called millennial generation happy. Edited excerpts:

WSJ:How do you define talent?

Mr. Nally:Having the technical skills is important but that's almost a given these days. [Talent is also] having the right softer skills in terms of being [able] to work in a collaborative environment, teaming with people, good communication skills, good sensitivities to cultural diversity.

WSJ:What's the biggest challenge for companies when trying to recruit talented staff?

Mr. Nally:The competition for talent in the emerging markets has never been greater and that's placing a lot of pressure on salaries. Having a competitive compensation base is really important. It's [also] about how to create an environment where people want to be. This millennial generation is not just looking for a job, they're not just looking for salary and financial benefits, they're looking for skill development, they're looking for mobility, they're looking for opportunities to acquire different skills and to move quickly from one part of an organization to another. How you manage that sort of talent and how you deal with their expectations is very different from what's been done in the past.

So, clearly articulating your people strategy, what you can deliver and importantly what you expect in return is key. Connecting with your employees so they understand you can deliver the career they want is key.

WSJ:How do you go about creating that connectivity?

Mr. Nally:The human capital agenda has to be driven by the CEO. It's so strategic today that you want to have great support coming from the HR organization, but if this isn't viewed as just as strategic as new products and services or research and development, [it] won't be successful.

WSJ: Why is this thirst for talent more evident now than before?

Mr. Nally: The opportunities are so significant, coming from all different directions in all parts of the world that the demand for talent is at an all-time high. In today's global competitive workplace, you can't think just in the context of your own territory.

WSJ: What sort of policies will companies need to put in place?

Mr. Nally: The millennium generation is probably the most technological group of people ever joining the workforce. How they want to work, use social media and team within a company is very different than the prior generation. If your human policies aren't responsive to what they are looking for, they are going to go to a company that is. They want less-hierarchical structures, they want more flexibility, they want to work as hard but they want to define how they do their work. If you can't figure out a way to accommodate that kind of flexibility, you're not going to be able to retain that talent.

WSJ: What [is PwC] doing to attract and retain talent?

Mr. Nally:We have adapted both how we recruit and how we work with people once they join us to suit the millennial generation. For example, in the U.S. we have set up a LinkedIn application that allows students to track the career paths of existing graduate trainees already in the firm so a student can see how a career with PwC develops. In the U.K., we use a Facebook application to connect recruits together before they join so they can begin to build their own PwC community.

We also provide mentors for our people from day one both formally and informally and encourage people to actively use their mentors to build skills and experience. We understand that flexibility and the ability to gather useful experience are key, as a result we actively encourage our people to move both between different business areas and around the world to gain experience. We also provide career breaks, flexible working, cycles of experience outside PwC and we actively encourage volunteering.

---
Correction: Dennis Nally is the chairman of PricewaterhouseCoopers. In an earlier version of this article, the caption and headline incorrectly said Mr. Nally was the CEO.

Richard Clarke's China's Cyberassault on America

China's Cyberassault on America. By RICHARD CLARKE
If we discovered Chinese explosives laid throughout our national electrical system, we'd consider it an act of war. China's digital bombs pose as grave a threat.
The Wall Street Journal, Wednesday, June 15, 2011
http://online.wsj.com/article/SB10001424052702304259304576373391101828876.html

In justifying U.S. involvement in Libya, the Obama administration cited the "responsibility to protect" citizens of other countries when their governments engage in widespread violence against them. But in the realm of cyberspace, the administration is ignoring its primary responsibility to protect its own citizens when they are targeted for harm by a foreign government.

Senior U.S. officials know well that the government of China is systematically attacking the computer networks of the U.S. government and American corporations. Beijing is successfully stealing research and development, software source code, manufacturing know-how and government plans. In a global competition among knowledge-based economies, Chinese cyberoperations are eroding America's advantage.

The Chinese government indignantly denies these charges, claiming that the attackers are nongovernmental Chinese hackers, or other governments pretending to be China, or that the attacks are fictions generated by anti-Chinese elements in the United States. Experts in the U.S. and allied governments find these denials hard to believe.

Three years ago, the head of the British Security Service wrote to hundreds of corporate chief executive officers in the U.K. to advise them that their companies had in all probability been hacked by the government of China. Neither the FBI nor the Department of Homeland Security has issued such a notice to U.S. executives, but most corporate leaders already know it.

Some, like Google, have the courage to admit that they have been the victims of Chinese hacking. We now know that the "Aurora" attack (so named by the U.S. government because the English word appears in the attack software) against Google in 2009 also hit dozens of other information technology companies—allegedly including Adobe, Juniper and Cisco—seeking their source code. Aurora wasn't an isolated event. This month Google renewed its charge against China, noting that the Gmail accounts of senior U.S. officials had been compromised from a server in China. The targeting of specific U.S. officials is not something that a mere hacker gang could do.

The Aurora attacks were followed by systematic penetrations of one industry after another. In the so-called Night Dragon series, attackers apparently in China went after major oil and gas companies, not only in the U.S. but throughout the world. The German government claims that the personal computer of Chancellor Angela Merkel was hacked by the Chinese government. Australia has also claimed that its prime minister was targeted by Chinese hackers.

Recently the computer-security company RSA (a division of EMC) was penetrated by an intrusion which appears to have stolen the secret sauce behind the company's SecureID. That system is widely used to protect critical computer networks. And this month, the largest U.S. defense contractor, Lockheed, was subject to cyberespionage, apparently by someone using the stolen RSA data. Cyber criminals don't hack defense contractors—they go after banks and credit cards. Despite Beijing's public denials, this attack and many others have all the hallmarks of Chinese government operations.

In 2009, this newspaper reported that the control systems for the U.S. electric power grid had been hacked and secret openings created so that the attacker could get back in with ease. Far from denying the story, President Obama publicly stated that "cyber intruders have probed our electrical grid."

There is no money to steal on the electrical grid, nor is there any intelligence value that would justify cyber espionage: The only point to penetrating the grid's controls is to counter American military superiority by threatening to damage the underpinning of the U.S. economy. Chinese military strategists have written about how in this way a nation like China could gain an equal footing with the militarily superior United States.

What would we do if we discovered that Chinese explosives had been laid throughout our national electrical system? The public would demand a government response. If, however, the explosive is a digital bomb that could do even more damage, our response is apparently muted—especially from our government.

Congress hasn't passed a single piece of significant cybersecurity legislation. When the Chinese deny senior U.S. officials' claims (made in private) that Beijing is stealing terabytes of data in the U.S., Congress should not leave the American people in doubt. It should demand answers to basic questions:

What does the administration know about the role of the Chinese government in cyberattacks on public and private computer networks in the United States?

If there is widespread Chinese hacking of sensitive U.S. networks and critical infrastructure, what has the administration said about it to the Chinese government? Specifically, did President Obama raise concerns about these attacks with Chinese President Hu Jintao at the White House this spring?

Since defensive measures such as antivirus software and firewalls appear unable to stop the Chinese penetrations, does the administration have any plan to address these cyberattacks?

In private, U.S. officials admit that the government has no strategy to stop the Chinese cyberassault. Rather than defending American companies, the Pentagon seems focused on "active defense," by which it means offense. That cyberoffense might be employed if China were ever to launch a massive cyberwar on the U.S. But in the daily guerrilla cyberwar with China, our government is engaged in defending only its own networks. It is failing in its responsibility to protect the rest of America from Chinese cyberattack.

Mr. Clarke was a national security official in the White House for three presidents. He is chairman of Good Harbor Consulting, a security risk management consultancy for governments and corporations.

World Bank on MENA: Opportunities To Reshape Economic Playing Field

World Bank on MENA: Opportunities To Reshape Economic Playing Field

There are historic opportunities for greater openness and citizen participation in economies across the Middle East and North Africa (MENA) that, if strongly managed over the transitions ahead, could see a significant boost to economic growth and living standards in the medium term.

This is the analysis presented on My 24, 2011 in the World Bank’s Regional Economic Outlook: MENA Facing Challenges and Opportunities. The report notes that current economic disruption in many MENA countries is translating into lower growth in the short term (now forecast at 3.6 percent for 2011 down from 5 percent) but that opportunities in the medium term offer new hope for an inclusive and sustainable development that has not before been seen in the region.

"The rich experience from countries that have undergone political changes suggest that short-term disruptions to economic growth and social  tensions are inevitable,” said Shamshad Akhtar, World Bank Vice President for the MENA region.  “However, transition offers an opportunity for countries to break with the past and set course in a newer direction.  A first order of priority is to offer the right signals to restore public and private investor confidence which, in MENA, calls for ensuring respect and citizen dignity through inclusive social policies, a fundamental change in governance frameworks and swiftly restoring macroeconomic stability." 

The report finds that by the end of 2010, MENA countries had largely recovered from the global financial crisis, and growth rates had been expected to reach pre-crisis levels in 2011. Events in early 2011 which led to swift regime change in Tunisia and Egypt, and ongoing challenges in Bahrain, Libya, Syria and Yemen, have affected the short-term macroeconomic outlook and the status and speed of economic reforms in the region. 

“The effects of reform tend to follow a J-curve, where things get worse before they get better. Experience from other countries which have made successful transitions has shown an initial decline of 3 to 4 percent in the first year but quickly recovering,” said Caroline Freund, Chief Economist for the MENA region.

“Also encouraging is that successful countries saw significant and fast improvements in voice and accountability, some of the very things that underpin the MENA uprisings. We need to learn from history’s successful transitions and carefully manage the short-term downturn which is where we are focusing our best efforts now. While the challenges are many, the opportunities are more." 

Freund said better rule of law will promote competition and political stability will attract investment, facilitating more rapid growth in a sustainable way. By the same token, more voice for civil society will prevent the unequal application of regulations, and can lead to more inclusive growth.

Examples of transitions to democracy in other parts of the world confirm that economic gains can be sizable.  Typically, successful transitions are associated with higher levels of income growth in the decade after change than in the prior one.  But, the short-run is challenging; investors typically wait for uncertainty to be resolved and it is inevitable that investment will be delayed.  Signs of stability and reform are quick to be rewarded though and evidence from other countries shows that this dip in economic activity typically lasts a year, with growth quickly gaining momentum if the transition is strongly managed.

The report’s regional forecast of 3.6 percent growth for 2011, down from 5 percent expected a few months ago, is largely due to the sharp drop in Egypt’s and Tunisia’s economic activity, but also because of weaker growth in developing oil exporters in MNA. Gulf Cooperation Council (GCC) countries will maintain strong growth rates, expected to exceed 5 percent. Growth effects are sharply differentiated by country in MENA, depending largely on whether the country is an oil exporter or an oil importer and the degree to which unrest and political change has disrupted economic activity.

The report also notes that government spending is expected to rise in 2011 as governments move to expanding supportive policy measures and social transfers to reduce the burden of unemployment and counter high commodity prices. Partly because of these actions, but also because of rising fuel and food prices, inflation rates are expected to increase in many MENA countries in 2011.

“Expanding social measures during an uncertain period is understandable to protect the most vulnerable and to help maintain support for reform,” said Elena Ianchovichina, World Bank Lead Economist and author of the report. “But it is important that these measures be used to complement needed reforms and be targeted efficiently to the poorest and the most needy.”

The report considers prolonged instability resulting from unmet political and social aspirations and lack of clarity about political transitions to be the most serious risk to short-term economic growth in MENA.   

The report also investigates the effect of high commodity prices on MENA countries. Impacts are country-specific and determined by dependence on food and oil imports, and the extent of the pass-through from international to domestic prices. While MENA includes some major oil exporters that are benefiting from oil price increases, it is also home to a number of countries that rely on imported oil. Importantly, because most MENA countries are highly dependent on imported food, particularly cereals, oils, and sugar, in the event of further food price increases, they face the risk of more malnutrition, increased import bills, higher domestic inflation, and worsened fiscal balances in cases when governments subsidize food. And new estimates of pass through from international food prices to domestic prices are presented for MENA countries.

“Food security is and will continue to be an important issue for Arab countries,” said Julian Lampietti, Lead Food Security Expert for MENA region at the World Bank. “Now is not the time to be complacent in addressing this with global wheat stocks low and with the Arab world importing one third of the world’s traded wheat.”  There is considerable scope for reducing food price volatility in the MENA region through investments in infrastructure and logistics, he said, pointing to examples in the region where ongoing analysis is showing that there are ways to manage exposure to food price spikes and ensure a timely supply of dietary essentials.


This press release is downloadable here: http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:22922472~pagePK:64257043~piPK:437376~theSitePK:4607,00.html


Full report on http://siteresources.worldbank.org/MENAEXT/Resources/EDP_MNA_2011.pdf

“The Day of Rejection” in Mauritania

Kal posts this:

"For pictures, flyers, video and a summary of the 24 May youth demonstrations in Mauritania (The Day of Rejection), see here and here. The youth staged a mock funeral for democracy in Mauritania, marching on the Blokate square in Nouakchott. As in previous demonstrations, there was an emphasis on reducing the military’s role in politics, corruption and commodity prices. The demonstrators were met by plain cloths police and security men, who allegedly distributed knives to thugs. The demonstrations on 24 May were smaller than in April and saw less head on violence from the authorities. But the government does appear somewhat spooked by the youth movement: aside from the use of plain clothes police and agents provocateurs, it has used misinformation campaigns to confuse and hamper the protests with false flyers (and by setting up false Facebook accounts and pages, according to activists). Here is a link to an al-Akhbar article on the demonstration [Ar.]. For background on the youth protest movement see the previous posts on this blog and this writer’s recent article in the Arab Reform Bulletin."

Here is one flyer, "posted by organizers on Facebook and by this writer on Twitter last week (they are also in a gallery in the links above)":

There is a second flyer in Arabic at the original post.

Analysts say GCC inclusion of Jordan, Morocco will strengthen Arab integration

Analysts say GCC inclusion of Jordan, Morocco will strengthen Arab integration

May 14, 2011
BBC Monitoring Middle East

["Today's Harvest" news programme on GCC's invitation to Morocco to join the GCC, and Jordan's request to join the GCC; Saudi Consultative Council member, Jordanian government spokesman, and Moroccan Socialist Unified Party member interviewed - live.]

Doha Al-Jazeera Satellite Channel Television in Arabic at 2001 GMT on 10 May carries within its "Today's Harvest" news programme a 200-second report on the GCC consultative summit held in Riyadh on 10 May, an approximately six-minute interview with Zuhayr al-Harithi, member of the Saudi Arabia's Consultative (Shura) Council, in the Doha studio; followed by a four-minute interview with Tahir al-Adwan, Jordan's minister of state for media affairs and communication and official spokesman of the Jordanian government, via telephone from Amman; and a four-minute interview with Hassan Tarik, member of the Political Bureau of Morocco's Socialist Unified Party, SUP, via telephone from Rabat. The interviews are conducted from Doha by anchors Khadijah Bin-Qinnah and Muhammad al-Kurayshan.
   
Al-Jazeera reports on the consultative summit held by the heads of the six Gulf Cooperation Council [GCC] states - or their representatives - in Riyadh on 10 May during which they discussed the situation in Yemen and Bahrain and the tense relations with Iran.
   
Al-Jazeera reports that GCC Secretary General Abd-al-Latif al-Zayani said the GCC Supreme Council delegated its foreign ministers to initiate talks with Rabat on Morocco joining the GCC, while the GCC leaders "welcomed Jordan's request to join the GCC, and promised to study the request."
   
Al-Jazeera then carries a video report by an unidentified correspondent on the summit. Video shows scenes from the summit, beginning with the Saudi monarch walking with the help of a stick, surrounded by Saudi and other GCC dignitaries. The correspondent notes that the summit coincides with "a big deterioration in the GCC states' relations with Iran, in the wake of recent protests in Bahrain," adding that Iran was unhappy with Bahrain's request for the assistance of the Peninsula Shield Force to end the disturbances.
   
The correspondent adds that the GCC states are becoming increasingly worried by the continuing crisis in Yemen where huge demonstrations are held daily to demand President Salih's departure. Al-Jazeera's correspondent adds that the GCC summit sent a delegation to meet with Syrian President Al-Asad, and the director of the Gulf Research Centre in Dubai has revealed that the GCC will not mediate in the Syrian situation, but it may have proffered advice to Al-Asad and stressed to him that the "security solution is not the only solution, and reforms are essential."
   
Bin-Qinnah then asks Al-Harithi about the GCC's "surprise move" in welcoming Jordan's request to join the GCC and inviting Morocco to join, Al-Harithi says "the picture is not quite clear yet." He explains that the move stems from "the GCC's desire to establish a bloc that represents a political stand, and an economic bloc that gives momentum to the GCC. The political systems in all those countries are similar: they are monarchies, and their political stands are also similar." Asked if he is referring to stands towards Iran, Al-Harithi says Iran and other issues. He says it is a "good move, because we are talking about the globalization age, which requires the creation of blocs that achieve economic integration."
   
Asked whether his assertion about the political systems of the GCC, Jordan, and Morocco being similar explains why the GCC had rejected past requests to join the GCC, Al-Harithi disagrees and says Yemen has begun preparations to qualify, adding: "I think it will join soon."
   
Al-Harithi says the GCC states are facing regional and domestic challenges, and they have certain demands, and the GCC states are wise to take such a far-sighted stand that could be helpful in the future. He says some states "are trying to exploit the present weakness of the Arab states, for we have seen some interference and some changes in the Arab political map."
   
Al-Harithi says he believes that since four months ago "the GCC embarked on a new stage" with regard to joint action and security and defence policies. He says the GCC's achievements continue to fall short of the aspirations of the peoples of the GCC states, and the GCC has sensed the dangers of the present stage and wisely looked for ways out.
   
Told it is called a Gulf council, while Morocco is a long distance from the Gulf, Al-Harithi says if Morocco and Jordan join the GCC geographic location will no longer be so important, for the states' joint action, political stand, and economic integration will be more important. He says if the outcome of those two states joining the GCC is that Arab joint action will gain momentum that ultimately serves the Arab states.
   
Asked about Yemen's application to join the GCC, Al-Harithi says: "The problem is in the Yemeni court, where there is some stalling and procrastination on the part of the regime, while the opposition is being intransigent and is taking a hard-line operation." He urges the Yemenis to seize this opportunity for it is "a road map to find a solution.
   
Al-Harithi says the GCC initiative because it will spare the Yemeni people's blood, achieve their demands, and lead to respect for the options of the Yemeni people. He adds: "The GCC states are neither backing the Yemeni president, nor siding with the Yemeni opposition, but seek to consolidate Yemen's stability and security." Al-Harithi adds: Yemen's security is a strategic matter. It is linked to the security system of the GCC as a whole."
   
Al-Kurayshan then interviews Jordan's Tahir al-Adwan. Al-Kurayshan begins by asking him how Jordan received the decisions of the GCC consultative summit. Al-Adwan says: "The Jordanian government issued a statement lauding the GCC summit's statement that welcomed Jordan's request to join the GCC. It is a big and important step for joint Arab action, and achieves the interests of the Arab peoples in this region. Amy step towards strengthening Jordanian-GCC relations is welcomed in Jordan, not only at the official level but at various popular levels as well." He notes Jordan's strong and longstanding relations with the GCC states where, he says, many Jordanians are employed.
   
Asked what does Jordan hope to achieve by joining the GCC, Al-Adwan says: "Such a step serves the interests of Jordan and also serves joint Arab action. It strengthens Arab integration and cooperation in economic fields, and bolsters the ties and contacts between the peoples of the region."
   
Seeking a more specific answer, Al-Kurayshan says why does Jordan apply to join the GCC which had so far been a club exclusively for Gulf states, Al-Adwan says: "It has been a longstanding ambition of Jordan to join the GCC. You may recall that in recent weeks when the king went on a tour, and the prime minister also went on a tour of the Gulf states, there were reports on the possibility of Jordan joining the GCC. The report was well received by Jordanian public opinion. I believe Jordan has constantly aspired to join the GCC, which is a very big step for Jordan. It is a welcome move. Certainly, Jordanians will feel that new horizons have been opened to cooperation between Jordan and the peoples and states of the GCC. It is in Jordan's interest. As you know, Jordan faces difficult economic circumstances. The entire region is suffering from unrest and instability."
   
Al-Adwan adds: "Now any step towards bolstering joint Arab action on various levels represents a ray of hope for the peoples of the region."
   
Bin-Qinnah then interviews Hasan Tarik, of Morocco's SUP. Asked how did Morocco receive the GCC's invitation to join the GCC, Tarik says Moroccan public opinion was surprised by the invitation, both because Morocco is more oriented towards the Arab Maghreb and the West, and because the GCC is a closed club. Tariq notes that not all the facts are known, and the reports are conflicting, for there are those who say Morocco has officially applied to join the GCC, while there are those who say that Mo rocco was invited by the GCC to join it. He adds that there had been no previous public discussions on the issue. He says there will be questions regarding the effect of such a move on Morocco's relations with other Maghreb and Mediterranean states. [Video shows King Hamad of Bahrain sitting and listening to other GCC leaders]
   
Asked how would Morocco's relations with other Arab Maghreb states conflict with its relations with GCC states, Tarik says the political stands of Morocco and the GCC states have always been close, and there was clear economic support for Morocco. He adds: "However, for those relations to go as far as Morocco joining the GCC represents a shift in Morocco's foreign policy. The fear is that, in the light of the political transformations that have been occurring in the Arab region, the bid to join the GCC will be construed as a return to the policy of axes. There is also a fear that it will be viewed as the last nail in the coffin of the Arab Regional Order. There are numerous questions that are being asked by Moroccan public opinion, but there are not enough appropriate answers to those questions."
   
Tarik says decisions on foreign policy are the prerogative of the state and the royal establishment, and adds: "However, it is hoped there will be a public debate on the issue and the options. Are we getting involved in a pragmatic and economic process? Does it have political significance and consequences? What is the cost? Why now? Those are all matters that require clarification?"
   
Source: Al-Jazeera TV, Doha, in Arabic 2001 gmt May 10, 2011

Leadership substitutes and personality impact on time and quality in some projects

Leadership substitutes and personality impact on time and quality in virtual new product development projects / Kenneth David Strang

Article first published online: Sep 29, 2010 - DOI: 10.1002/pmj.20208

Keywords:

• virtual product development;
• transformational transactional leadership;
• leadership substitutes;
• personality;
• competencies;
• time performance;
• scope quality

Abstract

Leadership, personality, and organizational factors were analyzed to measure their combined effect on virtual-based product development time and scope-quality performance. Over 1,000 team members were surveyed. MANCOVA was used to test if leadership, personality project, and/or organizational factors impacted performance. All realistic factors were included to detect leadership substitutes moderation, mediation, and prediction. Bias was reduced by not surveying leaders, by using reverse item coding, and by checking social desirability. Experimental control and common method variance were managed by including multilevel and multisource data. Performance was objectively computed from organizational data. The findings were that transactional leadership (not transformational) and some personality attri-butes (leader substitutes) were significant factors, increasing project scope quality and time performance. This article was published online on September 29, 2010. An error was subsequently identified. This notice is included in the online and print versions to indicate that both have been corrected. See the correction noted on the seventh page of the print version of the article.

More than 90% of Egyptians hold their property without legal title. No wonder they can't build wealth.

Egypt's Economic Apartheid. By Hernando de Soto
More than 90% of Egyptians hold their property without legal title. No wonder they can't build wealth and have lost hope.
WSJ, Feb 03, 2011
http://online.wsj.com/article/SB10001424052748704358704576118683913032882.html


The headline that appeared on Al Jazeera on Jan. 14, a week before Egyptians took to the streets, affirmed that "[t]he real terror eating away at the Arab world is socio-economic marginalization."

The Egyptian government has long been concerned about the consequences of this marginalization. In 1997, with the financial support of the U.S. Agency for International Development, the government hired my organization, the Institute for Liberty and Democracy. It wanted to get the numbers on how many Egyptians were marginalized and how much of the economy operated "extralegally"—that is, without the protections of property rights or access to normal business tools, such as credit, that allow businesses to expand and prosper. The objective was to remove the legal impediments holding back people and their businesses.

After years of fieldwork and analysis—involving over 120 Egyptian and Peruvian technicians with the participation of 300 local leaders and interviews with thousands of ordinary people—we presented a 1,000-page report and a 20-point action plan to the 11-member economic cabinet in 2004. The report was championed by Minister of Finance Muhammad Medhat Hassanein, and the cabinet approved its policy recommendations.

Egypt's major newspaper, Al Ahram, declared that the reforms "would open the doors of history for Egypt." Then, as a result of a cabinet shakeup, Mr. Hassanein was ousted. Hidden forces of the status quo blocked crucial elements of the reforms.

Today, when the streets are filled with so many Egyptians calling for change, it is worth noting some of the key facts uncovered by our investigation and reported in 2004:

• Egypt's underground economy was the nation's biggest employer. The legal private sector employed 6.8 million people and the public sector employed 5.9 million, while 9.6 million people worked in the extralegal sector.

• As far as real estate is concerned, 92% of Egyptians hold their property without normal legal title.

• We estimated the value of all these extralegal businesses and property, rural as well as urban, to be $248 billion—30 times greater than the market value of the companies registered on the Cairo Stock Exchange and 55 times greater than the value of foreign direct investment in Egypt since Napoleon invaded—including the financing of the Suez Canal and the Aswan Dam. (Those same extralegal assets would be worth more than $400 billion in today's dollars.)

The entrepreneurs who operate outside the legal system are held back. They do not have access to the business organizational forms (partnerships, joint stock companies, corporations, etc.) that would enable them to grow the way legal enterprises do. Because such enterprises are not tied to standard contractual and enforcement rules, outsiders cannot trust that their owners can be held to their promises or contracts. This makes it difficult or impossible to employ the best technicians and professional managers—and the owners of these businesses cannot issue bonds or IOUs to obtain credit.

Nor can such enterprises benefit from the economies of scale available to those who can operate in the entire Egyptian market. The owners of extralegal enterprises are limited to employing their kin to produce for confined circles of customers.

Without clear legal title to their assets and real estate, in short, these entrepreneurs own what I have called "dead capital"—property that cannot be leveraged as collateral for loans, to obtain investment capital, or as security for long-term contractual deals. And so the majority of these Egyptian enterprises remain small and relatively poor. The only thing that can emancipate them is legal reform. And only the political leadership of Egypt can pull this off. Too many technocrats have been trained not to expand the rule of law, but to defend it as they find it. Emancipating people from bad law and devising strategies to overcome the inertia of the status quo is a political job.

The key question to be asked is why most Egyptians choose to remain outside the legal economy? The answer is that, as in most developing countries, Egypt's legal institutions fail the majority of the people. Due to burdensome, discriminatory and just plain bad laws, it is impossible for most people to legalize their property and businesses, no matter how well intentioned they might be.

The examples are legion. To open a small bakery, our investigators found, would take more than 500 days. To get legal title to a vacant piece of land would take more than 10 years of dealing with red tape. To do business in Egypt, an aspiring poor entrepreneur would have to deal with 56 government agencies and repetitive government inspections.

All this helps explain who so many ordinary Egyptians have been "smoldering" for decades. Despite hard work and savings, they can do little to improve their lives.

Bringing the majority of Egypt's people into an open legal system is what will break Egypt's economic apartheid. Empowering the poor begins with the legal system awarding clear property rights to the $400 billion-plus of assets that we found they had created. This would unlock an amount of capital hundreds of times greater than foreign direct investment and what Egypt receives in foreign aid.

Leaders and governments may change and more democracy might come to Egypt. But unless its existing legal institutions are reformed to allow economic growth from the bottom up, the aspirations for a better life that are motivating so many demonstrating in the streets will remain unfulfilled.

Mr. de Soto, author of "The Mystery of Capital" (Basic Books, 2000) and "The Other Path" (Harper and Row, 1989), is president of the Institute for Liberty and Democracy based in Lima, Peru.

Angola country report

Angola country report

1  US State Dept: Angola Briefing: http://www.state.gov/p/af/ci/ao/index.htm.

Economy:


Despite a fast-growing economy largely due to a major oil boom, Angola ranks in the bottom 10% of most socioeconomic indicators. The International Monetary Fund (IMF) estimates that Angola's real GDP increased by 16% in 2008. However, GDP growth in 2009 was flat due to significantly lower oil prices owing to the global financial crisis. According to IMF the GDP growth in 2010 is projected at around 2.5 percent, but a solid pick-up in the pace of growth is expected for 2011. Angola is still recovering from 27 years of nearly continuous warfare, and it remains beset by corruption and economic mismanagement. Despite abundant natural resources and rising per capita GDP, it was ranked 157 out of 179 countries on the 2008 UN Development Program's (UNDP) Human Development Index. Subsistence agriculture sustains one-third of the population.

The rapidly expanding petroleum industry reached its Organization of Petroleum Exporting Countries (OPEC) cap of 2 million barrels per day (bpd) in 2008. However, Angola’s production was cut to 1.51 million bpd in January 2009 by an OPEC mandate in response to plummeting oil prices. Throughout 2009, Angola never got down to its OPEC quota and produced an average of 1.8 million bpd. Angola is currently Africa’s largest oil producer, a position that Angola has traded places back and forth with Nigeria over the last year. Crude oil accounted for roughly 85% of GDP, 95% of exports, and 85% of government revenues in 2009. Angola also produces 40,000 bpd of locally refined oil. Oil production remains largely offshore and has few linkages with other sectors of the economy, though a local content initiative promulgated by the Angolan Government is pressuring oil companies to source from local businesses. The government is also pressuring oil companies to increase the number of Angolan staff.

Block 15, located offshore of Soyo, currently provides 30% of Angola's crude oil production. ExxonMobil, through its subsidiary Esso, is the operator, with a 40% share. In 2005, Block 15's second major sub-field, Kizomba B, came on line, producing about 250,000 bpd. BP, ENI-Agip, and Statoil are partners in the concession. Chevron operates Block 0, offshore of Cabinda, which provides about 20% of Angola's crude oil production. Its partners in Block 0 are Sonangol (the Angolan state oil company), TotalFinaElf, and ENI-Agip. In 2007, Block 0 had a total production of 370,000 bpd, and drilling activity continues at a high level. Chevron also operates Angola's first deepwater section to go into production, Block 14, which started pumping in January 2000 and produced 105,000 bpd in 2006.

TotalFinaElf brought the first Kwanza Basin deepwater blocks on line with production from its Block 17 concession that began in February 2002. Inauguration of the Dalia oilfield in December 2006 combined with the Girassol field already in operation brought Block 17's total production to approximately 500,000 bpd as of July 2007. Total expected to begin drilling in new oilfield Pazflor in 2009, bringing production to a peak of 700,000 bpd by 2011. Exploration is ongoing in ultra-deep water concessions and in deepwater and shallow concessions in the Namibe Basin. BP made the first significant ultra-deepwater find in its Block 31 concession in 2002 and had reached nine significant discoveries by the end of 2005. BP shipped its first crude from the Plutonio oilfield in Block 18 in 2007 and ultimately expects Plutonio to average 200,000 bpd in full production. Marathon also drilled a successful well in its Block 32 ultra-deep water concession. TotalFinaElf operates Angola's one refinery (in Luanda) for sole owner Sonangol; plans for a second refinery in Lobito with projected production of 200,000 bpd are moving forward, with KBR selected to do the front-end engineering and design work. There are plans to increase capacity of the Luanda refinery from 40,000 bpd to 100,000 bpd. Chevron, Sonangol, BP, Total, and Eni are developing a $4 billion to $5 billion liquefied natural gas plant at Soyo, now under construction by Bechtel, expected to start production in 2012.

Exports to Asian countries have grown rapidly in recent years, particularly to China. In late 2004, China's state oil company Sinopec entered the market, offering two separate $1 billion signing bonus offers on two offshore blocks. Sinopec has also formed a partnership with Sonangol to operate Block 3/05 (formerly Block 3/80), whose operation was transferred from Total to Sonangol. Sonangol will seek to expand its operation of onshore and shallow water blocks. This includes the northern block of Cabinda's onshore concessions, which since the reduction in hostilities with separatist forces is now open to exploration. Sonangol and Sinopec will also be eyeing future concession rounds, particularly for 23 blocks in the Kwanza Basin onshore area and the relinquished parts of Blocks 15, 17, and 18, currently operated by Exxon, Total, and BP. In 2008, Angola was China’s second-leading source country for crude oil by volume, importing 599 million barrels valued at U.S. $59.900 billion, up 19.3% year on year.

Diamonds make up most of Angola's remaining exports, with yearly production at 6 million carats. However, the financial crisis severely depressed diamond prices in 2009, sharply curtailing Angola’s diamond exports, and at one point forcing the state diamond authority, Endiama, to buy up production at cost for stockpiling to keep operators going. Diamond sales reached approximately $1.1 billion in 2006. Despite increased corporate ownership of diamond fields, much production is currently in the hands of small-scale prospectors, often operating illegally. Eight large-scale mines operate out of a total of 145 concessions. In June 2005, De Beers signed a $10 million prospecting contract with the government's diamond parastatal, ending a 4-year investment dispute between De Beers and the government. The government is making an increased effort to register and license prospectors. Legal sales of rough diamonds may occur only through the government's diamond-buying parastatal, although many producers continue to bypass the system to obtain higher prices. The government has established an export certification scheme consistent with the "Kimberley Process" to identify legitimate production and sales. Other mineral resources, including gold, remain largely undeveloped, though granite and marble quarrying has begun.

In the last decade of the colonial period, Angola was a major African agricultural exporter. Because of severe wartime conditions, including the massive dislocation of rural people and the extensive laying of landmines throughout the countryside, agricultural activities came to a near standstill, and the country now imports over half of its food. Small-scale agricultural production has increased several-fold over the last 5 years due to demining efforts, infrastructure improvements, and the ability of returnees and internally displaced persons (IDPs) to return safely to agricultural areas, yet production of most crops remains below 1974 levels. Some efforts at commercial agricultural recovery have gone forward, notably in fisheries and tropical fruits, but most of the country's vast potential remains untapped. Recently proposed land reform laws attempt to reconcile overlapping traditional land use rights, colonial-era land claims, and recent land grants to facilitate significant commercial agricultural development. However, the lack of clear title to land tracts and burdensome registration process in Angola continues to be a significant impediment to foreign investment in the agriculture sector.

An economic reform effort launched in 1998 was only marginally successful in addressing persistent fiscal mismanagement and corruption. In April 2000, Angola started an IMF staff-monitored program (SMP). The program lapsed in June 2001 over IMF concerns about lack of progress by Angola. Under the program, the Government of Angola did succeed in unifying exchange rates and moving fuel, electricity, and water prices closer to market rates. In March 2007, the government announced it was not interested in a formally structured IMF program, but would continue to participate in Article IV consultations and other technical assistance on an ad hoc basis. In November 2009, following increased Angolan efforts to make oil revenues more transparent, the IMF approved a 27-month Standby Arrangement (SBA) with Angola in the amount of approximately $1.4 billion to help the country cope with the effects of the global economic crisis. According to a statement released by the IMF, “While the immediate goal is to mitigate the repercussions of the adverse terms of trade shocks linked to the global crisis, the program also includes a reform agenda aimed at medium-term structural issues to foster non-oil sector growth.” The loan is the largest IMF financing package to date for a sub-Saharan African country during the current global crisis.

In December 2002, President dos Santos named a new economic team to oversee homegrown reform efforts. The new team succeeded in decreasing overall government spending, rationalizing the Kwanza exchange rate, closing regulatory loopholes that allowed off-budget expenditures, and capturing all revenues in the state budget. New procedures were implemented to track the flow of funds among the Treasury, Banco Nacional de Angola (the central bank), and the state-owned Banco de Poupança e Credito, which operates the budget. The Angolan Government adopted a new investment code. Concerns remain about quasi-fiscal operations by the state oil company Sonangol, opaque oil-backed concessionary lines of credit that operate outside the budget process, inadequate transparency, oversight in the management of public accounts, and the lack of supervision of the commercial banking sector. A recent Financial Action Task Force on Money Laundering (FATF) report cited Angola for a significant lack of laws and regulations regarding anti-money laundering and counterterrorist financing (AML/CFT). The Angolan commercial code, financial sector law, and telecommunications law all require substantial revision.

Angola is the second-largest trading partner of the United States in sub-Saharan Africa, mainly because of its petroleum exports. U.S. exports to Angola primarily consist of industrial goods and services--such as oilfield equipment, mining equipment, chemicals, aircraft, and food. On December 30, 2003, President George W. Bush approved the designation of Angola as eligible for tariff preferences under the African Growth and Opportunity Act (AGOA).

2  CIA summary: https://www.cia.gov/library/publications/the-world-factbook/geos/ao.html

3  World Bank: Angola at a glance, http://devdata.worldbank.org/AAG/ago_aag.pdf

4  World Bank: costs of doing business in Angola, http://www.doingbusiness.org/data/exploreeconomies/angola. Here you can see costs for all of these (downloadable as Excel sheet):

Starting a Business
Dealing with Construction Permits
Registering Property
Getting Credit
Protecting Investors
Paying Taxes
Trading Across Borders
Enforcing Contracts
Closing a Business
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Employees:
Difficulty of hiring
Rigidity of hours
Difficulty of redundancy
Redundancy costs (weeks of salary)