Omar Al-Ubaydli is a Bahraini economist and a columnist for The National
December 25, 2024
As libertarian Javier Milei celebrates a year since assuming the Argentine presidency, other countries may be studying his experience closely. Fiscal challenges are a problem that all have recently faced, or will face in the future, and Mr Milei’s brand of heterodox shock therapy offers policymakers with a new perspective on how to balance the books.
At the turn of the 20th century, Argentina was one of the richest countries in the world in terms of per capita income, and the future was bright for the South American state. However, over the course of the past 130 years, it has become the poster child for many economists for how political instability, corruption, and economic mismanagement can precipitate a rapid decline in living standards.
In 2023, Argentina’s public debt was around 100 per cent of its GDP, consumer prices were growing at almost 300 per cent annually, and GDP per capita was approximately at its 2008 level. While these figures – especially the inflation – represented a recent nadir in terms of economic performance, the reality is that Argentina has been struggling economically for decades, with the new millennium alone witnessing three sovereign debt defaults.
A homeless man sleeps at Plaza de Mayo square in front of Casa Rosada presidential palace in Buenos Aires. The government managed to reduce inflation from 200% to 166% year-on-year as of November 2024. AFP
Given the historical dominance of left-leaning populists in Argentina’s political landscape, and the cumulative fatigue that the population felt toward the failure of their politicians to deliver economic prosperity, the stage was set for a radical alternative. Mr Milei campaigned effectively, conveying a distinctly libertarian economic plan revolving around deregulation, liberalisation and shrinking government. One year on, he has balanced the budget on the back of a 30 per cent decrease in government spending, inflation has decreased sharply, and the economy is beginning to attract foreign capital.
In 2023, a mere 24 per cent of Argentines expressed confidence in their government, while 73 per cent disapproved. Mr Milei succeeded in raising the first figure to 43 per cent, and shrunk the disapproval rate down to 53 per cent.
Before describing the somewhat jarring way he delivered these improvements, it is worth noting why so much of the world should be paying attention. Up until the early 20th century, orthodox government policy was to balance the budget unless extreme circumstances such as wars arose.
However, following the Great Depression in the early 1930s, economic thinking and political systems changed in tandem, leading to a situation where governments were comfortable perennially realising budget deficits and seeing their public debts rise seemingly without constraint.
The unsustainability of such arrangements is self-evident, but the negative impacts of ignoring the risks differ in the speed at which they materialise. Countries that were forced to default, such as Greece and Sri Lanka, experienced a loss of confidence in the economy and, with it, rising poverty.
Larger economies, such as Japan and the US, remain in the risky situation of having high levels of debt to GDP but for the time being they continue to be able to kick the proverbial can down the road. In the case of the Gulf countries, the 2014 oil price crash reminded all six a taste of diversifying their fiscal revenues and economies away from hydrocarbons.
Fiscal sustainability has much in common with its environmental cousin: the impact of imprudence is rarely immediate, and it takes a collective sacrifice for success. Humans are not very good at co-operating when the benefits are amorphous and will be reaped many years later, setting the stage for societies to delay the necessary reforms whatever the governing political system.
In Argentina’s case, society’s natural antipathy toward fiscal belt-tightening was overcome by the collective exasperation at previous failures. This allowed Mr Milei to effect radical policies, such as closing 16 out of 24 ministries, curtailing energy and transport subsidies, the elimination of rent controls and the dismissal of 24,000 federal employees. He plans to eliminate 90 per cent of existing taxes and cut an additional 50,000 federal government jobs.
One year on, he has balanced the budget on the back of a 30 per cent decrease in government spending, inflation has decreased sharply, and the economy is beginning to attract foreign capital
For countries – including many in the Middle East, where a great deal of national spending lies in the public sector – there is great value in studying Milei’s experiment, both operationally and in terms of securing the public’s support.
Businesses in the region regularly complain about excessive red tape, sometimes spawned by having a surfeit of ministries operating without a clearly defined mandate. Of course, the risky nature of drastic reforms to public sector spending makes it even more beneficial to begin by closely observing Argentina’s trail-blazing.
The large investments that countries such as Saudi Arabia and the UAE have made in the energy transition demonstrate the government’s ability to overcome disincentives and lead the way in adopting environmentally friendly policies. This bodes well for their ability to make bold fiscal decisions when required, as occurred when Saudi Arabia raised value-added tax from 5 per cent to 15 per cent during the Covid-19 pandemic.
One of the best things policymakers anywhere can do is harvest knowledge from the experiences of other countries. Dramatic moves can offer more acute lessons. In this regard, through his aggressive reforms, Mr Milei is serving not just the Argentine people, but the whole world.
6.30pm: Al Maktoum Challenge Round-1 Group 1 (PA) Dh119,373 (Dirt) 1,600m Winner: Brraq, Adrie de Vries (jockey), Jean-Claude Pecout (trainer)
7.05pm: Handicap (TB) Dh102,500 (D) 1,200m Winner: Taamol, Connor Beasley, Ali Rashid Al Raihe.
7.40pm: Handicap (TB) Dh105,000 (Turf) 1,800m Winner: Eqtiraan, Connor Beasley, Ali Rashid Al Raihe.
8.15pm: UAE 1000 Guineas Trial (TB) Dh183,650 (D) 1,400m Winner: Soft Whisper, Pat Cosgrave, Saeed bin Suroor.
9.50pm: Handicap (TB) Dh105,000 (D) 1,600m Winner: Hypothetical, Mickael Barzalona, Salem bin Ghadayer.
9.25pm: Handicap (TB) Dh95,000 (T) 1,000m Winner: Etisalat, Sando Paiva, Ali Rashid Al Raihe
Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
It's up to you to go green
Nils El Accad, chief executive and owner of Organic Foods and Café, says going green is about “lifestyle and attitude” rather than a “money change”; people need to plan ahead to fill water bottles in advance and take their own bags to the supermarket, he says.
“People always want someone else to do the work; it doesn’t work like that,” he adds. “The first step: you have to consciously make that decision and change.”
When he gets a takeaway, says Mr El Accad, he takes his own glass jars instead of accepting disposable aluminium containers, paper napkins and plastic tubs, cutlery and bags from restaurants.
He also plants his own crops and herbs at home and at the Sheikh Zayed store, from basil and rosemary to beans, squashes and papayas. “If you’re going to water anything, better it be tomatoes and cucumbers, something edible, than grass,” he says.
“All this throwaway plastic - cups, bottles, forks - has to go first,” says Mr El Accad, who has banned all disposable straws, whether plastic or even paper, from the café chain.
One of the latest changes he has implemented at his stores is to offer refills of liquid laundry detergent, to save plastic. The two brands Organic Foods stocks, Organic Larder and Sonnett, are both “triple-certified - you could eat the product”.
The Organic Larder detergent will soon be delivered in 200-litre metal oil drums before being decanted into 20-litre containers in-store.
Customers can refill their bottles at least 30 times before they start to degrade, he says. Organic Larder costs Dh35.75 for one litre and Dh62 for 2.75 litres and refills will cost 15 to 20 per cent less, Mr El Accad says.
But while there are savings to be had, going green tends to come with upfront costs and extra work and planning. Are we ready to refill bottles rather than throw them away? “You have to change,” says Mr El Accad. “I can only make it available.”
The Ashes
Results
First Test, Brisbane: Australia won by 10 wickets
Second Test, Adelaide: Australia won by 120 runs
Third Test, Perth: Australia won by an innings and 41 runs
Fourth Test: Melbourne: Drawn
Fifth Test: Australia won by an innings and 123 runs
Know before you go
Jebel Akhdar is a two-hour drive from Muscat airport or a six-hour drive from Dubai. It’s impossible to visit by car unless you have a 4x4. Phone ahead to the hotel to arrange a transfer.
If you’re driving, make sure your insurance covers Oman.
By air: Budget airlines Air Arabia, Flydubai and SalamAir offer direct routes to Muscat from the UAE.
Tourists from the Emirates (UAE nationals not included) must apply for an Omani visa online before arrival at evisa.rop.gov.om. The process typically takes several days.
Flash floods are probable due to the terrain and a lack of drainage. Always check the weather before venturing into any canyons or other remote areas and identify a plan of escape that includes high ground, shelter and parking where your car won’t be overtaken by sudden downpours.
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
The candidates
Dr Ayham Ammora, scientist and business executive
Ali Azeem, business leader
Tony Booth, professor of education
Lord Browne, former BP chief executive
Dr Mohamed El-Erian, economist
Professor Wyn Evans, astrophysicist
Dr Mark Mann, scientist
Gina MIller, anti-Brexit campaigner
Lord Smith, former Cabinet minister
Sandi Toksvig, broadcaster
Terminal High Altitude Area Defense (THAAD)
What is THAAD?
It is considered to be the US' most superior missile defence system.
Production:
It was first created in 2008.
Speed:
THAAD missiles can travel at over Mach 8, so fast that it is hypersonic.
Abilities:
THAAD is designed to take out projectiles, namely ballistic missiles, as they are on their downward trajectory towards their target, otherwise known as the "terminal phase".
Purpose:
To protect high-value strategic sites, such as airfields or population centres.
Range:
THAAD can target projectiles both inside and outside of the Earth's atmosphere, at an altitude of 93 miles above the Earth's surface.
Creators:
Lockheed Martin was originally granted the contract to develop the system in 1992. Defence company Raytheon sub-contracts to develop other major parts of the system, such as ground-based radar.
UAE and THAAD:
In 2011, the UAE became the first country outside of the US to buy two THAAD missile defence systems. It then deployed them in 2016, becoming the first Gulf country to do so.
What sanctions would be reimposed?
Under ‘snapback’, measures imposed on Iran by the UN Security Council in six resolutions would be restored, including:
An arms embargo
A ban on uranium enrichment and reprocessing
A ban on launches and other activities with ballistic missiles capable of delivering nuclear weapons, as well as ballistic missile technology transfer and technical assistance
A targeted global asset freeze and travel ban on Iranian individuals and entities
Authorisation for countries to inspect Iran Air Cargo and Islamic Republic of Iran Shipping Lines cargoes for banned goods
A worker is categorised as skilled by the MOHRE based on nine levels given in the International Standard Classification of Occupations (ISCO) issued by the International Labour Organisation.
A skilled worker would be someone at a professional level (levels 1 – 5) which includes managers, professionals, technicians and associate professionals, clerical support workers, and service and sales workers.
The worker must also have an attested educational certificate higher than secondary or an equivalent certification, and earn a monthly salary of at least Dh4,000.
Starring: Anthony Mackie, Aiysha Hart, Ben Kingsley
Director: Rupert Wyatt
Rating: 3/5
What are NFTs?
Are non-fungible tokens a currency, asset, or a licensing instrument? Arnab Das, global market strategist EMEA at Invesco, says they are mix of all of three.
You can buy, hold and use NFTs just like US dollars and Bitcoins. “They can appreciate in value and even produce cash flows.”
However, while money is fungible, NFTs are not. “One Bitcoin, dollar, euro or dirham is largely indistinguishable from the next. Nothing ties a dollar bill to a particular owner, for example. Nor does it tie you to to any goods, services or assets you bought with that currency. In contrast, NFTs confer specific ownership,” Mr Das says.
This makes NFTs closer to a piece of intellectual property such as a work of art or licence, as you can claim royalties or profit by exchanging it at a higher value later, Mr Das says. “They could provide a sustainable income stream.”
This income will depend on future demand and use, which makes NFTs difficult to value. “However, there is a credible use case for many forms of intellectual property, notably art, songs, videos,” Mr Das says.
If you go
The flights
There are various ways of getting to the southern Serengeti in Tanzania from the UAE. The exact route and airstrip depends on your overall trip itinerary and which camp you’re staying at. Flydubai flies direct from Dubai to Kilimanjaro International Airport from Dh1,350 return, including taxes; this can be followed by a short flight from Kilimanjaro to the Serengeti withCoastal Aviation from about US$700 (Dh2,500) return, including taxes. Kenya Airways, Emirates and Etihad offer flights via Nairobi or Dar es Salaam.
The specs
Engine: 2.0-litre 4-cyl turbo
Power: 247hp at 6,500rpm
Torque: 370Nm from 1,500-3,500rpm
Transmission: 10-speed auto
Fuel consumption: 7.8L/100km
Price: from Dh94,900
On sale: now
Paltan
Producer: JP Films, Zee Studios Director: JP Dutta Cast: Jackie Shroff, Sonu Sood, Arjun Rampal, Siddhanth Kapoor, Luv Sinha and Harshvardhan Rane Rating: 2/5
2002: "Hezbollah supporters feared becoming a target of security services because of the effects of [9/11] ... discussions on Hezbollah policy moved from mosques into smaller circles in private homes." Supporters in Germany: 800
2013: "Financial and logistical support from Germany for Hezbollah in Lebanon supports the armed struggle against Israel ... Hezbollah supporters in Germany hold back from actions that would gain publicity." Supporters in Germany: 950
2023: "It must be reckoned with that Hezbollah will continue to plan terrorist actions outside the Middle East against Israel or Israeli interests." Supporters in Germany: 1,250
Source: Federal Office for the Protection of the Constitution
