Tag: economics

“Free trade” and human trafficking in Jordan

Modern slavery in Jordan:

Tens of Thousands of Foreign Guest workers Stripped of their passports, trapped in involuntary servitude, sewing clothing for Wal-Mart, Gloria Vanderbilt, Target, Kohl’s, Thalia Sodi for Kmart, Victoria’s Secret, L.L.Bean and others.

In the Western factory, which was producing for Wal-Mart, four young women, including a 16-year old girl, were raped by plant managers. Despite being forced to work 109 hours a week, including 20-hour shifts, the workers received no wages for six months. Workers who fell asleep from exhaustion were struck with a ruler to wake them up.

At the Al Shahaed factory, also producing for Wal-Mart, there were 24, 38 and even 72-hour shifts. The workers were paid an average wage of two cents an hour. Workers were slapped, kicked, punched and hit with sticks and belts.

In a factory called Al Safa, which was sewing garments for Gloria Vanderbilt, a young woman hung herself after being raped by a manager.

All across Jordan, tens of thousands of foreign guest workers, mostly from Bangladesh, China, India and Sri Lanka, are routinely forced to work 100-plus hours a week while being cheated of upwards of half the wages legally owed them. Any worker asking for their proper wages can be imprisoned.

Factory bathrooms lack toilet paper, soap and towels. Dorm conditions are primitive, often lacking running water three or four days a week. Any worker speaking one word of truth about the abusive factory conditions will be attacked and forcibly deported without any of the back wages due them.

Jordan’s apparel exports to the U.S. are up 2000 percent between 2000 and 2005, reaching $1.1 billion, and these garments enter the U.S. duty-free. (Garments from Jordan go to Europe as well as the U.S.)

It’s incredible how this sweatshop model of manufacturing is spreading into new countries. Clearly the US companies commissioning this need to be held accountable, especially as I doubt the Jordanian legal system would be of any use. Prison terms for senior management and key shareholders come to mind.

And this of course in Jordan, which is meant to be a “model” for economic development and to have benefited so much from the Israeli-Jordanian-US QIZ agreement. But of course King Abdullah is “wise” and “moderate” — not a short, fat Quisling.

Questions for Egyptian capitalists

For the economically minded, Business Today editor Patrick Fitzpatrick’s introduction to their “bt100” issue, which provides rankings of the top 100 companies in Egypt, is an interesting read. The picture it shows, as Patrick explains, is one of tremendous growth for corporate Egypt. Particularly notable is the growth in the petrochemical, construction and tourism sectors, which is indicative of more long-term wealth creation.

Yet this is also a growth that by far and large is not shared by the average Egyptian. No doubt there will be some trickle down effect from the growth seen above, and official (notoriously unreliable) unemployment statistics are down. For a while they cruised steadily at 9.9%, as if the government was afraid to breach some symbolic point. Real unemployment, for all we know, is around 20% or more, depending how you count the problem of under-employment. And then there’s the problem about whether the jobs that are created are as attractive as previous types of jobs, the strength of labor welfare in an increasingly competitive world (but one in which labor, not management, gets downsized), and a million other questions.

All of this is of political interest. How will the growth in the income gap will affect politics in a country with, despite its social stratification, a strong egalitarian fiber? (Egyptians, you might not realize this, but take it from a Moroccan: Nasser made you more egalitarian than many, many Arab countries.) What role will an increasingly powerful capitalist class will play in politics, from which it was until recently excluded? What market transparency do you have, as a serious capitalist, in a country where finance and investment banking is dominated by one firm (EFG-Hermes) that has strong ties to the government? What of individuals whose business acumen and personal wealth make them, to a certain extent, untouchable by the state (Naguib Sawiris, perhaps?) And how long will capitalists make do with a corrupt system (some have benefited from it, of course, but at a certain point corruption becomes an obstacle to business) or accept that economic fiefdoms are formed only due to proximity to the presidency? In the future, will it be tolerable that a Gamal or Alaa Mubarak should be able to become a partner in a venture simply by bullying his way in?

As Patrick says, it is true that there is more corporate governance in Egypt today than there was five years ago. But where do corporations and capitalists position themselves on the day’s political questions? Thus far, they don’t. In the future, we’ll see. I once asked a prominent Egyptian businessman who has played a not unimportant role in promoting corporate governance (hint: he’s mentioned by Patrick) in the country how he felt about Gamal Mubarak’s possible inheritance to the presidency. “Well, it would mean we’re not a democracy,” he said, before shrugging: “that would be too bad.”

The Egyptian ADSL black market

If you have ever looked up to the sky while walking around in a Cairo mid- or lower income neighborhood, you must have seen a net of white cables above you, coming out of a window on one side of the street, stretching to balconies and windows on the other side, some fifteen meters above street level: A business-minded resident subscribes to a 1 Mb connection, and then informally rents out connectivity to his neighbors. 

I recently spoke to an executive of a leading ISP in Egypt, and he estimated that no less then 40% of all ADSL lines in Egypt are shared between apartments, which technically is illegal. Sometimes the number of sub-subscribers can reach up to 50 people.

 

The problem for ISPs is that people call and complain about services who are not their customers. They thus would like to legalize this black market by being allowed to offer multi-party contracts (which would also bring legal protection to the actual subscribers who are now held accountable for whatever their neighbors are doing on the web). But the government appears to be hesitating.

I find it interesting to see how creative Egyptians are in distribution when the offer doesn’t suit market conditions for whatever reason (while the government two years ago brought prices down, the market would now be big enough for prices to further decline, but the government keeps them up in order to protect smaller ISP from being driven out of the market).

A similar thing happens in the mobile market, where operators in vain kept trying to introduce packages where you buy both a mobile and a line at the same time. But distributors would in most cases tear them apart and sell both separately anyways to better tune their offers to the market.

The next round is coming up, as one of the operators is about to import handsets and SIM cards that via a code system can only be used together.

 

Al ard bidoun al fellahin

It’s a few days old, but don’t miss Maria Golia’s latest column for the Daily Star. It’s about one of the most important issues facing Egypt today — an existential one of greater long-term concern than even democratic reform — but one that the government seems to do little about. It’s about land, and how the little area of arable land that Egypt has is being rapidly being transformed from agricultural land into housing or commercial property.

Imagine you have a country, a big one, yours to do with what you please. There’s just one catch. Nearly all the land is desert, which makes the remaining 5 percent the place where 70 million people not only have to live, but farm in order to eat. Around half the people live in towns, and half live in the country. The country half are largely farmers. They constitute 36 percent of the total work force. They work for almost nothing and supply your table with hand-grown foods. Plus, their labor enriches you – they contribute around a quarter of your GDP and exports. So how do you treat the farmers?

Common sense says you encourage them because working the land, as they have for generations, is a noble and profitable pursuit. You might even reward them for accomplishing so much with so little space, water and cash. But not if the country were Egypt. In that case, you would herd the farmers off the land and into jail, raze their villages and give them nothing. Meanwhile you would build on precious agricultural land for fast money.

Read the whole thing for statistics — one of the great thing about Maria’s writing about Egypt is that it’s always shock-full of fascinating stats, as her book Cairo, City of Sand was — and the worrying conclusion: Egypt needs urgent, comprehensive land reform (beyond the limited, and at times disastrous, reform undertaken by Nasser, Sadat and Mubarak) not only to improve the conditions of fellahin but to literally prevent the country from running out of land. I’m always astounded that Egyptian newspaper columnists, who often speak about the need to achieve autarky in food supply (dream on!), urge the government to make farmers grow more wheat but never mention that there is less and less arable land available to grow anything at all. The disconnect between the urban intelligentsia and rural folks could not be wider. The column has a great line on this: “Only abiding shame in their rural past can account for successive administrations’ criminal neglect of Egypt’s countryside.”

The Ikhwan and the money

Right now, the Brotherhood has other problems, with continuous arrests taking place and PM Nazif thinking that they should not be in parliament in first place.

But a while ago, I thought it was time to document what the Brotherhood thinks about how to regulate the Egyptian economy. After all, with 88 seats in the People’s assembly, they are the second strongest political force in the country and possibly the most popular one. After their surprisingly strong showing in the parliamentary elections, I also heard a number of people in the Egyptian business community already voicing concerns, with corporate HQs abroad calling their Egyptian operations to find out whether their business would still be safe.

I rather thought it might be time to look for alternatives to an economic policies of the NDP, which as a whole, despite some decent reform measures of the economic reform ministers, is still catering to certain interest groups, combined with a state bureaucracy that all too often shelves good initiatives coming out of the cabinet.

Below is an excerpt of my piece on the Brotherhood’s economic policies, the full text can be read here.

As far back as the 1980s, years before the Egyptian government actually implemented a programme of privatisation that was forced on them by the international community, the Muslim Brotherhood demanded a less marked public sector and more support for small companies. The organisation champions the free market economy.

As a result of their moral standpoint, two points in particular are at the heart of their economic theories. It must be said that these two points are indeed the key weaknesses of the Egyptian economy: high unemployment and corruption. According to the OECD, unemployment in Egypt currently stands at over 17 per cent.
 

A second Alex?

At the WEF in Sharm last week, Prime Minister Ahmed Nazif fed the national press with some projects to be announced soon, in tourism, real estate and transportation, which will mostly be financed by UAE or Kuwait based investment groups. I am under the impression that the government over the past months has focused its efforts to attract foreign investment to Gulf investors.

An oil price at around $70 per barrel is a solid reason for the government to do so, but now they are exaggerating:

Gulf and Egyptian investors were planning to develop a $US40 billion ($53billion) tourist resort on the coast of northern Egypt, an Egyptian official said.

“It will be the biggest Arab construction project in Egypt,” covering more than 100 million square metres, government spokesman Magdy Rady said.

He did not name any of the investors involved in the project, details of which will be released in mid-June.

The consortium planning the resort included companies from the United Arab Emirates, and the signing ceremony in June would be attended by Dubai’s Crown Prince Mohammed bin Rashid al Maktoum, Al-Ahram said yesterday, citing Prime Minister Ahmed Nazif.

Al-Akhbar eported that the resort would be as big as Alexandria, Egypt’s second-largest city, and take 20 years to build.

Is there no more space in the Emirates for mega-projects? To me this looks like Egypt is now the Sheikhs’ mega playing ground. A few weeks ago, there were some press reports that Gulf investors wanted to invest no less then $4billions in an ArabDisneyland in Egypt, providing jobs for half a million young Egyptians.

This was denied by Disneyland -  looks like Mickey Mouse has a better sense of reality then some of those oil investors at the moment.

The arms trade and Iraq

When a few years ago, before I became a journalist, I worked as a researcher for NATO, I was very interested in the arms trade. At the time, new NATO members in Eastern Europe had to upgrade their military capabilities from Soviet-era equipment to the type of equipment that would work in joint actions with other NATO members. That meant that a lot of old weapons, particularly small arms (i.e. guns), ended up on the black market, presumably with military officers from these countries getting a nice commission. This was the time when you could buy a Kalashnikov in the Great Lakes region of Africa for a few dollars, which contributed enormously to the civil conflicts in that area.

The arms trade gets little attention from the press these days, despite the fact that it is estimated to be one of the top three biggest businesses internationally (alongside sex and drugs). Much of it is illegal, and as Americans in particular now know, even the legal part is morally dubious when your system of governance relies on a revolving door system with the military industrial complex of the kind Donald Rumsfeld and Dick Cheney used. The arms trade is not only part of providing deadly systems (as the military calls weapons) to a lot of people who should not have them, but it has also been a largely corrupting influence. Take US military aid to Egypt: it is the lubricant that greases a vast system of payoffs and commissions that keep this military regime in place, while also keeping US arms manufacturers in business. There is a vast and little-reported human rights dimension to the arms trade that this Amnesty International report exposes in all of its complexity:

The report shows how, partly as a consequence of the “export rush” that followed the end of the Cold War, arms trade routes are becoming more complex, requiring even more differentiated logistical, transport, brokerage, and financial arrangements. The use of private transport contractors and brokers for arms transfers is not adequately covered by national legal and regulatory frameworks, and the responsibility of states for the shipment of hundreds of thousands of tons of weapons and other military and security equipment, ammunition and spare parts to armed forces and law enforcement agencies around the world can be easily obscured by complex supply chains. The resulting lack of transparency, monitoring and effective control of such arms supply chains are contributing to the diversion and easy availability of arms by those perpetrating serious violations of human rights during armed conflicts and law enforcement operations. Examples in the report also show how arms are destined or diverted to arms-embargoed countries, criminal organizations and armed groups, including those believed to engage in terrorism, and are paid for with cash or bartered for narcotics, precious stones, metals, oil, timber and other natural resources.

International relations is not about institutions like the UN, as they’ll teach you in universities. It’s about international business and the process of distribution of money, goods and resources. One of the reasons these things can keep on going is the reluctance by even powerful democratic countries to do anything about the corrupting effect of international financial black holes like the Bahamas and the logistics of the arms trade in general. Only every now and then, as in the Clearstream affair in France, do these issues come up in the public eye.

For our region, the report has some interesting tidbits about the arms trade around Iraq:

International and local observers in Belgrade say that arms stockpiles of newly manufactured weapons and ammunition from Serbia and Montenegro are being transferred to Iraq and Afghanistan. The Taos executives mentioned the involvement of a previously unknown Israeli-registered company, “Talon,” which they said was an arms-brokering company “based in Tel Aviv, Israel”, playing a major role to facilitate the transfer of weapons from Serbia to the Middle East. A Montenegrin arms company executive also stated that Talon acted as an “agent” on behalf of Taos in Serbia & Montenegro, but that a confidentiality clause in their contract forbade them for discussing the company’s identity. Moreover, the Serbia & Montenegro Ministry of International Economic Relations (MIER) stated that the company involved in procuring weapons for Iraq in Serbia & Montenegro is Talon Security Consulting and Trade Ltd, registered at an address in the “Diamond Tower” Twin Towers complex in Jabotinsky street, Ramat-Gan, Tel Aviv.

Talon’s owner is Major Shmuel Avivi, according to the Federation of Israeli Chambers of commerce website. An Israeli source described Shmuel Avivi as “former Israeli military attaché in Switzerland.” Mr. Avivi declined to say whether he was currently a serving member of the Israeli defence forces. Mr. Avivi appears to have served as Israel’s military attaché in Denmark and Sweden. The Israeli source stated that “He [Mr. Avivi] operated out of Switzerland with a Swiss business partner whose first name is Henri.” Henri goes by the name of Heinrich in Switzerland where he is known as Mr. Heinrich Thomet, associated with at least two companies involved in arms dealing, Brugger & Thomet AG and BT International Ltd. Mr Heinrich Thomet stated that he worked together with Mr. Shmuel Avivi “occasionally” and that his company “are supplying Taos Industries on the US SOCOM business” but that his company was not “actually providing any services for Iraq or Afghanistan, we are mainly working on the US government contract which is a SOCOM transaction.”

Another company involved in arms transfers to Iraq is a UK-based company called Global Trading Group Ltd. Global have purchased large quantities of small arms and light weapons for Iraq, including an order for 1000 sniper rifles. In documentation supplied to the Ministry of International Economic Relations, Global Trading Group Ltd give as their address premises currently used by a high street store selling hi-fi equipment. This is a different address from the one supplied in their official UK company registration papers. Global Trading Group Ltd is a new company, incorporated on April 5, 2005, the only publicly available document is the appointments report which describes the company as a “private limited company”; no information is supplied under section entitled “Nature of business” and no accounts have been filed to date. According to UK company house data, Global’s business address is a private one, which appears to be the home of one of the directors of the company.

One of the directors of Global Trading Group Ltd is listed in the Company house documentation as “Fawzi Francis Toma”, who is described as a British citizen born in 1958. Mr Fawzi Toma is known in Iraq as Mr. Fawzi Hariri, a one-time aide to Kurdish faction militia and political leader Massoud Barzani and now a senior figure within Barzani’s political party the Kurdish Democratic Party (KDP). Mr. Hariri liaises with foreign governments on behalf of the KDP and currently serves as chief of staff of the Iraqi foreign ministry, currently headed by Mr. Hoshyar Zebar, also of the KDP. According to Companies’ House documentation, Global Trading Group Ltd’s registered business address is at the home of another company director, Praidon Darmoo, who lobbied the UK government to support the war in Iraq in 2003. A Global Trading director stated that the weapons supplied by Global Trading Group Ltd were on behalf of another company in Jordan who held the contract with the Iraqi Ministry of Defence but that he had seen the e
nd user certificate which he said was issued on behalf of the Iraqi ministry of defence and was sent to Belgrade.

The report is also available as a 149-page PDF. And remember that just two days ago it was revealed that:

SOME 200,000 guns the US sent to Iraqi security forces may have been smuggled to terrorists, it was feared yesterday.

The 99-tonne cache of AK47s was to have been secretly flown out from a US base in Bosnia. But the four planeloads of arms have vanished.

Orders for the deal to go ahead were given by the US Department of Defense. But the work was contracted out via a complex web of private arms traders.

And the Moldovan airline used to transport the shipment was blasted by the UN in 2003 for smuggling arms to Liberia, human rights group Amnesty has discovered.

It follows a separate probe claiming that thousands of guns meant for Iraq’s police and army instead went to al-Qaeda

Amnesty chief spokesman Mike Blakemore said: “It’s unbelievable that no one can account for 200,000 assault rifles. If these weapons have gone missing it’s a terrifying prospect.” American defence chiefs hired a US firm to take the guns, from the 90s Bosnian war, to Iraq.

But air traffic controllers in Baghdad have no record of the flights, which supposedly took off between July 2004 and July 2005. A coalition forces spokesman confirmed they had not received “any weapons from Bosnia” and added they were “not aware of any purchases for Iraq from Bosnia”. Nato and US officials have already voiced fears that Bosnian arms – sold by US, British and Swiss firms – are being passed to insurgents. A Nato spokesman said: “There’s no tracking mechanism to ensure they don’t fall into the wrong hands. There are concerns that some may have been siphoned off.” This year a newspaper claimed two UK firms were involved in a deal in which thousands of guns for Iraqi forces were re-routed to al-Qaeda.

Corruption in the Arab world

This just in from the BBC: Oil wealth ‘can cause corruption’.

Good to know they’re on top of things. Actually, to be fair this is a story about the latest report by Transparency International, the corruption watchdog. The Arab world, as always, does not fare particularly well. The least corrupt Arab countries are Oman and the United Arab Emirates who share a ranking of 29th (1st being the least corrupt, this year Finland) with Bahrain (slightly lower than Israel), Jordan and Qatar trailing not far behind in the mid-30s. Egypt and Morocco are way behind, sharing the 77th ranking — lower than Saudi Arabia and Syria, which is a bit of a surprise — and at the same level as Turkey. Libya and the Palestinian Authority don’t do too well and share the 108th position. The oil revenue issue is highlighted here:

“Corruption robs countries of their potential,” said [Transparency International (TI) Chairman Peter] Eigen. “As the Corruption Perceptions Index 2004 shows, oil-rich Angola, Azerbaijan, Chad, Ecuador, Indonesia, Iran, Iraq, Kazakhstan, Libya, Nigeria, Russia, Sudan, Venezuela and Yemen all have extremely low scores. In these countries, public contracting in the oil sector is plagued by revenues vanishing into the pockets of western oil executives, middlemen and local officials.”

TI urges western governments to oblige their oil companies to publish what they pay in fees, royalties and other payments to host governments and state oil companies. “Access to this vital information will minimise opportunities for hiding the payment of kickbacks to secure oil tenders, a practice that has blighted the oil industry in transition and post-war economies,” said Eigen.

And guess which Arab country is at the very bottom of the heap, along with notoriously corrupt countries like Pakistan, Congo, Azerbaijan, Myanmar and Haiti (the lowest-ranked country)?

Yup, that’s right: Iraq. Sure, it was probably down there at the bottom of the table under Saddam Hussein and the various “Mr. 10%” that controlled business, but seen as this is a report for 2004, I’m curious who they are reporting as corrupt: the Iraqi interim government, foreign contractors or the former CPA?

“The future of Iraq depends on transparency in the oil sector,” added Eigen. “The urgent need to fund postwar construction heightens the importance of stringent transparency requirements in all procurement contracts,” he continued. “Without strict anti-bribery measures, the reconstruction of Iraq will be wrecked by a wasteful diversion of resources to corrupt elites.”

Baghdad Year Zero

The essential Iraq article of September seems to be Baghdad Year Zero, a Harper’s piece by Naomi Klein, which is both an interesting political essay and a fine example of investigative business journalism. It’s all about the neo-cons’ dream of making Iraq a shining example of neo-liberal economic policy-making, and how that dream failed miserably in the face of reality and probably helped fuel the degeneration of the situation in Iraq.

The great historical irony of the catastrophe unfolding in Iraq is that the shock-therapy reforms that were supposed to create an economic boom that would rebuild the country have instead fueled a resistance that ultimately made reconstruction impossible. Bremer’s reforms unleashed forces that the neocons neither predicted nor could hope to control, from armed insurrections inside factories to tens of thousands of unemployed young men arming themselves. These forces have transformed Year Zero in Iraq into the mirror opposite of what the neocons envisioned: not a corporate utopia but a ghoulish dystopia, where going to a simple business meeting can get you lynched, burned alive, or beheaded. These dangers are so great that in Iraq global capitalism has retreated, at least for now. For the neocons, this must be a shocking development: their ideological belief in greed turns out to be stronger than greed itself. 

The era of tough oil

The Chronicle of Higher Education reviews two books on The End of Easy Oil and concludes that the “securitizing” of oil issues has led and could lead to more instability and war in the Middle East:

“Rather than develop a sustained strategy for reducing our reliance on such sources, he says, American leaders “have chosen to securitize oil – that is, to cast its continued availability as a matter of ‘national security,’ and thus something that can be safeguarded through the use of military force.”

Klare argues that our demands for energy and those of other major powers will require the petroleum-rich Gulf states to “boost their combined oil output by 85 percent between now and 2020. … Left to themselves, the Gulf countries are unlikely to succeed; it will take continued American intervention and the sacrifice of more and more American blood to come even close. The Bush administration has chosen to preserve America’s existing energy posture by tying its fortunes to Persian Gulf oil.”

Even more worrisome, Klare says, is the intense and growing competition among countries such as the United States, China, India, and those in the European Community over petroleum supplies. “This competition is already aggravating tensions in several areas, including the Persian Gulf and Caspian Sea basins,” he writes. “And although the great powers will no doubt seek to avoid clashing directly, their deepening entanglement in local disputes is bound to fan the flames of regional conflicts and increase the potential for major conflagrations.”