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tv   Key Capitol Hill Hearings  CSPAN  August 31, 2015 12:42pm-2:01pm EDT

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war missions. so the opposite - >> exactly, the opposite. and speaking of women, this is a tool that can be used. young people can educate themselves on their own time and they can do it with the computer, smart phones, so this is one of the main ways to create a social identity online. so just as the internet can be used for that, we need to be thinking about how we can use the civic engagement and political engagement to counter this kind of content as well. it can be a platform for positive engagement and so while discussing civic and data that might not be as interesting as some of the more radical propaganda that's out there, as
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implementers need to be thinking about how we can incorporate to create venues where they can bond with each other and share ideas and have discussion platforms, where they can find entertainment that perhaps advances the idea of civic engagement perhaps through media celebrities come through videos, music games and we are working also to create a game that would teach people about democracy that also reminded them how to register to vote and in libya, there's been a campaign to get young women and others to register to vote and this can be done much easier. this is a platform that can also be used to engage people do make sure they are out there and
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voting. we can use the internet to create ambassadors on social media. they can be ambassadors for change for propagating ideas relating to civic invasion of and democracy and civic action. >> are there any recommendations for how social media can be used for a tool or leveraged in places with low internet penetration i know this is an issue that we've talked about in the office and i think it is important to bring up here. >> i don't know that i have any sort of real suggestions how to successfully use social media in places that have low internet penetration. first of all i do think technology of course has a critical role to play in an gauge meant and i think it is one of those things that it's
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even more true for the youth band for the broader population. we were - the world is becoming increasingly technological and more comfortable and responsive to technology. the one thing that i would say though is all the technology certainly does play a role if not a silver bullet and it's not going to solve all the problems and with all development programming we need to be careful and always sort of keep in mind the effects that sort of technology-based programming might have on the people that don't have access to that. typically i think in most countries and certainly in africa those that for example have access to the internet are typically fairly middle class
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and aren't the most disenfranchised to begin with. they are sort of the ones that are somewhat engaged. so you just have to be careful when using technology that you are not sort of reaching those people that are already somewhat engaged in further disenfranchising those that kind of are not. that runs through in general but that needs to be repeated command again in the sort of the business of technology because it is seen as sort of innovative and seemed as the solution to all of the problems. >> i look forward to today that we stop talking about technology as new. i'm definitely not an early adopter, so i - we obviously meet young people where they already are with the afghanistan debate. we hold the u.s. afghanistan debate over skype and we reach out to the local partners and
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organize events. we use what is happening to reach people in some of the more remote areas and as we have some innovative discussions within our own organization to talk about what do we do when the drones are pervasive and we can access the technology and robotics are a part of our life and so we will also engage those tools when they become a reality as well. >> in addition to supporting the robot babysitters that you once suggested the good news from a gender perspective on the social media technology is that we are seeing in the global surveys in different countries the gender gap actually is disappearing into this equality is a good
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thing and an opportunity i think. the bad news of course is that the traditional gender problems persist so in a place like nigeria we are seeing a strong usage of young men and women on social media, facebook, twitter, etc.. but when we asked what you support a woman as president, the numbers for the youth are actually worse. so we have to do some of the longer term cultural work to address the image and the participation of the women leaders in political and electoral processes. thank you. i think that is a particularly powerful .2 - to pause. before we do, thank you again to jessica and j-juliett for all of the insightful comments that
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have helped frame the discussion we will open up to questions from the audience. the microphone is in the center so if you have a question please make your way. and if you would go ahead and introduce yourself and share your affiliation and let us know whether the qwest the cluster distracted to the specific panelists or if i can exercise my right as moderator to assign. >> it seems in each region and each theme civic education provided to those that have that have been to the countries where the government is either unable or unwilling to write it themselves seem to come up in a lot of your discussions. are their success stories that you can provide for civic education programs that isis may
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have started that have been adopted by the government or schools or to spread on their own. >> do any other panelists - >> i can get a couple of countries we work closely with the ministry of education so we are the ministry of education to engage with us and we definitely will work with them on curriculum. your exam is one of them in some places they were able to work with universities on the seminar into the engage in that as well. we are very fortunate to be joined by the different parties that ran a very long-standing civic education campaign and is also meeting with the ministry of education there so it's very exciting for us.
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>> i'm with the congressman's office. you talk a lot about the great programs that you will do around the world wondered if there's anything the u.s. policymakers can do to help promote this engagement. >> would you like to take that one on? >> i think i mentioned even the social media support for young women and girls around the world and these types of things are extremely important but i think that just continuing to invest in these programs and making sure that we look at this coworker specifically with talked a lot about including it in the program but i think targeted support to young people with talked about this as a negative but also as a positive and i think that is exactly
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right. the title of this event and the radicalization i think the panelists have done a pretty good job of sort of moving away from the youth themselves and explaining the structures that they are attempting to respond to and work with are failing them in a lot of ways and so the bilateral pressure between the u.s. into some of the countries that we are working is extremely important but also continuing pressure to make sure that the government structures are responding to the needs of the community and not just a sort of plutocracy to support the continuing power. those are important pieces. >> i would also like to add about its useful to number this is a long game. there have to be a lot of
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investments made some it's not something that's going to happen overnight and expecting them to adapt to things that have happened in 2011 and and in an environment where it hasn't always been conducive for them to adapt and learn and build their skills is something that we need to keep in mind and invest for the longer term and i always think that as i mentioned earlier investing in a younger generation is also important so not necessarily - they may be voting age only to the ones that are going to be coming up to vote and built in a democracy culture among them them at an earlier stage will pay down the line as well. >> i'm with project democracy which is the global youth coalition. and i had a kind of theoretical question to the panel. we talked about how we can't treat the youth as a monolith in
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society so the question in terms of the engagement that we run into is how do you engage one particular demographic in the monolith that is used without alienating another, and in your opinion is the risk of alienating another group was engaging for a different group? >> that's an excellent question. go ahead. >> it reminds me of a story for the town hall meeting and we were talking about engaging the youth at home in a marginalized in older men turned to me and said i need to be engaged as well and it was the sort of moment of especially in a place that's recovering from a 20 year conflict where of course you can always point out the multiple marginalization and the un kept
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having to up its categorizing them as both extreme and that all these things and you realize you do have to address all of the issues. you do have to engage the entire community. whether that's because they all need assistance and access to the process that we are talking about or to support you as i've mentioned. so if we are talking about engaging young women in a conservative society in north africa, we do have to involve the family and we do have to make the case to them of why this is important for everybody and i think that is critically important. we cannot sort of only focus on a particular segment in society without including everyone. but that said i think targeted support and targeted programs aimed at different cohorts is incredibly important and both are needed. >> to start with a quote i think
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it was by doctor daniel at georgetown and brookings and he also said when you're looking at youth and countering violent extremism one important thing is to targeted groups and i would say yes we always engage wherever you can do that is a very interesting question and something that definitely implementors need to be conscious of. one last point i will add up to something jessica is reminding us as we we design the program is a lot of times you can't just makes all the groups together. when we we break a project that has workshops we have to involve the youth and people with inexperience and have men and women sometimes that isn't always the best strategy sometimes it is to have them together before they are urged together so depending on the context that you are in and the type of social responsibility
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that you have to work your participants. >> thank you so much for your presentation. i'm from the congressman's office. i have two questions. the first one goes to people that work on the the africa issue. i'm going to make it general. the question is in the local skills how does it work for example when the organizations are not strong enough where the government may not be willing to accept international promotion and also i have to raise an issue that has been discussed earlier. when the sense of hope is minimal and it's very limited at
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the first question. the second question i'm kind of curious to know how your monitoring evaluation system operates in terms of output and impact-based indicators especially again i'm going to repeat the fact that in many african countries as complicated and different practice i'm going to raise one issue which is most of the time, many parties right now, i mean especially in this age, they are very hesitant to accept international promotion or international support on this issue. so if you could talk little bit about that. thank you. >> those are some tough questions. we do work in a lot of fairly difficult environments in which the government are not
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necessarily receptive to the kind of assistance that we are, that we would like to give them and are able to give them. i think in practical terms how it usually works, isis does have kind of the weight of the donor community behind it, so there is some support that comes from there and in many cases we wouldn't be able to do the work that we do without that kind of support. more broadly speaking, isis tries to when working with these situations tries to identify where, basically tries to focus on what we cannot come -- and what we can do. so i think that is mostly the strategy that we employ. we also are very much technical experts, so when we approach the
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work that we do from that perspective, and it's kind of - we basically have the international best practice that we can rely on and that serves as an entry point to working with organizations that might be a little bit skeptical of international assistance. ..
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on some level understand the power, a sort of influence they could have just by sort of sheer weight of numbers that there are, i think you sort of the way we can approach that in the long term. in terms of the other question, i'm not really sure how to answer that one in all honesty. honesty. >> i had a comment about the one. it seems julia and jessica both went away. >> you here a lot that hope is not the solution. i would argue inaction is the solution, particularly and cases you mentioned were hope is
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lacking. i think we look at that very much in terms of providing examples from other countries or from within that country and celebrating heroes and opportunities that do exist because without hope you haven't really got anything. >> just an example where we're working in west africa. we do provide technical expertise on issues related to democracy and governance but it's driven by the agenda of the people we are working with a local settings. we did our women's leadership training and the women said we will take, thank you for this leadership skills, thank you for these advocacy skills. we want up elementary gender quota. that wasn't so derived by ifes but it was what the want to do with the skills that they developed out of think that's an important piece of how we're doing this work. on the in and he i don't know if augustine will comment but i just have to say were busted on
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the. i think this is something we are getting, that democracy and governance sector for international development is a late comer to this issue of transit. to defend it for a second term it's not so easy to measure gave a change. when you dig a wel well you can count i dug ken wells and as those by would have and it's much, much harder to say i've changed 10 minds in this those. we understand this is critically important to putting a value on the work and seeing the need to move. we have a very progressive and strong m&e department in ifes. they're working on a quantitative aspects but also the qualitative peace. a good example is, sort of as an anecdote those floating around the hallways was we introduced
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civil society to the election commission for the first time. all these women's groups from all over the country in burma and he was delighted. delighted to me than. have never met with civil society before, but never met with women. when it came to the m&e section to the poor, to the donor, this was not captured. we had no way of saying this introduction has sparked a whole new way of engaging between different segments of society in burma. and i think that's a key piece that looking at the qualitative side of things and picking up, there's a lot, a body of knowledge on that side of knowledge spirit they are specific examples with kentucky. this program she leads in burma, we do in summer program other countries and we can count the number of them have made -- who leave that into our elected to office. those are points we captured. when it comes to young people in
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the civic leadership camps, we are rarely able to flaunt and after programs would've it continues down the road but we can look and say we able to engage? did you participate in something outside of the program we funded a demonstrate you want to continue to use these skills? i think nobody can do thing you can't prove. this is something we take very seriously. >> she's of us good reference in terms of evaluating the use of impact and youth engagement is a long game and how do you measure whether it is participation or exposure to democratic principles and ideas? one program, other programs, 15 years ago, and then you are a successful adult later. i think we have two questions us have two questions us all want to make sure with enough time to address those, so please.
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>> good morning, everyone. i am in washington fellow from nigeria and i like to say thank you for allowing me to be part of this young democratic briefing this morning. i want to make some comments and then a question. recently nigeria had the april elections and that's the first time we can really say we had successful elections. ifes has the work in the african region for many years now. i want to know the specifics, the specific contributions ifes, what's the success of april elections? that's one. secondly, i want to say that the
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young african leadership initiative has regional centers now in africa. i don't know if ifes has thought about partnership with its regional center because it brings together a lot of young people that can be worked on our giving skills and capacity building in the aspect of democracy and governance. i didn't finish my introduction. i'm actually doing my professional development internship now. i shouldn't be here ordinarily because i am a physician. but i'm interested on leadership, and all these issues interrelated. thank you very much. >> thank you. >> not to put you on the spot, but -- >> i'm actually not very familiar with the nigeria project so i'm sorry, i don't
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think it is becoming specifics as to what exactly ifes did nij. i know it was a real, we do have a very large program and a long-standing one in nigeria and i think the recent elections were definitely sort of a real sort of watershed moment in terms of our support to the nigerian election commission and to the democratization process in nigeria at all. we've got a few ifes folks in the crowd. i don't know if maybe somebody can speak a little more directly. sorry. we be happy to connect you with the nigerian team if you do want more details about it. so i'm sorry that i can't speak more to that. in terms of your suggestion of working -- ifes does have come has been working with transfer for a long time and we are familiar with the program and whether partnerships with him --
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yali. i think it's a terrific idea to sort of deep and the partnership and look at these regional centers as potential partners. i think that's definitely a great idea. >> think you. and our last question. >> i admire your programs. i know that we see democracy as a universal ideal and we are seeing that, special with the recent extension of suffrage to women in saudi arabia. have you found it hard to divorce democracy from a western ideal in your work? and what kind of reception do you have, do you have like a pushpit or is it generally really positive towards democracy? thank you. >> maybe i can start with that and i was of course we have had lots of pushback in the region
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before 2011 and after 2011. yes, it is hard. we think about democracy in the certainly put the rest of the world doesn't necessary see democracy in the same way. i think this realization is something that we have come to and it forces us to build flexible in the way we approach our program. we did a recent assessment in syria because we were wanting to get something called a serious democracy forum. we talk to people, there is a strong reaction against the word democracy because of what the blessing democracy, what is happening with democracy in the region where people don't really believe in democracy. we see the interview of this revision of less and less attention with the idea of democracy. they are putting too much value in the idea of democracy. there were suggestions force and i think that's won't have to learn to adapt. so did not talk about democracy is democracy. instead talk about citizenship and what does it mean to be a
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citizen of the country of what are your responsibilities? i think for us where to be able to adapt and maybe a certain context not use the word democracy, into a kind of language make sense in the context and use it. >> i agree. we get stuck on term >> i agree. we get stuck on terminology a lot and running a country is hard work. it doesn't end after elections in protest which are in their wake easy and exciting part because the easy to market on a day-to-day basis you need to create systems and infrastructure to be collected and incorporated and come up with a result that enables you to run the country. those are the pieces i think by breaking them down come in terms of their functional and practical applications that's what the interesting part of the discussion takes place.
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>> well, so we've come to the end of our time together in this room, and i, for one, have been enriched by your comment, the comment of the panel here and i do hope we can continue to have this discussion but i would encourage anyone who to reach out to a panelist or to ifes digital or engage with us on twitter or any other medium and would be happy to continue to discuss youth engagement with you. so just been close out like to offer thanks, many thanks once again to representative jackson lee's office without his support this event would not have been possible. i would like to thank the panelists to whom i am eternally grateful for agreeing to be a part of this discussion. thank you. and, finally, i would like to thank everyone in the river taking time out of their busy schedules to attend. your comments contributed to a lively discussion and hopefully it will be fruitful in the
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future for all of us in our work and youth engagement, whether that's in the u.s., abroad, on the policy or the practitioners inside. i look forward to many engaged with you in the future. thanks very much, and have a wonderful day. [applause] >> [inaudible conversations] >> [inaudible conversations]
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>> members of congress will be back on capitol hill next week as the august recess wraps up. >> when i was in college i wasn't a particularly good student. first part of college i was interested in boards. the latter part of his interest in working. i learned one thing. i learned about the critical path method ended up holding oligarchic. i learned if you start with
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something like this, and you lay out a vision and build it out and begin with the end they might and to put first things first, sort of the critical path. what i've seen our secretary do is, i know he's developed a tremendous warmth with iran's foreign minister zarif and he talks about it often, but what i think you've actually done in these negotiations is codified a perfectly aligned halfway for iran to get a nuclear weapon just by abiding disagreement. i look at the things that they need to do from the way it's laid out and i don't think you could more perfectly lay it out. from my perspective, mr. secretary, i'm sorry. not unlike a hotel guest that leaves only with a hotel bathrobe on his back, i believe
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you have been fleeced. >> the carnegie endowment income of initiatives to go look at the implications of lifting sanctions against iran. in a world bank report shows lifting sanctions to boost economic growth and iran while reducing global oil prices. this is about one hour. >> all right. let's get started or i first want to welcome all of you to the carnegie endowment. i'm a senior associate at carnegie, and i wanted to welcome our guest speakers today. shantayanan devarajan is the chief economist for the middle east and north africa at the world bank and he is the author of the report which were going to discuss today, very timely, y for insightful the report onin economic implications of lifting sanctions on iran.
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all right. to my left is my friend and colleague uri dadush, also hav a former senior official of the world that can only have about i 60 minutes i just want to jump right into it and then we'll have kind of a discussion amongst ourselves and handed over to all of you.and it so go ahead. >> thanks very much, karim, and thanks to carnegie for inviting us. of course, i should say i'm one of the authors of the report. i happened to be the boss that's what i think why my nam name cos up to get with the other officers is here.'m one we ofdid this because we thoughs that the nuclear agreement of thclear july 15 was one of the mostimpot important events of his time and it's fun to important economic implications for the world for iran inalso particular.e i have to confess that also thought since this was the dog days of the summer that's our
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report was be the most importano event to come out, but i think thewere wrong on that. quite chaotic with greece and china and whatever else. but nevertheless, we think to toward you try to understand thc economic implications of the of lifting of sanctions on iran. this is a very difficult and complicated problem. bairstow crystal ball you can look through and say this is what's going to happen. so we have to use a variety of different techniques that we're trying to almost try to triangulate the application using different sometimes methods that are not exactly consistent with each other.we said to org wanize it we said we'llo look at the implications at the global level, what's going to happen, what effect will have on the global economy, effect it's going to have on iran's trading
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partners, and thirdly, what it's going to dtd iranian economy itself let's first start with the global level, and the most important implication at the mot global level is the increase in oil exports by iran as a result of lifting sanctions. as you can see, when sanctions were tightened, particularly the european union tighten sanctions of 2012, there was a are separas a drop in iran's oil export by roughly about a million barrels a day.da you could also notice for laterg reference that the composition of trading partners alsoshd so shifted. b the big drop within, that trade with western europe, whereas trade with the eastern partners, the oil trade, oil exports to eastern partners actually increased in some cases ason
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certain as a proportion much larger. so what we did was we said as a first approximation, let's sayes iran's oil exports were going to as result of lifting sanctions would go about a million barrels a day in about six to 12 months t.ter the accord is ratified.ur that's what people expect the time needed to bring production back up to this level.e we took that assumption of a million barrels a day and simulated in a multi-countryhis general equilibrium model. this is a model of multiple countries that are trading with each other and then we insert mn additional million barrels a day of iranian expbaorts. we also simulated the effect ofe lifting some of the other restrictions that sanctions had such as on insurance and
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services trade, but those turned out to be less significance.ifin big effect is thatce these additional million barrels a dal had an effect of a lowering world oil crisis by 14%. some people, and i myself was a bit surprised initially because a million barrels a day doesn't sound like a lot of oil. el ans additional million barrelso day. g how do you get a drop of 14%? if you think about it, it's really the other side of the coin of the fact that oil demanl is quite inelastic. we know we talk about inelastic oil demand in terms of well,e pr when the price of oil goes up,dl demand doesn't fall very much. it only falls a little bit. in but the other side is to give it increase in supply of a small amount, the price will fall by quite a large amount as you canm see from this graph that if you
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have a shift in the supply curv, of a million barrels a day, given how steep that demand curve is, you get a pretty big drop in the price of oil. keep in mind that this is a puro affect of the additional million barrels al day.els a it's not a prediction about wha the oil is going to be six months from now or a year from now because lots of other things determine the price of oil, affe it likeowth in china n or europe or everywhere else. secondly, this is a simulation that assumes no strategic behavior by other oil exporters. so in particular we areowing wt following what seems to be the case with other oil producers, particularly the ones with swint capacity likeic saudi arabia whh is when the price of oil fell back and into 2014, they didn'tt really adjust their production. they continued keeping theirhe
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production as it is.f what is the effect of the additional million barrels a day and a drop in the price of oilpn on different countries? that's what we're trying to get at, and we expressed this in terms of welfare but you can think of it as a measure off income. it's just a little bit more precise an expression of income. the effect is about 3% increase is the oh for four iran if so. iran is the one country becausen it has an additional quantity exported and there's the price of oil is going to be a net oil n even though it is oil exporter. if you if you look at other countries,f the oil exporters, they typically lose because for them the price of oil has just fallen as a result of the additional, a as result of the increase in
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iranian oil exports.port. oil and oil importers including ofir the u.s. and the european union gain. so this is a classic term trade shock that we've experienced int different ways both an upswing a the downswing with the priceg of oil in different parts, different times in history. let's turn to the second question we were asking which is what is the effect on trading partners. t this is hia global model thatel doesn't actually look closer at iran's bilateral trading relationships. for this we use a different technique which was to try to simulate, or try to track iran'a bilateral trading relationships using what's called a gravity model. which basically is looking atheg the growth rate of the tradingin partners and iran's own growth rate come and look at what that
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trade would have been in the absence of sanctions, and we look at what the effect of 2012 and 13 were, by how much the trajectory of the trade change as result of the events of 2012 and 13 when the eu sanctions became 19. we could use that to actually calculate the net loss, bilateral exports that iranesult underwent as a result of the 2012 a ing of sanctions in 2012 and 2013.eet you can see that in the last column heremn that there is lotf of exports over those two yearsn of various trading partners,eura including some of the western and european ones which is what onu would expect. totaling to something like3.5
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$17 billion. this could be thought of as thet next -- net effect of sanctions on exports, and conversely thise is the amount by which we might expect exports to go back up once sanctions are lifted. the other thing is that, to keep in mind, if the composition of trading partners. because what happened both before sanctions became tie-ins as well as during the sanctions era was that there was a shift toward eastern partners. a iran was, present aquatint shot himself have been looking to these proposed or somethingmore without -- ahmadinejad. they were trading more with russia, korea, china, india and solar. that process accelerated during the sanctions era.uring i think what we will see with wh the lifting of sanctions, first
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of all, is just an increase in trade with the west, simply because that was what was cutbee during the sanctions era butf te also because of the composition of goods that they trade with the west are not very differents iran basically buys consumereasn goods from the eastern partners but it actually buys high-techwn machinery and equipment from the western partners. it is in dire need of those having neglected technology duri theg during the sanctions period. now, let me then turned to the third part, which is the affect on the iranian macroeconomy, or the iranian economy.think as i think many of you know, during the period of sanctions being tightened, particularly years, 2012 and 2013, iran went into a recession.ran quite a deep recession in fact.
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growth has now become positive just this last year to about 3%. we expect that to be somewhat higher with the stimulus offered by the increase in oil exports. 's's been much this penny of oit export revenues that goes to revive the economy, and we expect growth to be but 56% by now, that's 2017. now, that's one psychic you can see from the graph the other big issue in iran, as it is in any other country, is unemployment, particularly youth unemployment. hear there's an interesting stist to the usual story, because it'll look atrate and unemployment rates and labor force participation rates, -- particularly if you split it up between women and men, we foundp a very interesting pattern we during sanctions, and that
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pattern was nctions, and that pattern was one where the unemployment rate for young women actually went up. the labor force participation rate went down. women were dropping out of the labor force as well as, they were increasing in unemployment. abut unemployment rate for young men actually wentua down. this is a bit of a surprise but it, it's one of if you think about it it's one of those cases where economics action is useful. there was what was going on there was that during the sanctions period, 2012-2013, as some of you may recall the currency depreciated rapidly. when the currency depreciated like a devaluation, that trade sectors relatively moree profitable relative to the non-tradable sector. .. the
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men were in the tradeable sector like the automobile sector. you had a shift of a pattern of unemployment. they were suffering from the depreciation and so women were having trouble finding jobs and many of them dropped out of the labor force at that time. now, if you buy the story, this whole pattern >> this whole pattern would reverse with the end of sanctions, with the lifting of sanctions where you would get, now, foreign exchange coming into the country so the services sector will start growing and you'd actually be able to absorb women back into the labor force and into employment. and the tradeable sector, that's my last point, the tradeable sector might suffer. this is the non-oil tradeable sector might suffer. and this is an important point
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to keep in mind because this event, the lifting of sanctions, can be thought of as a windfall to iran. but it really matters how you manage this windfall if it's going to generate any kind of sustainable growth. and there there's some concerns, because we -- and in the report, we track the experience of previous windfalls. because iran has had windfalls before when the price of oil has doubled and tripled at various times. and the way they have managed those windfalls is, shall we say, not very impressive. and in particular, you know, in '73 when the price of oil first shot up, the shah decided to sideline the national planning office and decided by himself on all the public investment projects to be spent on that, and they weren't very well designed or managed. and it was really a wasted
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opportunity. and more recently when commodity prices rose in the early 2000s -- which is another windfall because iran was exporting oil there because the sanctions hadn't started becoming binding yet -- there was this big windfall. and it was very interesting because when there is this windfall, you get this real exchange rate appreciation. you get the price of non-tradeables going up. and traditionally you expect the non-oil tradeable sector to suffer. and it did during that period except for two sectors. it was pharmaceuticals and petrochemicals. those actually continued to grow their exports. now, why is that? well, it turns out those are the two that were subsidized the most. not only did they receive direct subsidies because the president at that time wanted to promote these two sectors as exporting sectors, particularly to the eastern partners, and the other -- not only did they
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receive direct subsidies, but these are the sectors that received, benefited the most from the energy subsidies because these are highly energy-intensive sectors. so really the reason why they kept the nonof oil tradeable sector going in these two areas was huge subsidies which is a very inefficient way to maintain it. so my final point is that this time let's try to make good use of this windfall, and is ways to do that would be -- and i don't think the real exchange at appreciation can can be avoided. that's just a phenomenon of market forces. but we can do something in iran about lowering the costs of production of these non-oil tradeable sectors by removing some of the man head constraints -- manmade constraints to doing business. there are lots of constraints that are policy and bureaucratic constraints and the lack of competition in many of these sectors that if we can implement some of those policies and
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reforms, you can actually bring down the cost even when the real exchange rate is appreciating. and secondly, infrastructure. and in particular, iran has a relatively good infrastructure in some ways, but telecommunications infrastructure has been neglected. and this is critical for these non-oil exportable sectors, because they need telecom. particularly the high-tech ones. and my final point is that this is what's going to be key for the postoil era. because iran has to start preparing for what it's going to do when the oil runs out. there's tremendous potential in this country because it's got a highly educated population. and if you got a highly educated population and you want to move to the non-oil era, you've got to move to a knowledge economy. and those are the things that require high-tech communications equipment and good infrastructure as well as the
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complimentary policies for a business environment. >> thank you. on wall street they say never confuse genius with a bull market, and in iran maybe the adage is never confuse economic wisdom with high prices of oil. everyone thinks -- [laughter] oil prices are high. let me hand it over to -- you're not using slides, are you? >> no, no. i'm just going to, i'm just going to speak. >> low tech. >> low tech, low tech. first of all, i'd like to congratulate my friend san japan for the comprehensive analysis of lifting of the iran sanctions. let me say a bit on the study and a bit on policy implications. the study brings home a couple of things. first, how devastating the intensification of sanctions since 2012 has been on the iranian economy.
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and how important the boost of lifting them will be. it makes you understand better why iranians came to the table and also why the negotiators are confident that they are unlikely -- that the western negotiators, so to speak, the p5+1 -- that they're likely to flout the agreement in the future. second, the report shows that the lifting of sanctions will be beneficial for the world economy overall even though oil -- will lose. it's a striking fact that the economies of developing countries on average are about 25-30% bigger than they were pre-financial crisis. but the iranian economy is not much different than it was then. that, to me, underlines in a
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very simple way what the effect of -- we're talking real money in these numbers. the report describes the lifting of sanctions as a windfall which which suggests a one-time big gain. and, of course, there is no -- there is a one-time big game, but the lifting of sanctions should not be called a windfall, in my view. it's much more of a fundamental shift in the iranian economy. an economic regime change, not a political regime change. an economic regime change. and so it should be looked at as the potential for a new start, a start where iran integrates into world markets in an integral way and where confidence rises with the lifting of sanctions. if you look at it this way, the welfare gains for iran are
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potentially, in my view, significantly larger than the 2% a year or so estimated in the report. because in addition to the one-time boost to oil exhorts and the efficiency -- exports and the efficiency aspects of trade opening, you have to factor in a sustained increase in total factor productivity growth and in private investment. not only foreign investment, but also domestic private investment. shanta is absolutely right to stress that these beneficial effects will depend predominantly on how iran deals with the new economic regime. as an opportunity to enact structural reforms and clean up its governance or, alternatively, as an opportunity to capture -- by the state and its associated special interest
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and possibly get up to no good abroad. iran is a large and sophisticate ed economy, about the same size in terms of oplation and income as turkey -- population and income as turkey. an income, an economy about 40% larger and 40% richer per person, roughly, than egypt. it is much more than an oil economy or an oil state. presanctions it produced 1.6 million cars. that is almost three times as many as italy produces today. admittedly, italy is not a very good example of efficiency. [laughter] opening up -- i was working in italy when they were producing two million cars in 1975. opening up iran has a nontrivial
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effect on world trade and investment at a time when world trade is stuttering. the report says that iran could attract fti in the low single digits, but the number could be much higher than that. turkey attracted $13 billion in 2013, and turkey does not have huge oil reserves in need of technology and money to restart and expand. as for the effect on oil markets which the report stresses is the biggest gain for the world economy, i have to say that i have my doubts as to whether this is good for the world today. i understand the point that it improves the incomes of oil importers including the united states and reduces the incomes
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of oil exporters. but the point is that we live now in a low inflation, low price world. we live now in a low price world. low oil rice -- price world. and i believe you can have too much of a good thing. the oil price has already fallen so fast and so low that the well known destabilizing effects on the budgets of oil exporters and on the income statements and balance sheets of companies in the oil sectors are already very significant. and they could outweigh the positive effects of consumer demand. looked at another way, oil is today a much smaller part of the family budget, but it is absolutely critical at the margin for a lot of oil producers. i'm also concerned -- this is slightly below the belt,
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shanta -- i'm also concerned about the effect of even lower oil prices on carbon emissions and the increased oil consumption that this implies. as i mentioned in a comment to an imf report last month in this room, it's amazing to me how the ifi's, the international financial institutions, can segment their analysis to put climate at the top of the list one day and to ignore it the next. finally, a word about business and about economic policies. business has already assumed that the deal is going to go ahead and have been flocking to tehran for months. the opportunities lie in investment in the energy sector and in providing all manner of goods and especially services, as shanta has stressed, in an expanding economy. how big the opportunities turn out to be depends on the energy investment regime iran puts in
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lace, on the evolution of the real exchange rate, on the international trade and foreign investment regime and on the growth of the iranian economy. obviously, the levers on these policy variables are in the hands of iranian politicians. but the international community is not without tools to help and influence this process. iran throughout this period has continued to receive article iv missions from the imf and to cooperate with them and, apparently, to listen to them. the message we have is that in all respects they're moving in the right direction on macroeconomic policies. businesses will be looking for sound fiscal and monetary policy, a sense that inflation is under control, that the exchange rate is simple, that the exchange rate regime is simple and nondiscriminatory.
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the exchange rate must be realistic. imf can help on all these. as important is the fact that iran has renewed its bid as it already has several times to join the world trade organization. accession to the wto is a multiyear purpose. it's a very frustrating process but also one which provides a unique opportunity to shape iran's economy for modern times. a tough wto negotiation result in an iranian economy with lower and more uniform tariffs, a more liberal investment regime affecting particularly trading service, a reduction in the role of state-owned enterprises, respect for international standards and norms including in intellectual property. crucially, if it is done well,
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the wto negotiation will greatly strengthen the hands of reformers in iran. for the world bank which has stayed pretty much out of iran for many years, iran would represent the singlemost important active program in the middle east region. there will be large lending opportunities, i suspect, and these are obviously important for the banks' effort to be commensurate and sustained. but in the end, the money will be secondary in iran. the bank, on the other hand, will bring enormous experience and analytical resource ares on iran's -- resources on iran's most pressing structural challenges, reforming the trade regime, improving the economy's competitiveness, upgrading the infrastructure, modernizing the education system, establishing more transparent governance mechanism, reforming the labor market. the list goes on.
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finally, i want to say that development economies learn the hard way that economic analysis is not the most important part. it's the politics, stupid. i may be naive, but i still like to believe that if iran can make substantial progress in terms of growth and economic integration and that the benefits are felt by families and the young, that the politics will gradually change. shanta's report helps clarify everyone's thinking. >> thank you so much, uri, and shanta. let me start with a simple question that probably doesn't have a simple answer, but that is if iran's oil production and exports are projected to double at a time when the price of oil has been cut by more than half, could we look back a few years from now and say, actually, this opening up be more iran was a -- up for iran was negative, that
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actually their gdp was higher when they were sanctioned? >> not in the case of iran, because i think the -- if you think about it, iran is still, currently, an oil-dependent economy. so if you like, the comparative advantage was oil. and that was the one thing they couldn't produce or they weren't able to export much. so even if the price of oil falls, it's not going to fall so far that iran will suddenly discover its comparative advantage is something else. so this will be, there will be a gain. now, the magnitude of those benefits will be lower, lower the price of oil. that's the point that uri was making, les no question about that. but i think it's still a net gain -- >> the figures, our debate is about what price of oil iran needs to be able to balance its budget. do you guys have an assessment of that at the bank? >> let me ask my colleague there. i don't think we have one for
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iran, but -- no, i don't -- >> [inaudible] >> it's 100? >> [inaudible] >> okay. very good. uri, do you have an assessment on that? it's just kind of -- well, let me actually move the suggest slightly, and that is both of you have been working in the field of development economics for a very long time, and there was a very interesting piece about myanmar, burma in "the wall street journal" a few weeks back about how the country's economic opening a couple years ago has really enriched government cronies, military cronies, it hasn't really trickled down to the population in myanmar. if you can kind of project two, three years forward based on kind of a comparative perspective that you have, how do you see this, you know, the potential removal of economic sanctions? how do you see that playing out within iran?
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and kind of to add on to that, what are the kind of countries which often times, you know, people who do political science like to invoke 1970s china or the soviet union. is there another country or region which you find kind of most applicable to iran's potential opening? >> well, i think i can answer a little bit on the first part of the question which is we have, and we have done some analysis not on iran, but in several other countries in the region n particular, tunisia and egypt, where we find that the unemployment problem is directly related to crony capitalism, to elite capture. so we find that the ben ali regime in tunisia before the revolution had controlled, had family connections that owned the banking sector, the telecom sector and the transport sector. and as a result, those sectors stood in the way of export-led
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growth. now, there is some work by kevin harris at princeton that's trying to do a simple kind of analysis of iran. it's preliminary work, but he's also finding various connections in the private sector with the regime that could lead to similar consequences. so i think there is, certainly, a concern. and in many ways when i was referring to in terms of creating a better business climate really is trying to promote competition so that this elite capture doesn't get in the way of promoting employment. >> uri? >> yeah. no, i agree completely with what shanta said. what i would add is that, you know, on first principles not having been to iran recently or ever, okay? i'm just looking at the data here and comparing it with other countries. you have a country that has been
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closed for a while. there's been a big shift of resources toward the traded sector very simply because you can import. and this is somewhat artificial. i'm sure that a lot of positions have been developed in this highly distorted and relatively isolated economy. in the course of the last three to four years. in this sense, this is why i have put so much stress on the wto accession negotiations, which the iranians apparently are really, really very keen on, and they keep on coming back to. because that's precisely what the wto negotiations can help offset to a degree by putting forward the interests of exporters and creating a binding
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mechanism for the reformers in the country to change things. and that's what has happened in china, that's what happened in vietnam, that's what happened in a number of other countries that underwent serious -- and i underline the word "serious" -- wto negotiations. the other point i would make is that this is drawing a little bit from the recent experience in egypt. if the regime is confident and well entrenched, it can take on its special interest more easily. if a regime is feeling threatened, insecure -- and, karim, you're the best judge of that, not me -- then its capacity to confront cronies and special interests is more complicated. >> there's a sense that there's been an evolution in the
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thinking in washington about the wisdom of iran's accession to the world trade organization, because i think in the past, especially i remember during the bush administration, that was perceived as a carrot, you know? we shouldn't offer that to them. and i think now there's a sense that, you know, this country is -- if you're an economic mafia, if you have the revolutionary guard joining the wto is not necessarily in your interest, and it's seen as something that is not a gift to the regime, but, you know, potentially a gift to private sector and civil society. a couple more questions before i hand it over to all of you so, please, have your questions ready. you talk a little bit about in the report about the potential winners and losers as a result of the removal of sanctions. i mean, the winners are major oil importers, china, europe, potential losers are the major oil producers, saudi arabia, russia. can you talk a little bit more about that, how you see that
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playing out? and maybe other countries that aren't necessarily in the obvious category, the fact that this economic opening might have. >> well, just to be clear, we were talking about winners and losers as a result of the effect of increasing oil exports on the world oil price. >> yeah. >> so that was simply that one particular thread that we were tracing through. now, there are lots of other implications for the result of the nuclear deal, shall we say, including the lifting of sanctions that will change the pattern of winners and losers. and, you know, there are people who are saying that this could actually eventually lead to greater peace in the middle middle east region. there's huge winners there like all of us -- [laughter] that we don't have but could definitely be part of the story. >> uri? >> no. i mean, again, i want to stress
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what i said at the beginning is that we've already had this big boon from the lower oil prices. actually, the results have been quite dispinting in terms of economic growth -- disappointing in terms of economic growth in part because, i'm talking about the decline in oil prices that's already occurred. many -- in part because the effects on investment, oil investments and many oil exporters has been more important than many had anticipated. they've cut back quite a bit, and in part because in many instances the benefits of lower oil prices have not filtered through to consumers. sometimes for good reason, because if we do subsidies -- which, by the way, is the case of iran as well. apparently, they have a very serious energy subsidy reform
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program. and in art because some -- in part because some governments just needed more taxes, so they've increased taxes. so the effects have been quite disappointing, but what worries me most now is that there are a lot of precarious situations among the oil producers. okay? so i don't assume i understand logic of a transfer of resources being from low spenders to high spenders being positive for world aggregate demand in the short term. i just question that that is the case now at this level of oil prices. i'm concerned that further oil price declines will actually mean no effect on world aggregate demand and perhaps a decline in world aggregate demand because of the bad effect it has on oil producers at this low level of oil prices.
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okay? >> i had meant to respond to one of uri's comments earlier, and this reminded me though. i think it's important to separate two things, which is the effect of an increase in oil supply and the market and its effect on oil prices from the secular decline in oil prices we saw, say, towards the end of 2014 and, in fact, we're seeing again now which is more on demand side. so one of the reasons that -- and as uri said, we're not seeing this growth as a result of the lower oil prices, because it's the lack of growth that is bringing oil prices down. >> right. yeah. >> and so, you know, we have to separate those two. those are two different phenomena. i think the low inflation is also a result of the lack of growth. we're just seeing a slowdown in china, lower growth in china, lower growth in europe and a nascent recovery in the united states.
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>> last question from me before i hand it over to all of you, i remember when the major financial crisis happened, global crisis happened 2008-2009, it didn't really affect the economic situation within iran. i think the tehran stock exchange even went up during the that time, and iran bragged about how it was basically immune to global economic trends. put aside the price of oil for a second, but some of these major collapses we're having in emerging markets and, you know, ebbs and flows on wall street, how do you see that impacting the economic situation in iran moving forward? >> well, i think it's still the case that iran isn't all that integrated in the global financial system, as uri was alluding to earlier as well. so i think the actual, the effect of the current turmoil of the stock market and so on on iran in the near future is going to be through the oil price mechanism. that's the main channel we're
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going to see. this and when iran becomes -- until and when iran becomes more integrated in the global financial system. >> very good. hand it over to all of you. i'll take maybe three questions at once if you can just introduce yourself and be brief as possible. here in the front, michael. >> [inaudible] >> wait for the microphone. finish. >> michael gordon, new york times. under this -- following up on the notion of winners and losers. under this, the jcpoa, the iran agreement which is a rather complicated document, there's a long list of banks, companies, individuals, enterprises of various sorts on whom sanctions are removed, and it's a phased process. some are removed right away on implementation day when the nuclear conditions are met, some are removed on transition day
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eight years down the line, and in some cases the sanctions are to be removed by the european union but not necessarily by the united states depending on the entity involved. but many, if not most, of these enterprises are linked to the irgc. and to people who have been involved in the nuclear program. so a question i have is, did you examine within framework of the iranian economy be what the effect is on removing these sanctions in terms of strengthening or weakening various players? .. -- various does the agreement strengthen the irtc-linked companies and if


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