The Arabist

The Arabist

By Issandr El Amrani and friends.

Posts tagged economy
In Translation: Egypt's foundering economy

Last month, the Egyptian pound reached EGP13 to the US dollar for the first time, highlighting the massive stresses on the Egyptian economy and the inevitability of a further devaluation (long expected by the markets) despite the Central Bank of Egypt’s efforts to have controlled re-evaluation of the pound. Also last week, Egypt announced that it was in the final stages of negotiating an agreement for as much as $12 billion in loans (which will of course come with policy conditions) from the IMF. Yesterday, President Abdelfattah al-Sisi warned that austerity measures are coming. All of this points to the continuing fall of the purchasing power of average Egyptians, from the poorest segment of the population (only partly sheltered by price controls on basic goods) to the middle class (perhaps the most dramatically affected).

These developments have appointed once pro-Sisi commentators to lash out. Like many once pro-establishment Egyptians I have met in the last year, it is not so much that they blame Sisi for the alarming economic condition of the country (that after all is a long-term trend) but his lack of vision for the economy and indulgence in wasteful prestige projects and the lack of transparency with what is being done with money raised from the Egyptian public and foreign backers. In the piece below, the Nasserist columnist Abdullah al-Senawi (who in 2013-14 was said to have Sisi’s ears and was a major supporter from the “nationalist left” through his TV show and writings) skewers the Sisi regime for his and more, predicting that such poor economic stewardship may very well spell its downfall.

Thanks to our friends at Industry Arabic for the translation. Do check them out for your Arabic translation needs - we’re very happy with them, and the New York Times recently used them to translate an excellent piece on Saudi Arabia by our friend Ben Hubbard.


The economic crisis and Its repercussions

Abdullah al-Senawi, al-Shurouk, 29 July 2016

In the face of an ominous economic situation, if there is no recognition of the causes there can be no avoiding the serious consequences. The collapse of the Egyptian pound against the American dollar is just one aspect of the crisis, not its core. The rising prices of basic goods are another manifestation, but they are not the whole of it.

There is near consensus among Egyptian experts that there has been no clear, well-understood economic direction. Nor has there been management competent enough to grasp the necessities and priorities. Thus, we have arrived at a disastrous failure that is now undeniable: the markets announce it and the numbers confirm it.

If there is not a serious reconsideration, we are heading for tough days with no hope of escape. When there is no way of reviving the markets except by resorting to the International Monetary Fund, this means that the economy is teetering and on the brink of collapse.

The first question is: what exactly is the underlying problem? Why were there no policies able to create plans for production that would pump investment into the sclerotic arteries of the economy?

The second question is: to what extent are the grand projects adopted by the state responsible for depleting the country’s foreign currency reserves, without feasibility studies to examine likely revenues in the foreseeable future?

The third question concerns the aid and loans that Egypt obtained since 30 June 2013: how were they spent and according to what priorities?

The fourth question: is there an opportunity to correct and review the roots of the policies that led to this difficult economic situation?

Frank discussion of the facts is an essential step in overcoming a deep-rooted crisis, and it is legitimate and normal to raise questions. If there are no feasible ways to correct the situation, there is no hope of any social cohesion to prevent sudden collapses. Here is one indicator from the Central Agency for Public Mobilization and Statistics: 27.8 percent of Egyptians live under the extreme poverty line and cannot afford the basic essentials of human life. That number is an indication of the dangerous level of poverty, which in the countryside of Upper Egypt rises to 57 percent.

That is a store of suppressed anger that is likely to explode if the suffering becomes unbearable and the state remains completely irresponsible. The state could take some degree of action to ease the suffering of the poorest parts of society, regardless of its capacity.

The same suppressed anger in the middle classes – the main victim of the economic crisis – could lead to unrest, which nobody can predict when or where it will begin. The declining purchasing power of the Egyptian pound, along with the forecasted steady rise in prices for commodities and services and the imposition of new taxes such as the VAT, all represent a dangerous fall in real income and an unprecedented erosion in living standards that cannot be compared with any previous period. When society is on the edge of despair, everything is possible and an explosion can be expected at any time.

Around four decades ago, on 18-19 January 1977, million-strong protests filled the squares and streets of Cairo, Alexandria and other cities. This became known as the “bread intifada.” It followed the announcement of price hikes on basic goods such as bread, gas, sugar and rice after an agreement with the IMF to tackle the budget deficit.

Those protests, in terms of their size and momentum, resembled the protests of January 25, 2011, but their aim was limited to cancelling the decision to raise the prices of basic goods. President Anwar Sadat was forced to announce a curfew and send the army into the streets to impose order after the police were unable to face down the public anger. What is more important is that the decisions were all cancelled.

The lesson stayed ever-present, particularly in the memories of the security services. The interior minister at the time, Hassan Abu Basha, published a memoir about the “bread intifada.” But the passing of time creates the temptation to forget experiences. If the same factors are present, the results are likely to be the same.

If the security services are ever tested in this way, the results are pre-determined. The worst thing that happened after the 30 June Revolution was the way the security services were given a free hand in public life, allowing them to interfere in an unprecedented way in party politics, parliament, university and economic life.

That was one reason for the state’s weak will to carry out its functions. Every institution has functions that differ from those of other bodies, and it is unfair to ask the security services to take on functions other than its natural duties.

Security solutions have a ceiling of what they can achieve, however extreme their shows of force. They can work for a week or two in stopping speculation on the dollar in the black market, but they do not build a basis for relative stability in the markets and trading activity. Excesses can lead to economic paralysis that cannot be sustained for long. The issue is not one of stopping a few speculators or closing some foreign exchange bureaus, but rather changing the whole environment and revising the policies of economic failure.

The first aspect of this economic crisis is that production has almost ground to a halt and factories have almost stopped, investment has declined enormously, tourism has hit its lowest levels and transfers from Egyptians abroad have fallen to abnormally low levels.

The second aspect is that projects haven taken precedence over policies, and that is a fundamental error. Assuming that projects are undertaken due to some necessity, what are those necessities, and which of them must be postponed for the sake of other needs that are directly linked to production and operations, according to a studied plan with well-defined priorities? After the IMF loan, another question is: where is the money going exactly? It is certain that loans place constraints on future generations through accumulated debt, and no one is entitled to deprive them of their natural rights.

The third aspect is the absence of any equitable distribution of burdens. The government’s policies are similar, but less competent, than those followed by the Policies Committee1 chaired by Gamal Mubarak, the son of the former president. All the burdens are borne by the middle class and the poorest parts of society, without any readiness to impose progressive taxes on businessmen and owners of large companies, based on their profits and income, despite the fact that the constitution requires it.2 The crisis of the Mubarak regime was the lack of any type of social justice despite that economic growth reached nearly 7 percent a year.

The fourth aspect of the crisis is the poisoning of the political environment, the human rights situation and public freedoms. The economy cannot move, investments cannot be implemented and tourism cannot return to its normal high levels in a climate where politics is taken off the map and freedom deleted from the dictionary. The bad state of human rights in Egypt is one reason for the escalation of the economic crisis, as are the deteriorating levels of transparency and integrity.

There is now a fear that Egypt will be seen as a country rife with corruption – which has become more ingrained now after the sentencing of Egypt’s chief auditor Hesham Geneina following statements he made about the cost of corruption in Egypt.3 Where corruption takes hold, the opportunities for investment retreat.

That is a truth that cannot be forgotten. Egypt is looking at its future through the prism of the economic crisis and its repercussions.


  1. The Policies Committee (legna siyasat of the National Democratic Party was a vehicle through which Gamal Mubarak rallied a number of technocrats and policy intellectuals and sought to promote liberal economic policies in the mid-2000s. ↩︎

  2. Article 38 of the 2013 constitution stipulates that “The taxes imposed on the incomes of individuals are progressive multi-tier taxes that according to their tax capacity.” ↩︎

  3. See “Egypt's former top auditor Geneina sentenced to 1 year in jail for 'spreading false news’.“

To Beat ISIS, Focus on Economic Reforms

The following is a guest post by Nathan Field, an entrepreneur and commentator on Middle Eastern politics. While Western governments weigh which military actions to take against ISIS, Field looks at the long-term economic reforms that could introduce greater employment, development and therefore stability to Arab countries, and weaken the appeal of extremist ideologies. 

Saudi construction workers

Saudi construction workers

The ultimate outcome of the military struggle against the Islamic State in Iraq and Syria is certain. ISIS will land some blows but has too many enemies. Eventually, it will lose a war of attrition. The territory it controls in those countries will be reclaimed.   

The bigger, long-term challenge is the spread of Islamic State’s ideology in the broader Middle East, as opposed to the presence of the group in Syria and Iraq. This ideology of extreme utopian populism is caused at a most fundamental level by the socioeconomic stratification of Middle Eastern societies, a problem that is aggravated by the weakness of Arab economies in the global marketplace.

This has created a division between roughly the top 20% of societies, which is in a position to thrive and obtain status, and the vast majority that can mostly only hope to achieve the same. While such gaps have always existed, they are now being amplified by the explosion of the internet, social media and smartphones. For a growing number of young men, Islamic State’s utopianism offers a sense of purpose, meaning and masculinity that they don’t believe they can obtain by playing according to the conventional rules of society.

Economic reform, therefore, will be the key to undermining the group’s broader ideological appeal throughout the Muslim world-- with one major caveat. To succeed, it must not be a mere intensification of the neoliberal reforms that have transformed Arab economies since the 1980s. Those efforts generated unprecedented macro-economic growth, but failed to distribute the gains to different segments of society in a socially optimal way. Socioeconomic stratification increased, and that has directly contributed to the ongoing surge of radicalism.   

Beating the ISIS ideology will require new economic reforms that retain the good elements of Neoliberalism, ie the profit motive, but are more likely to channel more (or most) of the gains to the bottom 80%. I suggest five ways this is possible. For the purpose of clarity, this post is primarily focusing on Saudi Arabia and Egypt, the source of several thousand recruits for Islamist extremist groups in Syria.

Making the Diagnosis: What are the “causes” of the ISIS Ideology?

Proper diagnosis of the cause is the key to solving any problem. At the most fundamental level, the appeal of Islamic extremism is related to economics. This is because the baseline needs and concerns of individuals in all societies are economic. Does a critical mass of people in a given country or region have a reasonable chance to get a job, which gives them the ability to attract a mate, raise a family, and live a purposeful life?

Political and religious views become more extreme or moderate depending on whether these baseline needs are met. Islam has not changed. What has changed is that over a period of 30 or 40 years, an increasing number of people have interpreted their religion more literally in response to their personal environment. Political instability and the lack of democracy is a reflection, not a cause, of the underlying baseline needs deficit. Until the economic equation changes, politics cannot be stable.

Three points to ponder:

First, from the information that is available, Saudi and Egyptian recruits for the Islamic State are virtually all coming from the lower socio-economic 80% of society.  Many commentators are misunderstanding this because of a focus on superficial symbols of economic status, such as university attendance, which are no longer indicative of much in a 2015 world where more people than not attend universities. For example, Saudi Arabia is sending a shocking 78% of its high school graduates to university – one of the highest rates in the world.

Peter Bergen of CNN argued against the Obama administration’s assumption that economics is a cause, by pointing to a lead ISIS terrorist who had received a degree in Computer Science from a British university. Yet what about the fact that this individual could not find a job with his degree? The more important question for those trying to understand the appeal of ISIS, is whether a person could get a job after university, not whether they went in the first place.

Second, if the rise of ISIS is a surprise to some US policy makers, its appearance is consistent with the trajectory of global history in the industrial era. The group is a 21st century Middle Eastern version of the forces behind National Socialism and Communism -- violent, utopian reform movements that gain traction in times of deep economic turmoil and class insecurity. Demand for violent reform options always grows over time as the more moderate options fail to achieve results. That was exactly the situation in Europe with Communism and Nazism, which could only attract a critical mass of followers for its “blow up the system” approach to reform in the 1920s, even if its underlying ideas had been in circulation for several decades. ISIS can point to similar failures of moderation in Arab politics today, which fuel its appeal.

A great book for understanding the appeal of ISIS today is German historian Joachim Fest’s biography of Hitler because of his focus on the role of status in explaining the motives of the original supporters of National Socialism:

Almost all came from numerically strong petty bourgeoisie that had long been prevented from rising socially; obtained positions of leadership during war only because of heavy officer casualties; had expected glorious post-war careers; Versailles had thrown them back socially, ended up teaching in grammar schools, standing behind store counters, grilled windows in government offices; lives that seemed utterly unworthy to them. Same impulse to evade normality that led Hitler to politics now brought them to Hitler.

There is little difference between the foot soldiers of ISIS, as seen in the Vice documentary The Islamic State and the true believers of National Socialism and Communism of the 1920s. Economic struggle and class conflict was the fundamental driver of those movements, just as a central tenet of US National security in the Cold War was economic reform to try to prevent their resurgence. With healthier baseline economic conditions, the “demand” for radical political solutions would disappear, or at least decline.

Third, while the Syrian Civil War is the immediate short-term cause for the appearance of ISIS, it is not the cause of populist utopian extremism, which was occurring in Egypt and Saudi Arabia long before the Arab Spring. In 2009, I co-authored a study on Salafi Satellite TV in Egypt, attempting to understand the sudden emergence of ultra-conservative Islamic TV stations that emerged in Egypt around 2007. These stations were widely believed to be the most watched programming of any kind in Egypt. We found their popularity was clearly linked to the liberalization of the economy, and that they were most watched by those on the lower end of the socio-economic spectrum. There is not a huge jump between the contents of these programs and what we see in ISIS today.  Salafis of the pre-Arab Spring Egypt period were “quietist” as a matter of pragmatism, not because of a permanent ideological belief in the utility of doing so. As one well-known Egyptian scholar of Islamism predicted to me in 2009 “Egyptian Salafists will eventually split: one group will move towards the Islamic centrism of al-Qaradawi and the political activism of the Ikhwan, while a second will embrace Salafi jihad.”

And if the Syrian Civil War has presented a natural cause for Islamists to rally around, especially when it is framed more nobly as “defending the Syrian people,” less honorable anti-Shia and ugly sectarian sentiment was a fundamental theme of Islamist media in the decade before the Arab Spring. So while some kind of settlement to the Syrian Civil War is desperately needed, extremist of the ISIS variety won’t go away just because that conflict ends.

 Growth is the Easy Part. The Dilemma is in the Distribution

The challenge with economic reform is not growth itself, but ensuring a socially optimal distribution of the benefits. What makes this difficult, however, is the natural human inequality of abilities. In any given country, and especially in the 2015 global economy, only roughly  20% of the people have the ability, the ambition, and the temperament to generate new growth either as entrepreneurs or as skilled employees. The gap between the two classes is even more pronounced in Arab countries such as Egypt and Saudi Arabia where cronyism, nepotism and familial connections play a stronger role in determining who is a position to succeed economically than in more developed countries.   

Egypt’s reform experience during the last decade perfectly illustrated this dilemma. The government followed the neo-liberal textbook and from 2005 through 2008 and achieved an impressive 7% annual GDP growth rate. It is an ironic fact that in the years just before President Mubarak was overthrown, the Egyptian economy was generating higher growth than at any other point in the country’s history. But the gains were disproportionately held by a very small segment of Egyptian society. That distribution is a natural, amoral, and inevitable result of free-market capitalism.

The Right Types of Economic Reforms

Here are five economic reforms that might strike the right balance between market-driven capitalism and socialist redistribution of wealth.

Promote Low(er) Tech Entrepreneurship

The State Department has correctly identified the promotion of entrepreneurship as key to generating long-term economic reform in the Middle East. However, it continues to operate under the assumption that entrepreneurship can only mean Silicon-Valley style tech companies, or the building of apps. This has the unintentional result of focusing reform efforts on those who are already generally in the top 20%.

What the Arab world needs is lots of jobs. The problem with tech companies or apps is that they are not labor intensive. Future economic reforms therefore should more strongly encourage people to think about starting companies in more traditional areas. In a 2012 Arabist post “The Virtues of a Low(er) Tech Future in Egypt,” I described this dilemma in greater detail and focused on several types of labor-intensive companies worth promoting because of their potential for greater impact for the 80%.

Try to Create Niche Industrial Sectors That Add New Value in the Global Economy

A significant obstacle to economic reform in the Middle East is the competitiveness of the world economy. Whereas countries like China and South Korea, roughly equal to Egypt economically in the 1940s and 1950s, created new opportunities for millions of people through the development of manufacturing, most Arab countries are purchasers of goods, not producers. Unless something new is created that people want to buy on the global market, new opportunities to shake up the economic power balances in Arab societies are limited.

It is very difficult to create value-adding niches at the global level in 2015. But out-sourcing happens constantly and there is no reason to think that work will cease flowing to places where the cost of labor is cheaper. Countries looking for an economic boost have seized on niche services and made them cornerstones of their economies. The textbook case is the Philippines’ call-center industry. In 1997 there was not a single person in that country employed in a call center. By 2012 it had surpassed India as the world leader, producing $11 billion in annual revenue and employing 638,000 people.

Saudi Arabia is attempting to do something similar by leveraging its oil resources to become a player in the automotive industry. Its goal is to manufacture up to 500,000 cars per year by 2025. If the program is even a partial success, hundreds of thousands of very good jobs for Saudis will be created.

Finding new gaps and trying to start new industries is a worthwhile endeavor. Even if the attempt is unsuccessful, the skills gained are useful to other areas of the economy.

Labor Market Reform

Labor market reform in Saudi Arabia is critical to undermining ISIS. Since 2011, the government has undergone a series of reforms to the labor market, which are shifting the balance of power between workers and employers more in favor of workers. I cover this trend in great detail in a 2014 piece for the Saudi-US Trade Group. The beneficiaries of these reforms are almost entirely Saudis from the 80%, precisely the group most vulnerable to the appeal of radical utopianism.

Promotion of Blue Collar Jobs

In Saudi Arabia there is significant potential for new Saudi employment in blue-collar sectors such as manufacturing, construction and maintenance. For example, just 6% of workers in the construction sector are Saudi nationals, making it one of the least localized sectors of the economy. This also means it is the sector with the highest number of available, already existing jobs. 

Some dismiss this argument out of hand, saying that Saudis just will not work those jobs. But, the grandfathers of the Kingdom’s younger generation worked with their hands, so there is no long-term cultural aversion to “hard work.” The issue is primarily one of status; if wages rise, so will interest in these types of jobs. According to Table 51 of the Ministry of Labor annual report for 2013, construction brings in the lowest average salaries for Saudi males, at just $937 per month. However, since this type of work is often for publicly-funded government projects, higher wages can be written into bids without affecting the bottom line of private sector firms.  

Furthermore, there are enough examples of successful industrial or manufacturing projects staffed by Saudi labor to refute the myth that Saudis will not or cannot work in this field (see Mr. Amr Khashoggi’s comments about the situation in his firm during the May 2014 SUSTG webinar on Saudi Labor reform). If we look at countries such as Germany or the U.S. where mechanics, construction workers, plumbers, etc., all make attractive wages and have a certain “masculine” status within their communities, there is no reason this can’t happen over time in Saudi Arabia. Making it possible would be beneficial in undermining ISIS’s appeal.

Increase Vocational Training

It is hard to find fault with the way Saudi Arabia is spending so much money on education, but as Dr. Habibi of Brandeis University points out is it quite possibly training too many university graduates. He notes that the Kingdom has increased the number of universities from 15 in 2005 to 34 in 2015 and enrollment has risen from 604,000 to 1.5 million during the same period. The reality is that the vast increase in graduates does not match the actual needs of the economy and significant numbers of these new graduates are not going to find jobs (to be clear this is a problem everywhere). This may have the ironic effect of increasing, not decreasing, support for radicalism. After all, the most vulnerable to its appeal are not usually the poor, but those educated enough to know what is out there, which only increases their disappointment when their expectations of higher status are not met. This explains why so many members of Islamist extremist movements have attended universities. 

One remedy for this is a massive increase in vocational training because the direct economic need for those skills already exists. There are some programs but not nearly enough. Better-trained Saudi workers would support the previous four policies of this section. If every year Saudi Arabia produced, say, 5,000new vocational graduates into an environment where there is enough blue-collar work to support them all at wages where they can raise a family, it would be a major challenge to the ideology of ISIS. 

Conclusion

I fear that ISIS-style utopian extremism may be just beginning to spread in the Middle East. It would be consistent with the decades-long slow path to radicalism that we saw in Europe in the late 19th and 20th centuries. Unless meaningful changes are made in the socio-economic distribution of economic status in the Arab world, the popularity of groups like ISIS will not wane. In fact, it will likely grow stronger. Yet because of the nature of the global economy, it is difficult to see how major reforms can be made. The only hope is through new thinking about the types of economic reforms that will put a larger share of the 80% in a position to succeed.

Nathan Field is the co-founder of Industry Arabic and a commentator on Middle Eastern politics. Contact him at nrfield2413@aol.com

 

 

In Translation: A modest proposal to fix Egypt's economy

Economist, former government minister and rare voice of reason Ziad Bahaa Eddin presents a list of sensible suggestions for what Egypt should do, undo, and not do to right its sinking economic ship. Pity that they will almost certainly fall on deaf ears. This installment of our In Translation series is brought to you as always by the professional translation team at Industry Arabic

Recommendations for Dealing with the Economic Crisis

El Shorouk newspaper, October 20 1015

Ziad Bahaa-Eldin

One cannot describe the current economic situation as only a minor bump, one that we can deal with using the same tools and methods the state has grown accustomed to using over the past years, and which exacerbated the crisis in the first place. I am not referring here to the disturbances in the exchange market that recently grabbed the media’s attention: they are a symptom of an underlying sickness, the expression of deeper problems in the management of the economy. The principle of these problems are weak levels of investment, exports and employment and the rise in both internal and external public debt. The most important of these problems, though, is the government’s lack of clarity in its economic policy and the direction it intends to pursue. For citizens, the steady price increases, especially in food, the continuing decline in public services and the scarcity of employment opportunities are the real indicators of the Egyptian economy’s performance. For them, these issues are more important than figures for growth, reserves and the public debt.

We can, of course, blame the slowdown in world trade, global conspiracies, or the regional situation. None of these, though, are sufficient to explain the rapid worsening of the economic situation over the past few months. We can also demand that minister after minister step down or cabinet after cabinet be replaced every time there seems to be a slowdown or a failure or every time the media calls for an immediate change. However, the gravity of the current situation requires us to stop and reassess our position and to build a minimum of consensus around certain important priorities instead of searching for a scapegoat or trying to satisfy the media’s thirst for a new victim. Here is what I propose:

Over the short-term, the government must make decisions on various issues that remain unclear and that cause persistent anxiety within the investment community. Most importantly, the government must explain what taxes and fees it intends to impose in the short and medium term, the future of energy pricing, what the forthcoming agreement with the World Bank contains and, last but not least, what measures it plans to adopt to deal with the exchange rate. Even if some of these are hard choices with a high social cost, lack of clarity is, in all cases, is more damaging than decisiveness. Lack of clarity leads one to imagine the worst possibilities and paralyzes investment and production. Furthermore, it is necessary for there to be complete agreement on a shared position among members of the government. Contradictory statements made by officials causes the government to lose credibility. As for the exchange rate, no statements or forecasts should be made, except by the Central Bank, as it is an issue that is negatively effected by any rumor or poorly thought-out statement.

In the short-term, as well, there is a great need to review many recent faulty decisions and to courageously acknowledge their shortcomings rather than stubbornly persisting in them. It is no longer up for debate that the Investment Law issued at the Sharm el-Sheikh conference was a big mistake. It further complicated the investment environment, opened up space for corruption and manipulation of land allocation and promised investors things that it could not guarantee. There is agreement among experts in law, economy and business that this law set us back ten years. So why do we not repeal it? The same applies to the policy of promoting global investment without giving sufficient, let alone similar, weight to small and medium-sized national ventures, older industrial zones and local investors’ associations that represent tens of thousands of small producers.

In the long-term, it will be useful to reexamine the utility of large national projects in light of the continuing lack of clarity and of contradictory statements made by officials about their cost, economic impact, funding and mechanisms of implementation. No one hates the idea of a new capital for Egypt, nor of adding millions of acres to the available agricultural land. Yet, due to the scarcity of resources, urgent needs in all areas of social expenditure and the need to upgrade existing public utilities, we must reconsider our priorities. There must also be dialogue within the community about the utility of such projects: which should be implemented now and which should be delayed or even set aside entirely.

Likewise, we must return to the issue of social justice, which has been neglected recently despite remaining, over the past four years, the Egyptian people’s clear, repeated demand. Though it represented for a time the core concern of the entire state, social justice has become again an overlooked issue, only pursued by the Ministries of Social Solidarity and Supply through the tools available to them. These tools -- pensions and social security through the Ministry of Social Solidarity, and ration cards and food subsidies through the Ministry of Supply -- are not enough to achieve the prosperity that people seek. We must transition from a concept of “social solidarity,” achieved by means of granting additional pensions and subsidized food supplies, to a concept of “comprehensive social protection” that gives all citizens proper education, the chance to become qualified for the labor market, healthcare and the opportunity to compete and advance. After this comes the role of social security: to protect the weak and those who cannot compete in the work market. Successive governments have made substantial efforts in this area, but a political decision needs to be taken to reinvigorate interest in completing this process, begun many years ago.

Finally, both in the short and long-term, there is a need to broaden the circle of discussion surrounding decision makers both in the Presidential Palace and the Cabinet. I speak here not only of the need to ask for assistance from Egyptian experts both inside and outside the country who could make valuable additions. More importantly than that, there must be an institutional dialogue. Economic policy should not be set solely by the group of people that surround the president, no matter how competent they are. Instead, it should be set through dialogue between the government, the Federation of Egyptian Industries, the Federation of Egyptian Chambers of Commerce, investors’ associations, professional associations, workers’ unions, political parties and civil society organizations. Each of these bodies represents a force in society and an interest that we must listen to and involve in the decision-making process so that they do not become spectators waiting to see what surprises the government throws their way. A sound economic policy should be designed with their support and participation and should represent a balance between their various interests.

Selling the world on Egypt

Jack Shenker gives a great run-down of the economic conference to tout Egypt's prospects. 

Christine Lagarde, head of the IMF, was among the first to pay homage to the reform-minded credentials of a man responsible for what Human Rights Watch (whose website was blocked on the conference WiFi network) has labelled one of the largest state massacres of demonstrators in modern history; John Kerry, the US secretary of state, Philip Hammond, the UK foreign secretary, and Blair all followed suit as the weekend progressed.
But memories are short. A foreign-investment led, GDP-growth orientated economic model was the hallmark of Mubarak’s dictatorship and received glowing approval from the IMF. The outcome was epic corruption, eye-watering riches for a crony capitalist class at the top and immiseration for everyone else; Bread, Freedom, Social Justice was the revolution’s slogan, though none of Egypt’s post-Mubarak regimes – from the junta that took power immediately after the January 2011 uprising, to the short-lived, aggressively free-market government of Mohamed Morsi and the Muslim Brotherhood, to the new military autocracy – have bothered to take the latter demand seriously. The Brotherhood declared last week that Egypt is not for sale, forgetting that exactly the same multinational corporations currently signing deals in Sharm el-Sheikh were fawned over and flogged to by Morsi as well. At Egypt’s economic summit, the more things change, the more they stay the same.
In reality, the conference is about the Egyptian military showcasing a business-as-usual vision for the future, one in which Gulf and western capital works in partnership with senior generals to carve up and commodify the country, and where Egypt’s identity – contested so dramatically in the streets over recent years – is curated solely and safely from the top. But Sisi could not pull off such a feat on his own. Enter an interconnected grid of international consultancies and high-level public relations agencies that specialise in subtly repositioning a nation’s image.


"Nobody wants to do what's in the country's interest"

Yesterday afternoon I found myself crossing the increasingly bedraggled expanse of Tahrir Square (where a permanent encampment of protesters has lived since last month's confrontation with Morsi and where a mild Mad Max vibe now prevails) to go hear about how the Egyptian ecomony is doomed.

At a media roundtable on the Egyptian economy at the American Univerity in Cairo's downtown campus, professors from the university predicted that the pound will fall to 7LE to the dollar; that growth will be no more than 2% of GDP; that foreign and domestic investment will remain low (private investment is currently 16% of GDP, whereas to promote growth it should be at 20-25%) and that inflation and social tension will rise. 

The economic policies of the current government were treated with ridicule -- starting with a recent announcement that they will create 800,000 jobs this year (most jobs "created" since the revolution by the government have meant giving permanent posts to functionaries on temporary contracts -- and we all know how the Egyptian bureaucracy needs to be strenghtened) and ending with their promise that new Sharia-compliant Islamic bonds will raise $200 million. Economics professor and disgruntled social observer Galal Amin, in particular, eschewed economic jargon and tore into the situation with refreshing candor and avuncular charm. "I don't see why we even need to have conferences to discuss fixing the economy, guys" he said, "when they can raise $200 million by creating a new kind of bond." 

According to Amin -- although the economy wasn' t great before the revolution -- the basis of Egypt's economic crisis is political, caused by "a lack of security and a lack of trust," which the prevailing political discourse does not help. Investors, Christians, tourists -- none of them are confident in Egypt anymore. And the Islamist government obfuscates. "They don't just not tell the truth," about the economy, he said. "They say the opposite of the truth." 

Rather than passing real economic reforms -- measures that would genuinely re-distribute resources or raise new revenues (Egypt is in dire need of tax reform) -- the government has been focused (one might say obsessed) with the creation of Islamically-branded financial tools, which, while they may appeal to certain religiously-minded investors, aren't fundamentally different from existing ones. 

The Islamic bonds, which would allow private investors to finance public projects with revenue streams, are reminiscent of the Mubarak government's Private Public Partnerships schemes. There has been concern that they will lead to privatization of public resources or services -- a concern that lead Al Azhar (which the Brothehood and Salafis just made the "reference" on all Sharia matters) to, embarrassingly enough, reject the bond idea.  

At the end of this rather dispiriting talk, one economist pointed out that Egypt could be doing much better economically -- that it was recently classified among developing economies with significant potential. Why, then, the Egyptian journalists in attendance asked, aren't things better? Is it corruption? A lack of qualified cadres?

Galal Amin stepped in again, with a short history of Egypt's recent economic crises: In 1967, after the war with Israel (which was solved by help from the oil-rich Arab countries, in exchange for Nasser abandoning pan-Arabism); in 1975, under Sadat (wihch was solved by US aid and assistance after making peace with Israel); in the late 80s, under Mubarak (which was solved by the Western nations and in particular the US forgiving half of Egypt's debts after Mubark supported the invasion of Iraq and accepted IMF "structural adjustments"). Basically, Amin's arguments goes, Egypt runs on the knowledge that it's "too big to fail" and that someone will always step in to save the day -- and always at a significant political price. "What are we expecting now?" He said. "Saudi Arabia, Qatar, the US to rescue us. I wonder what they'll ask from us this time?" 

As for why there aren't better people in government, Amin -- who had really gotten into his groove -- had this to say: "It's because in Egypt we look for the person best suited for the job and then we keep him away. The truth is our country has been ruled from outside forever and still is, so the most inconvenient people to have in government are وطنيين (watanyeen, or patriots). If you're not watani, then here you go, you can be a minister. But if you start to care about your country, you've got to go. Solving the economy is not a technical problem; it's a political problem. Nobody wants to do what's in the country's interest." 

How Egypt Can Learn from Iran’s Subsidy Mistakes

Breakfast Wrap: How Egypt Can Learn from Iran’s Subsidy Mistakes

Good post asking the right questions about Egypt  subsidy-busting plan. The biggest question I have is, considering that the approach is introducing quotas per family (all income levels having the same quota), is how quickly can this system be implemented? Sounds like a plan for in a  year or two at best, not something you can implement now to deal with an urgent budget deficit.

Great new anti-army video calling for Egypt general strike

This video, put out by Aalam Wassef, is one of the most daring and well-made I've seen yet by the anti-SCAF movement. The basic narrative is that the SCAF represents a military that has run Egypt into the ground for some sixty years, while enjoying the fruits of its economic empire, luxury hospitals, clubs etc. It calls for a boycott of military-produced products and a general strike on February 11.
Links for 08.08.09 to 08.09.09
Middle East Report Online: Rachel Corrie in Palestine…and in San Francisco | Joel Beinin on the hysterical reaction to the screening of French-Israeli filmmaker Simone Bitton's film on Rachel Corrie at the San Francisco Film Festival.
Israeli agents to screen judges before appointment - Middle East, World - The Independent | Israel - just another Middle Eastern autocracy: "Israel's internal security service has been given a de facto veto over the appointment of judges in an unprecedented decision that has the country's embattled liberals up in arms. The move by the Judges Selection Committee on Friday is likely to make it harder for members of Israel's Arab minority and others with views that are not mainstream to become judges, according to the Association for Civil Rights in Israel (Acri)."
Obama's letter to Assad .... | FLC: "According to the Lebanese daily Al Akhbar, President Obama heeded a "french advice" and transferred the Lebanon-Syria file (s) to the White House, away from the tractions and the oversight of such officials as Jeffrey Feltman... Moreover, and always according to Al Akhbar, a senior Arab diplomat in Beirut said that President Obama sent a "three pages letter" to President Assad asking him to "turn a new page in the bilateral relations between the US and Syria" ... and outlining ways to move forward. "
Typhoid outbreak in Egypt | In Qaloubiya governorate, due to water sanitation issues. There are increasing water sanitation and distribution problems in Egypt, a sign that the government is not sufficiently investing in infrastructure.
Central Bank: Egypt's remittances drop 26 percent (AP via Yahoo! Finance) | The crisis hits.
Al-Ahram Weekly | Living | Obituary: Fayza Hassan, 1938-2009: Life interrupted | Very sad to hear about the death of this wonderful writer.
Egypt's National Security Threatened By Sorcery: Psychiatrist | Mountain = molehill.
EGYPT: Anwar Sadat's daughter sues information minister over Hollywood movie | Babylon & Beyond | Los Angeles Times | Because of the film "I love you, man." Which isn't very good anyway (and the dog does not resemble Sadat).
Reptile wreaks havoc on Cairo-bound flight | Funny: "A “small crocodile” running up and down the aisle of a Cairo-bound flight recently sent passengers into a frenzy. No one claimed ownership of the creature, which turned out to be a lizard."
Israeli settlement freeze 'not enough for Saudis'
(AFP)
| I almost hate to praise Saudi Arabia, but they have this right.

Links for November 28th
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