Effect of Arab Spring on Direct and Indirect Investments - Research Paper Example

Effect of Arab Spring on Direct and Indirect Investments By The of this study was to examine the effect that the Arab spring had on the direct and indirect investments in the Middle Eastern and the northern African region. Data was collected from 5 countries that are from this region that were identified through random sampling. There were also questionnaires that were used to collect data from the citizens that are in these locations. Abstract Over the last few years there has been an increase in political instability in Arab countries. Due to the advent of social media and other platforms, citizens have become much more aware of their rights and freedoms and this has worsened the political situation in these countries (Adi, 2014). Political instability has an effect on the economic condition of these countries. Our study is focused on the impact of these political disturbances and the effect that they have on both the direct and indirect investments in the Middle Eastern and the North African region. For this study, I applied a combination of both quantitative and qualitative methods. The results show that there was a relationship between the Arab spring movement and the rate of investment in these countries. It was found that despite the economic powers of these countries, there was a decrease in the rate of direct investments when these movements began to take shape. This affected various forms of investments such as direct and direct investments and resulted in an overall decrease in the rate of economic growth in these regions. These countries were experiencing rapid growth rates and if not for the Arab spring movement they could have greatly improved their ranking on the global charts (Fosshagen, 2014). This can therefore be the only factor that influenced the rate of economic growth. Introduction In early 2011 there were several protests that were against the government and this is what is referred to as the Arab spring. Some of these were not only uprisings but took the form of armed rebellion and in most cases led to the loss of lives of several people. These uprisings began in early 2011 when protests by the people of Tunisia led to the removal of the then president, ZineAbidine Ali. Following thus move, other Arab countries were motivated to also follow suit and protest against their governments. Some of the countries involved in these movements were Egypt, Yemen, Tunisia, Syria and Libya. The main cause of these uprisings was the political leadership that was in place in most Middle Eastern countries. Most of these countries were under the rule of monarchies and their elections were constantly marked by rigging. The resources of the state were also under the mandate of a few well connected individuals while most of the people suffered from poverty. What was important was that there should be a complete overhaul of the political leadership through free and fair elections. Despite these promises, most of the people who led these protests did not have long term plans and did not have any solid plans after the elections were done. This study therefore has to try and find a link if there was indeed a relationship between these uprisings and the reduced rate of investments in these countries.Several hypotheses have been presented in an attempt to try and show the relationship between the Arab spring and the rate of political growth. One of the most common is that political instability scares away investors and they move to other regions where their investments are safe. In general, there was a reduction in the rate of economic growth during the time that the Arab spring was occurring. Literature review There have been several studies that have been conducted by different authors in regards to the effect on the Arab spring protests on the economy. Although their underlying reasons for writing on this topic may be similar, each looks at the issue froma different angle and these I have out lined in the literature review.According to Korany, the Arab spring was crucial in the development of democracy in these countries because the citizens were empowered to speak out against their governments. This is because despite the rapid rate of democratic change in other parts of the globe, the Arab countries were stagnated and were still under the rule of monarchial rulers. A critical step in this movement was when the regime in Egypt collapsed. The author focuses his book on the factors that caused these revolutions, most especially the collapse of the authoritarian regime in Egypt (Korany, 2012). Some of the factors that caused discontent among the people were lack of employment opportunities, economic and discrimination issues. Further evidence to support this topic was illustrated by Kenneth Pollack who made it clear that Arab states can be categorized into three after the uprising. There are those countries where the autocratic regimes were removed from power and the people hope to build democratic states (Pollack, 2011). Other types of states are those which are still ruled by autocratic regimes but have to undergo massive reforms so that the grievances of the people are addressed. The last groups of countries are where the protests have not led to any change in the regime, but have resulted in widespread civil war. He states that it is important to note that the change in these countries is not only political but also social and economical in nature.The role that peaceful protests have taken up in regards to seeking for social change has been highlighted widely by Howard and Hussein. In the past, all demonstrations began as violent protests. This has changed greatly and in the last decade there has been an increase in the rate of no violence. The views of the people are aired out and shared through social media and the required support is mobilized on these platforms. This has led to various social upheavals and the author tries to explain the cause and effect of such events on the economy (Howard and Hussein, 2013). The effect of digital forms of communication has also been discussed extensively by Adi. The author looks at the change in the attitudes of the political regime from when the protests were beginning and after the protests. Some of the key media platforms that are discussed are Facebook, twitter, al Jazeera and other forms of digital journalism that have taken dominance around the globe. The responses of the authorities in these countries are also explained and the consequences that these might have had on the citizens of each specific country.Fosshagens analysis of the Arab spring considers the economic aspect of these protests. He argues that although a few citizens were discontent, majority of the citizens were comfortable and had acceptable living conditions. The protests were therefore a result of a few people who wanted to take power and incited the masses for their own selfish needs. The end result was a decrease in the rate of economic growth in these countries as investors moved to other countries that were considered to be more politically stable. Research objectives and research questions The aim of this research was to determine the relationship between the rate of economic growth and the Arab spring movements. To help us to establishing a credible result, we developed a number of hypotheses to guide us in this process. These formed part of the research questions that the research tried to answer. What was the difference in the rate of the economic growth in the countries before and after the Arab uprising? Is it true that the standards of living of the people decreased after the Arab Spring? Is democracy a factor in the rate of direct or indirect investment in a country? Research design and methodology For this research I used quantitative and qualitative methods for analyzing the impact that the Arab spring had on the economy of Arab countries. The data I used was collected from the financial information of five Arab countries to show the differences in the rate of economic growth before and after the movement. These countries were randomly collected from a list that contained a number of Arab states. To further get an insight into the living conditions I used qualitative methods. This involved administration of interviews to citizens of the sample countries. All of my respondents were obtained from social media platforms but had to agree to undergo this interview live on camera. I was careful to select both male and female respondents and individuals from various economic backgrounds so that I could get a true picture of what was happening in these countries. In the case of financial information, I had a list of questions that I simply filled by examining the changes in the countries’ financial records. These two data collection methods were important as they could enable the answering of the questions that are raised in the hypothesis and we can conclude if they are right or wrong. The participants in this process were assured of the confidentiality of the information that they had shared and that it would only be used for this particular research only. Data and analysis There are various forms of information and statistics that need to be collected to explain how the Arab spring had an effect on Arab countries. These are primary and secondary data. Primary data is important as it will make us know the exact state of the living conditions of people in these countries. The people to be interviewed are obtained from the online interaction platform that enables people from across the globe to share their views and opinions in regards to world affairs. I identified ten people each from my five sample states and engaged them in live online interviews in regards to the living conditions in their countries. They were able to give open answers and it was from these that I obtained the necessary data. I made it clear to them that this information was to be held as confidential and would not be released to third parties other than for the reason it was intended. For secondary data I used various books among the many that have been written on the topic. These were able to provide relevant data such as the effects of the Arab spring on the social, political and economic scenes on the countries. The books were selected based on the reviews by various prominent scholars. To facilitate this research I needed financial information in regards to these countries. I accessed this information from the government websites of the respective countries as the information from these sources are credible and can be trusted. Analysis The following are the results from the research. Table showing the rate of economic growth in the Arab countries Countries 2010 2011 Egypt 5.1% 1.8% Yemen 7.70% 3.1% Tunisia 7.1% 3.6% Syria 3.98% 1.81% Libya 10.6% 3.98% The rates above show the Gross Domestic Product of these Arab countries. it can be noted that there was a decrease in the GDP of all the countries that had undergone the Arab spring. This reduction was significant and resulted in a reduction of the economic status of the countries. Although there are other factors that influence the economy, it can be noted that the most significant change occurred when these events took place. This can be pointed to the fact that most countries were not willing to enter into trading agreements with these countries and those who had existing agreements most probably looked for other sources of goods where they could be assured of a regular supply. This results in less investment in these countries and the level of economic growth reduces. Table showing FDI inflows in the Arab countries before and after the uprising and the number of projects funded by these funds Year Amount of FDI inflow USD(‘000,000) Number of projects 2003 9860 100 2004 11,342 120 2005 30,082 354 2006 35,145 423 2007 37,272 468 2008 47,256 531 2009 53,002 671 2010 64,532 824 2011 27,184 340 2012 37,061 430 The table above shows that in the years leading to the Arab spring there was a steady increase in the amount of foreign investments in the region. Most of the protests began in early 2011 and as a result a lot of foreign investors withheld their funds. This happened across several countries and throughout that year there was a decrease in the number of projects by foreign investors. There are several companies that had planned or had already invested in this region, but due to the uprisings had to withdraw their investments. Dutch company Royal BoskalisWestminster and the Italian port company Condote de Agua had submitted proposals to in the port in Israel. Each had planned investments of over $10, 000,000. They pulled out of the bid stating that the area was a risky investment. Pie chart showing peoples opinion on their living conditions The green section represents the people who feel that there has been a reduction in the rate of living conditions. This was 93% of the sample population. Only 7% of the people tested stated that their living conditions remained the same. This is because of the lack of products and services in the economy. There is also a limited supply of money in the economy and as such they cannot access important goods and services. The end result is that there is a decrease in the living standards of the people. These answer the question that indeed the Arab uprising led to the reduction in the economy of these states. Conclusion The research question was whether the Arab spring had a direct impact on the rate of direct and indirect investments in these countries. To obtain the data required for this research I used qualitative and quantitative methods. These results show that the citizens felt that their living conditions had reduced after the Arab spring movement. This is supported by the literature that is available on the topic. In the future, investments will be affected because investors will be cautious of the political state of these countries. The rate of investments will therefore be much lower than in the period before 2011. It is important for people to note that social unrest does not only solve their political problems but leads to adverse effects in terms of the economy. Bibliography ADI, M.-M. (2014). The usage of social media in the Arab Spring: the potential of media to change political landscapes throughout the Middle East and Africa. FOSSHAGEN, K. (2014). Economic effect of Arab Spring: uprisings, powers, interventions. HOWARD, P. N., & HUSSAIN, M. M. (2013).Democracys fourth wave?: digital media and the Arab Spring. KORANY, B. (2012).Arab spring in Egypt: revolution and beyond. Cairo, American Univ. in Cairo Press. POLLACK, K. M. (2011).The Arab awakening: America and the transformation of the Middle East. Washington, DC, Brookings Institution. Read More