Naguib Sawiris wants to plop hundreds and thousands of Syrian refugees on isolated islands for sale off the coast of Italy or Greece, and use this manpower to build a new country that he would own. Almost at the same time as the billionaire philanthropist was giving an interview to CNN, saying he “cannot just sit … and do nothing…and pretend it’s not my problem,” Egyptian security forces gunned down at least 12 tourists and guides in Egypt’s White Desert. It was an accident, of course.
For a telecoms magnate worth approximately $3 billion, it is hard to dismiss Sawiris, especially as the UN call this the worst global refugee crisis since World War II. But the motive behind this plan is questionable when Sawiris’ agenda in one country – his home in Egypt – does not align with his interests elsewhere.
In Cairo, the Sawiris family, who control the Orascom conglomerate spanning telecommunications, construction, tourism, industries and technology, have turned a blind eye to the ruthless crackdown of their fellow countrymen and women, thousands of whom are political prisoners, in exchange for a favourable business environment, where big corporations are rewarded while small business is plagued by red tape. Egypt still ranks 112th on the World Bank’s ease-of-doing-business index, trailing behind Zambia and Swaziland. But the disappearing of people and the silencing of dissent is not a worthy cause.
Sawiris told CNN (taken from a rough transcript):
I would build temporary housing and temporary school and temporary hospital, you know. And then we will use these people and provide them jobs to build a new city on the island, to build this island, you know. Because this war is not going to end in weeks or in months. It may be years even.
The exodus of millions of Syrians is devastating, and perhaps solutions should be unconventional, but is Sawiris the right person to be proposing and controlling such a project, when he is politically implicated in Egypt’s own disastrous government? And then there’s this fantastical promise of a haven for Syrians, that in reality, will become a massive refugee camp, lacking in infrastructure, on an island cut off from society. This is a temporary solution, at best, and at worst, it is an over-populated, under-served fiefdom controlled by a telecoms magnate. This is not how cities and societies are built.
A private equity fund launched by Gamal Mubarak managed to reel in millions of dollars of investment from Egypt’s elite, revealing the depths to which political and business connections ran as he began rising in stature in the late 1990s.
According to a document obtained by Rebel Economy, Gamal Mubarak’s $54 million Horus I Fund, created in 1997, attracted some of the country’s most controversial businessmen including steel fugitive tycoon and Mubarak-confidante Hussein Salem, steel magnate Ahmed Ezz, who was acquitted in June after being charged with monopolising the country’s steel market, and the ex-CEO of Egyptian investment bank EFG Hermes, Hassan Heikal. Heikal is a defendant in an insider trading case involving both of the Mubarak sons. His former colleague, Yasser El Mallawany, who is still officially an employee of EFG, is another investor in the Horus Fund.[caption id="attachment_2059" align="aligncenter" width="640"] Full list of investors who committed to Gamal Mubarak’s fund[/caption]
The fund, which was operated by EFG Hermes and invested in Egyptian projects and companies, attracted millions of dollars of investment from members of Egypt’s old guard, some of whom have been targeted in corruption cases since the fall of Hosni Mubarak in 2011. Although there is no evidence the fund engaged in corrupt activity, the connections between the people named as investors on the account has never been properly investigated by the Egyptian authorities.
The list of individuals and companies published above raises questions that have so far been left unanswered by Egyptian investigators.
The document, which details how much individuals and companies committed to the fund at the time of launch, also provides a window into the everlasting influence of Mubarak’s old guard and their long-standing ties to Gulf nationals in Saudi Arabia, Kuwait, the United Arab Emirates and Qatar.
It represents the beginning of Gamal Mubarak’s foray into private equity, where his financial interests in the Egyptian economy, from tourism to agriculture to oil, began to grow. The fund was created prior to Gamal’s entry into political life, when he acquired 18% of EFG Hermes Private Equity.
Among the handful of Gulf companies listed is First Arabian Development and Investment Company, run by Hamza al Kholi, a prominent Saudi Arabian businessman, and Yahya Al Yahya, the chief executive director of Gulf International Bank.
The ZAD Global Direct Investments Fund is also a notable appearance on the list. This investment company, founded by Prince Mishaal Al-Saud, second child of the Prince Abdullah bin Turki bin Abdulaziz Al-Saud in Jeddah is a privately controlled investment company, organized, owned, controlled and operated as the investment vehicle for the family of Prince Mishaal for the purpose of managing the family’s investments.
Some businessmen have used clever ways to hide their investment activity. A company connected to Hussein Salem appears on the document. Clelia Assets Corporation, a Panama registered company, is linked to his name.
Salem fled Egypt in 2011 when he came under fire for tax evasion and his complicity in a corrupt gas deal.
Other controversial names on the list include Mohammed Abou El Enein, the chief executive of Cleopatra Ceramics, a major Middle East ceramics firm that has faced repeated labour strikes.
Abou El Enein, who once called himself “the noblest businessman on Earth”, was at one point under investigation for allegedly violating labour laws. Workers have staged sporadic strikes asking for improved working conditions and higher wages.
The fund is a worrying sign of how little progress Egypt has been made in defeating a tight circle of Egypt’s mafia, some of whom were subject to now forgotten corruption cases.
And now, there is evidence that some of Mubarak-era moguls may make a reappearance on Egypt’s political and business scene. Hussein Salem, who is currently exiled in Spain, has reportedly asked to make a deal with the interim government that would end any court cases against him. He has said he is presenting a new initiative to the interim government which includes funding for the unemployed in the tourism sector, as well as restoration of police stations, churches and mosques.
Hassan Heikal, who resigned from EFG Hermes earlier this year, has indicated that he will be acting in a consultancy basis to the Egyptian government. He has signalled he will offer ideas and launch new initiatives “that offer long-term solutions to Egypt’s fiscal challenges and economic development,” according to a statement he made when he resigned.
But the army has a strategy of its own. It’s interest is in preventing an examination of its own assets and business interests, which not only is likely to affect other investigations but focus on a shift away from Mubarak-era crimes toward the Muslim Brotherhood and the former president Mohammed Morsi.
So as the army continues its assault against the Muslim Brotherhood, journalists and civilians, the more these characters will disappear into the background, leaving them free to operate, uninterrupted.
Nestled in the heart of downtown Cairo is the opulent headquarters of Arab International Bank, a secretive bank that has allowed kleptocrats to funnel money out of the country for decades with barely any regulatory oversight.
The bank, established in 1974 by a treaty signed by Egypt, Libya, Qatar, Oman and the UAE, is exempt from many Egyptian laws, customs duties and taxes and is testament to the once powerful nexus between the governments of the region.
However, the bank’s links to Egypt’s old guard, as well as the Qaddafi and Assad regime, led the bank to become a centre of controversy following the revolutions of 2011.
Operating free of the regulations governing other Egyptian banks, AIB was initially established to persuade Egyptians to bring their money back to the country after the death of president Gamal Abdel Nasser in 1970.
Nasser’s socialist policies had panicked depositors who wanted to keep their money safe from nationalisation and seizure. AIB flourished as an offshore bank and played a crucial role in jump-starting the economy during its first decade of business, providing roughly 90% of the letters of credit needed by the government.
But over time, the bank’s original purpose of providing a safe haven for Egyptians wary of political turbulence faded away and what was left was a nearly unregulated bank. It became a place for powerful people to hide their wealth.
It was to be expected then, that when Egypt’s revolution began in 2011, AIB would be a target for protesters eager to purge the country of corrupt elitists.
The bank’s directors found themselves the targets of corruption accusations. Once secret accounts, inaccessible by any authority without a final court judgement, suddenly seemed likely to be revealed to the public.
And the details of those accounts would be valuable to corruption investigators. According to a source familiar with the bank, Habib El Adly, Mubarak’s infamous minister of interior, tried to move money out of the country through Arab International Bank during the 2011 uprising.
The bank’s Tahrir Square office – one of seven branches – was ransacked and burned to the ground just five days into the uprising. A few days after Mubarak resigned and handed power to the military, a Muslim Brotherhood lawyer, Mamdouh Ismail, filed a case to freeze activity at AIB until an investigation into its transactions were complete.[caption id="attachment_2054" align="aligncenter" width="400"] Atef Ebeid (centre) of AIB, with Gulf leaders[/caption]
Within two months of the beginning of the revolution, AIB chairman Atef Ebeid was removed from his position by the military-appointed prime minister Essam Sharaf. In 2012, he was convicted on corruption charges related to “selling public assets at below value prices” and sentenced to 10 years in prison but was granted a retrial earlier this year.
For critics of the bank, Ebeid’s arrest and sentencing were proof that the secrecy and lack of oversight of the bank were exploited by members of the old regime to spirit away billions of dollars of ill-gotten money:
In 2009, two members of parliament penned an op-ed calling on Egypt to close the bank down, saying that “the bank is turning into a giant octopus that is going to swallow public money … the confidentiality the chairman imposes on bank clients, accounts and the volume of transfers makes the bank a doorway for all manner of crimes”.
But none of the claims about the bank being used by officials to move their assets out of the country have been proven by government investigators and AIB officials deny the bank was ever used to conceal the profits of using their government positions to enrich themselves.
Still, with pressure growing on the bank, the board of directors made a move to show it was transparent. In 2012, it announced the charter would be amended to allow the Central Bank of Egypt to regulate it like other banks in the country.
Nearly two years later, the bank has not yet reached a final agreement with the Central Bank on the details and implementation of that regulation.
Meanwhile, some of AIB’s top officials have come under scrutiny by activists.
The position of Mohamed AbdulJawad, the bank’s Libyan managing director and vice chairman, has triggered political wrangling in Libya – one of the five owners of the bank – because of his ties to the former regime of Colonel Muammar Qaddafi.
AbdulJawad was a key representative of Libya’s business community in negotiations with the UK and the US to remove sanctions placed on Libya after the 1988 bombing of Pan American flight 103 over the Scottish town of Lockerbie.
Adding fuel to the fire, his wife is Falak Al Assad, a cousin of Syrian President Bashar Al Assad.
A Lebanese court charged Ms Falak and two other family members last November with forging documents to gain access to money that belonged to her deceased father, Jamil Al Assad, according to an article in France’s Le Monde newspaper. The article said the family were connected to financing pro-regime militias in Syria.
While employees of the bank have come to AIB’s defence saying that the Central Bank’s oversight of the bank should be limited to prevent any damage to its competitive position, the bank has become one of the best signs that Egypt has failed to reform the leaky banking system that allowed members of the old regime to hide wealth derived from corruption and crony capitalism.
One of the key markers of a thriving economy is whether investors are committed.
For Egypt, attracting investors has remained a point of contention in the last three years – are they or are they not putting money in Egypt?
Marshall Stocker, an American venture capitalist, was among a band of businessmen drawn to Egypt’s transformation from a sleepy Arab socialist country to one that embraced the market.
The 2004 cabinet had cut the top rate of tax, launched a series of special economic zones and encouraged a rush of construction activity. This robust economic expansion plan, led by Hosni Mubarak’s son, Gamal, hit its stride in 2008, when foreign investment reached dizzying heights of $13 billion. Economic growth clocked in at a consistently high 7%.
The global business community applauded Mubarak’s rule as “bold”, “impressive” and “prudent”. On the surface, the country was a haven for investors like Stocker.
But once he had arrived in Cairo to launch his urban redevelopment real estate company, Stocker’s optimism was short-lived and he was forced to shut down his business just a year after it had hit its peak. He subsequently documented his experiences in a memoir published this year, “Don’t Stand Under A Tree When It Rains”.
Rebel Economy spoke to him about his experience as a foreign investor during the height of the revolution and why he won’t be investing Egypt again, at least for now.
A populist government panders to voters by preventing rents from rising. After several years tenants are paying much less rent than they otherwise should and this makes for lost income to the landlord and significantly lessens the value of an apartment building.
We intended to buy 12 large buildings in Cairo, and instead of buying building by building we could buy them all in a week and redevelop them.
Our team started raising money in 2009 for properties that were a particularly illiquid investment with a lock-up of 8 years. But the aftermath of the financial crisis prompted everyone to demand very, very liquid investments.
That meant that even though we solicited lawyers, doctors, colleges – all types of wealthy people, in the end the people we found to invest were all people we knew and they were all professional investors; people who managed mutual funds, hedge funds, they apparently have a better appreciation of the market liberalisation thesis in Egypt.
We were able to raise money to do that – $50 million of equity – and we started formally in 2010.
I had already advised the President of Yemen and his son on market liberalisation and the positive consequences of liberalising their economy. I always felt that direct investment in this type of liberal environment is where the real excitement is.
Egypt had both boxes checked – a nice liberalisation environment and it had rich opportunities in urban development. Egypt had the single greatest increase in economic freedom in the years leading up to 2008 and 2009, inflation had been brought under control, corporate taxes were halved to 20% and foreigners could own 100% of a business.
What you saw was direct investment increase collectively. And it was relatively easy to set up a business. The General Authority For Investment (GAFI) is a one-stop shop so the whole process of getting a company going was quite easy.
We had another dilemma: whether it is ethical to do business under an autocratic regime and what business are ethical in such environments. Ours was completely voluntary, as in sellers and tenants were free to refuse our offers. That, I thought, was the ultimate measure of ethics.
The peak came after the revolution had begun. Post-revolution there were genuine economic stresses and market prices were falling on buildings.
I negotiated inside a building on Mohammed Mahmoud Street that had its windows duct-taped shut.
The cost of the asset was dropping under tenants were under increased economic stress. So paying tenants to leave was easier to do, and redevelopment, another major component of our business, got easier to manage even though imported goods cost were going up as well as labour. The business made sense post-revolution.
There has been no economic policy post-revolution except to peg the currency. The volatility of the Egyptian foreign currency rate hit an all-time low post-revolution, and that’s absolutely not what should be happening.
In my opinion, economic policy took a backseat. Islamist president Mohammed Morsi had free-market ambitions at the micro level but didn’t show that he understood this at a macro level. So once he was in power, we had started hearing anecdotal evidence that people couldn’t move money out of the country.
GAFI told us this was not the case but we endeavoured to move a modest amount offshore. It took 7 months.
Luckily, we never had much money onshore but come August 2012, we made the decision that informal capital controls and lack of reliable economic policy meant that we would not be able to continue our business.
The business was still excellent. Profits were higher because asset prices dropped and those are the operational risks we were willing to take, but at the end of the project, if you can’t move your money out of the country, woe is the investor who makes the investment.
I have no money left in Egypt. Would I pursue a direct investment strategy that has a decreasing level of economic freedom? No, absolutely not. I wouldn’t go back.
The government has a blank cheque from a number of Gulf states but there is a credit limit and the risk is that this credit limit is reached before sound economic policy is enunciated and deployed.
And in the absence of policy, I have to believe that the money is going to run out first.
The Egyptian government visiting Gamal Abdel Nasser’s tomb also signals a certain level of respect toward his thinking but also of his socialist economic policies, which I don’t agree with. Those type of activities should not be ignored.
Stocker has published a memoir of his experience in Cairo. “Don’t Stand Under A Tree When It Rains” exposes the dilemmas of investing during the Egyptian uprising and provides advice on working in a foreign country.
General Abdel Fattah el-Sisi must be revelling in the image of an all-powerful oligarch created by the media.
Apparently he reigns over a sprawling economic empire that journalists describe (in now rather cliched terms) as so varied that it covers everything from the production of flat-screen televisions and pasta to refrigerators and cards.
It’s claimed that the army has control over as much as 40% of the Egyptian economy. It owns football grounds and restaurants and provides services such as managing petrol stations.
Some even estimate the military control as much as 80% of manufacturing alone. But then again, that estimate came from FOX News, not the most reliable of sources.
The truth is, the Egyptian military is far from being a well-oiled business machine. In fact, historically, the army have been very bad at making money and its own failures have led it to seek other forms of income. Why else would an army diversify its interests so considerably?
The pitfalls of the military’s weak economic strategy are laid bare in this detailed paper by Stephen H. Gotowicki, a lieutenant colonel in the U.S. Army who worked in the Army’s Foreign Military Studies Office:
In the coming years, Egypt’s military production sector will probably decline. Egypt suffers from low productivity, a lack of adequate funding and a dearth of external markets. Egypt’s largest customer during the 1980s, Iraq, has been removed from the market place as a result of UN sanctions imposed against Iraq for its invasion of Kuwait. Egyptian military products also face increased competition. The cash-strapped Russians are offering highly advanced weapons at bargain prices.
Egypt’s military industries have not promoted import substitution or sustained export earnings. The technological benefit of the armed forces’ military industrial endeavors have proven to be only marginal to Egypt’s economic developments. While Egypt does assemble sophisticated military weapons systems, the facilities to do so are provided by Western businesses on a “turn key” basis.
The Egyptians receive kits for assembly, but the technology involved is closely maintained by the Western partner. Hence, little technology that would allow independent Egyptian development of systems has been received. For Egypt, technology is a conundrum — high technology industrial efforts are a capital intensive endeavor; Egypt has a labor intensive economy with little capital. Finally, it would appear that Egypt’s military industries have done little to enhance its regional power.
In other words, Egypt’s army failed miserably at the one thing they should have been doing well – military production.
The piece goes onto explain how “self-sufficiency would permit a greater measure of Egyptian independence in security matters and should allow the Egyptian military to fight longer without foreign resupply.” Now the refrigerator production and petrol station management makes sense. The army, if anything, is simply trying to keep its head above water.
Contrary to popular belief, General Sisi and his partners do not have a powerful grip on the economy, nor are they savvy businessmen out to expand a flourishing empire. They are interested mostly in protecting the economic interests that allow them to be self-sufficient and not reliant on foreign partners.
It’s a lazy approach to their business and part of the reason why we have seen the army interfere in the transition so much – to manoeuvre Egypt, as much as possible, out of economic decline and shield its factories and production lines.
But still, the military plays no significant role in any of the major Egyptian industries today – oil and gas, steel and cement. The businesses that the military does play a role in would certainly not give them control of over 40% of the economy.
That figure has never really been verified or proven, with only a few rare instances when the military did reveal how much money they make.
At one point just before the January 25th revolution, Businessweek ran an interview with the then minister of military production, Sayed Meshaal, saying the army made about $345 million in revenue from the private sector, a far cry from the billions of dollars they are claimed to generate.
What’s more, the army’s “economic strategy” is riddled with corrupt practices. Mr Meshaal, who served as the minister of military production till 2011, is now being investigated for awarding contracts “above cost”.
In another example of dodgy money management, millions of dollars of profits from military industry exports during the 1980s and 1990s were reportedly returned to the military coffers with no government accounting or taxes (i.e. “off-budget”).
The military are far from being shrewd businessmen. Instead, because of a track record of losing contracts, bad ties to regional powers and dodgy accountancy, the army are relying on selling bottled water and other domestic goods to survive.
Plus, the military’s role in the economy actually stifles free market reform by increasing direct government involvement in the markets.
General Sisi has said nothing about the army’s economic prerogative but we can already deduce what the military is interested in: remaining conservative, keeping policy simple without innovation or anything too radical (such as cutting those precious energy subsidies that the army rely on so much to run their factories at a cut price) and focusing on big, state-run projects (just like Mubarak).
With no real systemic changes being offered, the army has missed an opportunity to save the economy and much to their demise, protect their own economic interests.
Could Egypt’s economy be on the road to recovery?
Some indicators suggest this might be the case. According to Reuters:
Egyptian business activity shrank for the 13th month in a row in October but at a much slower rate, suggesting the economy may be improving after months of renewed political turmoil.
The seasonally adjusted HSBC Egypt Purchasing Managers Index [PMI – which is an indicator of the economic health of the manufacturing sector] for the non-oil private sector rose to 49.5 points in October, up from 44.7 points in September and moving closer to the 50 mark separating growth from contraction.
In other words, readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
This handy graph from Capital Economics shows what’s been happening with Egypt’s PMI:
Economists at Capital Economics say that “at face value, the rise in the Egyptian PMI would suggest that, following several months of disruption to activity caused by July’s “second revolution”, the economy is starting to recover.
But that’s really all it is, “face value”, because below the surface, Egypt’s economic problems remain a menacing backdrop to any political tensions that unfold and a reminder that no leader can succeed without acknowledging that difficult decisions need to be made.
The reliance on Gulf money has cornered Egypt into spending a lot of political capital without reaping the benefits of economic reform, economist Anthony Skinner writes in the Financial Times:
Unlike the much-maligned and ultimately rejected IMF Stand-By Arrangement, the lenient terms of Gulf aid mean that Egypt is not hamstrung by conditionality; at least not directly. A square in Luxor has already been named after King Abdullah of Saudi Arabia in recognition of his generosity. Some Egyptians part-jokingly fret that the pyramids will be next.
The trial of former Islamist president Mohammed Morsi this week was partially brought about because of Mr Morsi’s failure to address mammoth problems in the country: joblessness, rising inflation and untenable subsidies that are costing more than the country can manage.
Once the inexperienced Muslim Brotherhood was out of the way, supporters of the coup expected the caretaker government to act immediately by expediting structural reforms necessary to relieve pressure on the deficit and free up the economy.
However, the theatrics of Egyptian politics has detracted from any serious issues.
The trial of Mr Morsi has became more about the power struggle between the army and the Brotherhood rather than the charges that were brought against him. The army’s petty grudge against comedian Bassem Youssef has busied the minds of Egyptians, rather than the creeping xenophobia driven partly by populist nationalism.
And God forbid if a politician were to attempt to bring up the notion of “compromise”, because he will likely be branded a traitor for giving in to the opposition.
The Egyptian government has come up with a $3.2 billion “stimulus package” that is unrealistic, in that the plan is based on spending as much as possible while simultaneously ignoring that the country cannot have a healthy, streamlined economy unless cuts are made and taxes are overhauled and collected properly.
It has also launched “Egypt 2022”, which in economics we call a complete joke.
Other than omitting the glaring detail of how the government plans to finance this multi-billion dollar investment plan, there is no discussion of how the interim government will achieve its ambitious growth rate targets. Instead, ministers have said the plan “focuses on building a strong and disciplined economy based on social justice, characterised by diversity and openness to the outside world.”
This isn’t a Miss World contest, and we’re not asking for world peace or prosperity. Egyptians are impatient and are wondering when vague rhetoric will translate into solid, targeted actions.
News that Washington will suspend a sizeable chunk of military aid to Egypt was met with little more than a shrug from Egypt watchers and analysts who said the decision was unsurprising.
The move to trim part of the $1.3 billion in military aid to Egypt had been in question since the US issued a warning in July when the military ousted Islamist president Mohammed Morsi.
For many, it was all talk not action.
“I don’t see it as any more than a symbolic slap on the wrist,” H. A. Hellyer, an associate fellow at the Royal United Services Institute, told Global Post.
In the short run, as this Associated Press editorial argues, “the suspension of hundreds of millions of dollars in aid will have little effect on Egypt’s military and its ability to defend itself. The cutoff probably will not do much damage to most of the companies with contracts to build such weapons.”
Indeed, a report by Al Jazeera revealed that US military aid has flowed as normal to the Egyptian cities of Damietta and Alexandria since the coup began, despite warnings.
Some also said the slap on the wrist decision avoids the real debate at the heart of the aid. Jonathan Guyer of the Cairo Review explains:
If we agree that American assistance doesn’t do much, then why continue it? The basis of this gargantuan military aid package is the 1979 peace accord between Egypt and Israel; that should be the topic under discussion rather than the idea of “leverage” in the abstract.
If Washington is going to cut aid, it must carry out the policy change with a bang, not a whimper.
On the flip side, for supporters of the military-backed overthrow, the announcement inflamed tempers. Naguib Sawiris, the politician and billionaire who has never been short on opinions, started a Twitter row:
Cutting military aid to Egypt is an arrogant counterproductive action! Do not underestimate the pride of the Egyptian people!
— Naguib Sawiris (@NaguibSawiris) October 11, 2013
But a healthy dose of realism from a few Egypt commentators doused Sawiris’ outburst:
— arabist (@arabist) October 11, 2013
How is US cutting its military aid to #Egypt arrogant? It seems that expecting aid without conditions is far more arrogant.
— Matt Bradley (@MattMcBradley) October 12, 2013
For all the discussion of symbolism and how much impact the aid cuts will make on Egypt, the US undeniably has a significant amount of fire power in the Middle East. The decision to suspend some aid, in and of itself, is a big deal that will influence other major donors in their attitude toward Egypt.
Aside from Gulf aid (and I’ve been clear about why that’s not a great idea in the long-run here and here) Cairo has pretty much lost the confidence of every major donor. Washington’s announcement is a nail in the coffin for the European Union, the World Bank and the African Development Bank who have been closely monitoring developments.
Of course, the US is just one of many countries and institutions that provide military and financial assistance to Egypt, as the chart compiled by the Center for Global Development shows below. Even though, taken as a whole, European bilateral aid plus EU assistance is double that of the United States, the US is still the single largest contributor and has huge voting power at other international organisations such as the International Monetary Fund, where the country’s quota on the board is the largest. The US can stop Egypt getting the help it needs when it undoubtedly asks for it in a few years, if not earlier.
Whether Egypt likes it or not, even a symbolic decision is damaging to Cairo’s ever-withering reputation in the eyes of the international community.
The only saving grace is that those in Egypt’s government realise how detrimental the US decision is to its chances of securing other aid and make moves to speed up the election process and be rid of the the military’s undemocratic rule.
But somehow, with condemnations of the US coming fast and steady from all parts of the administration, that looks very unlikely.
Instead, as Cairo isolates itself more and more it further drives itself into the power-hungry hands of the Gulf.
Questions were already being raised about Egypt’s new liberals and whether they really were as democratic as they claimed to be.
But, as Sharif Abdel Kouddous wrote in the Nation recently, “the turning point came on August 14, when the military and security forces brutally cleared the two mass sit-ins in Cairo that formed the epicenter of support for the ousted president”.
For critics of Egypt’s liberals, the killings of hundreds of people confirmed that this collection of non-Islamist groups were out for blood and their sole objective was to suppress the Muslim Brotherhood and banish them from the political sphere.
Effectively, these groups turned their back on the very morals that defined their movement: political pluralism, or the idea that power should be dispersed among a variety of ideological and economic groups.
For the defenders of the liberal movement, the group has simply lost their way. Pulled between the strong desire to oust an ineffective and unpopular president and the severity of the crackdown against mostly innocent civilians, leading members of the liberal movement have found themselves questioning their political direction.
Hussein Gohar, the international secretary for the Egyptian Social Democratic Party voiced the conflicting emotions of the actions that led to the downfall of Islamist president Mohammed Morsi. Speaking to Abdel Kouddous, he says:
“I think the army was forced to what it did on July 3 and August 14, with the breakup of the sit-ins. But I think the whole thing was handled in the wrong way. And if you say you’re against what has happened, you’re branded a traitor.”
No doubt, the right way would have spared the lives of the protesters. But you can’t have it both ways especially when the motive is to dispose of a president by military coup.
Now the question is, if Egypt’s so-called liberal groups have lost their political compass, how will they approach the challenge of an economic recovery?
The interim government has already shown it is unlikely to brave any sweeping changes to the budget and has instead played a populist card reminiscent of the Mubarak era, by calling for more spending even at a time when expenditure (particularly on public sector jobs and food and energy subsidies) needs to be reigned in.
Some shady characters are also making their way back to the economic decision making scene. Hassan Heikal, who this week formally resigned from Egyptian investment bank EFG Hermes, (though he was quietly replaced as CEO earlier this year, as Rebel Economy reported in February) simultaneously announced his intention to “focus on public service” by “helping devise economic initiatives in Egypt”.
Mr Heikal faces charges of insider trading, along with eight other defendants including the Mubarak sons. Even if he is cleared of any wrongdoing, his reputation has been tainted and is the reason the bank gave him the boot (of course the official statement says otherwise and describes him as “an architect of EFG Hermes’s regional expansion”).
But more worrying is the extent to which the liberals’ connection and reliance on the state will impact economic decision making.
As Samuel Tadros, an Egypt expert and a fellow at Hudson Institute’s Center for Religious Freedom, points out in this Time magazine piece, liberalism has a long history with the state:
“In Egypt, liberalism didn’t start as it did in Europe with the emergence of an independent bourgeoisie that sought to limit the powers of the state and other entrenched institutions.
In Egypt, liberalism was born with the rise of the civil-servant class in the mid–19th century. Since civil servants are a part of the state, this liberalism is not at all interested in limiting the role of the state.”
Even at the height of the revolution, when the Islamists combined forces with the liberals, the state could not be broken completely. And of course, the security apparatus is again acting with impunity.
That is already impacting political decisions that will undoubtedly have economic ramifications.
For one, Kamal Abu Eita, a longtime unionist turned politician (he’s now minister of manpower and migration) appears to have been co-opted by the military to the detriment of an already struggling labour movement.
After first applauding the armed forces’ move to overthrow Morsi, he has since taken steps to sack key members of the country’s trade union federation reportedly because they were Muslim Brotherhood members.
And Mr Abu Eita has already displayed his alliance to the military, by doing little to protect labourers from security crackdowns against two strikes in August, at the Suez Steel Company and at the Scimitar Petroleum Company.
Of course, labour unions were tossed an olive branch when the government decided to raise minimum wages for all state employees from 700 Egyptian pounds ($102) to 1,200 pounds ($174) as of January 2014, but that wasn’t good enough for many local and international trade unions. Plus, with spending on public sector jobs already soaring, Egypt officials may struggle to stick to their promise to pay for another increase.
The military did the liberals a favour by wiping out the Islamist presidency, and now they’re the paying the price for it by returning the favour through watered down economic policies that adhere to the state and the military.
Could Egypt see a return of Mubarakesque policies that prioritise subsidies on heavy industry (that have not yet been successfully removed), instead of subsidies for the poor? Will officials continuously promise impossible levels of investment or development in state projects that will inevitably stall, rather than actively implementing economic legislation designed to improve Egypt’s competitiveness?
So far, the liberal interim government has shown it will take the course that the state and the military determines at the expense of the ideology that it stands for and the people it serves.
It was bound to happen sooner or later.
Egypt has returned to Qatar the $2 billion the Gulf state deposited in Egypt’s central bank after negotiations to convert the money into three-year bonds failed.
Though this represents only a quarter of the total funds Qatar has lent or given to Egypt, the decision to return the money symbolises the increasingly strained ties between Cairo and Doha following the ouster of Islamist president Mohammed Morsi in July.
Qatar had been a strong supporter of the Muslim Brotherhood’s Morsi and his departure raised questions of whether Egypt would have to repay any of the total $8 billion in Qatar deposits and loans. Official reports suggest Egypt couldn’t reach a deal with Qatar and decided to repay the deposit rather than convert the $2 billion into bonds.
But in reality, perhaps Qatar was asking for a higher interest rate than Egypt was prepared to pay. Or maybe Qatar simply wanted its money back.
Either way, Egypt has been left in a vulnerable position.
Despite the $12 billion in support from Saudi Arabia, Kuwait and the United Arab Emirates that the government keeps boasting about, the breakdown of this bond deal shows that Egypt cannot rely on the Gulf to solve its problems.
The truth is that multi billion dollar support came because the Brotherhood were eradicated from the political scene, not because Gulf states are particularly bothered about seeing an economic recovery. But here’s the dilemma: the international community have openly stated they want an “inclusive political solution” that does not abandon the Islamists.
So how will Egypt reconcile the needs of international donors (such as the International Monetary Fund, African Development Bank and World Bank who can help implement essential reforms but need the Muslim Brotherhood on board), along with requirements of the Gulf states (who have provided a helpful but unsustainable safety net)?
Egypt has so far taken the easy road by refusing to make any real budget cuts and instead announced an unrealistic stimulus package that it can’t afford.
The Qatari deal breaker signals that the government is weak and its backers are dwindling. Now is the time for Egypt to reconsider how to make the most of the Gulf while the support lasts.
Words, Rudyard Kipling once said, are the most powerful drug used by mankind.
Individuals, companies, political parties and governments will work tirelessly to ensure the right words are transmitted to as many people as possible. Public relations can make or break a nation.
So it’s no surprise Egypt’s propaganda wheel is working overtime. In fact, it’s one of the few features binding the country’s warring sects.
While the military and some non-Islamist factions have branded the Muslim Brotherhood as terrorists and thugs, Brotherhood supporters consider the opposition as “putschists”, who are furthering a fascist agenda.
Slogans and logos now distinguish who is on what side, with each party trying to outdo the other in the hopes of capturing the majority support.
Except the propaganda, unsurprisingly, hasn’t worked. Egypt remains polarised and Egyptians suspicious of each other. Words spoken or written by the military, government officials or Brotherhood spokespeople now all seem to be part of the same political game citizens are no longer involved in.
As the Economist’s Max Rodenbeck highlighted:
At the hands of politicians, the truth can fare poorly in peacetime, too. Yet in Egypt, though the country is not at war, and normal politics is pretty much suspended since the army toppled an increasingly unpopular elected government last month, the truth is taking an unprecedented beating.
Now, Spin Doctors run Egypt.
General Abdel Fattah el-Sisi, who authorised a bloody crackdown on his opponents, has become a hero to some for the military overthrow of Islamist president Mohammed Morsi. His trademark dark glasses and soft-spoken addresses to the nation have won over Egyptians who were desperate for the stability Morsi failed to provide.
His picture, at times flanked by the logo “Egypt Fights Terrorism”, has been plastered on cars, shops and buildings.
“Right now, he could probably win an election at a canter,” Heba Saleh writes in the Financial Times.
Meanwhile, Gehad El-Haddad, the spokesman for the Muslim Brotherhood has been open to the international media, regularly engaging with his followers on Twitter and declaring the military overthrow of Morsi a crime against humanity and a bloody coup.
Muslim Brotherhood supporters, under the “Anti-Coup Alliance” have flooded journalists, diplomats and foreigners with English-language emailed statements daily.
Of course, some of these movements were wildly successful. The uprisings of January 25, 2011 and then again in June 30, 2013 were driven partly by organised PR campaigns, drawing hundreds of thousands to the streets.
Some have been less successful. Tamarod (“Rebel” in Arabic), the Egyptian youth movement that rallied street protests against Morsi, is struggling to retain momentum. Splits are forming within the group and some members have announced their collective resignation.
Black Bloc, more of a fashion fad than a movement, entered the political sphere in January this year, but drew more attention for their all black outfits and balaclavas than their anti-Brotherhood agenda. Months later, the group has lost steam and any of the original excitement they once garnered.
Still, small campaigns come and go. Masmou3 (“Heard” in Arabic) was created in the aftermath of the military overthrow to protest against the military-backed regime and the Brotherhood. Daily protests involved banging on pots and pans during the curfew. But the campaign was short-lived and soon enough, the tweets and Facebook updates stopped.
Egypt has lost its way, and brands, campaigns and movements won’t help. With each campaign, the Brotherhood and the military-backed government included, Egypt becomes more fractured and each party takes away the support of a smaller fraction of the population.
True recovery will come when the PR tools are put down and politicians prove they are civil servants organising along an economic revival.