Arab Spring taking toll on economy
A clearly emerging fact is that gas exports in Egypt and to some extent Algeria is declining at the time domestic consumption is rising, a development that is expected to have its impact on the potential the region has as a main gas supplier to Europe.
In Egypt and according to official figures the trend of declining production and rising domestic consumption that eats into the exports volume is simply consolidating and may even resort to imports later this year.
Between January and November of last year, Egypt’s gas production declined by mere 0.09 percent to 419.72 tons, while consumption grew by 6.6 percent during the same period to 360.39 tons. The worrying fact is that this trend is going on for three consecutive years and exports that have peaked reaching 62.7 billion cubic meters have declined by 3 percent to 60.6 billion cubic meters last year. At the time, local consumption rose 10 percent during the earlier year.
However, during the past two years and following the Egyptian revolution that ousted the regime of former President Hosni Mubarak and part of the feverish climate that followed, the pipeline carrying gas to Israel has been subjected to sabotage that led eventually to the complete stoppage of Egypt’s gas exports to Israel and reducing those to Jordan by close to two-thirds.
Then came the terrorist attack on Algerian facility of Algerian In Amenas, where shareholders include BP and Norway’s Statoil, in addition to the Algerian national oil and gas company Sonatrach. Given this international involvement and the Algerian position as a major gas supplier to Europe, especially Italy and Spain, question marks started to be raised on the future of Algeria as a gas exporter.
For once, figures show that Algerian gas production has declined by 12 percent since 2005 while consumption rose because of government subsidy to local consumers.
Accordingly, the share of Algerian gas in world market has dropped to less than 5 percent from 19 percent a decade earlier and its slice in the European Union, its main market, also declined to 9 percent last year from 12 percent in 2002.
Add Libya to the case of declining gas export volumes in Egypt and Algeria. Libya is not far away from that worrying trend. Though Libyan oil and gas production managed to restore some 90 percent of its pre-revolution production levels, the future uncertainty still looms. That is fueled by the sense that there is a weak government which, unable to navigate, is shedding negative the country’s oil and gas industry through difficult times that lie ahead.
The first outcome of this is that foreign companies will be more hesitant to pursue their investment plans in these countries. Already, Algeria, which is in a better position as far as security and stability are concerned, witnessed only two blocks out of ten offered to potential investors were taken. One of them is by Sonatrach itself. And that took place back in 2011 and before the In Amenas’ terrorist incident earlier this year.
Restoring political stability is the key to handling the economic situation be it tapping natural resources in these countries, beefing up exports and so on, and take these issues back to politics where the need arises to strike political deals that can ensure a degree of stability.
But aside from this is the way the economy will take in these countries and what policies will be adopted. Taking the case of Egypt, it seems resorting to the International Monetary Fund (IMF) is the visible option for the time being. The IMF prescription is well known and has been tried again and again with no clear cut success. It includes downsizing the government, lifting subsidies, and devaluing the national currency, all of which come usually with a heavy political price at the time the political environment is already in flame. Even if such medicine is taken, there is no guarantee that it will represent the utmost cure to the economic ailment in these countries.
Resorting to the IMF for a loan of less than $ 5 billion requires a political price. That price is better being paid to domestic and national opposition inside the country and ensures a degree of political stability that provides the needed conducive environment able to attract foreign investments. The old Bretton Woods institutions of the IMF and the World Bank are no longer the key to tapping financial resources worldwide. There is enough money all over the world that is chasing investment opportunities and they don’t have to come through the doors of both the IMF and the World Bank as used to be the case.
Rather, the priority should be to start charity back home first, and if each Arab country can manage its own resources in a reasonable way to begin with, it will provide the chance for more cooperation and coordination at the regional level, where various resources could be put together for the benefit of the region’s population.
