Category Archives: Eurozone

8 Ways To Ruin Egypt’s Economy

In business, there are skills you learn to do well, and habits you must shed or you risk losing everything.

Suffice to say, the rules of what NOT to do have become critical in business today where a high percentage of companies fail.

Taking inspiration from Donald R. Keough’s book, ‘The Ten Commandments for Business Failure” and a blog post adapted from the book, Rebel Economy applies eight steps of “how to ruin a company” to Egypt’s economy and to the guy in charge, Mohammed Morsi.

You’ll find the list eerily familiar to the economic strategy (or lack of) in Egypt.

1. Don’t take risks

Rather than playing to win, the President plays to avoid losing. Walls are built to protect what he has acquired but it stifles development, new ideas and therefore growth. But while it is natural human behaviour to stop taking risks as soon as we’ve acquired something of value, President Morsi is in no position to take the safe road when the country’s economy, its people and future is at stake.

2. Be inflexible

The worst attitude the government can take is to believe that their formula for success is everlasting and that they will never need to change or adapt it. President Morsi, has for the best part of his tenure, chosen to muscle out any innovative ideas from the opposition and within his own Brotherhood team (the Renaissance project team, for one, has struggled to get any of its ideas off the ground because they have been consistently blocked by bureaucracy).

3. Assume infallibility

We call this hubris. The perception that Egypt is “too big to fail” comes from the dangerous presumption that the country is too important/too good/ too strong/ too strategic to fall. But thinking you can do no wrong, only breeds negligence and arrogance – a recipe for disaster.

Like the companies that fell during the 2008 financial crisis, and the European states that have fallen in the aftermath of the Eurozone crisis, Egypt is not immune to this unprecedented economic pressure.

4. Play the game close to the foul line

Playing the game close to the foul line is an approach to business (and life) where one tries to get away with as much as possible.

Sounds familiar doesn’t it? The most dramatic turning point of when this became obvious was in November 2012, when the President decided to honour himself with powers that exceeded those of the judiciary. He was literally above the law. Then, perceiving the negative reaction, he withdraw this decree only to announce sweeping tax reforms which he also reneged on.

Now that Egypt’s top court has ruled that the upper house, or Shura Council, and a panel that drafted the new constitution are invalid, Morsi’s credibility is further undermined. He is being shown up and that’s what happens when you try to cheat people.

5. Don’t take time to think

Which brings us to our next point. Rather than narrowing down and limiting the amount of information that Egyptians are given, the government has bombarded us with contradicting statements that are often retracted or never followed up.

It is the job of the President to take time to filter the barrage of information and reassure citizens. But then, if Morsi had done that, you wouldn’t be reading this now.

6. Put all faith in experts and outside consultants

When a leader does not think for himself and does not come to his own conclusions, he resorts to the advice of sometimes ill-informed “experts” and outside consultants. If you are wrong, you can make amends. If your experts are wrong, you have no way of knowing why they were wrong or how you can learn from the mistakes they’ve made.

Making significant deals with political allies (e.g., Qatar, Saudi Arabia, Libya, Iraq) that Egypt becomes dependant on, will eventually lead the same course.

7. Love your bureaucracy

This list is almost made for Egypt.

Yes, every country needs a solid infrastructure to help it function. But there is a fine line between setting up structures to help the people of a country to do their jobs better, and those structures becoming a barrier to progress.

8. Be afraid of the future

The underlying theme of Keough’s book is if you don’t take risks, you’re doomed to fail.

But one reason people do not take risks is because they are afraid of the future. The reality though is that it is the person who stops taking risks who should fear the future, not the one who continues to take risks.

Egypt, the IMF and Europe

In a new policy paper for the European Council on Foreign Relations – Egypt, the IMF, and European Economic Assistance – I  argue that while structural reform is important to deal with Egypt’s deep rooted economic problems, it would be short sighted for the EU and key member states not to act now.  Here’s a blog post on the paper too.

Part of the inspiration for this paper came from numerous meetings with EU diplomats who have, up till now, held back most of loans and grants to Egypt because of a lack of political stability and consensus.

However, the more I spoke to Egyptian players, the more I saw this as a Catch 22 situation. 

Egypt needs cash to prevent instability in the face of unemployment and economic collapse, but it can’t get the cash without signing up to reforms that would themselves cause more short term instability.

Europe must commit some money to grassroots training now to avoid this Catch 22 destroying the consolidation of democracy in Egypt.

My key arguments are as follows:

  • The EU should invest in young people, with the Egyptian private sector still struggling to find qualified employees despite high unemployment levels. Donors should target vocational training programmes for young Egyptians.
  • The EU is already due to sign two programmes that put millions of dollars into infrastructure projects and technical skills training. These, plus World Bank funding for small and medium enterprises, should serve as a model for smaller, targeted aid programmes.
  • Europe should still stand by the IMF’s comprehensive reform programme, aimed at fixing long-term structural problems in Egypt’s economy.


Breakfast Wrap: Made in Asia – China & Japan in North Africa, Saudi-Style Revolution

[caption id="attachment_868" align="aligncenter" width="580"] Japan’s stamp on Cairo’s Subway. By Ed Giles.[/caption]

Egypt is to China and Japan, what Pick ‘n’ Mix is to an eager child.

The North African nation has a diverse selection of attractions for Asia, such as its proximity to Europe and the rest of Africa, its huge labour force and access to the Suez Canal.  All of that comes at a relatively good price and with a favourable tax climate.

That is why, during the revolution, Asian countries (especially China) continued to pour money into the country while others were wary.

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Breakfast Wrap: Ugly Financial Decisions, Morsi In Turkey For 12 Hours

The bad, the worse and the ugly 

Nothing is pretty about revolution and nothing is tidy about the consequences.  For those countries that are battling with a post-revolutionary economic crisis, difficult decisions must be made that will not be accepted universally.

Tunisia’s budget deficit should narrow to 6% next year from 6.6% of gross domestic product (GDP) expected in 2012, the central bank governor said on Friday, indicating economic recovery in the cradle of Arab Spring revolts may take longer than anticipated.

“2014 will not be the year of recovery for the Tunisian economy. It is still a year of transition that may see the premise of recovery,” said Central bank governor Chadli Ayari indicating the country may not fully recover by 2014.

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