Hope shines on for the Arab spring - IMF

The Arab spring still shines as a "beacon of hope" for citizens across the world, but governments in the region must become more open and the international community has to offer greater market access to the west if there is to be real change – according to the International Monetary Fund Managing Director. In a landmark speech to the Woodrow Wilson International Centre for Scholars, in Washington DC, Christine Lagarde urged nation states and international institutions to "reject the past" in order to redefine the future and create "a new Middle East" that protected human dignity above all else. "The Arab Spring embodies the hopes, the dreams and aspirations of a people yearning for a better way of life," she said. "Yearning for greater freedom, for greater dignity and for a more widespread and fairer distribution of economic opportunities and resources; basic human yearnings.

"Today, a year has passed and the state of play remains uncertain. Spring has turned to autumn, and autumn to winter. People feel uneasy and grow impatient. This is to be expected. Momentous changes of this sort - a new society in the making - are never smooth. They are almost always messy and complicated. But still, I think it is fair to say that the setbacks have been bigger than expected. It has always been clear that each country must find its own path and that the pace of change would vary by country, but few predicted the size of the setbacks or the intensity of the disruptions. And here, I'm thinking especially of the deplorable loss of life in places like Libya, Syria, and Yemen. Such violence against civilians is always a blight on humanity. It pains me deeply to think about it. And now we are moving into the most difficult period of all. We are in the middle of a delicate transition between rejecting the past and defining the future, a key psychological inflexion point. 'Yesterday is but today's memory, and tomorrow is today's dream', wrote the great Lebanese poet Khalil Gibran."

Acknowledging that the post-revolutionary euphoria was now giving way to more practical concerns about human rights, governance and economic growth, Lagarde praised Tunisia for its "smooth and inclusive process of transition" adding: "Just as Tunisia provided the first spark of the Arab spring, so now can it light the path forward for other countries in the region. I remain ever hopeful. Although the journey might take some unpredictable twists and turns and even prove perilous on occasion - the final destination is clear. The Arab spring is still poised to unleash the potential of the Arab people; the potential of a better future for all. That's what matters. And that's what everyone must keep in mind."

The IMF had warned, before the uprisings, of the "ticking time bomb of high youth unemployment in the region" but had not "fully anticipated the consequences of unequal access to opportunities" – said Lagarde. "Let me be frank: we were not paying enough attention to how the fruits of economic growth were being shared," she admitted. "It is now much clearer that more equal societies are associated with greater economic stability and more sustained growth. While each country in the region must find its own path to change, the over-arching economic goals of the Arab spring remain clear - higher growth, growth that creates more jobs and growth that is shared equitably among all strands of society. So how do we get there? How can we turn the dreams of the Arab spring into reality? At this delicate point in the transition, the risks are not only political, but also economic and financial. We are already witnessing an economic slowdown across the oil-importing countries that is pushing up already-high unemployment and aggravating social tensions. We must manage these risks carefully."

Reiterating the need for macroeconomic stability and inclusive growth as the building blocks of new societies to replace the discredited short-term focused regimes of the past, Lagarde advocated more sustainable and long-term solutions. "To date - governments have responded to social pressures by increasing subsidies, wages, and other spending to help lessen the hardship faced by ordinary people," she said. "This was needed for social cohesion in the short term. But it does not come without cost. Fiscal deficits have widened, which raises concerns about sustainability. It pushes up interest rates, which makes it harder for the private sector to get credit to set up or expand businesses and start hiring people.

"So across the region, more targeted social protection systems would help free up funds for spending on areas like infrastructure, education, and health while laying the foundations for inclusive growth. This would be a break from the past when generalised subsidies were used to appease the population, while allowing the privileged to benefit from unfair practices. The government and the private sector must work in harmony. The private sector, including small and medium-sized enterprises, must take on a leading role, to boost investment, productivity, competitiveness and create jobs. But for this to happen, the government must provide an enabling environment. It should put in place modern and transparent institutions to encourage accountability and good governance and ensure fair and transparent rules of the game. It should slay, once and for all, the dragon of corruption. The government must also lay the foundations of a modern and competitive economy by breaking down the vested interests and cosy networks of privilege that prevent the region from reaching its true economic potential. There is simply no other way to create the 50 to 70 million jobs needed for the people joining the labour force and to reduce unemployment over the next decade."

Moving on to the role that the international community should play, she said all nations across the world had a duty to help bring about change in the region. "The international community must listen to the hopeful voices and provide support including through financing and technical assistance," added Lagarde. "The international community must also offer greater market access to countries in the region. If these countries are to modernise and become more competitive, they will need to be given the opportunity to trade more with the rest of the world. To create the needed jobs and inclusive growth, there is simply no other alternative. "Amid a darkening economic outlook and waning confidence, the Arab spring still shines as a bright light and a beacon of hope, a symbol of what can be accomplished. One year on, the region stands at a critical juncture. The transition is going through a rocky patch and the challenges are substantial, but the light remains on. And the region, together with its international partners, must make sure that this light is never extinguished. This is a region that stands at the centre of human civilisation. Names like Carthage and Alexandria and Damascus are forever etched in our collective consciousness. The time has come for the region to live up to its legacy."