Evidence heard in Public

Questions 38 - 102



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Oral Evidence

Taken before the Foreign Affairs Committee

on Tuesday 6 December 2011

Members present:

Richard Ottaway (Chair)

Mr Bob Ainsworth

Mr John Baron

Ann Clwyd

Mike Gapes

Sir John Stanley

Rory Stewart

Examination of Witness

Witness: Dr Claire Spencer, Head of Middle East and North Africa Programme, Chatham House, gave evidence.

Q38 Chair: I welcome members of the public to the second evidence session of the Committee’s inquiry into British foreign policy and the Arab Spring and transition to democracy. I am delighted to have a witness who has been with us before-Dr Claire Spencer, who is the head of the Middle East and North Africa programme at Chatham House. Dr Spencer, is there anything that you would like to say by means of opening remarks?

Dr Spencer: I just wanted to declare a certain interest in that the programme I head is in receipt of funds either directly or indirectly from the Arab Partnership Fund, which is managed by the Foreign Office and the Department for International Development-the British Government. In respect of activities, there are some round tables that we are organising in Egypt and with the British Council in Rabat for a training programme that starts next year.

Q39 Chair: Thank you. I think it is pretty sensible to draw that to our attention, but I do not think that it makes much difference to your evidence.

Dr Spencer, I am just flipping through some of your recent publications, and you have one that was published in the FT in July called, "You’ve ousted an Arab autocrat. Now what?" What is the answer to that?

Dr Spencer: I am very concerned that we focus too much on the reasons why we got to where we are. It seems to me that it is rather like the storm at the beginning of "The Tempest" or "The Flying Dutchman". It unleashes a whole series of activities and events, which are going to be very different in different countries. So I think one of the key things to follow up on is whether all these transitions, particularly Tunisia and Egypt-in Tunisia, I think the assumption is that the elections were successful and free and fair, but now six weeks on we still have no Government in place.

Last week, the Central Bank of Tunisia was requesting the three parties in discussions to form a coalition Government and to do so quickly in the face of zero growth rates this year. So there is unrest still in Tunisia. There were protests last week in Gafsa in the south, which is the phosphate area of Tunisia, and phosphates are one of their major exports. We need to keep looking at details in the individual cases-that is largely my concern and what provoked that.

Q40 Chair: What do you think were the main causes of the uprisings?

Dr Spencer: I think it is the usual combination of economics and politics, which are inextricably linked across the Middle East. In brief, the figures no longer added up, with high demographic growth rates and high levels of unemployment, and the official version of state politics was no longer credible. So I think the catalysts were a combination of an insult to people’s intelligence, because they were better informed about where the money was really going, and an insult to their dignity-certainly in the case of those at the lower end of society.

Q41 Chair: Do you think greater transparency through modern technology was a driving factor?

Dr Spencer: Also word of mouth. I have been going to Tunisia over the years. I go there at least once a year, and it was noticeable over the last five years-not just the last year-how many of the apocryphal taxi drivers were speaking out when I asked them direct questions, for example, about who was buying all the villas that I could see being constructed in and around Tunis. They would tell me, "Madam, there are crooks everywhere," in rather acerbic French. So people were beginning to speak out. You were aware that they could see what was going on in the construction boom and the more flagrant displays of wealth.

Q42 Chair: So it is not necessarily an anti-Government protest; it was "them and us", with the poor complaining that others were doing better.

Dr Spencer: Well, it was directed against those who were seen to be directly or indirectly in government exploiting what were official growth rates, which were quite healthy in most of these states-5% or 6%-and which were applauded in the outside world, particularly in the case of Tunisia, which was applauded for its liberal economics. Most people in Tunisia knew that the money was not coming to them, and it was not creating sustainable employment.

Q43 Chair: No one saw this coming-let alone the Presidents of the countries involved. Do you think we in the West were a bit preoccupied with stability? Were we too comfortable with the regimes that were in place, which were not causing us any trouble? The Egyptians had signed a peace agreement with Israel. Were we actually turning a bit of Nelsonian blind eye to some of these problems that were going on underneath?

Dr Spencer: I think there were certainly people who knew. The Foreign Office certainly knew. We have seen from WikiLeaks, which has been widely quoted, that others knew what was going on. I think the dilemma is that we are just coming out of a decade in which the key security preoccupation was the containment of terrorism. I think there was an oversimplified vision of the Arab world being made up contradictorily of rather passive people combined with those who had a tendency towards radicalism.

I think the dilemma was, "How do you change a system from outside?" It was better to secure our own interests to work through known and trusted partners in the region like President Mubarak, who at least secured our interests by ensuring that the terrorist threat did not come through Egypt into Europe. I think that was the dilemma we were facing. People knew that the numbers no longer added up, but they did not know what to do about it without interfering. I think the British Government in particular could not do it alone.

Q44 Chair: That does not quite address the point of whether we were turning a blind eye to it. Do you think we were aware of the dilemma? Do you think we were saying, "Look, this does suit us, but we know what is going on is not morally right"? Were we in fact endorsing an unacceptable regime?

Dr Spencer: From the Foreign Office perspective, they were aware that the sequence of Arab Human Development Reports was actually reporting a situation that, over the longer term, would no longer be sustainable with high levels of unemployment and a crisis over education and demographic pressures, so they had already last year begun to address this. I think the problem was an over-reliance on persuading our partners and the leaders in the region to engage in reform. In my view, top-down reform, if it happens at all, is extremely slow and usually does not address the core problems.

Q45 Mr Baron: Dr Spencer, reports of the Tunisian elections in October were generally promising. You were an official observer. However, one of the reports suggested that vestiges of the old regime are, as one would expect, still lingering, and there were one or two concerns that there may be a counter-revolution. I understand that Ben Ali’s wife was on the phone inciting violence, for example.

Dr Spencer: There are elements of this. I was at the election with the Carter Center mission as a short-term observer, and certainly what I observed was pretty straightforward, open and transparent. The big surprise after the elections were the 26 seats that initially were contested for a number of reasons, one by this party Al Aridha, which is championed by a television magnate-Hamza Hamdi, I believe his name is-who broadcast from the UK into the region.

The rumour is, although I have yet to find any proof, that he was funded by elements of the former regime-namely, the former single party, the RCD. There have certainly been accusations, some of which have since been discounted, that votes were bought in the areas where those seats were gained.

The other risk is from the Salafist movement in Tunisia. It was active in protest just before the elections and it is subsequently now in occupation of the university of Manouba, near Tunis, in protest against the ban on women wearing full-face veils in the university system. There are a number of women wearing the niqab, which is the full-face veil, in occupation of the university. The two pressures are coming from those angles.

Q46 Mr Baron: Can I move us on to Egypt, if I may? How confident are you that the military will accept a purely military role once the transition to a civilian Government takes place? There have been reports from Amnesty International, for example, suggesting that human rights abuses have, if anything, been worse under the present military junta than they were under Mubarak. There are concerns there, are there not?

Dr Spencer: There are certainly concerns, and there are two schools of thought. I have been assured by a fairly senior Egyptian that the military will be out of power by next summer. Others contest that, saying that they have a role within the economy, with estimates that range from 10% to 40%, and that if they are going to leave power they will want to secure an exit strategy that secures some of those interests.

From the outside, we could have been doing more to challenge the use of military courts. A number of us, publicly and otherwise, have been challenging the use of military courts to try civilian protesters, particularly when former President Mubarak has been tried in a civilian court.

We are facing a dilemma; in an era where we are talking about greater conditionality, what levers do we as the UK or collectively with our partners have to protest against the use of these military courts? I think that is why we have seen things re-emerging into Tahrir Square in recent weeks, precisely to protest against the military’s role in politics.

Q47 Mr Baron: In our whirlwind tour of North Africa, we move to Libya very briefly. How confident are you that the transition to parliamentary elections and the timetable generally will be met? There are differing reports. Some say that the main concern is the clan-like tribal rivalries, but others say that that is not an issue-Chatham House does not believe that is an issue-and it is more a case of ensuring that there is a feeling of security, and law and order. Where do you think the potential pitfalls lie?

Dr Spencer: In the areas that you have identified. We are in completely unknown territory here, and this is a new experience for many Libyans, so there is a plus side and a minus side. On the plus side, I am encouraged by the energy and enthusiasm of many Libyans including, critically, the expatriate community, who can bring a lot in terms of technical assistance from their experience of having lived in exile here or elsewhere.

In terms of creating political parties and different political forces that actually represent elements beyond the tribal configurations in Libya, we have a long way to go. It will be problematic but, as I keep saying, if it is not noisy and argumentative, it is not democracy. We should make a big distinction between the risk of continued use of violence-hence the emphasis on moving the militias into something that resembles a national army or disarming them as soon as conceivably possible; I think that should be a priority-and allowing the kind of debates to take place, including from the East and West of the country where there are historical and traditional divisions, in a way that can reach a consensus.

Q48 Mr Baron: Whether we are talking about Tunisia, where elections have just taken place, about the drafting of constitutions or about upcoming elections, as you look at the countries mentioned what do you think our role should be-if anything-in encouraging these nascent democracies to take root after a turbulent period in their histories?

Dr Spencer: We need to spend more energy getting to know some of the new actors-the younger generation. There are a lot of very qualified younger people who have not necessarily either affiliated themselves to political parties or engaged too heavily in civil society.

A role that the UK particularly could play is in introducing young entrepreneurs from Tunisia to young entrepreneurs in this country. There has been a lot of emphasis, including through the new European Commission funding lines, on putting money into civil society and small and medium enterprises when in fact, although money does matter, there is technical and managerial expertise-how you grow a small company into a medium-sized or larger one. We should be doing a lot more on our side to galvanise some of the interest here in partnering people from the UK. It is in the UK’s interest as well for us to do that.

Q49 Chair: I want to go back to Egypt for a second. What sort of dialogue has been going on about the role of the army-that you are aware of? Can we afford to distance ourselves from the army at the moment?

Dr Spencer: The assumption is that any dialogue is going on behind the scenes with the Americans, who are well known sponsors; they provide subsidies of $1.3 billion a year to the Egyptian military. The expectation has been that where there is influence-and there is not only financial influence, but professional military-to-military influence-it will be going on there. I have heard the Secretary of State Hillary Clinton talk about the misuse of military courts, but there should be more voices speaking out against that from Europe as well. I have not heard so many.

Q50 Chair: Do you think the Egypt-Israel peace treaty is in jeopardy?

Dr Spencer: Not at the moment, but the SCAF, the military authorities and, I believe, the Muslim Brotherhood will manage this as a balancing act in terms of keeping the peace treaty going. I think it is in their interests not to upset the apple cart for now, but the expectation will be that more pressure-and I believe they think more pressure will do it-will be put on Israel to provide a settlement for the Palestinians. There is widespread disappointment across the region and in Egypt that the Palestinians’ bid for recognition of statehood at the UN has not taken the issue any further.

Q51 Mr Ainsworth: In Egypt and Tunisia we have seen parties with Islamic values at the forefront of the liberation movement. Is that going to be the model in other parts of the Middle East? If so, how fundamentalist are the parties leading these liberation movements?

Dr Spencer: It may well be the case, for the obvious reason that they have been able to organise at grass-roots level, even in opposition. What is interesting is that a banned party such as En-Nahda was able to reorganise itself at grass-roots level fairly quickly after the removal of President Ben Ali.

But I think we should move away from generalising about these parties; far too often, we have assumed that the word "Islamism" covers everything on a spectrum from "moderate and engaged in democracy" to "radical". I see no necessary progression along those lines towards radicalisation and radical action. So I think we will see more of it, but I would hesitate to generalise as to whether, for example, the emergence of the Muslim Brotherhood in Syria will resemble the Muslim Brotherhood in Egypt; it may be very different.

Q52 Mr Ainsworth: You talked about Salafists creating problems in Tunisia. Just paint us in on your views and analysis of that spectrum, as far as it is emerging so far, and where these different movements sit on that in terms of colours and shades.

Dr Spencer: They are a minority, but I think, as we have seen from the recent election results-the first round of three election results-in Egypt, the Salafists gained 24% of the vote, so they are not totally insignificant. I think the fear is-certainly I have heard it expressed in Tunisia-that they are not indigenous. There is a lot of talk about their not being authentic, that they are funded from outside.

There are vague allusions to the Gulf-the Gulf states-funding these movements as a way of preventing a full flourishing of democracy. I would not necessarily say they are anti-democratic, but an example of the sort of parties that they try to get recognised is Hizb ut-Tahrir in Tunisia, which, rather like in this country, was not legalised, and so they do not have an automatic vehicle. There may be one or two who are inside En-Nahda, but En-Nahda has recently spoken out against the occupation by the Salafists of the university that I mentioned.

I think it is a movement to watch in terms of where it came from, what it actually represents and whether it could be a stalking-horse for, dare I say it, those outside who are not so interested in democracy flourishing.

Q53 Mr Ainsworth: Dr Rogan told us that the reason that parties with a faith base have led these liberation movements was that the alternatives had been completely discredited and were now old-fashioned-the old Arab nationalists and secular movements and the rest-and that there really was no alternative. Would you accept that?

Dr Spencer: Yes, to a certain extent. They have not been able to rejuvenate themselves-as I mentioned earlier, quite a few young people have not joined political parties, particularly those on the secular spectrum-and they are also numerically smaller.

What I observed when I was in Tunisia seemed to me less a struggle between Islamism and secularism in the victory of En-Nahda; it seemed to me more like a good old-fashioned class struggle between the working classes, although not exclusively so-you do get middle-class merchants supporting En-Nahda-the dispossessed at the lower ends of the spectrum, against the middle-class élites, largely Francophone, largely living in the better areas of Tunis, who numerically were smaller and didn’t really know what was going on in the hinterland of their own country; they hadn’t needed to for years. Their opposition as human rights activists had been focused on the Government, so they hadn’t built up a grass-roots movement, and hadn’t really thought about how to do so in advance of the elections. I think some of them feel they have learned their lesson; we might see a rebalancing, particularly if the Islamist parties are not able quickly to address the economic issues that they represent in terms of their constituency.

A lot of people voted for En-Nahda because they are honest and they were going to provide economic solutions. I would say probably their economic programme is their weakest, and they know that they need the assistance of those who know more about job creation and the private sector to help them to do that.

Q54 Mr Ainsworth: The Foreign Office have said to us that they will engage with Islamist parties even if they are not well disposed towards the United Kingdom: sensible pragmatism?

Dr Spencer: Yes. I think it is in our interests to have parties who can produce results, create jobs, respond to popular demands and allow people to participate in the interests of their own state. I don’t think it is our role at all to pre-judge that. If I am going to make a distinction at all, it is between engaging with people who are competent and not engaging with people who are incompetent in the sphere in which they are acting. That is the distinction I would make.

Q55 Mr Ainsworth: Is that pragmatism new?

Dr Spencer: What-for me? I have always been pragmatic.

Mr Ainsworth: For the Foreign Office.

Dr Spencer: For the Foreign Office? No, but we should not always assume that the Foreign Office’s view-certainly from the professional Foreign Office perspective-is always the one that prevails when it comes to Government policy. I always see a distinction between what the Foreign Office per se observes and advises and what actually happens.

Q56 Mr Ainsworth: So you think that British Government policy hasn’t necessarily been as pragmatic as it should have been, going back?

Dr Spencer: In the past, I think it was dominated by an obsession with controlling terrorism and a secondary obsession with controlling migration. I don’t think we have resolved the second of those, by the way, with talk of mobility. I don’t think we have really come to terms with that. In the last year we have certainly seen much more awareness of the complexity of these issues, and responses accordingly.

Q57 Rory Stewart: Dr Spencer, it is very strange: these huge revolutions have happened, yet we often get the impression that there is not really a great deal to be said about it from a UK foreign policy point of view and, actually, there is a view that it is not too bad-that the situation has been good for democracy and human rights, and that it does not pose any great threat to the United Kingdom, and in any case there is not a great deal that we can do about it. Is that right? Is there a worst-case scenario that we are missing? Are there active things that the Foreign Office should be doing to head that off or is our posture correct?

Dr Spencer: I think it has to be looked at on a case-by-case basis, in so far as-this is my understanding, because of the level of British investment in Egypt-the Foreign Office has considerably more influence there than it does in Tunisia, where, in fact, it is the French and France who are the primary investors. But I would go beyond looking at this as an issue that we have to manage in terms of British interests. I am currently embarking on a project where I think the future-certainly of southern Europe-lies very much more closely with, and indeed in, North Africa. I think the current euro crisis, which I find strikingly kept separate from the crisis in developments in North Africa, should be joined together with it.

We are facing an historical junction, at which our own future requires us to look much more closely at the advantages, certainly with a young and educated population in this region, that it holds for Europe. We should be engaging in this region much more in our own self-interest, which happens to be the interest of the region, than as yet another problematic foreign policy issue that has to be managed in so far as we can or abandoned if we do not feel that we have any influence. The only way the UK will do so is by convincing its European partners of that. It is not something that the UK can do alone, and also the US.

Q58 Rory Stewart: What is the worst-case scenario? Can you spell out what kind of threat these developments-this region-could pose if things went badly wrong? We tend to be quite comfortable about it, but is there a worst-case scenario if the United States and Europe do not get things right in their relationship with this region?

Dr Spencer: I think the worst-case scenario is continued attrition in the economies. We have accepted that they have weathered the storm and that zero growth rates for this year, given what has happened in Egypt and Tunisia, are acceptable, but particularly in Egypt, where we are dealing with a population of 85 million people, a third of whom are on the UN $2 a day poverty line, this is not sustainable unless something critical is done in the economy.

One of the key problems in Egypt is a belief that the liberal recipes, if you like-the Washington consensus of opening up the economy to trade liberalisation and the private sector-led directly to the kind of corruption against which the protesters went to the streets. We need to look at new economic models that are more appropriate to the societies in question-perhaps, for example, co-operative models of development-and accept that a certain amount of protectionism is acceptable in the short term in terms of nurturing small to medium-sized businesses.

Egypt is an economy dominated by large businesses and very small-scale businesses employing fewer than 50 people. There is very little in the way of middle-level companies and firms, and that is where we should be focusing our attention. You talk about risks and threats. The overspill effects come from greater migratory pressures-disorganised migratory pressures-both into Europe and across the region, and a breakdown in social relations, fragmentation and eventually, sadly, a civil war if it goes extremely wrong. That is where we definitely have a self-interest.

Q59 Rory Stewart: Finally, how relevant is the Turkish model to the region in terms of a new moderate Islamist party-the way in which Turkey sees itself in the world? Is this a model that Egypt, for example, could follow?

Dr Spencer: I think there are certainly ways of looking at how the Turks overcame their own economic problems-a high level of inflation and so on-in the 1980s to nurture businesses within Turkey, but I am not sure, and even the Turks have said, "We are here to help, but we are not here to sell a particular model." Every model will be a combination of the historical trajectory of each state and new additions coming out of the discussions that they have in a democratic way; that is the way in which I think it will go. Certain elements of the Turkish model are relevant, but they cannot be exported wholesale.

Q60 Mike Gapes: May I take you a bit further on that answer? Prime Minister Erdoğan went to Egypt and, as I understand it, he was met by huge, enthusiastic crowds. Then he said, "I advise you to have a secular rather than an Islamist state," and there were very few crowds when he left. Was that statement significant or are the media exaggerating its importance?

Dr Spencer: That, it seems to me, is a reflection of the Turkish constitution, which does not allow overtly religious parties. The fact that we all seem to think from the outside that the AKP is a fudge-in other words, it is a secular party, which they insist it is-drawing inspiration from religious values, is part of the sort of compromise that each society, including Egypt, is going to have to come to. There are many ways of doing that. In the constitutional debates that they are having in Tunisia and which they will soon be having again in Egypt, it is really the extent to which you can have articles referring to the Islamic heritage of the state that determines how far the interests of those who are not Muslims-the Copts, in the case of Egypt-can defend their own values and freedom of expression within that state.

The debates that make these things into a zero-sum game-in other words, you are either 100% secular or you are going to be an Islamic republic-seem to me to be a nonsense. In this country we, I believe, live in a state that combines, at the official political level, politics and religion. We see ourselves as a secular state, but our Head of State is also Head of the Church of England. Each society has to find the balance. By not explaining the Turkish model enough, Erdoğan obviously set a few backs up, by suggesting that there would be no Islamic reference at all in the Egyptian constitution.

Q61 Mike Gapes: In your introductory remarks, you referred to the lack of conditionality on assistance and support from the European Union, in particular towards the old regimes. Obviously, there is now a need to reassess Europe’s approach to what is happening, and to the Neighbourhood Policy in particular. Should that now be much more conditional with these new Governments, which, ironically, are democratic or in transition to democracy, than we ever were with the autocratic ones?

Dr Spencer: I think it is very difficult to impose conditionality. It sounds like a nice idea. As I mentioned, it is obvious to me that the misuse of military courts is not part of a transition to democracy, and yet from the outside, are we really collectively prepared to say, "Right, because of that we are halting any funding so far committed to Egypt"? Most of that funding has not yet arrived.

It is very difficult to impose conditions, particularly in this era, given the attitude of the younger generations. I have seen it myself. We had a meeting here with the British Council, and the Deputy Prime Minister was there assuring a young group of Tunisians and Egyptians that now conditionality from Europe would be positive and pro-democracy. They were extremely sceptical. They were saying, "Where were you in December 2010? Why should we believe you? We don’t want your conditionality. We want you to listen to us, hear what we need and respond accordingly. We don’t believe in this abstract conditionality."

So there are two problems: one, it is not very credible, given our track record; and two, I find it difficult to see how we will have the leverage or implement it in practice.

Q62 Mike Gapes: You mentioned the British Government’s Arab Partnership, which was only established after the events in Tunisia in February. I am wondering how important that could be-because it is quite small money, isn’t it? We have a position that is different from that of the French, who have historic influence in Tunisia. We have had Mr Ghannouchi living in London. Does that mean that, even with limited resources, we are in a better position to influence developments in Tunisia than President Sarkozy, whose former Defence Minister was on holiday, etc. etc., bearing in mind that the image of France is a very different one in Tunisia?

Dr Spencer: I will start with the end of your question-the role of France in Tunisia. I have been impressed by how forgiving the Tunisians have been of the French role. A number of people still refer to it, but they, too, are very pragmatic about the amount of French investment in Tunisia. To move on to the British side of this, they have a huge appetite for diversifying their trade away from France and, to a lesser extent, Italy-80% of Tunisia’s external trade is with the EU, but most foreign direct investment in joint projects is French. There is a huge appetite for learning English.

I was there in April, September and October, and my sadness is that when I asked around, there was very little visibility of the British presence in Tunisia, and what is being done is small-scale money, but a number of people mention the British Council cultural activities, and more could be done on that level. I also think that if we are to fund civil society organisations and small and medium enterprise, we need to focus more on the justice system, which still needs reforming, not only in Tunisia but also in Egypt, in order to create the robust framework within which these new actors can act without being impeded in the way they were-without fear of arrest. If more was said and done about reforming the justice system at the governmental level, the British could make this their own and have greater visibility.

Q63 Mike Gapes: Will we be more effective with our soft power as the UK separately than through working through the much wider, new European Neighbourhood Policy?

Dr Spencer: The vast funding lines are going through the European Commission. Our £110 million is small fry beside what will be channelled, not just through direct aid lines, but through the European Bank for Reconstruction and Development loans for business and so on-the sort of arrangements that were agreed through Deauville and subsequently with the G8.

Obviously, the British have to work with partners, but there are still ways to respond and make a mark by, as you say, making a virtue of having hosted Mr Ghannouchi over all his years of exile, and to say that the British way of doing business is different, and we believe in the rule of law. In the past, we have put money into training magistrates; now we must put some more energy into conditioning the environment in which trained magistrates can operate freely. In other words, a little more political pressure would be required to get on with things like transitional justice and appointing new judges. They are still the same judges and magistrates as were active under President Ben Ali. If you are focusing on the context within which new actors can act, that will be seen as much less interfering than more funding directly into organisations, because with small amounts of funding, some organisations see themselves as more favoured than others, and others will complain that the procedures to get funds out of the system are too complicated and so on.

Q64 Mike Gapes: Finally, how does the European effort in the countries of the region compare with what might come from other parts of the world? Are the Americans taking an interest in funding or development of civil society, or are they basically seeing it more as a European back yard?

Dr Spencer: No, the Americans have been very active through the National Democratic Institute and others in democracy promotion, and in training parties and observers to take part in the elections. Certainly, when I was there, it was not just that I was with the Carter Center; the American role in funding and supporting these sorts of activities was very visible. That is where they have put most of their emphasis.

Q65 Ann Clwyd: Several witnesses have talked about the UK pursuing its economic interests, particularly in oil and gas, and that this has been done at the expense of human rights-I think you have hinted at that. Do you feel that this is still the case-that we are soft-pedalling certain aspects of democratic development because we do not want to upset our future trading prospects in those countries?

Dr Spencer: Yes and no. I think that there is this difficulty, particularly for Britain. It is well known across the region, and commented on occasionally, that the role of Britain in Iraq has been countered by the more recent role of Britain with France and NATO in Libya. There is a sense, which I am certainly picking up, of great nervousness not to be seen to be interfering too much. My fear is that that means we are tempted to work with tried and tested actors, those well-established non-governmental organisations and people we already know, and that we will not do enough to reach out to new actors. Having said that, the activity of convening round tables with new actors in Egypt is countering that. It is not very wide scale and it is small numbers of people, but certainly a contribution of the British is to show how you can have debates without them necessarily ending up in a violent, zero-sum game. Teaching and demonstrating how you can agree to differ as a debating skill is something that the British have been doing more of.

The energy interest is clearly there, but it is there for everyone else. I think that the dilemma-certainly if you look at Libya and, in the case of Tunisia, British Gas is the foremost investor in the energy sector-is that there will be an interest there, but I do not think it is a zero-sum game. It is not a question of our interests versus human rights. We have to think much more constructively. I think we have learned the lesson, or should be learning it, from this year that the two are not opposite ends of the spectrum, but that they should work together. Therefore, ensuring our energy interests should not somehow trample over human rights.

Q66 Ann Clwyd: You criticised arms sales in a speech that you made in 2009: "It is in the interest of North Africa’s partners to recognize where their assistance towards these goals can most effectively be directed. This is not in arms sales".

Dr Spencer: I am afraid-I think the witnesses last week commented on this-that the role of the Prime Minister, David Cameron, when he visited the region together with an arms sales delegation did not necessarily send out the best image. With the financial and economic crisis that we are facing here, there are many, many more British businesses that should be going on such missions to show the diversity of what we do-areas in which Britain excels, like star companies such as Rolls-Royce, technical high-level animation or IT skills.

There is a whole series of next-level-down businesses that, for the reasons I gave earlier, should have an interest in meeting up with potential partners in Tunisia in the interests of the Tunisians and of companies in this country, which have been losing market share and exports, and in putting in an investment potential over the recent years since the economic crisis here. If all we are doing is saying that the only things that matter to us in this part of the world are energy and arms, we are indeed still sending out the wrong messages.

Q67 Ann Clwyd: You said that we should do more to challenge the use of military courts. In the case of Bahrain, for example, a lot of politicians here have challenged the use of military courts. I think as a result of the criticism-not only from here, but from human rights organisations-Bahrain did transfer some cases from military to civil courts. Should more be done in that area?

Dr Spencer: Yes. That seems to be an area in which external pressure has an effect, if concerted and done by a number of parties-it is no use if it is just the UK doing this; it has to be the European Union, the US and others. People do worry about their reputations. As you know, in Bahrain there has been the recent Bassiouni report on how the whole protest period was managed. In the case of Egypt, more should be said in a concerted fashion, as well as elsewhere in the region, if we are in the business of supporting transitions when there are obvious examples of things taking place that cannot conceivably be part of a transition towards democracy. If there are alternatives-civilian courts-then we should be speaking out much more loudly about this.

Q68 Ann Clwyd: Would you say that UK policy in the region has been too closely aligned with US policy and that we should seek to be more independent of the US?

Dr Spencer: I think in the past. I get the impression recently it has been more independent.

Q69 Chair: Dr Spencer, I understand that you are going off to Jordan later today. I know that this is not specifically within our terms of reference, but I believe you may have met the King of Jordan when he was over here the other day. How do you see things panning out in Jordan, knowing the context of what we have been talking about today?

Dr Spencer: I am interested in going there. I am looking into European Union policy towards Jordan within the context of EU policy towards Morocco, Tunisia, Egypt and Jordan, the reason being that they are, if you like, the vanguard countries in receipt of European assistance. In the case of Morocco and Jordan, for being the reforming states who have not undergone-they have had protests, but not a change of Government through protest. It is really to find out from the Jordanian perspective whether enough is being done. But I think the particular challenge facing Jordan-unlike, to a lesser extent, Morocco-is its neighbourhood. It is in a very tricky neighbourhood, as we see with Syria.

There is a real risk in that part of the world-maybe not in Jordan itself, but certainly in Syria and elsewhere, and potentially in Lebanon-of a proxy war developing between Iran and Saudi Arabia. When I heard about the bomb attack against the British embassy in Bahrain, I was thinking this could be another stage in that sort of conflict.

The Jordanians are facing a number of difficulties, obviously first and foremost the economic challenge of creating employment, of engineering things in a top-down fashion for reform. There is a division within the population between the large number of Jordanians of Palestinian descent and indigenous Jordanians, and the influence of what is happening around them, including from Israel, Syria, Iraq and elsewhere.

Q70 Chair: In constitutional terms-I know they are geographically different issues-do you see Jordan ending up as a constitutional monarchy in the mould of Morocco?

Dr Spencer: That is certainly the stated desire. I think one of the problems with top-down reform programmes is they tend to be incredibly slow, because at each stage you have to deal with vested interests that may or may not wish to engage in reform and you have to encourage-from on high, if you like-new actors, particularly in the form of new and representative political parties, to engage in the political process. This is somewhat difficult if there is not a sort of grass-roots support for this, and incremental, rising credibility in the process actually amounting to something. If it is too slow, people tend to get disenchanted. I will give an example: my favourite taxi-driver quote from Morocco, where I was asking the taxi driver what he thought about the new constitution in Morocco. He said, "Madam, you can change the text; you can’t always change the reality." Unfortunately, a journalist friend of mine says they are not allowed to use taxi-driver quotes, but sometimes they are short and just what you need.

Q71 Chair: Would a London taxi driver say the same?

Dr Spencer: I am sure.

Chair: Dr Spencer, thank you very much indeed. I wish you well in your trip to Jordan. I hope it goes well. We really appreciate the insights that you have given us today. Thank you very much indeed.

Dr Spencer: Thank you for having me.

Examination of Witness

Witness: Robin Lamb, Director General of the Libyan British Business Council and Executive Director of the Egyptian British Business Council, gave evidence.

Q72 Chair: I welcome our second witness this morning, Mr Robin Lamb, who is Director General of the Libyan British Business Council and Executive Director of the Egyptian British Business Council. He is also former ambassador to Bahrain. Can I welcome you here, Mr Lamb? I am very grateful to you for finding the time to come and see us. Is there anything you would like to say by way of opening remarks?

Robin Lamb: Only that, as you described, the jobs I have on a temporary or part-time basis at the moment are giving me the opportunity to pay attention to what is going into those countries. Those jobs are with membership organisations, however, and I do not represent the views of the British companies that belong to those two organisations. The views are mine and possibly, if I can commit them, those of the management of the two business councils.

Q73 Chair: That is understood and clearly on the record. This session is primarily about looking more at the business aspects of what is going on. Would you like to give us a quick overview of how you see trade with Egypt and Libya-and, for that matter, Tunisia, if you feel qualified?

Robin Lamb: I am less qualified on Tunisia, to be honest, so if I may I will major on Egypt and Libya. They are two very different countries, in the sense that one, Libya, is the least diversified country in the region, with a high, massive dependence on oil for GDP, exports and Government revenues, whereas Egypt is the most diversified economy in the Middle East and has a very broad range of economic producing sectors-at least it did until the revolution this year. In both cases, business has been interrupted to a greater or lesser extent. It has been completely disrupted in Libya, but not totally disrupted in Egypt, and I can come back to that if you want to explore it.

In terms of business with both countries, they are both potentially good markets for the United Kingdom, and ones that we want to see grow. Although they are very different economies, they have very similar key issues, and the word is jobs. That provides the UK, in partnership with others, with the opportunity to assist them in that, not least through helping them to develop their SMEs and helping in the area of skilled development.

Q74 Chair: If political stability is restored, what is the attraction of doing business with Libya and Egypt?

Robin Lamb: I will start with Libya, because it is a country that has the wherewithal and the aspiration to develop very rapidly. The new authorities are very keen, once they have the opportunity, to reconstruct their economy and also to develop it, because they are very clear that over the past 42 years under Gaddafi the country has not developed as it should and could have done. Indeed, there is no reason-well, there is a reason, which is Gaddafi and his regime-why Libya should not today look like a Gulf country, because it has the oil and it has a sovereign wealth fund, which was held by the IMF to amount to $160 billion. The fund is largely uninvested-mostly still cash in one way or the other-because it could not make its mind up how to place it.

Q75 Chair: Whereabouts?

Robin Lamb: At the moment, a lot of the funds are frozen by us, by the Americans and by other countries. Unfreezing the assets when the time is right is a great interest of the new authorities. Some say the time is right now, but others within the regime say they are not sure that they are ready to provide the safe hands that Security Council resolution 2009 said must be there in order for the assets to be released. There will be tremendous business opportunities for all, and I expect that to be even-handed, in a sense, by the Libyan authorities. I do not expect favours, and we are not looking for favours; that would be a corruption of the purpose of the revolution, and indeed of the British help for that revolution, which was not business focused.

There is always more detail one can give on Libya, but I will move briefly to Egypt. In Egypt we are very familiar with the short-term economic problems that have struck the country, which you will have heard about. Growth has tanked to below 2%, and one of the reasons for that is the impact on tourism. Another is that business and exports have slowed. They were totally interrupted at one point, but have resumed, although at a lower level.

Egypt has the problem that it is not obtaining the revenue that it would have expected in normal times, so it is drawing down reserves, and is having to sell Treasury bills to cover the deficit because the provision of aid has proved to be very slow. Amusingly, to me at least, this week the Egyptian Army announced that it was lending the central bank $1 billion, which gives an idea of the Egyptian Army’s role in the economy-not just in military industry, but also in civil industry.

There were great promises from the Gulf that it would provide deficit financing, but according to reports from Egypt, only about a billion of that has arrived, and it is not enough. Egypt is beginning to reconsider whether it should pick up the IMF’s earlier offer of a loan of $3 billion to help to tide it over.

There are serious short-term problems, but in the Business Council-we are not alone in this-we are very aware that the fundamentals of the Egyptian economy are still there. The IMF says that the medium-term prospects are positive as the economy’s potential remains intact. I read this morning that Ernst & Young include Egypt among four Middle Eastern countries in their identification of 25 global countries that are rapid growth markets. There will be a time when stability is returned, or maybe before, when the Egyptian market will take off. The fundamentals are a population of 85 million, and the Nile, which produces water, which is such a key asset in the Arab world, and produces agriculture. Agricultural products are some of our main imports from Egypt, for example.

Egypt has other strengths going for it-for example, oil and gas. It produces more gas than the either the UK or Libya, and the expectation is that the amount it produces can be doubled through investment. I am trying to pick out a few examples, and another might be that although one could say that business has been interrupted this year, our exports to Egypt in the first nine months were only 6% down on the same period last year.

Business opportunities continue to be available. Egypt promises to be an important market globally as well. In fact, there is an international bank that identifies it as likely to join the world’s top 20 economies-okay, by 2050, which is some way away, but a South Korean Government Minister recently predicted a return in two years to being an important economy and was urging all Korean companies, as he put it, to get on the bus now.

Q76 Chair: Going back to what you were saying about finance, are banks willing to lend to Egypt? I picked up the impression from what you were saying that they are, and that arguably they are more willing to lend in Egypt than they are here.

Robin Lamb: The issue there is that the banks are very strong in Egypt, very liquid, and in fact profitable. For example, BNP Paribas is not an Egyptian bank, but a bank with an Egyptian outlet. It has just announced its profits for the first three quarters of $50 million. They are very liquid and they can lend, but there is such good business from Treasury bills being sold by the central bank, at about 14%, that that is one reason why the banks are so profitable at the moment, I suspect. They have the funds, but the question is, when will it be right on economic grounds for them to invest in SMEs?

There are issues with SMEs, which we hopefully can assist with. For example, a lot of SMEs operate in the grey economy and have absolutely no idea of how to produce a business case, books or anything like that. A lot of training needs to be done. So yes, I think the banks can play a role in due course, and there is a willingness in principle, as soon as the commercial realities make it a sensible thing to do so for their shareholders.

Q77 Chair: I think that answer begs a lot more questions, but I leave that to my colleagues on the Treasury Select Committee.

You mentioned training. Are the personnel skills there? Have they got the right people? Should there be a focus on training?

Robin Lamb: We are focusing on training-both ourselves, as the Egyptian British Business Council and Chatham House and the British Egyptian Society, for example. This is a very key area in Libya as well as in Egypt, because they both have had education systems that have had almost universal membership for many decades, but as the Arab human development reports have reported, as Claire has mentioned, they have found that the quality of the education was poor and it did not generally produce people who were qualified for jobs in the modern economy. So that needs to be upgraded.

There have been attempts at reform, with differing degrees of success, in different Arab countries. Bahrain tried a lot, for example. But there is a lot more to do, particularly in the area of business management and training. We are working with the British Council and Chatham House. We are starting the process, perhaps with a round-table in January, when we will have people from the Egyptian business sector, British training providers and others with expertise in how you can upgrade the skills in an economy where there is a major problem to overcome. We will start with that and work our way forward.

We were already looking at programmes before the revolution. For the last couple of years, we have had a management development programme as a business council in Egypt, trying to relay some of those skills, but it needs to be done on a larger scale. Our resources are extremely limited, but we have the support of the two Governments and some of the leading British and Egyptian companies. We have to get that trickle-down, which is what was lacking.

Q78 Mr Ainsworth: What do British companies operating or seeking to operate or invest in the area need from the FCO and UKTI?

Robin Lamb: If they are large companies, they need in many ways less from the Government; it is the SMEs that need the support of Government, because they have very shallow pockets. You need to be able to be in a market to be most effective. The SMEs can’t afford to spend time waiting for the good news; they have to get on with their very busy lives. So it is with the SMEs that UKTI can help in particular. Embassies, with the support of the political and commercial staff in embassies, can also help.

Clearly, at the senior level, the policy level, it is important for the embassy and for the FCO to contribute to policies that support the right sort of climate in which business can be done. Business wants predictability and stability. Those are two key things for any business. The ability to be paid is rather important as well. So the FCO’s job is perhaps to work on trying to get the right context.

UKTI can assist with identifying business opportunities. It can particularly assist SMEs to get into the country. We do that-for example, with the Libyan British Business Council. We take in trade missions of members to see what the opportunities are, how to get on in the country and who they need to work with to form business partnerships. Those are the key requirements.

Q79 Mr Ainsworth: Within the realms of the practical-you have sat on both sides and been within the Government system-are there things that we could be doing that we are not necessarily doing?

Robin Lamb: It is important for Government and business to work together, and that is being done. I can go back, for example, to my days in Bahrain. One of the things that I did there was to take an active part in various business organisations. Every month, I hosted a meeting of the heads of leading British businesses in the market. I took part in local business meetings-the Rotary Club and so on. Contacts are so important in business, particularly in the Arab world, and that is something else that UKTI and embassies can provide. Introductions are something important that can be done by the Government for business, as is advice on how to do or not do something, and background advice on the economy and politics in so far as it impinges on business.

Q80 Mr Ainsworth: The coalition Government have told the world that there is a new emphasis from the Foreign Office on trade. Have you seen a change under this Government?

Robin Lamb: At this stage, because we have not yet been able to take our own companies and businesses back into those two markets, we have not had an opportunity to rub alongside them to see what change has been produced by that announcement. I think that support for business in the Foreign Office is not new-I was doing it, and others in previous generations did it.

Mr Ainsworth: I was rather hoping that you would say that.

Robin Lamb: In the end, the basic thing is that the UK is an export-dependent economy. Put basically and simply, internationally, since the days of empire-if I can use a dirty word-the job of government was to enable business to prosper. Those were the specific and first words concerning the initial appointments of consuls in the glossy document; it was to enable British merchants to pursue their business in the market. It is an important element; it is not new and the emphasis on it has risen and fallen.

If you read Sir Anthony Parsons’s book, after the revolution in 1979 you will see that he partially blamed too much of an emphasis on commercial business and too little attention on what was happening in the more remote regions of Iran, away from the gilded halls. If you are in the Foreign Office, you cannot afford to ignore either business or politics-neither can you in business, to be honest.

Q81 Mr Ainsworth: You, I am sure, will have taken part in conversations, of which I was part over a period of time, where there is a feeling that we have an active diplomatic service-we intervene in countries both positively and negatively-but when it comes to business and capitalising on commercial opportunities, we Brits often do not cut the mustard and we let other people beat us to the prize. Is that true? If it is, what are others doing that we are failing to do?

Robin Lamb: It is true in certain respects, and it is an inevitable result of who we are and what our system is. We have developed a very market-based economy-okay, it is still mixed, but not nearly as much as it was 30 years ago-and we have recognised that business should largely be the competence area of businesses.

What can the Government do for business that they are not doing? One thing that has changed is the reduction in subsidy from Government business. That may well be appropriate, but it is an area in which we are not doing something that our European- and other-competitors are doing. Now, if you want assistance from UKTI, you are charged for it, and instead of it being subsidised, you have to pay.

A recent spectacular example is that of the French, Germans and Austrians who all took trade delegations, provided with Government aircraft and led by a Minister, into Tripoli over the past couple of months. Actually, that was counter-productive and all the feedback we have seen suggests that they were not particularly welcome. The Libyan authorities had other priorities at the time, and it did the French, Germans and Austrians no good. We are looking to take great care not to be too late, but also not to be too early in going in. In September, I went in to see how it is, and we are looking to go back in January. We think we are getting there now, but we were not going in with an aircraft provided by HMG, nor would we expect to at this stage.

Q82 Mike Gapes: For the record, you have been involved with the Libyan British Business Council and the Egyptian British Business Council. What period are we talking about?

Robin Lamb: Two years.

Q83 Mike Gapes: So you have been there in the old regime and in the new regime, if you like.

Robin Lamb: Yes.

Q84 Mike Gapes: Can I take you back to the old regime? The memo that you sent us concludes with a statement. You said that our material interests should prevail if our moral interests would cause significant damage. The emphasis that you are making is that having high moral aspirations on human rights and issues of that kind can be damaging to our economic interests. In the context of Libya, do you think that that was the case or were we inadequate in the human rights concerns that we expressed?

Robin Lamb: If I may say so, one of the things that I tried to bring out in the paper that I submitted is that, actually, I see our moral interests as part of our interests, as opposed to different from our material interests. In short, our interests comprehend both the moral and the material. I think that, most of the time, we can pursue both.

When I was in Bahrain, for example, I was supporting British companies, as I have said, but we also had programmes to assist the development and training in the Parliament and with other parts of civil society. Indeed, a member of my staff was the regional officer. We can do both, on both sides. I was also talking to the Opposition.

Q85 Mike Gapes: Can I specifically focus not on your role working for the UK Government in Bahrain? I am asking specifically about what was happening in Libya in the period under Gaddafi and the transition.

Robin Lamb: Under Gaddafi, of course, for many years we were part of the international community’s imposition of sanctions on the regime. The change really came about in the beginning of this century, particularly with the embracing of the policy of normalisation. As Claire has said, this very much came out of a period in which we were focusing in foreign policy on counter-terrorism and on the fears of development of the weapons of mass destruction. Gaddafi had a record in both, and although the policy of normalisation is understandably much criticised now, it did achieve something with Libya.

Q86 Mike Gapes: Did it improve the human rights situation?

Robin Lamb: No, it did not.

Q87 Mike Gapes: So we basically took the view that there were bigger issues, particularly the weapons of mass destruction and the potentials of terrorism, and we put those as a priority because that was perceived to be more in our national interest. We downplayed the human rights issues. Is that your assessment?

Robin Lamb: I would have thought that was true in Libya in that period, but we have to recognise that the UK was not acting alone in this. The whole of the international community was involved in that as well. We have to work with the possible and we have to work with others.

Where I talk about a conflict between the moral and the material, it is that we must be very careful about taking the moral lead in a situation, unless we are quite sure that others will follow, because our material interests would be damaged without us achieving anything. Now that does not stop us trying to pursue the moral, in collaboration with others.

Q88 Mike Gapes: Evidence has been submitted to us that says that basically we allowed corporate oil interests to override other concerns, particularly in Libya, since the period after 2005. Would that be fair?

Robin Lamb: I think there is too much of an emphasis-concentration-on oil. We have much wider business interests than oil, and oil companies are only part of the scene of the business that was developing between our two countries.

Q89 Mike Gapes: Taking it a step further, to your knowledge, what warnings and advice were given to British companies operating in Libya and Egypt about the risks of becoming complicit in the human rights abuses that might occur in those countries?

Robin Lamb: It is hard to see how many of the companies that we were working with in Libya, for example, could have been complicit in human rights abuses. The concern-the risk-that needed to be avoided was being complicit in the corrupt practices of members of the regime. How exactly would British companies that are involved in oil, in building and designing waste water plants or in training be involved in supporting human rights violations?

Q90 Mike Gapes: But there is a Toolkit on business and human rights that is produced by the FCO, UKTI and the Department for Business, Innovation and Skills. There are also international guidelines from the OECD. How seriously have those been taken?

Robin Lamb: When they are going to enter a market, all businesses have to do their due diligence and they will be very aware through those discussions, if they pursue them, that there are issues like this to avoid. When I was invited to take over as Director-General of the Libyan British Business Council, before doing so, I asked what the policy was on corruption in Libya. I was assured that, as an organisation, we had zero tolerance of corruption. That is a necessary approach for any company approaching that sort of market. Not only is it not right to get involved in those things but, quite frankly, it is just too damaging for both sides.

Q91 Mike Gapes: You have mentioned corruption twice. I am also interested in human rights issues because the Toolkit from the FCO is specific. It talks about human rights. How seriously has that been taken within your organisations and also in terms of the FCO’s and other Government Departments’ advice? Is this just a document that has been produced but is not actually followed through, or is it at the centre of the advice being given by our representatives?

Robin Lamb: It is not at the centre of the advice. Nobody going to Libya, Egypt, China or many countries around the world will be unaware that there are lower levels of human rights observance, to put it mildly, than in our country.

Q92 Mike Gapes: Will they be aware because they just know generally, or will there be a specific effort by the British Government and their representatives to inform them and tell them, "These are the standards we expect you to apply"?

Robin Lamb: It will be part of the process that they follow in trying to learn about the market and, if they are a big firm, they are bound to be discussing their prospects with the Foreign Office. It may well be in that process.

Q93 Mike Gapes: But it will not be a central issue that British Government representatives will discuss with companies trying to operate in countries with poor human rights records?

Robin Lamb: I hesitate to be too definite on that. It has not been part of my experience with the Libyan British Business Council or the Egyptian British Business Council that we have had discussions of that level. Those sorts of discussions will be taken forward by our member companies. It is they who would be in a position to say to what degree the particular paper you mention is playing a part in their guidance.

Q94 Rory Stewart: Looking back at our relationships, for example with Libya, are there lessons that we can learn? For example, might we be able to say that it was necessary to develop good relations with the Libyan Government, but that we went too far-that the Prime Minister should not have been portrayed kissing Gaddafi warmly on the cheeks and that there are limits to what Britain should have done in terms of its re-engagement with Libya?

Robin Lamb: It is very difficult. If you make a decision to pursue a particular policy line, you want to make it work. In retrospect, a hug in the tent doesn’t look too good, but in the context of the time, maybe he judged it necessary in order to show Gaddafi that the relationship would be fully normalised. I do not want to defend that particular thing. The point is that a process of normalisation, when we are trying to achieve an end to support for terrorism and the relinquishing of programmes for weapons of mass destruction, is an international relationship. There has to be something in return, and that was "normalisation."

Q95 Rory Stewart: Are there not balances we could strike so that we could re-engage with a regime that has a bad human rights record in a way that retains our dignity and some distance in the re-engagement? Is it really necessary to go the whole hog and embrace them in the full way?

Robin Lamb: In the Arab world-you know this very well-embracing is a very normal part of interaction between males. He may have felt-I was inside Arabia when Mrs Thatcher visited, and she wore very long clothing. She didn’t cover her face, but she covered her head, arms and legs. She was trying to adapt to the cultural requirements of the country she was visiting. I do not go in for the embrace myself, but maybe Mr Blair thought it would be appropriate.

Q96 Rory Stewart: What can we do and not do in Egypt? Obviously, you have come up with some good ideas about collaboration on technical assistance for SMEs, but can you sketch out, for when the British Government are feeling over-ambitious, where the limits are in Egypt of what Britain can do and what we may not be able to do in relation to the Egyptian economy?

Robin Lamb: That is a pretty broad canvas. We obviously cannot fund its deficit. It would be lovely for Egypt if somebody could help them fund their deficit. We need to look to others like the IMF and the International Bank for Reconstruction and Development to give them advice on how to manage their dwindling reserves and some of their economic policy, while recognising that the Egyptians will have to take the lead on that and ensure that the realpolitik of what they are coping with is taken into account. Similarly, in Libya, there are various things we could do. Maybe one is to be as sympathetic as we can to the defrosting of frozen assets as soon as the Libyans can demonstrate that they have the ability to safeguard those assets from loss, diversion and corruption.

Q97 Rory Stewart: You seem to have a very different analysis of Egypt’s economy to that of the Foreign Office. You have portrayed a much more positive vision. Is that you as a technical economist challenging their GDP projections, their macro-economic projections or their deficit calculations, or are you simply saying as somebody representing businesses, "I think it’s not that bad"?

Robin Lamb: I think it is bad at the moment. Maybe the difference is between the short term and the medium term. It is not just me, in a sense. We had a round table at the Mansion House on 2 November with British businesses and some Egyptian members of the business council, reinforced by some other authorities. We had a presentation on the Egyptian economy, for example, by the director of research at the Egyptian Center for Economic Studies, Dr Magda Kandil. It set out some of their perspective on the possibilities and the potential for Egypt.

As I said, these were shared by people from the British banking sector. It is shared by people like Ernst and Young. You are kind to refer to me as technically an economist. Technically, I am not. As a former diplomat, I am very much a generalist. I am trying to point out that there are gleams of light in the gloom, and that we must not assume that because things are bad at the moment they will necessarily be bad for a long time, or certainly not in the medium to long term.

There are various other areas where we can assist, but we are not the only ones who see it that way. I quoted the Koreans; the Japanese, too, are giving favourable terms to exporters looking at the Egyptian market. Audi has just announced that it has successfully launched its A1 in Egypt, and, as I said, there is other business on offer. I don’t think that I am a lone voice in this, as perhaps you were suggesting.

Q98 Rory Stewart: Finally, may I just push one more time on the particular macro-economic indicators you are looking at? It’s fine that Audi launches the A1, but the structural problems facing the Egyptian economy in terms of unemployment, long-term growth figures, debt and deficit financing are appalling. This looks like one of the very worst of the southern European countries-and worse still. Where are you going to generate this kind of sustainable growth from in the Egyptian economy?

Robin Lamb: It has to come from SMEs, and SMEs need support and development. We cannot do it all ourselves. I have described how we will hope to assist in skill development, for example. Other agencies, including perhaps the World Bank and other aid donors, may be able to assist in funding greater assistance for developing the SMEs. They may be able to help develop an improved legal context for the development of SMEs. As I suggested, when access to capital for SMEs can be better structured and more available, that will help as well.

I don’t want to underplay the short-term problems; they are severe. The problem of job creation is massive. It will take a long time to turn that ship. All the evidence we have is that there is business being done, there are deals to be done in Egypt. A couple of business members of our business council-senior representatives of British companies-have said that in certain areas we should not allow the macro-economics to discourage us from seeing the opportunities in Egypt.

Q99 Ann Clwyd: Can you tell us what damage has been done to British-owned property and installations during the current conflict?

Robin Lamb: In Libya?

Ann Clwyd: Yes.

Robin Lamb: I have no figure. The LBBC is a membership organisation and we support our members but they do not report to us in any way; we do not regulate them. I can say that I am generally aware that the major damage from fighting has occurred in maybe three towns in particular: Zawiya, Misrata and latterly Sirte. Tripoli and Benghazi have relatively not been damaged. Very few refineries have been damaged. What has struck a lot of British companies with investments or capital in the country is that they lost a lot of vehicles, which were taken away by the forces of one side or another in the prosecution of their war. There has of course been some damage or loss on building sites of other equipment. Although this is not necessarily a British loss, I am aware that at one time in Tripoli port there was only one forklift truck left. Things went astray.

Q100 Ann Clwyd: Who pays for the restoration?

Robin Lamb: That is a very good question. Going back, there were already British companies in financial difficulty in Libya, because in 2010 there was a slowdown in business for opaque reasons. The Government slowed down in its payment and the companies were already trying to retrench and see that period through. This year, their business stopped. They have not been paid. They have taken some loss. Some of them will have gone to the wall.

When I went out in September, I asked a senior Libyan official what message we should give to British business about what in summary we might call reparations. He said that the Libyan authorities would want to "resolve problems" and to do so through negotiation. They wanted to offer new business, but he warned that companies that entered negotiations should have what he called a reasonable view of the outcome and that those that resorted to litigation should not expect to get new business in Libya. To a degree, some companies are going to look at the loss, accept it and look for new business, and realise that, actually, the prospect of growth and opportunity in Libya is worth the investment. Others will no doubt want to find what it is that the Libyans will agree to negotiate, and I don’t think those negotiations will have started yet.

The Libyans have a lot on their plate. They are having to move stage by stage, from revolution, through victory, to Government formation, to constitution building, and we do not expect to see a lot of brand new business let until we have a permanent Government in Libya.

Q101 Ann Clwyd: Do you think the UK will get a fair crack at the reconstruction process?

Robin Lamb: I think it will. We have a number of advantages going for us in Libya, some of which predate the revolution. As one senior Libyan told me last year, before the revolution-he was the general who was assassinated after he switched sides to the rebels-"Don’t forget that Libya is the only English-speaking country in northern Africa." You might challenge that with Egypt, but it is still very chic in Egypt to speak French rather than English and, of course, the Maghreb countries are all Francophone.

There is a long tradition of empathy with the United Kingdom, funnily enough. Last February-in 2010-we took a health-care mission to Libya. Nearly every Libyan medical authority or person we met had trained in the United Kingdom and had worked in the NHS, and they wanted to continue that relationship. There are many ways in which, in terms of our traditional long-term position in Libya, we have a natural affinity and sympathy. One must also mention the presence of a lot of young British Libyans from families who fled the Gaddafi regime and have lived here-many of them have been educated here and so on. All that expertise and those relationships help.

We may well be in a slightly better position in terms of the view that is taken of countries that did or did not assist the rebellion, but as I said earlier, I do not expect favours. I think that would be wrong, because although there may well be pragmatic reasons to look for favours to win a contract, if you do, there are others there who also qualify and-even in terms of self-interest, let alone in terms of what the point of the revolution was-it is not a good thing to be looking for favours. The best thing-what we will hope to see and what the NTC has promised-is essentially a level playing field, where we don’t have the arbitrary and corrupt Government that we had before, and where we can compete on the terms of all those good things that Britain has to offer.

Q102 Mr Baron: Can I return you to the issue of values versus interests? You’ve touched on it a little bit in a variety of your answers. The Prime Minister, in February earlier this year, certainly acknowledged to the Kuwaiti Parliament that we had perhaps got the balance wrong in the past. Given your business links and interests at the moment, what are your thoughts on this? Perhaps more importantly, are there any lessons going forward, given that, even after the parliamentary elections in certain countries and transition to a civil Government, you are still going to have a range of countries, both those that are authoritarian and those that are more democratic-nascent democracies taking root? You are going to have that range. Is our policy going to remain an ad hoc one, depending on who we are dealing with, or do you see us drawing some lessons from past mistakes?

Robin Lamb: We have to approach different issues and different countries-I am talking on just a commercial basis-on a case-by-case basis. All countries are different. The further away you are from Europe, you probably think that all European countries are the same. The closer you are, you will see the differences. It is the same, for example, with the Gulf Co-operation Council countries.

One of the reasons why I put in the two pages was because I thought that the speech that differentiated between interests and values took insufficient account of the fact that values can also be part of our interests. I’d rather see included among our interests something that we can pursue in normal circumstances in nearly all situations in parallel. They are an important element in our relationship with nearly every country in the world.

A particularly difficult nut to crack is, for example, going to be a country like China, which has tremendous and growing economic and military strength, and is heading towards being a-not the-superpower of the future. Its fundamental principle of international relations, which we have seen time after time in the UN Security Council, is non-intervention in the private affairs of countries. It is a principle to which we generally adhere ourselves, but it has been slightly diluted over the years through the Helsinki declaration and things like that, where we saw the need to allow values, to put it most broadly, to play a larger role in the developing relationship that we came across. That is going to be difficult in China.

The question is, where do we set the bar on a country-by-country basis? We should always start with the assumption that we stand for something, and we make that clear. The question is, having made that clear and seen whether they will work with us to try to improve a situation that is either of their own making or not-sort of unconsciously-we have to decide at what point we are going to push that interest, and how many British jobs we want to imperil in doing so. It is an issue where there is perhaps a degree of ad hocery, because it has to be on a case-by-case basis. We mustn’t be too hide-bound by an ideology, but we have values, and we must incorporate them overall in the policy that we pursue.

Chair: Thank you very much, Mr Lamb. I know that you are a busy man. We appreciate that you have taken the time to come and talk to us. It has been very helpful.

Robin Lamb: Thank you.

Prepared 9th December 2011