Group items tagged

Analysts said it appeared the new demands stemmed from certain long-term investments, which were previously exempt from zakat, now being deemed liable for the tax

Some bankers said privately they worried the demands might essentially be a money grab by the government, which wants to raise new revenues to cover a big budget deficit caused by low oil prices

“They changed arbitrarily how they assess the tax base,”

“You can’t do this type of thing if you want to attract foreign investment -- these are the things that frustrate people.”

Most of the world's countries have VAT, and Saudi Arabia introduced its own on January 1, 2018, as a way to source new income other than oil revenues. The US does not have a VAT; it uses a sales-tax system instead.

The Saudi government is the country's largest employer, and the "state's wage bill accounts for about half the budget,"

The way for Turkey to achieve a sustainable growth rate by financing its current deficit is to make the country attractive for direct foreign investment. That in turn requires Turkey to have a properly functioning legal system, properly and justly operating independent institutions, good governance, a stable democracy and a free market — in short, to be predictable. Authoritarian and arbitrarily governed countries first lose their predictability.

The same situation has emerged concerning the Koc Group, which has been subjected to one tax penalty after another. The Koc Group, the largest capital group of Turkey, attracted the ire of Erdogan during the June 2013 Gezi Park protests when the nearby Divan Hotel it owns opened its doors to those escaping the pepper gas and brutality of the police. Erdogan perceived that as a challenge and accused the Koc Group of being accomplices to the protesters. Alluding to the group June 17, he actually said, "We know those who cooperate with terrorists and accommodate them in their hotels. We will settle accounts on this. Now we have an interest lobby emerging.” We all discovered how that account was be settled when tax audit teams from the Ministry of Finance accompanied by police raided the Koc companies.

Mustafa Boydak, the president of the Chamber of Industry of the Anatolian industrial city of Kayseri and a well-known conservative industrialist, denounced the tax audit of the Koc Group and called on the government "not to become party to the business world and not to treat the companies that carry Turkey as an enemy.” The government clearly didn’t appreciate Boydak’s call and responded with a tax audit of the Boydak Holding group of companies.

Some public corporations led by Turkish Airlines and private companies with ties to the government withdrew 900 million lira ($391 million) of deposits from Bank Asya, recognized as the Gulen movement's bank, on the same day without waiting for the deposits to mature, and put the bank in a tough bind. Bank Asya was saved from going under when companies and businessmen affiliated with Gulen deposited the same amount of money.

The first allegations of the AKP government using tax penalties as a political weapon came out in 2008, when the Dogan Media Group was openly targeted by Erdogan and fined $1.6 billion

Bureaucracy, in short, is all the fundamental building blocks of civilisation some people have the luxury of taking for granted.

These days, a westerner can hardly imagine how complicated the world would be without bureaucracy. But try to picture it: living without an address, without a social security number. Could you open a bank account? No. Start a business? No way. Register to vote? Never.And yet, about four billion people around the world have no address.

imagine having no proper tax authority. Without one, a government loses out on billions of dollars of potential revenue. There’s no money for social services or infrastructure. People living in poverty stay living in poverty.

people living in poverty own much more than they’re able to prove on paper. In Cairo, for example, they have $241.4bn worth of unregistered property, according to De Soto. In his book The Mystery of Capital (2000), he puts this figure into perspective: it’s six times all the money held in Egyptian savings accounts, 30 times the market value of every publicly listed company in Cairo, and 116 times the value of all Egypt’s privatised former state companies.

Without papers proving ownership, you can’t record the sale of your property or use it as collateral to secure a loan.The evidence is ample: bureaucracy – and the security that comes with it – is what people living in poverty need to climb out of poverty.

capacity building remains the neglected stepchild

Tax Inspectors Without Borders

British tax veteran Lee Corrick went to Kenya in 2011 to train local inspectors. For years, the Kenyan tax office had had problems with a big multinational company – something to do with tea auction licence rights and letters of credit. It sounds overly complicated, and the Kenyans thought so too. But after two workshops with Corrick and a stern talk with the multinational, the Kenyan tax office managed to collect $23m. In fact, revenues from Kenyan tax inspections doubled after Corrick came to town. And in Colombia, the take increased tenfold after training.

In one area, farmers’ land was officially added to a land registry; in another, it wasn’t. The researchers then looked at how the farmers used their land.Here’s what they found: farmers who owned their land on paper invested more. For example, they more often planted trees, such as oil palms, that would continue to provide income all their lives. And since they no longer feared their land would be snatched out from under them, they spent less time guarding it. That left them more time to do other things – like earn money.

If development economists and people living in poverty like Lebrun are calling for bureaucracy outright, why doesn’t everyone – aid organisations, governments, companies – get behind it 100%?The answer is simple. Bureaucracy is boring.

A TV ad showing a sweetly smiling Haitian girl who’s just got her first school uniform works better than one with a blah bureaucrat in a fluorescent-lit office drawing lines on paper with a ruler

one agency after the other has started donating paperwork, Excel sheets and bookkeeping courses. They call it "capacity building".

the truth is, real progress is a gradual, thoroughly bureaucratic, deadly dull process. Saving the world isn’t sexy.

Public taxation is also increasing. A sin tax was implemented in June 2019 on products like sugary carbonated drinks and tobacco, and a serially delayed 5% value-added tax is expected in 2021. According to Salmi, electricity and water subsidies could soon be slashed and, in the long term, Omanis could see an income tax.

Above all, reforming the labor market — an unpopular move — would be the cornerstone of a post-Qaboos welfare state. About 43% of Omanis work for public entities. Abousleiman recommended economic diversification to foster private sector job creation and to further "relieve the expectations on the government to provide employment."

Following a field visit to Oman in 2019, the International Monetary Fund (IMF) suggested that the wages and benefits of the private sector need to align more closely with the public sector to make employment in the former more appealing.

Omanis who talked to Al-Monitor, as well as Mukhaini, believe any upcoming austerity measures "should not make the poor poorer and the rich richer," Mukhaini said.

According to rating firm S&P, the new ruler will face “a difficult trade-off” in the coming months to address high unemployment among youths, weak growth, and fiscal and funding pressures

Defense and security expenses account for over a quarter of Oman's annual budge

Oman — rated junk by the three major rating agencies — has several other options to fund its short-term ballooning deficit: Go further into debt; deplete its sovereign wealth fund; sell state assets; devalue its currency; and seek assistance from neighboring countries or international organizations.

Analysts believe Oman should build a model of governance tailored to the post-oil era. Along with a more stringent budget environment, the new leadership pledged to implement structural reforms to diversify the rentier economy and foster private sector-led growth.

To ensure political and social stability, Sultan Qaboos avoided controversial measures that could have triggered short-term political unrest

In 2011, at the height of the Arab uprisings, Sultan Qaboos promised to create 50,000 jobs and institute unemployment benefits in an attempt to defuse unprecedented nationwide protests.

the lack of economic reforms did not stop Omanis from loving the monarch, who built a modern state out of a medieval-like society he inherited in the early 1970s

Sultan Haitham bin Tariq "is already planting the seeds by cutting the royal expenditures tremendously,"

The relationship between state and society that Omanis have known for decades will likely never be the same

In 2016, the military and other security institutions were given exemptions in a new value-added tax (VAT) law enacted as part of IMF-inspired reforms. The law states that the military does not have to pay VAT on goods, equipment, machinery, services and raw materials needed for the purposes of armament, defense and national security.The Ministry of Defense has the right to decide which goods and services qualify. Civilian businessmen complain that this can leave the system open to abuse. Receipts for a cup of coffee at private sector hotels, for example, add 14 percent VAT. Receipts at military hotels do not. Employees at the military-owned Al-Masah Hotel in Cairo told Reuters that no VAT was charged when renting venues for weddings and conferences.

The Ministry of Military Production is projecting that operating revenues from its 20 firms will reach 15 billion Egyptian pounds in 2018/2019, five times higher than in 2013/2014, according to a ministry chart. The ministry does not disclose what happens to the revenues. The chairmen of two of the firms said profits go to the ministry or are reinvested in the business.

“I don’t want to be a local shop. I want to be a company that has the capacity to export and compete internationally.”

The chairmen of two military engineering companies, Abu Zaabal Engineering Industries Co and Helwan Engineering Industries Co, said in recent years it had become much easier to access financing through the Ministry of Military Production.

Military companies receive an exemption from import tariffs under a 1986 law and from income taxes under a 2005 law. Cargoes sent to military companies do not have to be inspected.

The Ministry of Military Production signed a memorandum of understanding with China’s GCL Group last week to build a solar panel factory worth up to $2 billion. The military has taken over much of the construction of intercity roads from the Ministry of Transport and now controls the toll stations along most major highways.

Economists and investors say reforms tied to a $12 billion three-year IMF program signed in Nov. 2016 should lay the ground for economic expansion. But foreign investors are still shying away from Egypt, apart from those focusing on the more resilient energy sector. Non-oil foreign direct investment fell to about $3 billion in 2017 from $4.7 billion in 2016, according to Reuters calculations based on central bank statistics.  

foreign investors were reluctant to invest in sectors where the military is expanding or in one they might enter, worried that competing against the military with its special privileges could expose their investment to risk. If an investor had a business dispute with the military, the commercial officer said, there was no point in taking it to arbitration. “You just leave the country,” he said.

Egypt’s military, the biggest in the Arab world, has advantages.It enjoys financial support from Saudi Arabia and the United Arab Emirates, staunch supporters of Sisi since he toppled the group they see as a threat to the Middle East, the Muslim Brotherhood. Western powers see Cairo as a bulwark against Islamist militancy. Egypt receives $1.3 billion in military aid annually from the United States alone.

In 2015, the defense minister issued a decree exempting nearly 600 hotels, resorts and other properties owned by the military from real estate taxes

Among projects the Ministry of Military Production announced in 2017 was a plan to plant 20 million palm trees with an Emirati company and build a factory to make sugar from their dates. It agreed with a Saudi company to jointly manufacture elevators. The military inaugurated the Middle East’s biggest fish farm on the Nile Delta east of Alexandria.

At bustling Cairo squares, people line up to buy subsidized meat and other food handed out from trucks sponsored by the military. Sisi said he had instructed the military to enter the market “to supply more chicken to push down prices.”Some disagree with such measures on the grounds the military’s mission is to protect the country from external threats.“We have reached a point where they are competing even with street vendors,”

ISIL today in many ways looks and acts like a state. In Mosul, according to reports, ISIL enforced taxes on a variety of commercial activities, including telecommunications companies that had relay towers in ISIL-controlled zones. Those who refused to pay risked abduction or murder. In Syria’s Raqqa province ISIL imposed the jizya (poll tax), the same tax the prophet Muhammad placed on non-Muslim communities in return for protection.

The prospects for the territorial re-division of the Middle East and conclusive territorial rectification of Sykes-Picot appear slim. As has long been the case among the perennially weak states of Africa, none of the relevant regional or extra-regional powers at this point have an interest in changing European-installed boundaries. But political boundaries are just the skeleton of Sykes-Picot and San Remo. At the levels of governance and political authority the colonial system has already been substantially gutted. The outstanding question has been what will emerge instead

quasi-states

The big exception is Norway, which had the foresight to become wealthy and democratic before striking oil. As almost all the world’s untapped oil reserves now lie in the developing world, Norway is not likely to have much company

Governments often try to save for lean years by paying a portion of oil revenues into a walled-off, legally untouchable fund. Unfortunately, temptation is often more powerful than the law. Venezuela’s oil fund, for example, has been raided6 (pdf, p 16) by Hugo Chavez, dropping from $6 billion to $3 million in the last decade — during a time of record-high oil prices

Taxes create accountability — citizens want to know how the government is spending their money. Substituting oil revenues decouples government from the people

Oil-to-cash programs are essentially unconditional transfers financed by oil. They can be targeted at the poor — like the cash transfers we know — or universal. It is obviously cheaper to pay only the poor. But universality helps the second goal of oil-to-cash: creating better government. If you want citizens to become effective watchdogs, it helps to include people with clout. Governments tend not to respond to the clamors of the poor

you want people to know they are paying taxes, and know exactly how much. “That’s exactly the point,” says Moss. “It creates accountability and forces tax authorities to build a sound, transparent system.” (This is plausible, but there is no evidence either way just yet that oil-to-cash programs would lead to better governance.

Distributing oil money to citizens is a big step, and oil countries and companies have rejected much more modest ideas that might put limits on their abilities to manipulate oil revenues. One that is gradually gaining ground is the Extractive Industries Transparency Initiative13, now implemented by 37 countries. Under the EITI, oil companies disclose what they pay to governments, and governments disclose what they receive. The EITI then compares and reconciles these figures

oil-to-cash is probably easiest to do in countries just starting to exploit oil — that way there aren’t entrenched interests guarding business-as-usual

The Interior Ministry, which still nominally controls all local government, came up with an interim fix: a special committee representing various local interests — activists, doctors, the unemployed. The committee picked one of their number, the teacher Abbassi, as vice mayor. He served in that capacity for four years until the mayor resigned; Abbassi was then picked to replace him

Pre-revolutionary Tunisia was rigidly centralized, concentrating virtually all power in the national capital. The central government appointed all regional and municipal officials: They were little more than placeholders. They had minimal control over their own finances, and depended on the national government to allocate funds to them whenever it saw fit to do so

The 2014 constitution explicitly stipulates the devolution of power to provincial and local governments, but actually putting those reforms into place has proven a challenge

“We’re a poor municipality that lives on aid,” says Abbassi, who can only really increase his budget, he notes, by attracting money from international development institutions and nongovernmental organizations. “Citizens don’t pay [taxes]. The citizens that talk about corruption and ‘my money’ — well, it’s not their money.” The city gets most of its budget from the Interior Ministry in Tunis, and financing is hardly generous. While income tax payments are automatically deducted from the pay of public employees in Tunisia, tax avoidance is rampant among the rest of the population — especially since around half of the economy, according to estimates, operates in the unofficial sector

Life expectancy in the province is only 70, a full seven years less than in Tunis. Unemployment is 26.2 percent, almost 9 percent higher than the national average. The infant mortality rate is 23.6 percent, nearly 6 percent greater than the national rate. The local paper factory churns out mercury and chlorine byproducts that are polluting land and water resources, contributing to widespread health issues like cancer and neurological diseases

Khadraoui and his fellow protesters want the government to solve the problem by giving out public jobs to all applicants with university degrees. The old regime used to hand out state jobs as a way of tamping down public dissatisfaction, and their post-revolutionary successors have continued the practice (if not expanding it). This has predictably resulted in bloated public-sector employment rolls and painfully inefficient public services. It is, perhaps, no coincidence that one rarely encounters Tunisians who expect their jobs to come from the private sector

expectations gap is deeply corrosive

The current administration is doing little to advance the city’s development — and officials and citizens have entirely divergent ideas of the reasons for it

Parliament Speaker Rached Ghannouchi condemned the incident. However, Abbou has accused Ghannouchi of encouraging a “culture of violence” with his "inertia", and has vowed to continue her hunger strike “until the head of parliament assumes his responsibilities” and publishes a “statement condemning the violence and the aggressors".

“We cannot entrust the interests of Tunisians to this assembly, which is full of smugglers and tax evaders," she said, referring to the president of the Qalb Tounes Party, Nabil Karoui, who has been implicated in cases of money laundering and tax evasion, as well as the head of the al-Karama bloc, Seif Eddine Makhlouf, also accused of tax evasion.

between November 2019 and July 2020 there were a number of attacks against female politicians at the assembly, including misogynistic remarks and death threats

The Democratic bloc, which has 38 MPs and is supported by other blocs and a number of independents, has spent the last month holding a sit-in at the parliament to express fears over their safety there.

While Article 68 of Tunisia’s constitution states that “no civil or penal legal proceedings can be brought against a member of the Assembly of the Representatives of the People, nor the latter be arrested or tried, because of opinions or proposals expressed or acts carried out in connection with his parliamentary functions”, physical and verbal attacks are not protected by the parliamentary immunity enjoyed by MPs and are liable to legal proceedings. 

“There are many other alternatives, including tax dispute settlements with business owners, the settlement of tax evasion cases, as well as stopping the corruption in various state institutions, saving the resources of officials’ extravagance, and finding economic development alternatives in various economic sectors,”

"The weakened economy is hurting ordinary people too and a quick and brutal subsidies slash would serve to fuel discontent,"

New policies and programs are announced constantly, while the delivery capacity of the sluggish Saudi bureaucracy continues to lag. Below the upper echelons, the Saudi state remains the deeply fragmented, bloated, and slow-moving machine that I described in my 2010 book. The government seems to have no clear strategy for reforming this bureaucracy

While space for political opposition arguably has narrowed, women will soon be allowed to drive and the religious police force that once harassed them has been almost entirely neutered. By relaxing religious controls over the public sphere, the crown prince is seeking to attract more foreign investment and facilitate diversification into tourism and entertainment

Saudi Arabia has tackled fiscal reforms more vigorously than most local and international observers expected, introducing unprecedented tax and energy price measures, including the introduction of a 5 percent value added tax, new levies on foreign workers, and increases in electricity and transport fuel prices. The government is now experimenting with new non-oil sectors with an increased sense of urgency, including information technology and defense manufacturing.

As limits on government employment kick in, young Saudis will increasingly have no choice but to seek private jobs. But they will face tough competition on the private labor market where employers have become accustomed to recruiting low-wage workers from poorer Arab and Asian countries

public sector employment remains the key means of providing income to Saudi nationals. Cheap foreign labor dominates private sector employment, thereby keeping consumer inflation at bay and business owners happy. Citizens, however, are parked in the overstaffed public sector. Out of every three jobs held by Saudis, roughly two are in government. The average ratio around the world is one in five. Public sector wages account for almost half of total government spending, among the highest shares in the world

Local economic advisors fear that the majority of private petrochemicals firms — the most developed part of Saudi industry — would lose money if prices of natural gas, their main input, increase to American levels.

Saudi wage demands will have to drop further if private job creation is to substitute for the erstwhile government employment guarantee. For the time being, private job creation has stalled as the government has pursued moderate austerity since 2015 in response to deficits and falling oil prices

The government has also underestimated how dependent private businesses are on state spending. The share of state spending in the non-oil economy is extremely high compared to other economies. Historically, almost all private sector growth has resulted from increases in public spending

As long as oil prices remain below $70 per barrel, the goal of a balanced budget will cause pain for businesses and limit private job creation. This will pose a major political challenge at a time when an estimated 200,000 Saudis are entering the labor market every year. More than 60 percent of the population is under 30, which means that the citizen labor force will grow rapidly for at least the next two decades.

It would be far more prudent to gently prepare citizens and businesses for a difficult and protracted adjustment period and to focus on a smaller number of priorities

The key structural challenge to non-oil growth is the way the Saudi government currently shares its wealth, most notably through mass public employment — an extremely expensive policy that bloats the bureaucracy, distorts labor markets, and is increasingly inequitable in an era when government jobs can no longer be guaranteed to all citizens. A stagnating economic pie that might even shrink in the coming years must be shared more equitably.

A basic income would not only guarantee a basic livelihood for all citizens, but also serve as a grand political gesture that could justify difficult public sector reforms. A universal wealth-sharing scheme would make it easier to freeze government hiring and send a clear signal that, from now on, Saudis need to seek and acquire the skills for private employment and entrepreneurship. The government could supplement this scheme by charging fees to firms that employ foreigners while subsidizing wages for citizens to fully close the wage gap between the two.

Focusing on such fundamentals might be less exciting than building new cities in the desert or launching the world’s largest-ever IPO — but they are more important for the kingdom’s economic future. No country as dependent on petroleum as Saudi Arabia has ever effectively diversified away from oil

The government is expected to play a "crucial" role in tourism development by injecting $6 billion over 25 years to trigger $43 billion worth of investments from the private sector.

the promises to allocate 223,000 direct tourism jobs to Omani nationals by 2040 does not align with Oman's undersized tourism education sector, which graduates only a few hundred students per year, mainly from the Oman Tourism College

although the number of tourists visiting Oman has doubled since 2008, the industry employs less than 17,000 Omanis.

“Corruption was also an issue since local authorities requested me to pay imaginary taxes," he said. "I am an ordinary man so I had to shut up and comply.”

“The concept of SMEs [small and medium enterprises] does not exist in the field of tourism anyway, the whole system is designed for large corporations,” said Christopher Chellapermal, a French entrepreneur. Chellapermal ran a scuba diving business in Oman for 15 years before being forced out of business in 2017.

The country’s ratio of debt to gross domestic product is rated junk by all three major agencies, as it has multiplied by 12 since 2014. Moreover, the Omani economy is ranked the worst performing among Gulf countries

For Chellapermal, Oman "makes the crazy wager" of luxury tourism by prioritizing premium visitors when the backpacker segment would be a better fit.

“Chinese and Indian tourists are very much interested in culture and heritage destinations," Hollister said. "Oman could focus on this segment to make it their niche, a differentiator.”

wealth of cultural and natural assets. The Ministry of Tourism promotes Oman as a hidden jewel at the tip of the Arabian Peninsula. 

regional tensions had very little impact on tourism

As Sultan Haitham bin Tariq Al Said takes power, analysts worry that Oman’s foreign policy of neutrality could be at stake. Will “any of Oman’s more assertive neighbors seek to sway Haitham to align more closely with their own approach,” Kristian Coates Ulrichsen wrote for Al-Monitor.

The prospect of tensions between Muscat and neighboring states does not please tourism actors, as Saudi Arabia and the United Arab Emirates are Oman’s key source regional markets for tourism. In 2018, Gulf citizens accounted for about half of international arrivals.

Saudi Arabia’s aggressive push to develop its leisure tourism industry and attract 100 million visits by 2030 collides with Oman’s ambitions

Other politicians have often accused Karoui of corruption, and cases have been opened against him, as well as his Nessma TV channel

Karoui founded the Qalb Tounes party, which came second in 2019's legislative vote, just ahead of that year's election cycle. The party is an ally of the Islamist-inspired Ennahda party, which holds the most seats in parliament

“A youth bulge is coming into the labour force at a time when the ability of Gulf societies to continue in the traditional pattern of offering public-sector jobs is diminished,”

In 2019, the World Bank estimated Oman’s youth unemployment rate at 49 percent. The pandemic has almost surely worsened it

Muscat is seeking to improve education and diversify the country’s economy by promoting job growth in sectors like tourism, manufacturing and technology

Like Oman, Saudi Arabia faces an acute problem of creating jobs for young people. Half the population is under the age of 25 and nearly 60 percent of unemployed people are under the age of 30

Oman is a country of just five million, with expats accounting for more than 38 percent of the population. Filling the roughly 80 percent of jobs held by foreigners in the private sector is critical to the government’s economic transformation plans

Muscat has recently passed laws making it more costly to hire foreign workers while also implementing nationwide training programmes to address skills gaps with Omani nationals

A demographic that has been more willing to take jobs in the private sector, particularly in Saudi Arabia, is young women

Around a third of exports from Jordan and Lebanon go to oil-rich states, which send back wealthy tourists. Kuwaitis, Saudis and Emiratis account for about a third of tourist spending in Lebanon.

The bad news is that these states are moving too slowly. Some have cut their bloated bureaucracies and pared back subsidies. Saudi Arabia recently tripled its value-added tax. But the public sector is still the region’s main employer. Despite talk of diversification, the Gulf’s economies continue to revolve around oil

these reforms will be painful and are harder in bad times

The plans put forward by leaders like Saudi Arabia’s Muhammad bin Salman are tearing up the social contract. Saudis wonder why he doesn’t sell his $550m yacht instead of raising taxes. Anger is growing across the region. For the past century Arabs have been ruled by abusive leaders who hoarded their country’s wealth. Now these leaders are asking their people to make sacrifices and giving them little say in the matter. That is a recipe for continuing unrest and brutal suppression. If Arab rulers want citizens to pay their way, they will need to start earning their consent.

The April 2019 revolution, which ended Omar al-Bashir’s 30-year military rule, brought hope that a civilian regime would emerge to govern Sudan. But – less than a year since the appointment of the transitional prime minister, Abdalla Hamdok – this hope is fading fast.

In February 2020, the International Monetary Fund (IMF) described Sudan’s economic prospects as “alarming” – unusually blunt language by its standards. Then came covid-19 and the associated global economic downturn. The IMF revised its assessment: Sudan’s GDP would shrink by 7.2 percent in 2020. By April, inflation had risen to almost 100 percent (one independent estimate finds that inflation may have hit around 116 percent). Adding to this grim catalogue of calamities, the swarms of locusts that have ravaged the Horn of Africa in the worst outbreak in 70 years are widely expected to arrive in Sudan in mid-June. The United States Agency for International Development estimates that more than 9 million Sudanese will require humanitarian assistance this year.

Despite the fact that a “constitutional declaration” places the civilian-dominated cabinet in charge of the country, the generals are largely calling the shots. They control the means of coercion and a tentacular network of parastatal companies, which capture much of Sudan’s wealth and consolidate their power at the expense of their civilian partners in government

In particular, Hamdok will need to establish civilian authority over the parastatal companies controlled by the military and security sector. The task is daunting and fraught with risks, but Hamdok can acquire greater control by taking advantage of the rivalry between Hemedti and General Abdelfattah al-Buhran, the de facto head of state.

draws on 54 recent interviews with senior Sudanese politicians, cabinet advisers, party officials, journalists, former military officers, activists, and representatives of armed groups, as well as foreign diplomats, researchers, analysts, and officials from international institutions

Sudan’s chance for democratisation is the product of a difficult struggle against authoritarianism. For three decades, Bashir ruled as the president of a brutal government. He took power in 1989 as the military figurehead of a coup secretly planned by elements of the Sudanese Muslim Brotherhood, before pushing aside Islamist ideologue Hassan al-Turabi, who had masterminded the plot. During his rule, Bashir survived US sanctions, isolation from the West, several insurgencies, the secession of South Sudan, a series of economic crises, and arrest warrants from the International Criminal Court for war crimes, crimes against humanity, and genocide in Darfur. He presided over ruthless counter-insurgency campaigns that deepened political rifts and destroyed the social fabric of peripheral regions such as Darfur, South Kordofan, and Blue Nile.

he turned pro-government tribal militias from Darfur into the Rapid Support Forces (RSF), an organisation led by Hemedti, as insurance

Throughout the 2010s, the Bashir regime put down successive waves of protests. But the uprising that began on December 2018 – triggered by Bashir’s decision to lift subsidies on bread – proved too much for the government to contain

a coalition of trade unions called the Sudanese Professionals Association (SPA) established informal leadership of nationwide demonstrations

As junior officers vowed to protect demonstrators, the leaders of the military, the RSF, and the NISS put their mistrust of one another aside, overthrew Bashir, and installed a junta

On 3 June, the last day of Ramadan, the generals sent troops to crush the sit-in. RSF militiamen and policemen beat, raped, stabbed, and shot protesters, before throwing the bodies of many of their victims into the Nile. Around 120 people are thought to have been killed and approximately 900 wounded in the massacre.

prompted Washington and London to pressure Abu Dhabi and Riyadh to curb the abuses of their client junta

envisioned a transition that would – over the course of a little more than three years, and under the guidance of a civilian-led cabinet of ministers – reach a peace deal with armed groups from the peripheral regions of Sudan, while establishing a new constitutional order and free elections

When Hamdok, a UN economist picked by the FFC, took office on 21 August, there were grounds for cautious optimism. The peace talks with armed groups began in earnest and seemed to make rapid progress. Hamdok inherited a catastrophic economic situation and political structure in which the generals remained in high office but the constitutional declaration put civilians in the driving seat. Western countries expressed their full support for the transition. The journey would be difficult, but its direction was clear.

Sudanese citizens have gained new civil and political rights since the transition began. The new authorities have curtailed censorship. The harassment and arbitrary, often violent detentions conducted by NISS officers have largely ended. Minorities such as Christians now have freedom of religion. The government has repealed the public order law, which allowed for public floggings. And it is in the process of criminalising female genital mutilation.

The authorities have not achieved much on transitional justice.[3] The head of the commission in charge of investigating the 3 June massacre of revolutionary demonstrators said he could not protect witnesses. The authorities said they are willing to cooperate with the International Criminal Court to try Bashir and the other wanted leaders, but the generals are blocking a handover of the suspects to The Hague

By 2018, the authorities were struggling to finance imports, and queues were forming outside petrol stations. The economic slide continued, prompting Bashir’s downfall. It has only continued since then. The Sudanese pound, which traded at 89 to the dollar in the last weeks of Bashir’s rule, now trades at 147 to the dollar.

Although the state sponsor of terrorism designation does not impose formal sanctions on Sudan, it sends a political signal that stigmatises the country, deters foreign investment and debt relief, and casts doubt on Washington’s claim to support civilian government. Unfortunately for Hamdok, Sudan does not sit high on the list of priorities of the current US administration. President Donald Trump decided not to fast-track Sudan’s removal from the list of state sponsors of terrorism, allowing the process to take the bureaucratic route and become enmeshed in the conflicting perspectives of the State Department, national security and defence agencies, and Congress

The European Union has pledged €250m in new development assistance (along with €80m in support against covid-19) to Sudan, while Sweden has pledged €160m, Germany €80m, and France €16m-17m. Yet these are paltry figures in comparison to Europeans’ declared commitments

The path to debt relief under the Heavily Indebted Poor Country (HPIC) Initiative is long in any circumstances. But US indifference, European timidity, and the indecisiveness of Hamdok’s cabinet have combined to kill off hopes that the diplomatic momentum Sudan established in September and October 2019 would quickly translate into substantial international assistance

Donors want the Sudanese government to commit to reforms that will have a social cost in return for a promise of unspecified levels of funding. The pledges Sudan receives in June could fall far below the estimated $1.9 billion the government needs, forcing the authorities to create the social safety net only gradually.[8] This would go against the logic of a temporary programme designed to offset one-off price hikes. In these conditions, subsidy reform – however necessary – is a gamble for the government.

Failure to stabilise Sudan’s economy would have far-reaching consequences for not only the country but also the wider region. Since Hamdok’s appointment, the domestic balance of power has once again tilted in favour of the generals, who could seize on the climate of crisis to restore military rule. If they remove civilian leaders from the equation, rival factions within the military and security apparatus will be set on a collision course.

Within the government, the configuration of power that has emerged since September 2019 bears little resemblance to the delicate institutional balance – enshrined in the constitutional declaration – that the FFC fought so hard to achieve in its negotiations with the junta.

The generals’ public relations machine is now well-oiled. The military opened a bakery in Atbara, the cradle of the 2018-2019 uprising. Hemedti has established health clinics and a fund to support farmers; his forces have distributed RSF-branded food supplies and launched a mosquito-eradication campaign.

Neither Hamdok nor the FFC has attempted to mobilise public support when faced with obstruction by, or resistance from, the generals. As such, they have given up one of the few cards they held and created the impression that they have been co-opted by the old regime. The popularity of the FFC has collapsed; Hamdok earned considerable goodwill with the Sudanese public in late 2019, but their patience with him is wearing thin. Many activists say that they would be back on the streets if it were not for covid-19 (which has so far had a limited health impact on Sudan but, as elsewhere, led to restrictions on public gatherings).

The so-called “Arab troika” of the UAE, Saudi Arabia, and Egypt have taken advantage of the revolution to sideline their regional rivals Turkey and Qatar, which had long supported Bashir’s regime. The Emiratis, in cooperation with the Saudis, are playing a particularly active role in shaping Sudan’s political process, reportedly spending lavishly and manoeuvring to position Hemedti as the most powerful man in the new Sudan

The Emiratis are widely known to be generous with their covert financial contributions, which flow either directly to various political actors or, indirectly, through Hemedti.[20] Mohammed Dahlan, the Palestinian exile who runs many important security projects on behalf of Emirati ruler Mohammed bin Zayed, handles the UAE’s Sudan file.[21] Former Sudanese general Abdelghaffar al-Sharif, once widely considered the most powerful man in the NISS, reportedly lives in Abu Dhabi and has put his formidable intelligence network at the service of the UAE.

The Arab troika has also worked to undermine Hamdok and prop up the generals

Saudi Arabia and the UAE have avoided financing transparent mechanisms such as the World Bank’s Multi-Donor Trust Fund. Meanwhile, Hemedti appears to have a large supply of cash with which to support the central bank. In March, he deposited $170m in the bank. These developments suggest that the Gulf powers could be using their financial might to shape the outcome of Sudan’s domestic political process, redirecting flows of money to prop up Hemedti and exacerbating the economic crisis to position him as a saviour

The levels of resentment between the RSF and SAF are such that many officers fear a local incident could escalate into broader clashes between the two forces

Beyond subsidies, the economic debate in Sudan has recently turned to the issue of how the civilian authorities can acquire greater revenue – particularly by recovering assets stolen by the Bashir regime, and by gaining control of the sprawling network of parastatal companies affiliated with the military and security sector.

It is not difficult to identify who to tax: companies owned by NCP businessmen, Bashir’s family, the SAF, the NISS, and the RSF play a dominant role in the economy, yet benefit from generous tariff and tax exemptions

the military and security apparatus has shares in, or owns, companies involved in the production and export of gold, oil, gum arabic, sesame, and weapons; the import of fuel, wheat, and cars; telecommunications; banking; water distribution; contracting; construction; real estate development; aviation; trucking; limousine services; and the management of tourist parks and events venues. Defence companies manufacture air conditioners, water pipes, pharmaceuticals, cleaning products, and textiles. They operate marble quarries, leather tanneries, and slaughterhouses. Even the firm that produces Sudan’s banknotes is under the control of the security sector.

These companies are shrouded in secrecy; high-level corruption and conflicts of interest make the boundaries between private and public funds porous

The generals are using dark money to keep the civilian government on life support, ensuring that it remains dependent on them

Following decades of consolidated authoritarianism, Sudan has entered a rare period of instability in its balance of power.

The US, Europe, and international financial institutions have left Sudan to its own devices, allowing its economy to tank and its political transition to stall. In the interim, the generals have expanded their reach and FFC leaders have returned to Sudan’s traditional elite bargaining, at the expense of institutional reform. Western inaction has also enabled regional actors – chief among them Abu Dhabi and Riyadh – to play a prominent role in Sudan, dragging the country closer to military rule or a civil war.

Across the region, Saudi Arabia and the UAE have demonstrated their preference for military governments over civilian-led democracies. Their recent actions in Sudan suggest that they may hope to repeat their success in helping return the military to power in Egypt in 2013. But this would be both cynical and naïve. A strong civilian component in the government is a prerequisite for stability in Sudan. The country’s conflicts are a direct result of state weakness – a weakness that pushed Bashir’s military government to use undisciplined militias to repress citizens, fuelling cycles of instability and the emergence of a fragmented military and security apparatus. In the current political environment, any attempt to formally impose military rule could ignite further instability and even a civil war.

fallout from the corruption cases overshadowed much of the final year of Emir Sabah’s life and has continued to loom over the opening months of the rule of Emir Nawaf al-Ahmad Al Sabah. The allegations, including one linked to the explosive fallout from the 1Malaysia Development Berhad (1MDB) scandal and another over $789 million said to have gone missing from the Army Fund, have implicated members of the ruling family and senior officials and further sapped public trust. In a move unprecedented for Kuwait, the former prime minister, Sheikh Jaber Al-Mubarak, was detained in April 2021, as was Sheikh Khalid al-Jarrah Al Sabah, a former Defense (2013-17) and Interior (2017-19) minister. A leaked court document also indicated that Sheikh Jaber had repaid $180.7 million in funds that prosecutors had accused him of misappropriating

the fact that the Al Sabah quickly cohered around the choice of Sheikh Mishaal as crown prince in 2020 has only delayed the moment when the ruling family must identify a next generation of leadership to eventually take over from Emir Nawaf, who is 84, and Crown Prince Mishaal, who is 80

only transitioned from one generation to another twice in the past century, in 1921 and again in 1977

Sheikh Mishaal has become important, creating a National Security Council, under his leadership, in March 2021 and visiting Saudi Arabia at the end of May. Ties between Saudi Arabia and Kuwait had been strained by the prolonged shutdown of two oil fields in the Neutral Zone along their border and by a visit by Crown Prince Mohammed bin Salman to Kuwait in September 2018. This visit was cut short over disagreements that included Kuwait’s preference for a diplomatic resolution of the Qatar blockade

The fact that Kuwaiti politics was less stormy between 2013 and about 2019 did not, however, denote that any of the contentious underlying issues had been resolved, such as the relationship between the mostly appointed cabinet and the elected (and strongly populist) MPs

38 MPs backed a motion to question the prime minister, Sheikh Sabah al-Khalid Al Sabah, over claims of constitutional irregularities in forming the government, leading ultimately to the cabinet submitting its resignation in January 2021

the replacement of four cabinet ministers, including the Minister of Interior, Anas al-Saleh—who had become a lightning rod for opposition criticism—failed to significantly placate opposition MPs, who sought unsuccessfully to block the swearing in of the new cabinet in April and criticized a decision to postpone all parliamentary questioning of the prime minister until 2022.

the political opposition in the National Assembly lacks consensus of its own on policy objectives and the degree to which it should negotiate with the government on specific issues. So long as there are no changes to Kuwait’s electoral law or to procedural (and constitutional) aspects of the way politics is conducted, and the government and parliament coexist, little in practice is likely to change. The populist streak that has long been such a characteristic feature of Kuwaiti politics continues to complicate efforts by the Kuwaiti authorities to respond to public policy challenges caused by the COVID-19 pandemic and the oil price collapse of 2020 that, itself, followed years of growing budget deficits

Kuwait has not run a budget surplus since 2014 when the long oil price boom that began in 2002 ended, and fiscal deficits have risen sharply. Whereas officials in other Gulf states responded to revenue declines by scaling back subsidies and introducing a variety of new taxes and fees on their citizen and resident populations, the maneuverability of Kuwaiti authorities was constrained by the difficulty of securing National Assembly support for such measures

almost 72 percent of spending in the budget proposed in June 2021 will go to salaries and other entitlements

While Kuwait remains one of the wealthiest countries in the world, the authorities have had to resort to short-term measures, such as withdrawals from its General Reserve Fund, to plug spending gaps, actions that are poor substitutes for a long-term solution