Tag Archives: Egypt economy

The Honeymoon Is Over

“Let us savour the moment now, and we’ll worry about the future later,” some Egyptians said yesterday hours after Egypt’s military had ousted the country’s president Mohammed Morsi.

Led by General Abdul-Fattah el-Sisi, the army – backed by the heads of Al Azhar, the Coptic Church and Mohamed ElBaradei – moved swiftly and confidently to suspend the country’s Constitution and create an interim government. Crowds erupted in cheers and screams.

Some say the military was working on behalf of the people of Egypt and that the country’s first democratically elected president had to go. Others say the army’s decision was carefully orchestrated, and cannot be described as anything but a military coup.

But as the jubilant atmosphere of Tahrir Square begins to fade, there is one certainty: Egypt’s economy must be made an absolute priority, or risk repeating this scenario in another 12 months. 

This is really a mirage.  The immediate gratification gained at getting rid of Morsi is at the expense of solving the basic bread and butter problems that helped push Egyptians onto the streets in the first place.

For example, resolving Egypt’s ever-increasing budget deficit, finally getting over a costly addiction to energy subsidies and actively creating jobs for the 1.2 million Egyptians who lost a job under Morsi (and the millions more who have been seeking formal employment).

Whoever takes over the helm inherits these problems and will likely meet a public backlash to any reforms.  The economic challenges have not gone away just because a Muslim Brotherhood leader was booted out.

In fact there are many more questions now lingering:

What of the $4.8 billion loan from the International Monetary Fund? Egypt still desperately needs this but the last time the army was in power (in June 2011), the loan was refused because it was considered too much of a public debt burden. Fast forward two years and you have an intractable crisis made worse by the fact international lenders won’t touch Egypt until this loan is signed.

Also, Egypt currently has no constitution: is it even possible for the IMF to sign a deal with a country with no governing charter?

What of the the billions from vehement Muslim Brotherhood ally Qatar? Will the Gulf state pull out now that the Brothers are gone? As Emad Mostaque, strategist at Noah Capital Markets says:

[There are] big question marks over $8 billion of existing Qatari cash being rolled over in a couple of years [and] $19 billion of pledged foreign direct investment in next 4 years (more than everyone else put together over last five [years])

Egyptians may be celebrating now, but hardship is yet to come for the poorest Egyptians who need immediate reforms, and the price we have paid for accepting the military’s aggressive move will no doubt set the tone for the next few months.

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.

Guest Post: Egypt’s De Facto President

Guest post by Mohamed El-Bahrawi, business editor at Daily News Egypt

[caption id="attachment_674" align="aligncenter" width="580"]Khairat Al Shater, courtesy of Egypt Independent Khairat Al Shater, courtesy of Egypt Independent[/caption]

The saying goes, “behind every great man there is a great woman” or, in Egypt’s case, “behind President Morsi there is Khairat Al Shater”.

It is no secret that it is Khairat Al Shater and not Mohammed Morsi, who has really been running the Muslim Brotherhood behind the scenes.

The multi-millionaire, or The Engineer as he likes to called by friends, is regarded as the brains behind the group’s “Renaissance” or El Nahda project, and is among the most powerful members of the Islamist movement.

Evidence of this power play has been piling up by the month.

Last month, for instance, when Morsi issued a decree that granted him omnipotent authority, it came as a surprise to everyone, including his aides and his vice president.  In response, many of his advisors resigned in protest and his former vice president, who resigned last week, denied any previous knowledge that such a decree was going to be issued.

So if his aides and his own VP were not privy to the decision-making process, someone else has to be. Who are the decision makers then? Whose advice does the president seek before taking action?

In October, more evidence of Al Shater’s influence was leaked when word got out that he was appointed to the presidential economic team and would be given an office in the presidential palace.

And just a few days ago, Egypt’s Al Watan newspaper (disclaimer: also regarded as a rumour mill) said Al Shater and Hassan Malek, another elite business-oriented Brotherhood member, had compiled a black list of businessmen they wanted excluded from certain activities.

So where does that leave Morsi?

Morsi is being cast more as a puppet the longer he is president.

His determination to push through the new charter with such a slim mandate has damaged his political clout.

The Muslim Brotherhood are not as strong as when they first came to power, and with the economy in tatters,  narrowing the budget deficit and showing tangible signs of economic recovery is their last chance to prove to the people that they are capable of getting the country back on its feet.

If they fail to do so, they’re finished.

With the cabinet reshuffle ten ministers were replaced, including the critical positions of finance and interior minister.

Khairat Al Shater is still nowhere to be seen.  As the most charismatic, shrewd and business-minded member of the Brotherhood, some may question why he is not represented in the government in any way.

But he has morphed into the perfect silent leader of the Brotherhood, using relatively inexperienced politicians to enact his orders.

He will remain in the background as it would be political suicide for the Brotherhood to openly push out Morsi.

As the Muslim Brotherhood’s first choice for a presidential candidate, he is already running the country through Morsi, and is the defacto president.