Alexonomic's Outlook for 2013: South America

Yes, the Brazilians are still the centerpiece of South American economic growth, yet there are competitors arising. While Venezuala faces a period of uncertainty with the potential replacement of Hugo Chavez, Argentina offers a renewed challenge to the Falklands under Cristina Fernández de Kirchner.

Alexonomic's Outlook for 2013: Europe

Europe reminds many historians of conditions during the 1930s. Economically depressed countries are embracing extremist political parties with racial divide, riots, and anger as the symptoms. Currently, most of the population is aware of the European debt crisis. Although a serious as the economic crisis is, the side effects of lower economic output can be more serious.

Americans and their Guns

To stray from the Predictions of 2013 series, I did an infographic of the gun control debate raging in the US, along with some statistics. The objectives of Obama gun control rules come plainly from the White House publication on the topic. As one can see, the proposed regulations are quite practical.

Alexonomics' Outlook for 2013: Africa

Egypt has often been the focus of news in Africa as of late. The removal of Mubarak and election of Mohammed Morsi has proven to be an interesting turn of events, but the excitement is far from over. Morsi symbolically removed ties from the Muslim Brotherhood, but that move hardly removes the influence the party has on the President.

A guide to Environmental Economics

Often, articles will be conclusions with a few supporting facts that will often sway the reader. I find this problematic for two reasons. First, the reader does not have the chance to fully understand the topic because no background is given. Secondly, the reader doesn't really have an opportunity to disagree with the writer's conclusion if the reader has little to no knowledge of the topic.

Tuesday 30 July 2013

The India Series: Look Both Ways

Tacitus was a senator and historian of Rome which spent most of his career under the Emperor Domitian. Often, Tacitus would write his histories with a distinct distaste for politics due to his exposure to corruption, and is quoted "The more corrupt the state, the more numerous the laws".

If one can associate numerous laws with a rather baffling large bureaucracy that has been ranked the worst in Asia, then according to Mark Twain India has a corruption issue. Indians seem to agree, as 75% of Indians has said that corruption has increased in the last two years in a report by Transparency International. Additionally, 47% of Indians felt corruption was a serious problem while 75% stated that the police were affected by corruption.


To turn the statistic into harsh reality, an anecdote is needed. Bihar,a state in northern India with five billion dollars to be invested in the power sector, has come under scrutiny for their mid day meal program. Basically, a program provides 1.2 million students in government run schools with a hot meal everyday. Twenty three children have died eating contaminated food from the program, which is a result of corruption according to the convenor of Right to Education forum Ambrish Rai - which is one of the NGO's working in the area. Rai stated that the southern states do a far better job at administering the program, but in the north the situation is "pathetic":

"Children are getting low quality and insufficient food; hence there is lack of nutrition. Corruption is involved in the delivery system. Fake enrolments are being done to embezzle money. These rackets are killing this very important scheme, and the main reason is lack of guidelines and institutionalisation,"

Indian scandals are not a rarity. One article lists 25 major corruption scandals from 1948 till the present in India. Seven have occurred in the last two years alone. The Lokayukta, which is an anti corruption agency in India, had 11,153 allegations of corruption from 1981 till 2006 finding only 57 offences which were of consequence. Although recently the Lokayukta caught a clerk accepting a $120 bribe, the Lokayukta has a rather dismal record of slowing corruption. In fact, there is an entire site devoted to corruption in India, called Corruption in India, which lists stories everyday showing less than upstanding conduct portrayed by Indians. 
An article in the Time of India gave some recommendations to fix bureaucracy such as linking
compensation to competence, subjectivity in appraisal process, and fixed terms for bureaucrats.
The analogy of comparing India to a one way street that is necessary to look both ways is solidified by the economic system. Although foreign investment is stalled in the one way rules and regulations of Indian bureaucracy; should one look the other way and offer a bribe, business can operate a fair bit more efficiently. An interview by NPR in 2010 of Mr. Singh stated the depravity of the situation. Mr. Singh began a telphone/internet business hiring four people, and stated he had to bribe 10 - 15 people to gain possession of the proper licenses to begin his company. The case is not held to just small business', but to large corporations such as Walmart. 

Rema Hanna an Economist at Harvard, stated that in India it takes 30 days to begin a business, as opposed to 6 in the United States, while mere minutes in Estonia. Additionally, Hanna stated that bribery may be the only recipe for growth in India, as it may be the only method to speed along business to counter the large amount of paperwork. To counter corruption, the OECD will hold a seminar in India, although succeeding in slowing the rise of corrupt bureaucrats will take commitment and be no easy task as India has already not just accepted corruption, but institutionalized it. 

There may be a street to cross in India that states traffic is only coming from one direction, but it is wise to look the other way. Most likely, there is someone going the wrong way. 




Sunday 28 July 2013

The India Series: A One Way Street

This blog began the India Series with the saying  India can best be described as the place where you need to look both ways before crossing a one way street. This post looking at the broad economy of India will continue with this theme. 

Economically, India belongs to a group of nations known by the acronym BRIC. The acronym stands for Brazil, Russia, India and China; four nations that are emerging on the international scene as global economic powers. A one way street economy has emerged, as Indian foreign investment is slowly drying up due to political wrangling resulting in deteriorating infrastructure. Definitionally, this blog will state a one way street in terms of foreign investment means following the long bureaucratic rules of Indian government without anyway around.
Retail and Agriculture still leads to Indian economy in terms of percentage of GDP. Overall, 2013 has been a rough year for the Indian economy as growth has fallen in the banking, oil/gas, and auto sector and unexpectedly, the property sector. The Indian economy is predicted to hit a decade low of 5% GDP growth , as the 2011/2012 Industrial Sector saw a growth of only 2.9% opposed to 8.2% in 2010/2011.  According to the Indian Central Statistics Office (CSO), agricultural, manufacturing industries will both drop in terms of growth. In addition, the services sector including finance, insurance, real estate and business services are expected to grow 8.6% as opposed to 11.7% the previous year. 

Per Capita Income is set to be $1163 in 2012/2013, a nine percentage points above last years $1042. Coal, crude and oil production are all supposed to fall during the 2012/2013 year in comparison to the previous year . India has a trade deficit that is deepening as exports have fallen while imports have grown with the need for more petroleum becoming ever more present. Inflation is around 6-7% as per numbers from January 2013. Additionally, as this blog has stated before Indian foreign investment has declined. 
Problematically, India has not improved its infrastructure to foster continual economic growth. This was explained by G P Hinduja, owner of truck maker Ashok Leyland, stating that India could have capitalized on its advantage over China being a relatively large English speaking country, but the infrastructure has failed to foster proper growth conditions. India is now ranked lower than all the BRIC nations in terms of foreign investment. 

Infrastructure is failing as India already had a few blackouts that had grabbed international media attention. More than half the population of India suffers from unreliable power sources, something that Nobel Prize winning Amartya Sen has stated is detrimental to economical development:

Unlike India, China did not miss the huge lesson of Asian economic development, about the economic returns that come from bettering human lives, especially at the bottom of the socioeconomic pyramid.

Sen is not mistaken, as improving the plight of the bottom of India's population will need to be done to spur development. For foreign investors, it is a one way street as they must comply with the elite and political rules to conduct business in the country. 


Visit us on facebook!


Wednesday 24 July 2013

Video Blog St. Petersburg


Alexonomic's first video blog in St. Petersburg. The India Series is on hold until a proper internet connection can be found.




Sunday 21 July 2013

Entrepreneurial Estonia

Tallinn is not exactly on the list of major cities in the world, yet it is a word being repeated in the technological startup community. As the capital of Estonia, Tallinn continues to offer entrepreneurs quick and easy access to beginning their business with an easy to use online bureaucracy. For example, it takes only about five minutes to register one's company.

Skype is probably the greatest example of Tallinn technological success, and some reports have stated that Estonia has the most start-ups per person not only in Europe, but the world. This is quite the bold statement for a country of 1.3 million people. Other companies in the region are Zerply (a professsional networking service for creative minds), ZeroTurnaround (tools for Java programmers) or GrabCAD (a service meant for mechanical engineers). Start-up competitions such as Garage48 offer hackathons to encourage continual development.

This information was inspired by Forbes.
















Estonia has constantly been invaded since the Middle Ages. Geographically, it is a gateway between the West and Eastern countries and acts as an important port. Once the property of the Germanic order of Teutonic Knights who bought the property from the Danish, the country declared freedom in the 1920s, only to be invaded by the Soviet empire, then the Nazi's, and then the Soviets again. Unfortunately, the Soviet occupation resulted in thousands of Estonians being sent to Gulags, or leaving their own country because of the occupation. However, in 1988 the country declared independence.

As a result, the Estonian government had to reinvent their bureaucracy cheaply and decided to us information technology. The decision along with support for free higher education has resulted in a more educated technology savvy society. With tax existing for corporations only on their dividends, and the governmental fee to corporate can be paid at a later date, more start-ups are attracted to the country. In additional, a strong community of start-up organizations such as the Estonian Development Fund offer to support to entrepreneurs. At Tallinn University a start-up hub entitled Technopol houses 150 companies while accelerator programs like Gamefounders exist.

Unfortunately, size does matter for companies, as the population of 1.3 million means companies must immediately think international when looking for customers. Additionally, once companies grow they usually have to look abroad for new talent.

However, Estonia is a healthy example of a country that once was under the Iron Curtain in to a capitalistic success story. The international community should take notice of the more efficient utilizing of IT by the bureaucracy of Estonia, and apply the example. As the last Russian troops left in 1994, Estonia has quickly created a strong unique technological niche that hopefully will continue to remain successful.  

Saturday 20 July 2013

An Introduction to the India Series

India has been classified as a BRIC nation, a term coined by Goldman Sachs. This term puts India at a similar industrialization pace as China, Brazil and Russia. However, India has many hurdles to jump over before it can convince this writer that the relatively rosy economic predictions concerning India will occur.

While this writer was in India, four cities were visited. These are Mumbai, Delhi, Chennai and Bangalore. As a result, do not be surprised if this series mentions these cities a few times more than others.

India has crumbling infrastructure, massive corruption, and badly seeks some sort of unity. For example, Chennai speaks more Tamil while Mumbai speaks Hindi. If one utters a word of Hindi in Chennai the locals might not even respond even if they know the language, they just prefer and expect fellow Indians to know Tamil. This cannot continue for the country to achieve the growth prophesied. Additionally, infrastructure of cities is in dire shape. While in Bangalore, one often has to hop over open sewer drains while they walk along the sidewalks. Lastly, corruption in the country is not just witnessed in the political system, but also in other areas such as the IPL. India’s cricket league had a major scandal involving match fixing.



Lastly, should one wish to see true capitalism in force, India is the place to go. The country needs more social security nets, which admittedly is very difficult to administer with such a large population.

Although many negatives have been mentioned, India has far more positives that reveals why investment banks such as Goldman Sachs see such potential. Citizens of India are hardworking individuals, and fairly accepting of new ideas. With strong family systems in place to train the next generation, India should ignore some Western ideals which are constantly portrayed by Indian media.

A friend of this writer once stated “India can best be described as the place where you need to look both ways before crossing a one way street”. The statement is quite true, as readers will see as the India Series begins. 

Thursday 18 July 2013

Alexonomics Outlook for 2013: North America

Some of the same words used by this blog to describe the Middle East can be used to describe the United States of America. Incessant wrangling would certainly be a well fitting pair of words to describe the American Congress at this point in time.

The United States has the largest economy in the world, its GDP more than double that of the second place China. Compared to January, the unemployment rate has fallen from 7.9 to 7.6, while the average hourly earnings have increased from 23.78 to 24.01, as reported by the American Bureau of Labour Statistics. Positive news has been reported lately, specifically in the corporate world. After tax corporate earnings were almost $2 trillion in 2012 led by ExxonMobil, Apple and Chevron. In addition, the banking and housing industries have both rebounded as home sales went to levels not seen since 2006 while bank failures have dropped to 51 in 2012 which is a third of what it was in 2010.  An opinion piece in the Telegraph recently stated the US economy has soared, which should continue as the US is home to 47% of innovators.  This trend should continue as the United States is home to 19 of the world's top 25 Universities, and despite demographic worries, Wells Fargo states that the US will have its percentage of young working people at 42% between 2000 and 2050 compared to China, Europe and Japanese declines anywhere between 10% and 40%. In addition, only 25.4% of Americans will be 60 or older by 2040, lower than projections in Germany, China, and Japan.

In addition to this, the United States is on the road to energy independence through the extraction of natural gas, now the world's largest producer. The natural gas explosion has been fuelled through the chemical process  of fracking, which is an unconventional form of extraction. Basically, natural gas is trapped by pumping fluid into a wellbore causing shale rock strata to create a crack, or fracture. The crack seals and traps the gas for easier extraction as the oil and gas flows to the surface.

Although the fracking industry is estimated to hold around 1.7 million jobs and projected to create a million more, there is a serious debate on whether the activity should be allowed. Fracking began with the the passage of legislation known as the Halliburton Loophole, which exempted hydraulic fracking from any regulatory supervision by the EPA under the Safe Drinking Water Act. This was a result of Dick Cheney, who used to work at Halliburton, being appointed to the Energy Task Force and lobbying for lessened regulation on the industry. This law was passed in 2005, even after a 2004 EPA report stated "fracturing fluids may pose a threat to drinking water long after drilling operations are completed".

The anti-fracking crowd's concerns should not be ignored. Water is essential to fracking, as one well uses around 3 to 8 million gallons of water during the lifetime of the well. Besides the heavy water usage, toxic chemicals such as antifreeze, hydraulic acid, are pumped underground and as some anti-fracking groups claim - leak into the water supply. These claims are heavily disputed by natural gas producers. The fluid that is pumped into the ground is isolated by steel and concrete from the earth, as well as the fracking takes place well below groundwater as the fracking takes place 2500-3000 meters below the surface compared to groundwater - which is 300 meters at most below the surface.

Most problematic about fracking is the massive amount of water used. Of the water used, only 60% can be used again for fracking fluid, and eventually is too polluted to use at all. Additionally, a report released by the Democrat party stated that 750 chemicals used in the process, 29 are carcinogens while an amount of fracking fluid remains in the ground after the well is abandoned. 

This is what the anti-fracking groups claim occurs.
However, Mr. Obama has never fully addressed his issue, echoing supporter's of fracking sentiments that there is 100 years worth of shale gas ready for exploitation. This statement most likely is not true, as the gas wells requiring the least capital have already been exploited and to extract the remaining reserves most likely will cost more than its worth. This is exemplified by Chesapeake which has been borrowing to fund its rather unprofitable ventures.

Wall Street begs to differ. Oil production in the US hasn't been this high since 1992, and has reduced reliance on OPEC as the United States has cut their oil imports by 37% from January 2008. Ed Morse, global head of commodities research at Citigroup stated that OPEC will find its survival challenging with the US competition.

With the heat of the debate increasing, the topic of fracking will continue to make headlines over the next year as the United States battles between energy independence and potential pollution of their water supply.

Although Americans are slowly recovering from the recession, many are not happy about their gridlocked political situation. The Republicans and Democrats simply refuse to work together, causing the markets to react sternly in the form of debt downgrades. This issue has been widely talked about not just on this blog, but on many different media outlets. For America to begin to have a functioning government, the Republicans and Democrats must find common ground and learn to compromise for the betterment of the United States, not their own political party ambitions. Already, New Jersey governor Chris Christie has recognized this fact and has begun to offer an olive branch to the other side. Hopefully, this mentality will be copied or else America will continue to rack up budget deficits while increasing their $16 trillion debt.

Finance Minister Flaherty of Canada is looking
towards a balanced budget by 2015.
Contrarily, America's neighbours to the north have had better success in debt management, at least federally. Finance Minister Jim Flaherty has a plan to balance the budget by 2015, and so far looks on path to complete the goal. Thus far, Canada has been looked at by the rest of the world as a model for keeping a strong economic course during the global recession spurred by the financial crisis in 2008/2009. Comparatively, Canadian economic confidence is higher than the Americans and British according to an Angus Reid Opinion poll.  The Royal Bank of Canada (RBC) has raised their estimate of Canadian growth outlook to 1.9% for 2013 and 2.9% in 2014 thanks to the improvement of corporate balance sheets along with stronger trade. This is in agreement with the IMF, which has upgraded Canadian growth to 1.7% in 2013, but states 2014 growth will be 2.2%, well under the RBC forecast.

However, problems still lie on the horizon for the Canadian economy. It was only in April that many more negative indicators reared their ugly heads, as Statistics Canada reported that building permits for residential construction fell by 7.2% along with slow job creation and predicted higher unemployment.  It was only in January that former Bank Of Canada governor Mark Carney admitted along with Prime Minister Stephen Harper that government economic forecasts were too rosy.  The blame was placed on slow global economic growth along with a cooling housing market. Additionally, Scandinavian countries replaced Canada as the model for growth along with Australia and New Zealand. 

Mr. Stephen Poloz, the new Bank of Canada governor stated that Canada had four economic hurdles in their recent report.  First, stronger American private demand such as the recovery in the American housing market which could create stronger residential investment and higher interest rates, which may force Canada to reciprocate by raising their own interest rates. In addition to external threats, slow BRIC growth in nations such as China and Brazil will have an influence to Canada, most likely through weaker export sales and lower commodity prices. Europe most likely will continue to struggle economically, as the largest threat is contagion to the financial markets spreading. Physically, Canada's risk to European debt is little, but theoretically the risk of fear spreading could cause great damage in borrowing markets. Lastly, domestic debt continues to remain high. Although lower than previous years, Canadian household debt continues to be a problem that risks the Canadian Me\economy.

One economic event that shall be watched is the Keystone XL pipeline, which TransCanada Corp's CEO Russ Girling stated that it is unlikely construction will begin by 2015 as the company awaits a decision from the US government.  The pipeline is expected to cost around $5.3 billion and take two years to build.

Politically, Canada is relatively stable under the Conservative government led by Stephen Harper. Elections will not occur until 2015. Although some scandals have occurred and questions raised about different expenditures such as the F-35, the conservative government of Canada has set a relatively steady course rejecting rash decisions and focusing on slow thoughtful decisions. Politically, Canada is almost the opposite of the US as the majority government makes decisions that can be implemented. Although the liberals led under the popular Justin Trudeau and NDP argue differently, they will have to wait until 2015 to prove differently.

To the south of the United States lies Mexico, a country grappling with not fulfilling expected growth rates. GDP grew .8% in the first quarter of 2013, less than the 1.1% analyst estimate. Home building has fallen in Mexico while Mexican public companies reported less than expected sales in the first quarter of 2013. Although the OECD reported at the end of 2012 that the Mexican economy will grow 3.3% in 2013 slowing from 2012's growth of 3.8%, politics may prevent this.

Can Mexico enforce reform?
While American internal growth may hurt Mexican exports to the United States, President Enrique Pena Nieto has attempted to earn favour with the Obama administration by putting through legislation that would increase bank lending and competitive behaviour. This may be tough, as Mr. Pena's own ruling party is not exempt from mischievous action. Additionally, Mr. Pena plans on reforming telecommunications, education, and energy; industries that will oppose any sort of change. Exemplifying this is the PRI oil workers union, which means Mr. Pena will come within confrontation of his own party. Mexico long has had problems with governmental corruption and badly needed reform. The question is how possible the reform will actually be when it comes to implementation.

In central America, many analysts are calling Panama the Singapore of the Americas. With the IMF expecting growth averaged out around 6% over 5 years, it is known how large a part the originally American built canal is playing in the growth of Panama. However, the Panama government's business friendly rules have created foreign investment worth around 9% of total GDP. An expansion worth $6 billion of the canal will be complete in 2014. However, wealth does not solve problems. Education and average income of many aboriginal populations both remain low. Additionally, President Martinelli has been accused of meddling with the courts while asking for American help in spying on democratic opponents. The most problematic hazard of Panama is that the Panama Canal Authority could be nationalized for cash, as cautioned by the story of Pemex in Mexico.

This blog has only mentioned four countries, and could mention other nations such as Cuba or Nicaragua. However, due to the fact that this is a continental report, the more outstanding nations in each continent are mentioned. Below, the following should be looked at in the future within the boundaries of North America:

  • American political gridlock will have to end for the United States to have a successful existence. The country is not in as bad financial shape as many have suggested, but the continual disregard for compromise by both Republicans and Democrats could prove to be detrimental. 
  • The Keystone XL pipeline will become an increasingly important issue as Canada looks to extend their energy outlook. 
  • With regards to fracking, it will become a more debated topic not just in America and Canada, but across the world. The question of whether the environmental challenges that may occur because of hydraulic fracking are worth extraction of natural gas to achieve energy independence by the United States will become one of the larger questions America asks in the future.
  • Panama will extend their canal successfully and become a more important nation in international commerce as continual cross ocean trade continues. 
North America will continue to lead the world in both innovation and economic growth, but only if the United States' government decides to create a bipartisan relationship between the Republicans and Democrats. It is hopeful this occurs, as no other country is prepared to take over the role of global hegemony from the United States. 






Monday 15 July 2013

Alexonomics Outlook for 2013: The Middle East

Continual controversy, timeless dispute, uninterrupted dissension, endless altercations, incessant wrangling.


The IMF report can be found here.
All these two word utterances could describe the Middle East. However, the Middle Eastern economy still continues, and offers growth opportunities in 2013 and beyond. Although many Middle Eastern countries have brought in large amounts of wealth from oil exports, the failure of properly investing in infrastructure and institutions have led to stunted economic growth.

There are few countries in the region that have broken the aforementioned trend. One of these countries is Israel, where growth has been relatively unaffected by the financial crisis of 2008, as the OECD predicts 2.9% growth in 2013 with 3.9% growth in 2014, while HSBC pegged Israel's 2013 growth at 3.3%, closer to the Israeli government's own prediction of 3.5%. Standard and Poor's stated that “the Israeli economy continues to generate solid economic growth" while keeping their credit rating at an envious A+, while Moody's kept their credit rating of Israel at A1. 

The bond rating agencies and positive growth predictions are well founded. Israel has a GDP of $250 billion, or around $32000 per capita while their Debt/GDP ratio is below the OECD average of 78%. One of the leading reasons for the country's growth is their technology industry, which recently added Lockheed Martin to the many companies in the sector. A 2011 study by Ethosia estimated that the Israel tech industry employs almost 200 000, with that number most likely currently higher. Israel Aerospace Industries is the largest tech employer, with two defense companies follows (Elbit Systems and Rafael Advanced Systems), which HP and Intil both have more than 5000 employees, and IBM employing around 2000. Software companies lead the way, while hardware, Internet and telecommunication companies all have flourished. Additionally, it should be recognized that women occupy almost 40% of  tech positions, a rare statistic for a Middle Eastern country. 

To pinpoint a few interesting developments in Israel's tech valley was President Obama, who met with 7 different startups. One company created an exoskeleten suit that allowed a paraplegic to walk around a room while another company pitched a snake like device with a camera attached that could potentially find humans quicker in disaster zones.  The Israeli Tech industry is living up to its nickname, the Silicon Wadi, as it continues to grow. 

The future may be brighter for Israel not just economically, but geopolitically as well. With Iranian elections ending with the election of Mr. Hassan Rouhani, who has declared that Iran "will also reconcile with the world" and plans on seeking "constructive interaction with the world". Israel is not convinced, as Prime Minister Netanyahu has been cautious if not negative about Mr. Ahmadinejad's replacement. An opinionated article in the Jerusalem Post rejected the notion that Mr. Rouhani is a moderate, stating that "Hassan Rouhani is a cunning terrorist mastermind", who has been quoted naming Israel as a terrorist state and Hezbollah a legitimate political entity. 


However, despite the negativity surrounding Rouhani, there are some good signs. Mr. Rouhani has said he will attempt to end infighting between the legislative and executive branches of government, calling for more cooperation to resolve the issues surrounding Iran. The call for cooperation is well backed by precedent, as Mr. Rouhani has been noted for building relationships between different Iranian political factions. In addition to this, Mr. Rouhani has called for more freedom for the Iranian people in terms of internet access, more freedom for journalists , and less interference from police and clergy members in personal lives of Iranian citizens. 

This blog has covered Iranian issues before, going through the history of the country to note the reason behind tensions with the West and also how the current sanctions from the West have created economic problems such as inflation. In 2012 the Iranian economy contracted almost a full percentage point and 2013 saw additional contraction of 1.3%, while some analysts have pegged inflation at 25%. Besides Western sanctions reacting to the nuclear stalemate that have cut crude oil production to less than half of peak produiction, Mr. Ahmadinejad attempted to save the Iranian government $100 billion by ending subsidizations of gas, wheat, rice and other staple commodities which created obviously higher prices. 

The economic problems will be the chief concern for Mr. Rouhani when he officially takes on the Presidency.  With 14% unemployment, Mr. Rouhani has admitted that improving Iran's lacklustre economic performance will take time.  This is well known fact to most Iranians as a businessman stated that the "supermarkets will soon look like they did in the war years. The colour of the shelves is fading. Foreign products are disappearing". This is almost a direct result of the subsidization cuts, which has hurt the lower and middle class. Already, Iran's parliament has discussed bringing the subsidization policies back. In addition to this, the subsidization of fuel was key to the manufacturing industry, which has been hurt with energy bills two or three times the usual cost. It is also interesting to note that Iran has stated India can use rupees to pay for an outstanding $1.53 billion debt in oil.. 

With Israel calling for increased sanctions and not ruling out a military option, Mr. Rouhani will face an immense challenge attempting to fix the Iranian economy. External geopolitical pressures over Iran's nuclear program will likely be the determinant of internal economic growth. Contrarily, neighbouring Iraq is painting a different picture of their future. Although violence has been getting worse as the UN stated almost 700 Iraq's were killed in May 2013 alone, some solid signs of economic improvement have occurred in Iraq. 


The main challenge for the Middle East is curbing violence.
Citigroup has launched a physical presence in the country looking to dip their toes into oil profits. Although the country still has violent problems along with government corruption, the economy did jump 8.4% in 2012 and is reported by the IMF to improve 9% in 2013. Although this most likely can be attributed to the large amount of oil produced, other signs are pointing to a positive business environment. Iraq's credit is 9% of GDP compared to 55% average to the middle east. Banks are attracted to the lending rates of around 12%, and the demand for physical expansion as there is only one ATM for every 100 000 Iraqi's and 900 bank branches in the whole of Iraq. Chapter Seven restrictions which did not allow the country to deal with all the countries of the world, will be lifted. Chapter Seven sanctions caused all Iraqi assets in international banks to be frozen. 

Obviously, the major risk for foreign investment is violence. However, this risk can be mitigated as over 90% of violence occurs in seven of the 18 provinces. The other problem is corruption, as the country has been compared with North Korea and Afghanistan in terms of corruption. It is noticeable that these problems are relatively non-existent in Kurdish northern Iraq. Kurdistan has raised per capita incomes while keeping peace and has discovered oil reserves around 45 billion barrels. It is possible that Kurdish oil production will reach a million barrels per day by 2015. Constant talk of independence and squabbles with Baghdad are the only problems for the province, which do have legitimate chance of sparking into a conflict.  

Afghanistan has responded similarly after American invasion. The World Bank has reported that 2012 saw 11% growth in Afghanistan, due to an exceptionally good harvest. This slowed inflation and Afghanistan is almost at food self sufficiency. However, the country faces momentous security concerns with the Americans vacating the country and the constant threat of the Taliban regaining control of the country through violent means. Elections in 2014 will most likely be accompanied by violence as Mr. Karzai is constitutionally barred from entering a third term in office. It is recognized that the Afghan National Security Forces is quite competent and has the ability to control the major cities and protect citizens against insurgency due to the enriched training received by NATO forces. For now, Afghanistan must concentrate on creating a more peaceful country by mitigating the Taliban threat.
Peace is not a term used much in Syria right now. The economy is the not exactly a major concern for Syria right now, as a violent multi faction civil war has caused The Economist to entitle an article on Syria "The death of a country".  The Arab Spring protestors were attacked by the Assad regime with tanks, which sparked the conflict. As jihadists enter the country, it is hard to differentiate the different sides to the conflict. Economically, a Syrian economist predicted a decline by 10-20% in 2011 GDP while the Syrian pound has fallen from 50 pounds to the dollar to more than 200. Prices are rising while Syrian currency is almost worthless. In 2012 foreign trade fell by 97% with GDP dropping 30% in 2012 and another 10% most likely in 2013.  

Syria's economic problems can be associated with the civil war, a war in which the world has suspected chemical weapons being used while millions are displaced. Personal stories such as a young 14 year old being brutally assaulted and murdered for making a small joke have horrified the world, which has caused the United States to take notice. While the US wishes to enforce a no fly zone, the Russians continue to supply the Syrian government with weaponry advocating for no involvement from the rest of the world. 

Even as the opposition political group elects a new leader Ahmad Jarba, there is little belief that this conflict will end soon. Mr. Assad is too strong to simply lose the war, but too weak to defeat the many different types of rebels. Hezbollah, al-Qaeda, the Taliban all have members in Syria, along with other rebels with different beliefs. Disunity of the rebel forces will ultimately extend the violence in the country, and most likely increased concern by the international community could cause intervention. 

No stranger to international attention is Saudi Arabia, which recently made headlines after banning a man from an event for being reportedly too handsome. As the second half of 2013 looms, Saudi growth has become more moderate. A large stimulus package given by the Saudi regime stopped any Arab Spring action, as the economy is expected to grow around 4% in 2013. The Arab Spring has been profitable for the Saudi's, as the end in Libyan production along with turmoil in oil markets couple with sanctions in Iran have increased demand for Saudi crude. 

Policy wise, the government has created a program which penalizes companies should they decide not to hire enough Saudi nationals. Construction fueled by the stimulus should accelerate growth, as economically the country is doing fine. The greatest complaint is the lack of woman's rights in the country, which is slowly being liberalized, admittedly at a snail's pace. The largest concern is succession, as there is controversy and speculation on who will rule the thrown when King Abdullah ends his reign. 

There are many more countries that can be talked about in the Middle East, such as the rise of Qatar or Kuwait.  The main issues surrounding the Middle East have been covered in this article, which give rise to the following assertions: 

  • Israel and Iran will enter into a new uneasy and suspicious relationship as Mr. Rouhani enters the Presidency. Iran will seek to end their economic strife which most likely will cause some latitude in the nuclear talks, hopefully stagnating any military option in the region. 
  • Iraqi growth will surprise the world as sectarian violence becomes less common in a majority of the country and more international corporations decide to test the Iraqi economic markets to profit off of oil revenues. 
  • Afghanistan and Saudi Arabia will see increased scrutiny on who will take over from their respective leaders, King Abdullah and Mr. Karzai. Election in Afghanistan most likely will be fraught with violence while internal politics will govern the succession of the Saudi King.
Economically, Israel most likely is the safest bet in the region as the country offers the most freedom and security in the region. External threats are problematic, but none can doubt the economic opportunity in the country. Overall, Middle Eastern violence has been sensationalized by the media which is quite unfortunate as there are many other issues to look at besides car bombings. Hopefully, the world will realize there is opportunity in the Middle East as it is filled with people looking for a peaceful existence, like the rest of the world.