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11:00 AM – 12:00 PM





Transcript by
Federal News Service
Washington, D.C.

J. PETER PHAM: Welcome to the second panel which, now that we’ve discussed some of the issues more broadly of the Arab Spring and the challenges faced, as well as perhaps the case of the Moroccan exception made by Ambassador Gabriel but certainly echoed by the other panelists, to drill down on that case where perhaps U.S. engagement, European engagement, trans-Atlantic engagement might have an effect – the case of Morocco – as the way – the way forward, the Moroccan model and some of the imperatives for that engagement.

I’m very pleased to have with me this panel this morning. We’ll begin with Claude Salhani. He’s the former editor of the Middle East Times, former international editor of United Press International and a very prolific author on all things in the region and currently at work on yet another book which probably will join the significant contributions he’s already made.

We’re also very pleased to have this morning a very good friend. Dr. Anouar Boukhars now much closer to Washington as assistant professor of international relations at McDaniel College, and a former visiting fellow at the Brookings Doha Center. Anouar just returned literally less than 24 hours ago from the Gulf, so we are very appreciative of his making the effort to be here today. Anouar and I have known each other for a number of years, and he’s authored a very good volume that was just published last year on – a little bit ahead of its time on democratization in Morocco; should have timed the timing of the release for the spring and you could have done all the talk shows. But Anouar and I met a number of years ago at one of those nondescript buildings on the other side of the Potomac where they run loud rackets in the background and make you surrender your mobile phones on the way in. And we had a very interesting discussion, and I’m glad we’ve continued that over the years.

And then finally, Dr. Gary Hufbauer, currently the Reginald Jones senior fellow at the Peterson Institute for International Economics, a very distinguished CV that’s there in the program, and one of the great experts on the economy, political economy, and the regionalization issues facing in particular the Maghreb region. His book – just tell you that he led on that certainly – remains one that’s frequently cited by many other authors, yours truly included, on that topic. So we’re delighted that he’s able to join, as I know leaving later today, so coming and going. So we’re very grateful to the panel.

So without further ado, Claude.

CLAUDE SALHANI: Thank you very much for inviting me here. I must say, I am indeed honored to be here. And this is a difficult panel to kick off seeing what we’re – just heard. The quality of the previous panel makes, I think, our life a little bit more challenging. Having said that, I had to change what I was going to say because it has all been said already in the previous panel. So I was furiously taking notes and trying to think what to – what was missing from this last panel. And I think the question that we can ask ourselves is, why this change, this sudden change of pace in the Arab world? The Arab world that has been stagnant for so long all of a sudden is changing.

Let me start off with a little anecdote about a question I was asked. When my first book came out, I was on a radio show here in Washington. And the interviewer said to me, Claude, when do you think – first of all, will there be peace between the Arabs and the Israelis, and what will it take for that peace to happen? And you have 30 seconds before commercial break. (Laughter.) So I said – thinking fast, I said, well, yes, I do believe there will be peace, because I’m the perpetual optimist. But there will be peace when the antagonists develop more love for their children than hate for their enemies. And he thought that was a good quote and we went to commercial break, and that was the end of it.

Now, let’s ask ourselves the same question about why this change in the Arab world. What brought about this sudden change? And I think that basically one issue keeps coming to the surface is the disappearance – the gradual disappearance of fear amongst the people. The people are so fed up that they are no longer frightened of the security imperatives. They are no longer frightened of the secret police. They are no longer frightened of being tortured and killed.

See what’s happening in Syria for example, what happened in Tunisia, in Egypt, in Bahrain, in Yemen. People are just so fed up; they want change, that they have almost taken a step beyond fear. And this frightens the governments more than anything else, because fear was the one tool they had to fight the people. That tool has disappeared. And I think that’s very important to keep in mind.

Now, when we talk about the Arab Spring, there is – there are two sides, as far as I’m concerned, to the Arab Spring. First, there’s the disconnect between the old generation and the young generation. There was a joke going around the Internet amongst Lebanese users of Facebook about a Syrian opposition advocate who was stopped at a checkpoint and the soldier ask him – asked him, do you have Facebook? And he says, no, I don’t have Facebook. He says, OK, then you can go. And while this may be an anecdote, it may very well be true, because this is the level of disconnect that you’re dealing between the old generation and the new generation, and that brings us to the fact that the new generation has lost the fear.

Now, two things again that come into play in this Arab Spring: One, I believe, is a genuine result of people losing that fear and wanting change, and the other one is a continuation of old politics. And if we look at what happened in Tunisia and Egypt, I think that’s a genuine reaction of the people who want to change. When we look at what’s happening in Yemen and Bahrain, I believe it’s an influence of Iran, through the Shia population in that part of the world, trying to impose its politics on that region. I think it’s two very different issues we’re dealing with, one in North Africa, one in the Arabian Peninsula. And they should be treated very differently.

Where does Morocco come into all of this? Well, Morocco is part of the system. If one is to believe in the systems theory, that everything and everyone is part of a system, Morocco is part of the Arab system, it’s part of the North African system, it’s part of the Muslim system. And when one element in the system is touched, it affects the rest of a system.

Now, that could be good, that could be bad, depending on how the Moroccans themselves react. In general, it’s been positive. There has been some shall we say less than positive aspects in the way that some of the demonstrations have been treated in Morocco. But we’re still a long, long way from what’s been happening in other parts of the Arab world. I think if we understand that, we come a long way in understanding what’s going on in the region. The military, again, play a big role in this Arab Spring. The fact that the Tunisians and the Egyptians wouldn’t join in putting down their own people and the difference in other parts of the Arab world where the military has participated in putting down demonstrations: That also plays a major role in what’s going on.

So I know – I know I was asked to keep it brief, and I will just add one more thing that I think is important in this development in the Arab world, is one of the reasons of this Arab Spring idea is also the fact that the Arab world has a lack of leadership at the moment and – which is one of the reasons why the Turkish prime minister, for example, and the Iranian president – non-Arabs – have become so popular in the Arab world. Mr. Erdogan on a – on recent visit – recent, let’s say, six months ago, I think – visit to Syria was greeted in a way that even made President Bashar Assad comment that he was more popular than – the Turkish prime minister was more popular than the Syrian president. I think today would be a totally different scenario. But there was that lack of leadership in the Arab world that led to, first, the rise of Islamism and then second – the second reaction is the beginning of a new change – takes me back to the disappearance of fear and the emergence of this new system generation – call it what you will – which I think it’s too early to really know where it’s going to take us. But it’s certainly going to introduce changes in the region. Thank you, Peter.

J. PETER PHAM: Thank you very much, Claude, for those remarks and helping once again set the context for our discussions.

And I’ll turn the floor over to Anouar.

ANOUAR BOUKHARS: Thanks, Peter, and thanks for the Atlantic Council. Keen observers of the region have been warning us for years now that the Arab authoritarian regimes are faced with two choices, for years now: reform or you’ll rot internally until you’re swept away. The same choices face these regimes today. Those who have decided to dug in and try to reassert their authoritarian controls will find only temporary reprieve. Experience tells us that regimes who have lost their legitimacy cannot survive. And the legitimacy, as you know, of the Syrian, Libyan and Yemeni dictators is totally spent, therefore it’s only a matter of time before they are overthrown – if not now, then in the coming years.

In Morocco, the monarchy has managed to weather the storm because the regime decided to spend its legitimacy on measured political reform. The Moroccan monarchy has always distinguished itself by – historically by its flexibility, an ability to reinvent itself. When under pressure, it reshaped its discourse and reorganized its governance practices. When in the early 1990s, for example, Ben Ali of Tunisia was brutalizing the Islamist movement and pulverizing the political landscape, and the Algerian generals decided to hijack the democratic process, King Hassan responded to the real prospects of unrest, which arose at the time from an economy in crisis and popular resentment against his support for the American-led Gulf War in 1991, by installing a controlled liberalization process. Unlike his neighbors, he relaxed restrictive controls on civil society activity, and he redesigned the political rules of the game.

In 1998, as probably you know, that process culminated in what was then described as a historic alternation of power, when a long opponent of the king, Youssoufi, was tasked with heading an opposition-led government. That same year, an Islamist party was integrated in parliament. At his death, King Hassan was transformed from being an enlightened authoritarian monarch into a visionary reformer who cleverly fended off threats to his throne and set the country on a liberalizing trajectory.

Today, in these trialing times, the monarchy once again faces serious challenges unless it quickly readjusts to the dramatic changes sweeping the Arab world. In the face of the 20 of February demonstrations King Mohammad VI reacted flexibly and intelligently, and he traced a no victor, no vanquished trajectory. Unlike the win or lose outcomes we’re seeing in Libya, Yemen and Syria, the monarch acted proactively and proposed to cede significant legislative power while retaining considerable executive power.

In a dramatic speech March 9, he implicitly acknowledged that the rules of the game that governed the country have reached the end of life. The 1998 political bargain between the monarchy and the opposition has reached its limits with the protagonists unwilling or incapable to undertake the necessary political reforms to bring accountability, transparency and credibility to the country’s elected institutions. Today, only political reforms can pacify the people, because remember – and this was touched on on the previous panels – the explosions of rage and frustration that set neighboring Tunisia ablaze has been building in Morocco over time. The only difference is the legitimacy of the rulers.

There are many parallels between Morocco and Tunisia, said Muhammad Tuzi, who was – who was recently appointed by the king to the commission entrusted with revising the constitution. That’s what he said. They both have the same demographic structures, quote, “and both suffer from serious governance problems.” Like in Tunisia, the blend of technocratic rule and centralization of economic policymaking has not led to equitable economic development. There is economic growth – significant, I think, economic growth – but it has not led to equitable economic development.

Large scale investment projects have been beneficial to the country at the macroeconomic level, but at that the same time they have not significantly reduced the economic disparities between regions and within regions. Marrakesh and Agadir is a case in point. Both received substantial amounts of investments, tourism investment, but both rank near the bottom of poverty scales. Out of 16 regions – but this is changing, by the way – (inaudible) – less than 16 – Marrakesh ranks 12 and Agadir ranks 11, leaving many to question the impact of tourism and the failure of the benefits of investment to trickle down, at least not yet, to the majority of the people.

So to wrap it up, reform efforts that have been engaged by King Muhammad VI, and previously by his father, they have enhanced the legitimacy of the monarchy, and they have strengthened the king’s campaign to ease social pressures on the population. The danger, however, has always been that political reforms have lagged behind socioeconomic modernization. Right? The focus was on socioeconomic modernization.

Samuel Huntington warned us that instability are most, quote, “likely to occur in societies which have experienced some social and economic development and where the processes of political modernization and political development have lagged behind.”

So the kingdom of Morocco faces the same typical dilemma that every modernizing state grapples with – and Morocco is a modernizing state – which is you provide a glimpse of what modernity has to offer, but then you have trouble to fulfill wholly and to deliver fully that promise. As theory and history – political scientists here knows – demonstrates over and over again, socioeconomic liberalization processes, they unleash popular expectations of change which often quickly outstrip what the regime can or is willing to do. So put succinctly, revolts are a product of increasing promises to the common man while failing to fulfill them.

And always remember, Morocco is not a stranger to social protests, for example. Protest movements driven by unemployed associations have been going on for years now. The only difference between Morocco and Tunisia is that these locally based protests did not find immediate echoes in other areas of the country. That’s why the king’s speech was extremely important, extremely significant in March 9, because his quick reaction, right, proactive reaction to the fast-developing events regionally and nationally is a clear testament to the monarch’s sound judgment.

As one scholar said, today, the two most effective vaccines against democratic contagions are two things. First, there’s the rentier effect, money, the Gulf countries, with the exception of Bahrain; and second, the legitimacy of the political system. In terms of the legitimacy factor, Morocco, as we all know, the monarchy enjoys considerable moral authority and political legitimacy, and that’s what has enabled the country to ride out the current epidemic protests.

So unlike previous promises, the king in March 9, he set out a clear timetable for enshrining the separations of powers, the independence of the judiciary and parameters for the decentralization in the constitution. He also allowed protests to proceed largely unhindered, with few exceptions as happened in the last few weeks. He freed political prisoners, he empowered the National Human Rights Council and the Competition Council with additional – (word inaudible). These reforms were carefully considered to meet the most pressing demands of the Arab Spring, if you want to call it, which is to tackle the major problems of corruption – and Morocco does have that – the lack of accountability and impunity for some governmental officials.

So the king’s announced reforms will not transform the nature of monarchial powers, right, but they will pave the way for an evolution towards a better equilibrium between the king and other branches of government. If such peaceful, democratic transition that the king has announced in his March speech, March 9 speech, proceeds, that event, if those reforms are translated, would be as seminal as the extraordinary revolutions in Tunisia and Egypt. The Moroccan monarchy would once again be a powerful model to other monarchies.

Remember, after the king’s speech in March 9, we heard some rumblings in Jordan asking for the same thing, asking for their monarch to follow in the shoes of King Mohammed VI. So it’s important that Morocco’s friends in the West, especially the United States, support this very important transition that the country is engaged in by offering economic incentives for quickly promoting programs that prioritize the people’s demands. These are rule of law, social justice and job creation.

There will be a resistance to change in Morocco within some quarters in the corridors of power. Remember, the keepers of the status quo – there are some entrenched elite which they applaud the king’s boldness, but at the same time they work to derail any meaningful democratic change from taking root. If this democratic transition takes place, there will be a lot of losers, right, especially at the top. And we should expect that there will be resistance to the changes that the monarch has announced, and they will be unveiled very soon.

So if political reforms are not implemented quickly and the tense social climate is not tempered, the risk of destabilization cannot be overruled. That’s why it was heartening to see the speech in March 9. And we are all looking forward to unveiling these – from what I heard – the news that it’s ready. And the draft is being circulated as we speak, new constitution. And I’ll stop right there. Thank you very much.

J. PETER PHAM: Thank you, Anouar.

And to round us out with the rounding of the dismal – but very necessary – science of economics, Dr. Gary Hufbauer.

GARY HUFBAUER: Well, thanks very much, Peter. And since I’m going to Casablanca this evening for a program that’s organized by OCP for Moroccan government officials and business executives, I very much appreciate the tutorial you put on for me.

One can question Karl Marx’s contribution to economic analysis, but one thing he did was to put economic determinism front and center in my profession, and in that respect, I’m one of his disciples. So let me emphasize the economic side of the story.

Morocco is in many respects the best of the MENA countries, but it is just not good enough. And you can contrast, as Tony Cordesman did, the developments in MENA generally, but let’s take Morocco specifically, with East Asia. And I think you all know the numbers, but, I mean, Korea’s the outstanding country in East Asia. You can’t quite see this chart. But, you know, back in 1960, Korea had twice the per capita income of Morocco. There’s Korea, Morocco’s still down here; it’s now nine times.

East Asia is an area of autocratic governments. I’ve done a fair amount of work in East Asia. They’ve only become democratic recently. But had they had – they’ve had coups, but have they had revolutions such as we’re seeing now in North Africa and the Middle East? And the answer is no. And I think the big reason is that East Asia has delivered growth and jobs and prosperity to the people in a way that the MENA region has not and nor has Jordan and many of the other countries in the area.

So what are the – let me quickly and very quickly go over some of the problems in Morocco and maybe some possible economic answers. By one classification, Morocco is a stage-two country where you have a three-stage kind of trilogy. And I won’t go into the details, but examples of stage-one countries are Ghana, Honduras, Bangladesh, Tajikistan. Examples of stage-two countries are Guatemala, Morocco, Sri Lanka. And then you go up to countries moving from stage two to stage three, and you have, you know, Estonia, Hungary, Taiwan, China.
Now, amongst – compared with its peers in just the stage two – so that’s not all countries, just its own peers in the stage two – Morocco looks pretty good on macroeconomics – in fact, very good in macroeconomics – by which I mean inflation, fiscal position, exchange rate stability. It actually also looks pretty good on health and primary education, primary. Stops there. It doesn’t do well, compared with its peers in stage two, in institutions and quite a bit of infrastructure.

In terms of economic characteristics, Morocco is blasting out with growth, with a fairly large economy, certainly compared to many stage-two countries which are really quite tiny. You can take an extreme example like Swaziland, but many of them are fairly small economies. It’s fairly efficient in its goods markets, and it’s moderately OK on the financial markets. Where Morocco is quite weak, compared to other states at least, the labor market – I’ll come back to that in a moment – and technology.

So Morocco, while it’s reasonably open, has been very poor in attracting foreign direct investment. I mean, despite this terrific location, good linguistic abilities, connecting with Europe and so forth, but very poor; the numbers are quite modest. And the result, as was mentioned earlier, is there’s high unemployment amongst young people, certainly young women, but I guess from a standpoint of social stability, young men.

And a recent statistic I heard – Anouar can tell me if this is right or not – but is that if you’re a university graduate in Morocco, your chance of being unemployed is roughly five times the chances of a technical or a high school graduate with some technical education. I mean, the universities are not turning out people who know what they need to know for the economy. So as has been famously said in this country, it’s jobs, jobs, jobs, in Morocco.

And where are the jobs going to be created? Well, Morocco is not going to replicate the East Asian story, which is a manufacturing story. That’s just not on in terms of the training of the young men, or young women, for that matter, and the current level of income where Morocco would have to face Vietnam as well as China and other obvious competitors. It’s just – we’ve written books on this, but take it from me – that’s not where Morocco is going to develop.

It’s going to develop, if it develops, in the services sector. And there, there’s a big fork – (chuckles) – fork in the road. Either it’s going to be an expansion of government services – and this is true generally for the MENA region, Egypt and so forth – an expansion of government services; this is how you buy peace right now, right here. You create a lot more government jobs – you, the government.

And that’s what university graduates have typically done in the – so it’s government, meaning civil government, but also the security apparatus which we have heard a lot about, which is already a growth sector, is a growth sector, or it’s going to be private-sector services jobs.

Now, if you were sitting across the river, as we all have, you would predict the first – that these countries are unfortunately going to go for government jobs. That will buy short-term stability. It will not buy a Korean story; it will not buy a Taiwan story. But it will be stability for now.

The way the U.S. should want to press and hopefully enlighten governments – and I think Morocco is probably the most enlightened in the – amongst its peers – is the second fork, which is private-sector jobs in the services sector. Yes, there’ll be some manufacturing, but just as the U.S. has declined in manufacturing – we have 9-percent unemployment – employment, excuse me, 9-percent employment in manufacturing; we’ve come down a lot – Morocco is never going to have a 20- or 30-percent employment in manufacturing. It might get 10, 15 percent at most, but mostly it’s going to be services.

Now, what can be done? Well, I guess contrary to Tony Cordesman – who has left, so I don’t need to worry about him responding immediately – I believe in urbanization. Every country which has succeeded – prosperity – has urbanized dramatically. You do not prosper on the basis of some idyllic notion of the farm in any country, with the possible exception of New Zealand. And even there, it’s a highly urbanized country. Or Australia, one of the highest-urbanized countries – and I happen to know Australia fairly well – but it’s an 80-percent urban country.

You urbanize, but you have to make urban living a decent proposition. It’s not bad in Morocco; it’s just not great. It’s kind of like Mexico. Mexico is not bad as an urban country, and has a fairly large rural population, still, about 20 percent, but the urban areas are pretty dreadful on the whole, with some noticeable examples – I mean, exceptions – Guadalajara, and so forth. But there are many dreadful –

Well, the government has to really make the urban areas a pleasant place to live, and the economics of this is quite simple: People are much more productive when they live close to other people. It’s as simple as that – people who live remote distances from one another, they tend to do a lot themselves – it’s all very inefficient, all this taught by Adam Smith and Ricardo. And it’s the same today.

So government has to concentrate on making the cities even better places to live than they are now. Let me now turn to labor reform.

Unfortunately, one of the inheritances Morocco got from France – got many good things from France – but it has accepted or embraced or whatever the French notion of labor laws, which are about the worst you can get for a developing country, and they don’t work very well in France, either. But leave France to one side – prosperous country on the whole.

For Morocco, it’s terrible. And what these labor laws try to do is guarantee lifetime security, or at least a long term of security once you get a job. OK, what’s any employer going to say? He’s going to say, I don’t want to hire people – it’s as simple as that. It keeps employment from growing because you hire them, you marry them. And you create all these problems: flexibility and so forth. We write about in length in our books; I think probably everyone here knows about it. That’s a tough thing to reform once you get it.

But the government has to start reforming, starting with probably the new entrants, which is where Sarkozy tried to start for a while in France, has kind of given up on it now. But that really has to – you have to flex – you have to introduce flexibility into the labor market in whatever way you do it.

The second thing is on the education system – you cannot turn out liberal arts graduates who know Arabic, classical and so forth, but don’t know health, don’t know finance, don’t know computers, don’t know engineering, and so on. I mean, it just has to be a pretty radical change in the university education system to have the people be suitable for the jobs in the future.

What else can be done? And I’m going to talk about some internal things. Business taxes: Morocco – and I’ve urged this in the past; haven’t got a – haven’t sold the idea yet – but Morocco should emulate the best part of Ireland, which was the 12 ½ percent corporate rate. Yes, Ireland did a lot that was wrong; its financial system went wacko – housing market, et cetera, which I think you’ll know.

But the – but Ireland’s growth starting in the ’80s, and for two solid decades, was based on a very low corporate tax rate – very simple, very flat. And that’s what Morocco should do. Morocco has a very complicated system with a lot of exemptions and so forth. All the exemptions to get them probably means some corruption along the way, and so forth. So it should reform that.

Then, turning to a point that Anouar has emphasized on – losers of reform: If you’re going to have a services economy, which is dynamic – and Morocco is positioned so they can be the interface between Europe or North America and rest of Africa in all kinds of services, obviously finance, but health and education and so on – you need to have competition there. You have to allow firms to come in. Unfortunately, Morocco as now exists – and it obviously lines up with the power system as it now exists – is a series of monopolies and oligopolies, especially in the services sector. That’s not going to – it’s obviously good for the people who – money systems now, but it is not good for growth; it’s not the way to create a lot of services jobs in the future. It needs to be liberalized.

There are parts of the goods trade which also need to be liberalized, but the services is the growth area, and that’s where the liberalization should be very, very strong.

Now, what should the U.S. and the EU do? Well, the EU has done quite a bit. And I think out of the developments, political developments, it’s going to do more soon. They recognize, as was said in the previous panel by Mr. Alexander, that instability in MENA means instability in Europe, particularly in France and Italy and Spain. So they’re going to bolster this Barcelona process, and so on.

But what should they do, and what should the U.S. do? Well, the U.S. – and I know the ambassador is here, Ambassador Gabriel – and I guess the agreement came in place before he was ambassador. But the problem with the U.S.-Morocco free trade agreement – it has various problems, but one of them is that we have excluded in the agreement the stuff that Morocco can sell today, here and now, which is a lot of specialty agriculture. And Morocco has a lot of good specialty agriculture.

Is that the growth of the future? Probably not. But is it where the U.S. could fire up Morocco today? It is, same with EU. EU has a pretty deep agreement with Morocco, which covers everything but two things which count: One is immigration on a controlled but reasonable basis – and that’s not part of this story – and second is agriculture.

So the U.S. and Europe should really open up these agreements in ways that are quite constructive to growth. And I will toss in one other thing that the U.S. can do, which Europe has already done – we have an absolutely absurd corporate tax system in many respects, but one of it is that we try to tax income earned abroad.

And we ought to at least have an exception for income earned in responsible countries like Morocco – if it lowers its corporate tax rate, we shouldn’t pick it up by our corporate tax rates, so we ought to have a special exemption. On that, I could talk at length about that – but in any event, to encourage investment in countries like Morocco, which are doing a good job.

Now, there are other things you could go down this line, and it’s very similar to the CSIS package that Ambassador Gabriel outlined. We have a similar package that our institute outlined. And that we need to go forward with urgently soon.
Let me just end on one point – you know, the United States cannot afford massive entitlement programs at home and ambitious nation-building abroad. I mean, look at the cost of the Iraq and the Afghan war where we expanded the mission quite dramatically from dealing with a handful of terrorists or one bad guy to rebuilding them. And we haven’t exactly, by my standards, succeeded, but we certainly have spent a lot of money. We can’t do that worldwide – can’t do it.

And we’re not probably going to cut back the entitlement program to the point where we have the resources to do it. It might kind of backslide. But what we can do is engage these countries with open access to our markets here and in Europe to a far greater extent than we’ve done so far. And we should do that.

Thank you.

J. PETER PHAM: Thank you very much, Dr. Hufbauer, and thank you to our panelists. Before we open to questions from the floor, we do have a few from our colleagues joining us from the George C. Marshall Center in Garmisch. From Ms. Haddaoui: a question, I think, follows immediately upon both what you said, Anouar, and what Dr. Hufbauer said: How do we ensure Morocco that the corrupted parts of the elite won’t overshadow the efforts at democratizing?

It’s both an economic and a – (inaudible, off mic).

MR. BOUKHARS: That’s a good question. And there is a debate, I mean, within Morocco because as we all know, obviously, there is the monarch, and we know where he stands. I mean, his reformist credentials have been proven for over a decade now.

But within the regime, there was always two, at least two to three schools of thought – I mean, one school of thought is, do as little as possible when it comes to political reforms because the ones you engage in that trajectory, then people would be encouraged to demand more. And you don’t know where the ball would stop.

Then, there is another camp within the regime – the – (inaudible) – generally – that said, let’s focus on socio-economic modernization, and put political reforms on hold because the belief was that political transition to democracy cannot succeed unless you develop those preconditions, preconditions like, you know, decent economic growth, GDP about 6 percent, et cetera.

And then, there are – there’s another school of thought that said, you can’t do economic reforms without political reforms. I mean, the two have got to go together. So you’re right – I mean, there is resistance on it and the United States has a role to play; Europe has a role to play – as, you know, through economic aid has to be conditioned, and there has to be criteria that have to be met in terms of the economic and political reforms that the monarch has announced in March 9th, and would know very soon. So you can’t just disperse aid without meeting that criteria.

But there is obviously resistance. The good news is that we know where the monarchy stands. That’s as far as political reforms is concerned, I guess.

GARY HUFBAUER: Thanks. Well, very briefly, coming back to my economic roots, I would classify corruption at two levels – retail corruption and wholesale corruption. Wholesale corruption, by which a ministry controls, let’s say, a big transport project, power project, whatever, electrical project rakes off 5 million, 10 million – that can only be controlled by the king. So he wants to do it, or he doesn’t.

Now, let me talk about retail corruption, by which I mean all the administrative corruption which goes on in so many countries. And that, we know more about, I mean, analytically. And the answer is simplification, simplification, simplification.

When you have a customs schedule, which Morocco does, which is quite complex, every bit of that complexity invites corruption. When you have a tax system quite corrupt – quite complex, invites corruption – same with licensing – you have to deal with this by simplification, which actually means reducing a lot of jobs in the government, and I know that isn’t popular. But that’s the retail corruption.

J. PETER PHAM: Thank you. We have a question –

Q: Thank you very much. Peter, thank you very much for the Atlantic Council for hosting this today. I found it to be really very educational.

I got to ask you a rather – a large, philosophical question, and it’s on politics and the development in the Arab Spring: What effect do you think what’s going on in the MENA region right now is going to have on the evolution of political Islam as a political force in the region? What do you think’s going to happen with it?

J. PETER PHAM: Let’s go down the row.

CLAUDE SALHANI: Well, thank you for the question. Matter of fact, I address that in my book, “Islam Without a Veil.” It’s coming out in two weeks – a little bit of publicity here. (Laughter.)

(Off-side conversation.)

CLAUDE SALHANI: Thank you. I was – right after I sent the manuscript to the printers, I was beginning to have double – second thoughts about this. And I went to a conference for the 10th commemoration of 9/11. And Michael Hayden, a former CIA director, was there. And he gave the keynote speech in which he said, he believed based on what his analysts had given him that al-Qaida was on the way out. This was about three days before the killing of bin Laden. And he believed that Islamism – militant Islam was beginning – the very beginning of the end.

And I – that’s exactly what I’m saying in my book. I went up to him and spoke after his speech, and I said, you know, I can’t tell you how happy I am to hear you say this because you back up what I’m saying. He says, well, this is what my analysts tell me. How long will it take to get there is unknown, but it’s the very beginning.

I predict in my book – I don’t give a timeline because that’s impossible, but I make the analogy with communism – that communism was a phase; Islamism is a phase. How long that phase is going to be is unknown. But I think we’re seeing the beginning of the change with this Arab Spring.

Now, when you start a revolution, it’s always hard to know how it’s going to turn out. But this is where we are today.

ANOUAR BOUKHARS: Sure. I mean, here we lumped all Islamists as one. And as we all know, I mean, there are different shades. And I’m glad Claude talked about the militant aspect of it, and that’s true: I mean, if there is – the biggest loser out of these evolutions, if obviously they evolve into a democratic system, is al-Qaida and its affiliates. Right?

And then, there are the moderate political Islamists like the PJD in Morocco, for example, or even the Muslim Brotherhood to some extent in Egypt. And in my view, this evolution or this transition is – the Islamists would play a major role. Right? But based on history and political experience, right, when the system opens up in different contexts – Middle Eastern context or Asian context, Indonesia is a very good example as well – I mean, the Islamists’ share in the market, electoral market, did not exceed more than 30 percent.

In Indonesia, which has exceeded more than 40 percent, in time that number dwindled because it was easy – or it is easy for the Muslim Brotherhood; they throw out this – (inaudible) – resistance movement to stand against something. Right? Now, they have to stand for something, right?

When you come to power, you have to govern. The Muslim Brotherhood and others, they would learn, as their Indonesian counterparts and Malaysian counterparts and Moroccan counterparts have learned, that decisions, that the backroom dealing, for example, is messy. When you govern, you have to make compromises.

So when you open up the system, there is going to be a moderation effect. We have seen it in Morocco and even in the Muslim Brotherhood. I mean, we cannot lump that movement as one. I mean, is there a radical – it’s not radical? Well, you can’t say there are generational divide on the Muslim Brotherhood – there are progressives, and there are hardliners, and they’re fighting it out right now.

That’s why when you open up the system, it’s good. Let them settle out their ideological debates because anti-Americanism or anti-Israelism or anti-whatever you want does not feed bellies. When you govern, you have to deliver. Same thing in Turkey – look at the Islamist movements, how it has evolved – yeah, Turkey, special case, true, but so is Egypt.

Turkey, it has evolved, whether based on principle or not, the military, right, as the guardian of secularism played a major role. Then there is the European Union. That lure played a major role to constrain the Islamists and to have this evolution.

And the Islamists that are in power in Turkey are moderate. I mean, regardless of you may like their foreign positions, their stand – their regional stand. But they are, I mean, progressive. I mean, every Arab society would love if you can evolve as Turkey has done. It is – it has progressed economically and it is a regional powerhouse. That’s not that odd.

But Islamism, there are different shades out of it. And we will see those battles play out in the next five to 10 years. How the Muslim Brotherhood evolve, we don’t know. Based in history, it would moderate. But we don’t know. The good news is that it’s not a monolithic movement.

CLAUDE SALHANI: Can I add something real quick? If you look at where the Islamists are the strongest – sort of Hezbollah in Lebanon, Hamas in Gaza – it is due to a weak government or a lack of government. And therefore, because they provide services; the government doesn’t. If you look at Hezbollah and Hamas, they have a similar infrastructure. They’re made up of three elements: the political party, the social services and the militia. You put in a strong government; you take away the two – the social services and the militia. You’re left with a political party.

And I think this is something that has been overlooked is the fact that if you strengthen the central authority, you weaken these groups.

J. PETER PHAM: Okay, another question from Garmisch, this one from Professor Martha McSally. The first 2002 Arab Development Report identified three deficits that needed to be addressed in the Arab world for it to develop and prosper: the freedom deficit, the knowledge deficit and the gender equality deficit. My question is about the third deficit. Women and men contributed to the revolutions in Egypt and Tunisia yet they are pretty much left out as usual from participating in the leadership of the transition. What are your thoughts on this dynamic and the implications for the transitions to democracy?

You want to take that on?

ANOUAR BOUKHARS: Do you want to start?

CLAUDE SALHANI: I can start. Well, I think we’re going to see a change there as well. In Egypt, for example, women are beginning to play a little bit of a major – a more prominent role. Women in Morocco have been empowered in a way that has been quite different from the rest of the Arab world. So there is a change.

I think what we’re fighting is we’re fighting a culture, a longstanding culture that is reluctant give women equal rights and empower them as they are in the West. And this is something that we can change through education, education and more education.

ANOUAR BOUKHARS: You’re absolutely right. I mean, there is a gender deficit. The good news is that women played a major role in the Egyptian revolt, for example, in the Tunisian revolt. There are some good stories out there – Tunisia. I mean, Tunisia, the women had more rights than anybody else. Even within the – (inaudible) – of the Islamist party, for example, 50 percent right now must be women in the new elected parliaments. We will see 50 percent. The Moroccans have already done that. There is a quota for women. Women are having more right.

So you’re right; it’s going to be a long journey. But the good news is that women have been empowered. They are standing up. They are challenging that patriarchal order that has, I mean, put down whole societies. I mean, even in Saudi Arabia. I mean, look at that woman for example who challenged the apparatus by going to drive. And we’ll see what happens in 20 days, whether women will – which was a – I mean, Saudi Arabia is a different model. But still, I mean, that’s unprecedented in my view. So you are right. I mean, we are seeing a change. And the more freedom there is, the more open debates there are, the more women, I mean, will find their voice and will excel.

GARY HUFBAUER: If I could just add something to what’s been said, it’s that gender equality is not only important for, you know, the women but it’s really important for the economy. And I’d emphasize the service economy. And this is an area where women excel often. Often they are a little bit faster at learning computers, some of the technology, than men – very good in law, very good in health, very good in design. Right across the service economy, women make a terrific contribution in countries where it is permitted.

And right now, of course, Morocco has a youth bulge as does most in the – (inaudible) – region. So maybe you don’t think – one does not think about, you know, a shortage of employment – but look at – or a shortage of workers for employment. But look at the problems that Japan immediately faces and China in not very many years. And Japan’s case is acute because it’s basically excluded women from the workforce for many, many years or limited, capped their opportunity. And boy, that’s a devastating limitation on the future growth of Japan and ability to cope with its demographic problems. That may well happen to Morocco. Not now, but in 50 years, it will.

J. PETER PHAM: We have time to take one more question from the audience if there is one. If not, I thank you for your participation this morning. Just got to pull it together – I think we have in both panels. I’m grateful to the panelists, both the first panel and the second one. I think despite the diversity of perspectives and viewpoints, we’re really left with perhaps four takeaways.

I think first is that – or takeaways or lessons – first is that this process is one that is going to take time. And so, we have to be, as policy-makers and analysts – we have to be patient and let it play itself out. Secondly, unfortunately, our preferences notwithstanding, it’s going to be messy. We don’t know the paths, the byways it’s going to follow. And so we have to be humble in our policy about what we can achieve and the timeframes in which we can hope to achieve it.

I think the third takeaway is the importance of the socio- and economic factors. Where are these economies going to develop to take in the aspirations, integrate these people into their own economies, into their own societies and into the global economy? So it goes back to that dictum from the 1990s: It’s the economy, stupid.

And then finally, I guess, the lesson we take away is that this process has to be organic. It has to come from within. It can’t be imposed from the outside. It has a dynamic of its own. And in that context, we have to support those countries, those regions – places like Morocco and others on the way where organic developments have begun. Reforms have begun – to build support for those as oases or islands of stability as we don’t know whether, as was said earlier at the very beginning, whether we face a sandstorm or what sort of summer or winter comes afterwards. So support for the organic development.

So again, thank you again for joining us today, both those in the audience here and to those who are joining us from the Marshall Center. And we’ll look forward to having you again with us as we continue to explore these and other related issues. Thank you very much.



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