Kings trump aid for Arab spring nations

Back in May 2011, at the Deauville summit in France, the Group of Eight leading industrialised nations promised close to $40bn in assistance to Egypt and Tunisia, with the amount set almost to double once Morocco and Jordan were added to the list. The objective at the time was to support the historic change in the Arab world and prevent delicate democratic transitions being derailed by economic failure.

The recipients, however, have been disappointed, receiving much less assistance than they had anticipated. Most frustrated has been Egypt, which received about half of what it was expecting last year.The aid was supposed to be a combination of bilateral assistance, support from multilateral institutions and a cash injection from oil-rich Gulf countries, which were supposed to weigh in with about a third of the total commitment. But, according to research by Barclays, only more than $18bn has been disbursed in 2011 and so far in 2012, with even some of that possibly stemming from commitments that predate Deauville.

“The numbers are not negligible at all in absolute terms, but the issue is that only a small portion is coming from the major donors who launched theDeauville Partnership and the multilateral institutions,” says Alia Moubayed, senior economist at Barclays. “Moreover, these numbers represent only a small portion of the financing needs of the four countries. [So there is] nothing to boast about for western countries that initiated the partnership.”

What is also interesting about the figures, however, is that Jordan has received almost as much – $4.9bn – as Egypt ($5.9bn), much of it through bilateral funding. Yet Egypt’s economy is more than 10 times larger than Jordan’s. And, while Egypt’s revolution mesmerised the Arab world, Jordan is taking one step forward and two steps back on its promised political reforms.

To be sure, Egypt’s chaotic transition has delayed agreement on multilateral aid. It is only with the recent election of the Islamist president Mohamed Morsi that the International Monetary Fund can be expected to progress with the $3.2bn loan agreement that has been under discussion. An IMF deal, moreover, will facilitate other agreements with multilateral institutions.

But the struggling Egyptian economy, whose foreign exchange reserves have dwindled to alarmingly low levels, could have been bolstered with more generous funding from the oil-rich Gulf.

According to the Barclays figures, Gulf states have given Egypt only just over $3bn since the beginning of last year. About $2bn of that came from Saudi Arabia, half of it deposited with the central bank.

While the petro-states say they are waiting for political stability and a credible programme of reforms before giving more, regional economists say the relatively small donations so far reflect the way politics dictate aid from the Gulf. For most governments in the region, the uprisings sweeping the Arab world have been unsettling, bringing uncertainty and too much democracy.

True, pragmatism ultimately prevails in Saudi Arabia – Riyadh, for example, last week became the first country to host Mr Morsi, even though it has no love for Islamists. But in general, as far as the Gulf states are concerned, monarchies such as Jordan represent more reliable allies worth investing in.

No matter that Jordan’s reforms have been more talk than action. While Morocco has embarked on a credible constitutional reform programme, the European Council on Foreign Relations had this to say about Jordan in a report published in April: “Despite a promise of rapid reform in early 2011 and subsequent tinkering of the legislative system, the King [Abdullah] has nonetheless resisted meaningful change that would loosen his absolute hold on power.”

The king’s biggest problem today, however, is the economy, which one diplomat says has gone from “disaster to more disaster”. This is in part a result of repeated cuts in Egyptian gas exports to Jordan, which have increased massively the country’s energy bill. With a cut in subsidies envisioned, the fear among Arab and western partners of Jordan is that the relatively limited protest movement will gain momentum.

So it is with the stability of the monarchy in mind – rather than the necessity of political change – that Amman has been one of the largest recipients of Gulf aid.