The ‘Arab Spring’: A new era of change and risk

March 9, 2011 - 0:0

LONDON (UNAOC) -- The start of 2011 marked rapid and important changes in North Africa and the Middle East that have far-reaching implications. International businesses in the region have had to keep a close eye on events, in some cases evacuate staff, and must now come to grips with a new and rapidly changing risk landscape.

The Middle East and North Africa has long represented a socio-economic time bomb for risk analysts. We see this tsunami of unrest as a convergence of several factors: economic crisis, state violence, and rising internet literacy among the youth.
Unemployment rates are very high, large numbers of people live on the poverty line, and commodity prices and living costs have soared.
These factors, coupled with lack of basic services and housing, and a visible wealth gap between the public and elite, has made hardship intolerable for many.
Since the fall of Presidents Ben Ali and Mubarak, Tunisia and Egypt are in a transformative phase moving towards democracy and elections, yet these transitions towards democracy are likely to be rocky and present significant security and political risks.
Increased local security risks in both countries are unlikely to drop back to pre-revolt levels for some time.
When a security and political situation is in flux, terrorists typically see opportunity.
The new Egyptian and Tunisian leaderships also face the huge economic damage incurred from lost output, exports and tourism.
Economic grievances, particularly inflation and unemployment, lay at the root of the uprisings.
Both new governments have blamed the old regimes for the parlous state of the economy and opened investigations to trace and confiscate the vast wealth and assets from the deposed presidents.
It remains unclear what will happen to the vast commercial interests of the Gaddafi regime, but if he falls, a similar outcome is almost certain. As such, companies with stakes in the region would be wise to check their levels of exposure to the commercial interests of the former regimes.
In such an unprecedented and changeable environment, one of the few certainties is that companies must now reassess their exposure to new political and security risks and how they will manage them.
The spread of unrest has led to concerns that a domino effect of tumbling governments is now in motion across the region. In general, the countries experiencing the worst unrest of the “Arab Spring” are the same countries (and towns) where there was already pattern of unrest before the Tunisian revolt.
Many Arab governments have taken measures to preempt or quell protests. These include pledges for political reform, subsidies on commodities, pay rises, job creation schemes and ministerial sackings. Countries that have undertaken such initiatives include Morocco, Algeria, Jordan, Yemen, Saudi Arabia, Oman and Bahrain.
Kuwait has announced it will spend $4bn to lower the cost of commodities. Saudi Arabia has announced an even bigger package to improve the quality of life.
With the exception of Bahrain, these efforts are probably enough to stem the tide in the PGCC, where governments are wealthy and the public less disaffected.
But protests have continued in poorer states in North Africa and the Levant as well as Iraq and Yemen, and reforms that are more extensive may be the only solution to quell dissent.
The speed and ferocity of the North African revolts appears to have taken many companies by surprise.
The sudden and dramatic deterioration of the security environment has meant many organizations have struggled to evacuate their personnel and provide them with security on the ground.
Companies operating in other countries in region ought now to be reviewing how they will respond if popular uprisings break out in other countries.
It is impossible to say when this tide of unrest that has risen in the Arab world will recede, and what kind of a risk environment will remain once it does. But it will certainly be different to what existed before.
(Companies and indeed governments, would be wise to take stock of these changes and recognize that the Arab world is not what it was just two months ago, and is unlikely to be so again. As the saying goes, revolutions never go backwards.
** Henry Wilkinson is associate director at Janusian Security Risk Management.
** Global Experts is a project of the United Nations Alliance of Civilizations (UNAOC)