Failures – exposed, reflected, considered

Posts Tagged ‘MENA

Chicken or egg: democracy vs economic growth – case Thailand

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With 2011, a wave of unrest descended upon the MENA. What became later known as “Arab Spring“ represented a ragged set of uprisings throughout MENA countries including Tunisia, Egypt, Libya, etc. The vision of those uprisings was but one, at least initially, as it could be heard on every street and square, shouted or screamed from mouths young and old. Freedom. Democracy.

Some of those uprisings turned ugly (civil war in Libya and Syria), others (Tunisia, Egypt) ushered in what many reformers/revolutionaries believed to be a new era.

Freedom, democracy. Of course, those high-pitched and loaded terms are as cliché by now, without much merit nor substance, rallying slogans for disillusioned and ignorant. What people really meant, or needed to mean, was “better life standards,“ “more and secure jobs“ (on social/personal level) and “economic growth“ (on national level).

Another cliché/stereotype associates democracy and economic growth. Many think that those two are interchangeable, i.e. occurrence of one will automatically imply or cause the other. Then there is “modernization theory,” predominant since the late 1950s onward, and which claimed that middle and other aspiring classes created by industrial capitalism would necessarily (and eventually) bring about accountable and democratic governments. Reality is less obvious that this foregone and simplistic conclusion.

Why so? There is an easily spotted pattern, in which democracies usually are among the economically developed countries. However, the paths to democracy are varied. One is tempted to think that lack of economic stability or growth, which implies increasing poverty levels, will trap societies in a vicious political circle of dictatorial reign and economic deterioration. While bonds of poverty cannot be dismissed, they are not inexorable. Countries such as Taiwan, South Korea, Japan, Singapore, Malta and Greece went from utter poverty into spectacular growth, some as much as quadrupling their per capita incomes. Dictatorships bloomed in Taiwan and Singapore during the entire and South Korea during most of this period of drastic economic transition and growth. Only Japan and Malta remained democratic throughout their respective periods of economic growth, and Portugal as well as Greece tattered between democracy and dictatorship, while growing economically.

There is no predictable pattern, but once a democracy is established, its survival depends on a few factors. Foremost among them is the level of economic development.

Let’s have a closer analysis of how a democracy caused an economic depression, with a study of Thailand’s recent history.

In the 1980s and early 1990s, nations from Indonesia to the Philippines embarked on their own democratic transitions, not unlike the 2011 Arab Spring. In Thailand, hundreds of thousands (middle class) came out into the streets of Bangkok in 1992 to bring down a military government. They wanted democracy and freedom. Thailand boasted a large, educated middle class, one of the best-performing economies in the world, and a relatively robust civil society. By the late 1990s, Thailand had held several free elections and passed a reformist constitution that enshrined greater protections for civil liberties and created a wealth of new institutions designed to ensure civil rights.

However, the “reformist“ frenzy started cooling off in the late 1990s, as many leading Thai reformers, who were behind the protests in 1992, backed off. They believed that Thailand had passed a threshold (of transition to democracy and economic growth), and as a result, many NGOs, media watchdogs, and organizations that were instrumental during and in the immediate aftermath of the 1992 uprising closed down. It only helped, with dawn of the Asian financial crisis in 1997, to put many of those idealistic-minded middle-class reformers into unemployment, making it even harder for them to spend time volunteering at organizations dedicated to reforms.

As Thai reformers slowly drifted off, a telecommunications tycoon Thaksin Shinawatra used his fortune to build a political party. He bought up politicians to join his party. To soften the blow and an at the same time trying to appeal to the larger part of the Thai society, the poor, Thaksin initiated a well-thought combination of entrepreneurial inducement and grassroots empowerment projects, including inexpensive health care schemes and loans to villages to start businesses.

In 2001, Thaksin became the elected PM, and showed little love for democracy. He used his power to threaten Thailand’s free media, eviscerate its independent civil service, and launch a campaign against insurgents in the Muslim south. He rewarded political allies and punished political enemies. In 2005, Thaksin was reelected, again with massive support from the poor, and largely thanks to the lackluster opposition of the Thai middle classes, which by then had grown disillusioned with democracy, believing it had delivered only elected autocracy. The reaction was prompt. Another row of street protests in 2006, whereby Thai middle class once again took to streets, hoping to topple the elected (autocratic) government. The result was a military coup of 2006. Thaksin fled into exile.

The military coup triggered an economic meltdown. Thaksin might have damaged the country’s weak democracy, but the military ruined it. It shredded the reformist constitution and set the stage for today’s Thai government, which unleashed massive force against demonstrators who gathered in the streets of Bangkok in spring 2010.

Thaksin is once more back to the country, in a proxy way, via the elections favoring his sister’s party and her as a PM.

How to avoid a similar democracy failure in MENA?  It is essential to create and keep independent government watchdogs, new and independent press outlets. Introduction of government policies to reduce economic inequalities is also vital, allowing an increasing transition from low to middle class. Lastly, while a charismatic (or not so much) leader is a good focal point for rallying reformists, a more important and longer-term reform is to induce a knowledge economy and infrastructure facilitating foreign investment and (especially foreign-owed) property rights/protection.

Written by Hayk

February 20, 2013 at 9:19 am

Suspending operations of the first coworking community in MENA

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You might remember from my earlier post that I started the first coworking community space in Egypt and the MENA region (with exception of Israel), Elegua, back in August 2009.

Ever since, we have been struggling to break-even, all the more given the unfamiliarity of the market with the concept and with many semi-alternatives such as Starbucks-style coffee shops with moderate Internet connections/quality.

Initially, our agreement was – I was doing it with an Egyptian friend of mine and a partner – that I will take care of the business side and he will be in charge of the logistical and day-to-day management of the company. It took few weeks for me to realize that, however professional and hard-working my friend was, he was not committing the time or brain work required to the company, especially considering the initial stage of our startup and the fact that we did not seek any venture capital, but decided to boostrap. We were both employed full time and Elegua was to be our side project, which we wanted to grow.

Our first stumbling block was to find a comfortable and affordable space in the central Cairo, or close to where many foreigners were living – our target were mostly young, class A/B foreigners, students, young entrepreneurs, techies, geeks. Anyone with a laptop, a need for high-speed Internet connection, comfortable and relaxing working environment and willingness to network with like-minded individuals was qualified. All the more so as there was no real competition, besides the coffee shops with slow and unreliable Internet connections and few Internet cafes (in downtown Cairo there are quite few of them but they all look ramshackle and none allows flexibility of using your own laptop/WiFi).

We did not conduct a proper market research. Instead, we relied on my gut feeling and my partner’s knowledge of Egyptian market and our collective perception that a co-working space would not even need to be sold out. It would be so intuitively appealing that everyone would go for it.

What were the results 7 months later?

Modest revenues (not close to break-even). Many people loved the idea, but not many were ready to brave the Cairo traffic in order to reach the place.We kept on hiring and firing few employees as none were qualified enough- due to lack of time we opted for friends and connections of friends: high turnover. Elegua fan page on Facebook has 200+ fans which failed to convert.

In brief, a failure, but a failure with lots of valuable lessons for me, and surely for my partner.

The main factors in our failure were (my view):

  1. Choice of partner/co-founder (my partner was more ready to commit in words/ideas but not in actions as it became eventually clear)
  2. Time/effort commitment (both I and my partner treated Elegua as a side project and did not allocate enough time and effort for its growth)
  3. The place (the choice of the place was crucial for such a business – though it was central but still not enough to attract the potentially interested)
  4. Missing market data (we did not realize at the time how popular, reliable and affordable the Internet USB sticks became – many preferred to sit at any chosen place and plug-in a USB stick rather then to displace themselves to a coworking space)

Maybe we were to much in a hurry and could have been a bit more patient and perseverant. But maybe not.  The time will show. In any case, I felt this was the right time for such a decision and as much as it was my original idea and closing it, even temporarily is not a joyous occasion, we decided to take this route.

I am moving on with my other project – more about that later – and will perhaps eventually reopen Elegua but with different offerings, another partner – in Egypt any company has to be 51% owned by an Egyptian, and I am not Egyptian – and in a different part of the city!

Written by Hayk

April 11, 2010 at 8:48 pm