Leading in an Agile World – Can We Usefully Redefine Leadership?

A colleague of mine recently circulated an email asking several of us to respond to his juxtaposition of leadership and catalyzing, reflecting the notion that the former is passé and the future is ‘catalyzing’ as the key concept. The response was quick and definitive…although “Concepts of leadership are evolving to keep pace with the disruption, transformation, and agility demands of today’s organizations,” as I noted in my last blog, most respondents believe that leaders still need skills grounded in experience while integrating catalyzing skills  for existing and future challenges.

This I believe is the core of agility: recognizing, mobilizing, enabling, empowering, and sharing leadership throughout the organization so that the culture reflects a blend of human and digital capacity geared toward innovation and collaboration. Now the challenge comes in several forms: the first is that not all companies are equal, in size, complexity, structure, and business model. Some are client or customer centric and have high brand recognition. Others offer specialty products that require strong R&D components to be competitive; while others are service-providers to emerging niche markets. Mixtures of bricks and mortar and virtual POS and distribution are not uncommon.

So while the structures and operational priorities may be dissimilar, the missions and goals can be reduced to “make money, keep customers happy,  stay happy.” This core of profitability and satisfaction are at the center of how leadership, whatever styles are effective, is exercised. Why “styles?” We learned ages ago that leadership defined by functions can range from directing and evangelizing to coaching and coercing, and at least a dozen more characteristics.

Leadership is a shortcut to conflate those traits that enable leaders in whatever context to lean forward, lead from behind, and construct and organizational culture that emphasizes continual innovation, adaptation, and a competitive edge, mirroring Jack Welch, former CEO of GE’s mantra of change leadership.

Michael Hamman and Michale K. Spayd put it this way in their White Paper, “The Agile Leader.” “An organization’s agility is not a function of “‘scaling’ current team-based delivery practices…Simply put, agile leadership entails a move from driving to results to creating environments that generate results.

Agile leadership is no accident. There is a clear methodology for enacting agile leadership.” They use the phrase ‘enterprise agility’ to express their assumption that “At the heart of sustainable enterprise agility is an adaptive, agile leadership.”

To value leadership in both its complexity and its simplicity, it is vital to remember that at the heart of leadership principles are, at least for now, human beings who make assumptions every day about how to succeed in a fluid and competitive environment. Back to Hamman and Spayd, “Fundamentally, it is as much about the interior—of individuals, of organizations—as it is about the exterior. It is as much about developing people as it is about building systems. It is as much about creating an agile culture as it is about adapting structures and processes.”

Catalyzing in this context is about aligning talent, resources, systems, objectives, and expectations to support agility, so that a catalyzing leader is an agile leader dedicated to mobilizing a coherent, consistent spirit of innovation shared by company teams that have transparent, respectful, reliable, and valued communications with their counterparts in- and outside the organization.

One could argue that because of the impact of technology and the yet to be understood tsunami called ‘AI’ that leadership is more difficult in today’s environment. On the other hand, it is also reasonable to point out that leadership in the past did not have the data, modelling options, robust algorithms, and highly developed technologies as learning aides. The uncertainty, complexity, and fluidity of today’s competitive environments, at all levels, demand a differently tuned skill set, which is why sometimes the strong survive, and sometimes they don’t. Change management has to begin within the individual, which is why companies have to seriously invest in driving agility throughout their organization and its processes and relationships.

The difference I believe is enabling the agility of leaders, teams, policies, communications, and the workforce to recognize, embrace, and capture change capabilities in order to survive and thrive. For success, mindsets need to be rewired to accept the inevitability of change and the acquisition of skills required to master its impact. These skill sets must extend beyond their particular silos and empower staff to collaborate across boundaries – and be rewarded for it. As employees recognize and accept agility as a means to mobilize and execute, they then become team members whose communications with others both assume and reflect the cultural values of the organization.

So for me, this is the role of leadership at all levels: to build consensus and collaboration around company strategies and communications that build agility internally and in its external relations.

 

Fair Trade Lebanon Has a Banner Year Developing Local Communities through Jobs and Business Development

In the past few years, it has been instructive to see the achievements of Fair Trade Lebanon (FTL), an organization dedicated to empowering rural communities and women’s organizations through economic development. At a time when a great deal of attention is focused on megaprojects to advance Lebanon’s economy, FTL works at the local level to change how people build their futures. Given the well-known attraction of Lebanese food products both at home and abroad, FTL came up with the idea of encouraging local cooperatives and farmers to produce food items for local consumption and export with a fair trade certification. Initially directed at the overseas Lebanese, FTL now exports to over a dozen markets.

I caught up with Philippe Adaime, FTL’s CEO on a recent trip to Washington, DC and asked him to give ATFL a report on their progress in 2017. Here is his report.

2017 has been an extraordinary year for Fair Trade Lebanon. Proud of its 12 years of community engagement, the Lebanese non-profit organization is on the path to move forward from “good to great.”

In a country with regionally displaced populations of refugees, facing socio-economic pressures, and increases in unemployment and political instability, Fair Trade Lebanon (FTL) has been able to implement and manage 7 important projects in 2017 and impacted 2,500 jobs. These projects benefit first the host communities and farmers who are the backbone of the rural areas, and includes efforts to help refugees deal with their uncertain future by generating employment opportunities and the seeds for business development.

In 2017, FTL supported 35 women cooperatives and group of farmers to improve their production in order to access local and international markets. In fact, 19 cooperatives received 40 pieces of new equipment and supplies that benefitted more than 540 people. In addition, 1,000 men and women benefited from a MEPI-funded project (A US foreign assistance program) – a number that doubled in 18 months of activities – through the organization of 187 training sessions to support cooperatives and Small and Medium Enterprises (SMEs) in improving their production. As a result, cooperatives and SMEs within the FTL network saw their sales increase by up to 40%, which affected 500 new jobs among 20 business units.

Furthermore, this improvement in production and increase of sales led to an addition of 15 new points of sales in Lebanon and 2 new importers. Currently, 35% of FTL’s producers’ production is meant for export; 13 units are certified organic, and 4 obtained the FLOCERT certification, which indicates that they have met international standards for fair trade.

Regarding refugees in Lebanon, FTL supported 900 vulnerable women from host and refugee communities through specific food processing training (preserves, catering, saj), and insured that 55% were Lebanese and 45% Syrian. FTL organized 390 training sessions related to food processing, hygiene, marketing, pricing, and event management. Importantly, 12% of these beneficiaries were youth.

FTL linked 300 Lebanese and Syrian to the private sector by enrolling them in a 2-months internship program where 12% where able to find a decent job. In 2017, FTL intensified its work in Akkar with a group of 30 dedicated Lebanese and Syrian women who established a cooperative in Khreibet el Jundi, and their products can now be found in the well-known Topline supermarket in Halba.

FTL’s target in 2017 expanding its domestic network by organizing 33 awareness sessions in mainly schools and universities reaching 1,300 students. In order to revive and promote authentic Lebanese cooking practices, FTL developed the concept of “make your own saj” and adopted the “shop in shop” channel to get closer to consumers. This created 12 new jobs and revenue of 8,000 USD per month of selling saj.

Concurrently, FTL launched a media campaign all over Lebanon through offline and online platforms, which reached 3,000,000 people all over the country and 18,000 followers on Facebook. FTL took part in 22 events in Lebanon and abroad to promote fair trade practices and market the cooperatives’ products. FTL also attended the World Fair Trade Organization conference in India, where it strengthened strengthed its partnerships with fair trade actors from other countries.

Finally, 2017 was marked by two big events. First, FTL organized the World Fair Trade Day in Lebanon with 2,000 attendees, 45 products exhibited, and 15 live stations to cater friends and supporters. Secondly, in partnership with the Lebanese Embassy in Washington DC, FTL organized an event at the Embassy’s residence under the theme “Authentic Lebanese Culinary Products” where FTL presented its mission and the wide range of products from “Terroirs du Liban.” Over 400 guests attended this event, including 10 importers and 5 media representatives who were greatly impressed with the quality of “home-made” Lebanese products now available in the US.

With a fair and ambitious motto “from good to great,” FTL looks back at 2017 with a feeling of satisfaction and yet a feeling of thirst to grow and inspire everyone they come across. Follow this link to see where FTL works all over Lebanon and this link to see the many products available.

 

 

Lebanon Needs to Pass 2018 Budget before Paris Donors Conference April 6

Not only is Lebanon’s fiscal health in question as Parliament struggles to pass a new budget, but it can ill-afford to show up at the international donors conference in Paris on April 6 without a strong case for how it will spend funds made available to Lebanon. There are three steps to be taken, starting with approval by the relevant committees, then agreement by the Cabinet and then Parliament. While the initial approvals were completed last week, there is plenty of time for mischief in the Cabinet and Parliament deliberations. Added to this is the challenge of being prepared for the donors conference later in April in Brussels dealing with support to countries hosting Syrian refugees.

The latest news is that the government is likely to approve the budget this week at the latest so that it can be presented, along with its Capital Investment Program at which Lebanon is requesting funding for a 10-year, $16+ billion capital investment program of reforms and incentives aimed at strengthening and accelerating economic growth. The donors summit is dubbed the Paris IV donors conference, which along with summits planned in Rome and Brussels, intend to rally support for building up Lebanon’s and attracting foreign investments to strengthen Lebanon’s economy battered by the consequences of the Syrian refugee crisis and regional unrest.

In a recent comment, the IMF noted that Lebanon’s deficit, already at 150% of GDP, was expected to increase another 10% under the 2018 budget projections, even with planned reforms. The projected deficit of $5.3 billion makes Lebanon one of the three most indebted countries in the world.

A recent statement by Prime Minister Hariri underscored the current negative situation. “It is no secret that the economic situation in Lebanon today is difficult and that we face big challenges. Growth rates are low, unemployment rates have exceeded 30 per cent, poverty rates are increasing, the balance of payments suffers a deficit, public debt is rising at a rapid rate and has exceeded $80 billion and the treasury deficit has reached unsustainable levels.”

Unfortunately, Lebanon’s power-sharing agreement among sectarian parties exacerbates the difficulty in reaching agreement on the budget and recommended reforms as each group seeks to maximize their benefits under the budget while avoiding reforms that would help stabilize the overall economy. Added to the dysfunctional process at the national level are issues such as the battle over who can provide Lebanon with reliable power, when some communities have only 12 hours of electricity a day. Generator owners, tied to different factions, continually block legislation that would allow solar power incentives to help close the gap.

In many ways, the goals of the donors conferences are all interrelated. For example, in 2017, Lebanon spent $10 billion of its funds addressing the Syrian refugee situation in the country, a sum not reimbursed by the donors. According to a report by the Carnegie Endowment, “Lebanon’s national response plan—a joint initiative with the UN to address Lebanon’s challenges related to the Syrian conflict—only received 54 percent of pledged funding in 2015, down to 46 percent in 2016, and 43 percent in 2017.” Some of this, Lebanese officials admit, is due to its lack of organization regarding services to the refugees and supporting local host communities.

So the debate on the national budget carries enormous fiscal consequences beyond allocations for the government, its programs, and its broader responsibilities to the refugees, and regional security. It is an opportunity for Lebanon’s leaders and Parliament to adopt a reform agenda add hopefully make a dent in a system that depends on arguments over assigning benefits by sect rather than the national good.

Of Note: MEI Panel weighs in on Protests in Morocco and Tunisia

The Middle East Institute (MEI) recently presented a panel discussion on “Protests in North Africa: parallels and prospects.” Speakers addressed “the social and economic drivers behind the recent demonstrations [in Morocco and Tunisia], as well as prospects for resolving these inequities.”

The Washington, DC panel included Intissar Fakir (Carnegie Endowment for International Peace), Dokhi Fassihian (Freedom House), William Lawrence (George Washington University), and moderator Paul Salem, MEI’s senior vice-president for policy research and programs.

Although the immediate causes of the most recent demonstrations are very different – in Tunisia protesters want a change to the country’s new austerity laws, while in Morocco the flashpoint is the death of two young coal miners, Houcine and Jedouane Dioui in Jerada – the root causes are the same: economic inequality, perceived lack of investment and development resulting in high unemployment, and ineffective government responses to local needs due to corruption and lack of accountability.

In Tunisia, protests have been continuing for many months due to the lack of economic growth in the country, corruption and lack of government accountability, and strong feelings of marginalization among youth. Laws exonerating wealthy businessmen and politicians from persecution for actions during the Ben Ali regime overthrown in 2011 have soured public confidence in the government. Despite large amounts of international assistance, some significant international investment, and large doses on congratulations for Tunisia’s democratic progress, many citizens are unhappy with the government’s inability to develop sustainable and equitable strategies for moving forward. Its nascent democracy is challenged by these protests as the government is resorting to tougher security measures, arresting hundreds of demonstrators.

Although Ms. Fassihian, senior program manager for MENA at Freedom House, characterized Tunisia as “more free” than Morocco due to its strong and more open human rights record, she notes that the continuing demonstrations have led to extensive arrests and to trials in military courts, further undermining the civilian government’s credibility. Arrests are both planned, i.e. targeted at certain leaders, and random of people at the demonstrations. This has resulted, according to Ms. Fakir, who is the Editor-in-chief of Sada, CEIP’s Middle East blog journal, in a growing lack of trust in the government and impatience with its inability to resolve the economic crisis. The lack of transparency in decision-making has also undermined the public’s faith in the government.

In Morocco, one can link the Jerada protests to the 2016 marches in the Rif protesting the death of fishmonger Mouhcine Fikri in El Hoceima. Both incidents highlighted the regional and local governments’ lack of accountability and corruption, leaving them unable to move effectively to solve local programs of unemployment, lack of investment in infrastructure and social services, and providing the services, education, and job opportunities that citizens expect.

The protests, which spread beyond the Rif region, drew a strong response from King Mohammed VI who showed his displeasure with those officials charged with not having carried out the more than $100 million of development projects allocated to the region over the past six years. He fired and blacklisted past and current ministers, director generals, and other officials responsible for the economic development and governance of the region. The King sent his personal envoy, Aziz Akhannouch, Minister of Agriculture, to meet with leaders of the Rif protests.

Now, the King faces a similar crisis some 120 miles away where young men, working to mine coal in abandoned quarries, died in attempts to scrap out some income for their families. Again, there are charges of local government inaction, extensive unemployment, corruption and lack of accountability, and insufficient investments to retool the local economy, create jobs, and build needed infrastructure.

While Ms. Fassihian pointed out that Morocco is at least attempting to observe freedom of assembly by allowing protests, security forces eventually cracked down on the protestors. The judicial system is still dominated by the security forces, controlled by the Palace. So without an independent judiciary, there is an observable regression in observing civil and human rights, more protests, and a decline in public confidence. Hence, demonstrators continued to come out in order to reach out to the King as the ultimate arbiter in the country.

One of the recurring themes mentioned by the panel is the need for credible decentralization or regionalization that devolves effective decision-making from the central government to local elected authorities. Both countries have committed to decentralization as a means of promoting political and economic development. Ms. Fassihian noted that although Morocco is a leader in the region in decentralization, the process is very slow and many obstacles are due to lack of clarity from the central government on issues such as power-sharing between elected and appointed leaders, budgetary guidelines and allocations, and standards of accountability and transparency in government transactions and services.

Despite these challenges, there was agreement among the panelists that US policy can play an effective role in both countries. Dr. Lawrence pointed out that he US government has many links to Morocco and Tunisia through various agreements, assistance programs, training programs, as well as educational and cultural ties. A more strategic and targeted approach, especially focused on economic issues and youth can have a significant impact as these are the root causes, along with corruption and accountability, that drive the protestors.

It is a conundrum in Morocco and Tunisia, as well as other emerging economies in Africa, to meet the rising expectations of the majority of their citizens without a more efficient use of their limited resources. There are no single or simple solutions. Each country, given its historical and recent experiences, must confront dilemmas that arise from inequities in their societies that reinforce social, economic, and political disparities. Morocco is fortunate in that it has a King, widely respected, but a government which lacks widespread credibility with the people is not trusted to carry out needed policies.

Tunisia’s struggles are well-known, some historical, others part of the generational shift from an authoritarian regime to a democracy that seeks to balance its forward progress without weakening the country’s economic, cultural, and social infrastructure.

A major step in the right direction could be a firm and consistent commitment to forms of decentralization/devolution/regionalization implemented within a context of clear government authority, responsibility, and accountability. The people of Tunisia and Morocco are demanding to be at the core of their countries’ futures. The US can continue to upgrade its commitment to its partnerships by working to target both the short and long-term efforts to enable and ennoble the government-citizen relations.

 

Working to Grow Lebanon’s Economy through Enabling Entrepreneurs

I recently wrote about the visit of Lebanese entrepreneurs to the US to learn more about how we support the growth of entrepreneurs on the local level. Many of them have met Tony Fadell, the Lebanese-American who is credited as co-creator of the I-Pod, I-Phone, and Nest, and believe that they can only benefit from more interactions with overseas Lebanese. One of the participants, Hani Mawlawi, provided me with information on a program that may be of interest to overseas Lebanese who want to provide concrete encouragement to young people working to advance Lebanon’s economic growth.

Lebanon Science and Technology Park (LSTP) provides support to entrepreneurs to transform their innovative ideas/R&D science or technology projects into successful businesses, creating more job opportunities, and promoting the country’s economic development. Although currently targeting the north of Lebanon, it has aspirations to take its work throughout the country. In order to do this, it is necessary to recruit international donors and specialized agencies as partners who can bring their experiences and resources in support of LSTP projects.

In orders to reach the minimal size and development to become a viable entity, entrepreneurs must rely on an entrepreneurship ecosystem that includes access to technology infrastructure, financing, mentoring, skilled human resources, business and market strategic planning, and testing, marketing, and distribution of the final product or service. In Lebanon, boosting and enabling this ecosystem has been a focus of a number of programs within universities, government agencies, and international donors.

LSTP is collaborating with the UK Lebanon Tech Hub (UKLTH) to make the ecosystem a reality. UKLTH is a joint initiative spearheaded by the Lebanese Central Bank (BDL) and the British Government with a mission of creating jobs and sustainable economic wealth in Lebanon. Since its inception, the UKLTH has supported 77 startups locally, helped 7 enter the UK market and scaled up 3 into the Middle East and North Africa (MENA) regional market through Dubai. It is reported that 1257 jobs have been created in the process and the cohort startups are collectively valued at $206 million. Another competitive round to identify new candidates for the program has just closed and there are high expectations that the project will successfully continue to advance entrepreneurship in Lebanon.

At the current time, the UKLTH’s programs include:

  • The Nucleus: Early stage venture-building program focused on product development.

  • The International Research Centre (IRC): Funds and manages applied research projects between Lebanese universities/startups and international partners.

  • The Scale-Up Program: Aimed at internationalizing and expanding MENA based startups into global markets.

  •  GEM: The Global Entrepreneurship Monitor is the world’s foremost study of entrepreneurship that looks at the entrepreneurial behavior and attitudes of individuals alongside the national context and how it impacts entrepreneurship.

The UKLTH wants to hear from overseas Lebanese with an interest in promoting technologies and applications from Lebanon to the world. So if you’re a tech person or someone who markets and distributes technology devices and applications, contact them and see how together you can make a better world for Lebanese entrepreneurs!

Is there Synergy between Trump’s Foreign and Domestic Policy Tracks?

Administrations generally base foreign policy on a set of principles reflecting worldviews that include domestic considerations, historical precedents, and a desire to have a legacy that will endure beyond the end of their tenure. With the end of foreign policy bipartisanship in the 80s, collateral damage from pendulum swings after Vietnam, the rise of insurgencies sparked by non-state actors, and a growing disaffection between Congress and whatever administration was in power, defining core US interests became murky and inconsistent from one term to the next.

No region has been immune to these inconsistencies, with the possible exception of NATO-linked Europe. And the Trump Administration has made it clear that even a ‘principled’ foreign policy will not interfere with its definition of national interest.

Which brings me to the point of this blog. It complements an earlier one that listed challenges confronting the Middle East and North Africa (MENA) regarding obstacles to growing the kind of political and economic institutions central to long-term stability and security. Whatever the homegrown definition of democracy guiding each country, at some point an accountable relationship between citizens and government (the social contract) evolves as a touchstone for measuring its development.

Given the challenges outlined previously, it is not clear if a US foreign policy, or rather policies, consistent with the ‘American First’ national interests defined by the Trump Administration, can be defined with any certainty. Early indications are that what we have so far are muddled, regardless of the country or region. This may reflect the “art of the deal” approach to keeping an opponent off guard, a determination that offers should not be set in concrete until the other side’s hand is exposed, or any other feints in a negotiator or card player’s handbook.

In any case, the choral approach of everyone on the same page is still emerging in the Administration so in that absence, I’ll suggest some ideas for how debates about our domestic policy could enrich options perceived by those across the table from us.

Tying together domestic and foreign policy lessons learned

Let’s begin by recognizing that I believe that an integrated strategy on our part is essential – combining ‘all of government’ attention to shaping approaches that clearly calculate the odds of success and results of failure in achieving our objectives. Domestically, this should be applied to issues ranging from upgrading our infrastructure to facing domestic terrorism. Internationally, upcoming steps on resolving the Israel-Palestine conflict will be instructive in this regard: do we adopt a piecemeal approach or a comprehensive settlement? I argue that what we can learn domestically can be applied to relations with our counterparts and help generate strategies that integrate as far as possible all sectors of governance in a national consensus on next steps…the new social contract.

Why should the promotion of economic growth and equitable distribution of wealth and opportunities, certainly on President Trump’s national agenda, be avoided in conversations with other countries? If American voters see these as vital to our country’s future, why would we think these goals are foreign to foreigners? For example, enabling economic growth through increased competitiveness of our products and services can serve as an example of a benefit of better governance by other countries. Technical assistance focused on advancing models of teamwork, efficiency, and accountability in government programs using US funds can be a step in that direction. Of course, how this messaging is accomplished will, by necessity, be informed by lessons learned from generations of US assistance programs.

Job creation is another overlapping goal of the US and its partners. If the readouts of Trump’s talks with industry leaders are accurate, the President is learning that young and jobless Americans need to be educated in marketable skills that enable them to be active in our transitioning economy. The only difference with our overseas partners is the perceptions of their youth that some jobs are unsuitable for them…even though their parents may complain about the high price they pay for maintenance and technical support services at home and at work. No, I take that back…many American youth are also allergic to jobs that require manual labor, operating machinery and computers, and vocational skills that are the backbone of imported and immigrant labor.

As we look forward to a robust commitment to building infrastructure across this country, we can share those experiences with others. For example, when the US provides economic assistance to build the partner country’s economic capacity, we should insist on a few conditions. The first would be to limit the effect of “wasta” or influence through engendering merit-based recruitment and advancement. Another useful condition would be to align donor programs to minimize redundancy, promote efficiencies of scale, and thereby have additional capacity to address issues. A third factor in which we have experience is the promotion of small and medium-sized job creating enterprises through enabling services from financing to legal and marketing resources. While some of these factors are already in play, frankly, we don’t have a great results to date.

Another area in which the Trump administration may create replicable patterns is the recruitment and use of foreign labor. Just as the US has become addicted to legal and illegal immigrants to handle the jobs that Americans resist, the same is true throughout the MENA region. Tens of thousands of South Asians are working in countries where few labored previously. Countries are caught in a bind between jobs that citizens will do versus what foreigners will do at much less cost and often more diligently. It is a dilemma that may not have any solutions, in the US or abroad.

Finally, one quality of American business that should become a key component of the Trump foreign assistance program is to redefine what we lump under ‘transparency.’ American companies with US contracts here and abroad should be models of integrity in business dealings and support that value with their counterparts overseas. When we look at the sums mentioned for the proposed US infrastructure program, many still remember the obscene abuses of contractors rebuilding Iraq, supplying forces in Afghanistan, and myriad other examples that trouble our procurement processes.

If we are unwilling to behave within the bounds of propriety (however defined), then why do we expect it of our partners? The President would be wise to establish a proactive IG corps to monitor and assess infrastructure initiatives, which will incorporate broad private sector participation, as a good faith commitment to US taxpayers. If we insist on a similar transparent approach with our partners, including public bid processes, regular auditing and reporting, and incentives tied to better outcomes, then we will have made ‘America First’ a model for international cooperation that has extensive benefits for both parties and brings more stability and prospects for economic growth.

While these ideas may seem a bit faded, in this time of transition, fresh thinking about formulating and implementing domestic policy can help influence how we re-imagine foreign policy. Sharing lessons that we learn as we retool the American dream, can be both a humbling experience and potentially make a significant contribution to how the US moves ahead in these challenging times.

 

 

What’s not working in the World Economic Order

I just spent three months working in Jordan and two weeks in Lebanon. Watching the spectacle of the US presidential politics from a distance has had a sobering effect on my usual quick retorts to questions about US politics even though I’ve been at it for several decades in this part of the world. Arabs of all political stripes are alarmed by both presidential candidates, one because she is well-known and carries a great deal of baggage, and the other because his posturing is both alarming and invigorating as there is still a mystical glow around hard-charging leaders in this part of the world, as elsewhere.

It shouldn’t be surprising, I suppose. The chaos that now engulfs the MENA region has much of its origins in the upheaval of autocratic regimes that once provided stability so prized by international investors and Western leadership. The irony is that today, many in society long for the law and order days of the old regimes, as long as they aren’t the targets of repression and human rights violations. And there is symmetry in their yearning in the populist rumblings across Europe and the US.

Indicative of the seismic shifts that are going on are challenges to the ‘economic order’ that has guided free market policies since the heydays of Reagan and Thatcher. Rob Rowden writes in Foreign Policy about a article by an IMF economist that takes direct aim at two cherished principles of its Washington consensus for countries in financial crisis: the need fiscal austerity during economic slowdowns and the deregulation of financial markets.

Commonly referred to by its critics as ‘neoliberalism,’ the IMF author criticizes these tenets for not achieving higher growth rates as promised, in fact, Rowden points out, “fiscal austerity and increased financial openness have often exacerbated economic inequality, which itself could become a drag on future economic growth rates.”

To be fair, the IMF article also notes that other principles promoted by the IMF have been more successful in addressing issues of growth, stability, and capital fluctuations. Rowden writes, “Most strikingly, the article infers that three policy prescriptions long advocated by the IMF’s critics — regulation of some capital flows, Keynesian fiscal stimulus policies, and effective economic redistribution — all have more merit than the IMF has long contended.”

bbc.com

bbc.com

An especially relevant point in the article for developed economies is that the financial crisis of 2008 demonstrated the weaknesses in the IMF’s prescriptions in dealing with economic inequality, stabilizing financial markets, and reviving economic growth. Most levels of GDP growth are still failing to measure up to levels before the crisis, hence the stagnation that is feeding the middle class angst among Europeans and Americans, benefiting non-traditional political candidates like Donald Trump.

As the FP article notes, “Today, in a time when Thomas Piketty’s critique of worsening economic inequality is a best-seller, leading U.S. presidential candidates rail against free trade deals, right-wing anti-immigrant parties win elections across Europe, and even the Organization for Economic Cooperation and Development calls on its members to put the brakes on austerity, it’s clear that the political center, which has favored neoliberal policies for the last 30 years, is no longer holding.”

For the US, the challenges of addressing economic inequality, lower growth rates, and the resulting depression in job quality and compensation, have brought out a strong anti-establishment fervor among the fast-fading white majority as well as conservative ethnic groups who see their share of the economic pie turning sour. Globalization, represented by the IMF’s Washington Consensus, is a convenient target for those who want to return to or move towards a new golden age. The lack of logical discussions in this age of turbulence has resulted in pithy pitches to damn trade deals, erect barriers, punish corporations, and target immigrants. It is hardly a basis for sustainable policies but nevertheless the reality being faced in the US and abroad as the current world order has failed to deliver its promises.

As the Foreign Policy article concluded, “The cynics who provide comfort for those delusions are as dangerous as the extremists.” It is a rough road ahead that will not be mended easily.

Morocco’s Moves to Improve Economy Are Paying Off

Country Continues to Improve Growth Results

Although the overall economic news in North Africa is mixed, due to the impact of the decline in oil prices and a lackluster rainy season, Morocco’s economic diversification priorities are enabling it to balance out the negatives with continued growth and development.

One sign of the economy’s health is that, as Reuters reports, “Morocco’s central bank cut its benchmark interest rate on Tuesday to 2.25 percent from 2.5 percent, loosening monetary policy for the first time in more than a year to boost growth hit by one of the worst droughts in the past decade.” The outsized impact of the agricultural sector on the economy affects both the country’s gross domestic product, revised downward from 2.1 to 1%, and gainful employment, as fully 40% of the workforce is engaged in the agricultural sector.

On the other hand, since Morocco imports more than 90% of its energy needs, its economy is benefitting from the drop in energy prices by reducing deficits, supporting cutbacks of energy subsidies, and enabling policy makers to consider a broader range of options in promoting growth. This good news is supplemented, of course, by the continued growth in the renewable energy sector, which will further drive down oil and gas imports and contribute to increased foreign reserves through export sales to neighboring countries

“We don’t have any concerns regarding inflationary pressures … So we can give some support to the economic activity,” Central Bank Governor Abdellatif Jouahri told reporters. The bank last cut rates in December 2014. In line with IMF recommendations, additional structural reforms are being implemented, including a more flexible exchange rate, reducing the euro’s weighting in the currency basket, and more emphasis on targeting inflation.

According to the article, “Morocco has already done more than most North African countries to make painful changes required by international lenders to curb its deficit, such as ending fuel subsidies and freezing public sector hiring. The government still controls the prices of wheat, sugar and cooking gas.”

Banking and Auto Manufacturing Sectors Drives Harder into Africa

In an FT article, Finance Minister Mohamed Boussaid spoke about the changes in the financial sector that are boosting growth. He noted that Moroccan banks are in 22 African countries, and about 17% of their activities are in Africa. “Europe will always remain a primary partner for Morocco, but Africa is now seen as the future in terms of growth and economic potential.”

Hassan el-Basri, head of risk at Banque Centrale Populaire (BCP), which has large holdings in seven sub-Saharan countries, says their impetus is that “These countries represent a real growth potential given the level of banking penetration, which remains one of the weakest in the world.”

The banking sector is dominated by BCP, Attijariwafa Bank (AWB), and Banque Marocaine du Commerce Exterieur (BMCE), which together hold 65% of the country’s banking assets. While this may be dangerous in some countries, the article noted that “most acknowledge that strong regulation by the central bank has so far contained this risk.”

Risk will be further mitigated with new players entering the financial sector as there are opportunities beyond the large company portfolios held by the Big 3. Minister Boussaid indicated as much, saying that “We are concerned by financing, especially of SMEs, which do not have enough capital.” By addressing their needs and with new mid-sized players in the sector serving the middle class, financial services will become even stronger.

blog biz2The success of automobile manufacturing is another star in Morocco’s African economic strategy. As reported by the FT, it is now, along with aeronautics manufacturing, the largest contributor to the country’s GDP. The Renault factory in Tanger produced 229,000 cars in 2015 and is the largest car factory in Africa. Jean-Francois Gal, director of the factory, notes that “We are in a perfect location at the gates of Europe,” and the bulk of its output is shipped to markets in France, Spain, and Germany.

The plant has created more than 7000 jobs and attracted some 150 supply-chain manufacturers that supply Renault and export to Europe and other markets. This extensive network attracted Peugeot Citroen to invest in a plant in Kenitra, on the Atlantic Coast north of the capital Rabat, with an initial capacity of 90,000 vehicles, mainly for the African market.

The goal for the sector, according to Hakim Abdelmoumen, president of the Moroccan Association for Automotive Industry and Trade, is 90,000 jobs by 2020, in addition to the 100,000 that already exist. This rapid expansion of the industry is having an important side benefit – attracting expatriate Moroccans with managerial and technical experience to return from overseas and lend their talents to this important sector.

In diversifying its economic base, moving up the value chain to industrial manufacturing, and developing agricultural strategies that encourage better use of technology, irrigation, seed selection, and production and marketing, Morocco continues to build positive economic indicators that facilitate growth and competitive strength.

Nizar Baraka Details how “Advanced Regionalization” is Advancing Democracy in Morocco

Plan for the Sahara only the Beginning for Empowering All Moroccans

At a recent roundtable discussion in Washington, DC, The Honorable Nizar Baraka, former Minister of Finance and Economy, who serves as president of the Economic, Social, and Environmental Council (CESE) in Morocco, provided his analysis of the regionalization program being rolled out in Morocco, and how this is already changing the political space in the country.

Mr. Baraka began by reviewing the CESE process for developing the first study of “the South” (the Saharan provinces), which included public hearings with testimony from some 1500 people as well as dozens of studies prepared by experts, which resulted in recommendations for extensive restructuring of local government and a robust economic development strategy. He explained that what is being done in the South is the beginning of “advanced regionalization” for all of Morocco.

He believes this is part of the implementation of shared decision-making and devolution of power promised in the 2011 Constitution. Mr. Baraka emphasized that the credibility of regionalization will only become real when citizens participate in local decision-making that affects their daily lives.

For example, the Parliament (Chamber of Deputies) is currently debating bills that give Civil Society the capacity to submit proposals and petitions directly to Parliament.

There is great economic disparity among the regions in Morocco, he explained. For example, 52% of Morocco’s GDP is produced in four regions, while 53% of its doctors practice in two regions. Similarly, the rate of joblessness in the South is twice the national average. Baraka insists that the direct election of the region’s presidents (the highest locally elected officials), and the five-fold increase in budgets for regional development are strong incentives for citizens to be more involved in local affairs.

So the CESE efforts have focused on how the government can create an environment for greater political responsiveness, and part of this campaign is a new economic development model for the region based on public-private partnerships. This includes large-scale investments in diversifying the economy, a new university focused on local needs, particular attention to conservation, and positioning the Sahara as a gateway to sub-Saharan Africa.

Economic Diversity to Drive Economic Growth

The Sahara is well poised for economic growth. Its GDP is 60% higher than the national average, but some 30% of that is generated by government programs. So the strategy going forward is to deeply engage the private sector to increase investments and jobs. One critical target is to diversify the local economy while protecting the environment. The focus is on empowering individuals to more fully participate in the economy; for example, raising the rate of women in the workforce from a woeful 14% to at least the national average of 25%, and doubling the number of employed youth..

Sectors slated for diversification include fishing, aquaculture, value-added farming, renewable energies, downstream phosphate industries, and eco-tourism. Plans have been finalized for a local university focusing on the needs of the region, including professional development of medical personnel, educators, managers, and lawyers; tourism and hospitality; and research and development supporting local industries. Given that the South’s literacy rate is already 20% higher than the national average, targeted efforts to build on their capabilities through focused programs of higher education should reap short and long term benefits, in terms of jobs and meeting future employer needs.

Conserving the environment is also a prime consideration, especially well water, which is overused. Desalination, reuse of gray water, greater efficiency of energy utilization, treatment regulations for well water, a new dam, and a comprehensive campaign to preserve the eco-system in the Bay of Dakhla are the headline items in this effort.

Looking at both the supply side, which pushes the growth of the local economy, and the demand side, which is the pull of market needs, Africa is the obvious market. Building a new expressway from Agadir to Dakhla onwards to Mauritania and Senegal, high speed digital connectivity, expanded port facilities, and the export of solar power along an interconnected grid are all in the plans for the next 10 years. It is anticipated that 75% of the targeted $10 billion of investment will come from national government public-private sector partnerships, while the regional governments will contribute the remaining 25%. The goal of these efforts is to create 120,000 jobs and cut unemployment in half.

Mr. Baraka provided discussed other plans underway, which he believes will create a seismic shift in how citizens see their roles in relation to the government. Empowering proactive, engaged, and contributing citizens is the core mission of advanced regionalization, which will require a different mix of incentives in Morocco’s different regions. The most important impact, according to him, is that the political space in Morocco has changed forever. This is clear in viewing the evolving role of the media and civil society, debates in Parliament over legislative initiatives, and the pressure on political parties to restructure their governance to reflect issues and priorities. More importantly, advanced regionalization will continue this process and move Morocco towards its goal of a new social compact based on engagement and respect.

Second Millennium Challenge Compact with Morocco Gathers Steam

Initial Contracts Being Signed; Formal Approval Needed by Moroccan Chamber of Deputies

There is good news coming from Washington and Rabat as the second Millennium Challenge Corporation (MCC) compact with Morocco – valued in excess of $517 million ($450 US, $67.5 Morocco) — is taking off. The partnership between Morocco and the US that makes the MCC compact feasible is the result of years of collaboration across a range of projects funded by various US agencies. The mutual respect and trust engendered serves both as a model for other programs and a legacy of a friendship of shared values and interests in human, economic, and social development. The link to the compact site is http://compact2.cg.gov.ma , and the actual compact document is at https://assets.mcc.gov/documents/compact-morocco-employability-and-land.pdf

The process began in November with a “technical” signing that enables the release of funds for initial activities. The MCC press release notes that “Signature of the compact allows MCC and the GoM to begin the work necessary to ensure a successful and timely implementation of the program such as hiring staff and beginning key studies.  A larger, public ceremony to celebrate the commencement of compact activities is planned for spring 2016.”

With this “technical” signing, some $21.4 will million to be spent in the coming months to set up: financial management and procurement activities; basic administrative functions, including staffing, offices, equipment, and other items; finalizing monitoring and evaluation activities; hiring consultants for preparatory studies and activities; and other steps needed while awaiting final approval by the Chamber of Deputies.

In Morocco, the GoM will set up its MCC counterpart (in the office of the Head of Government); to establish its accounting and budgeting process; ensure that it “will not reduce the normal and expected resources that it would otherwise receive or budget from sources other than MCC for the activities contemplated under this Compact and the Program”; and continue to contribute its committed funding to existing programs that will be part of the compact.

 How the Process Works

Once Morocco was approved as a candidate for a second MCC grant, extensive consultations with stakeholders and a study by the African Development Bank identified weaknesses in workforce development and land management as obstacles to greater economic momentum. This resulted in a two-phase compact focusing on “Education and Training for Employability,” assigned $220 million; and $170.5 million allocated to “Land Productivity,” which concentrates on more effective management and investment practices for agricultural and industrial land. The rest of the grant is for monitoring and evaluation, program administration, in addition to contributions from the GoM.

Signing for the Moroccan side was the Head of Government, Abdelilah Benkirane, while Jonathan Bloom, Deputy Vice President, Africa, represented the MCC. It was attended by representatives of the seven Ministries, who, along with a private sector representative and two from civil society, will make up the Moroccan board of directors for the compact.

Once program areas are identified, “terms of reference” are developed to describe the goals of each program in sufficient detail that companies and organizations can submit comments – through “call for ideas” conferences –and eventually bid on services. The initial “call for ideas” conference results in public RFPs (Request for Proposal) in which competitive bids and project descriptions are submitted.

This process often results in new initiatives that had not been considered initially. One example is the Technical Vocational Education and Training (TVET) program to focus on support for new and existing public-private training centers, with companies taking the lead in the training and placement of trainees. The goal is to deeply involve the private sector in curriculum development, standards for qualifications, and eventual employment.

Land development is a much trickier proposition, as titling and management issues “inhibit access to and productive uses of rural and industrial land, thus diminishing investment and the consequent demand for labor.” “In rural areas, the project develops a faster, fairer, replicable process for moving the country’s collective irrigated land into the hands of smallholder farmers. In the industrial sector, the project develops a new model for industrial zone development” enabling the government to streamline how it brings industrial land to investors.

Overall estimated beneficiaries of the program are: more than 1.7 million graduates from improved and skills-centered secondary schools; 275,000 from the workforce development efforts; more than 80,000 farmers benefiting from improved rural land management; and some 96,000 benefiting from upgraded industrial land policies.

In addition, the MCC compact emphasizes sustainability across all sectors. Secondary Education “will pilot an Integrated School Improvement Model that will demonstrate how to achieve cost-effective, quality education, and a plan will be developed during the Compact for expansion of this model post-Compact. The Private Sector-Driven TVET grant facility is intended and designed to continue functioning after the Compact. GoM co-financing during the Compact will continue afterwards and enable the grant facility to continue.” Throughout the program, GoM and MCC “will collaborate to ensure that interventions aimed at mainstreaming social and gender inclusion will include mechanisms that promote sustainability beyond the Compact Term.”

There are many additional details available on the website, and more will emerge as future “call for ideas” conferences are announced. At this point, MCC is pleased with the enthusiasm and responses to the initial conferences from both Moroccan and US entities. Hopefully, the Chamber of Deputies will approve the overall compact in time for a formal signing in conjunction with the US-Morocco Strategic Dialogue in Rabat in April