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Is the military good for Egypt’s economy?

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Farah Halime

Farah Halime

By Farah Halime, Rebel Economy

That’s a question I put to around a dozen Egyptian businessmen over the weekend, all of whom responded with a resounding “Yes”.

Here are some snippets of conversations I had with a few of Egypt’s business community over the weekend (some appeared in this story for The National newspaper):

Nassef Sawiris, billionaire and head of Egypt’s biggest listed company, Orascom Construction Industries: The previous government had lost all economic ties with the majority of Arab Gulf governments and tourism has suffered tremendously because of conflicting messages [from the former Islamist administration]. This is one of its biggest failures, which resulted in a decline in foreign reserves. I hope the new government will be inclusive to all Egyptian political sectors.

Mahmoud Abul Eyoun, former governor of the Central Bank of Egypt: I’m very optimistic. We need a government to set the priorities for solving the internal and external imbalances. Rebuilding the confidence within the Egyptian business community will create momentum for attracting foreign direct investment and portfolio investment.

Alaa Arafa, chairman of Egyptian clothing conglomerate Arafa Holding: The economic situation will take at least 6 months after the violence stops to show some signs of improvement. Everybody is ready to pay the price of freedom. The army is a great support to the people.

Mohammed Badra, board director at Banque Du Caire (Egypt’s third largest commercial bank): All of us are very happy, because at least we can see a light at the end of the tunnel. I think the army will guard the implementation of the roadmap. We are hoping the security situation will improve and tourism returns so that we can have an improvement in the [credit] rating of the country.

For many businessmen, the military-backed political transition gives the country its best opportunity since 2011 to create a technocratic administration that has the expertise to tackle Egypt’s economic problems and lure back investors.

This says more about the failures of former president Mohammed Morsi, who was widely accused of doing nothing to prevent a looming economic collapse, than support for the military.

Still, the unwavering optimism that the military’s actions were good for Egypt’s economy was astonishing (especially in light of the divisive atmosphere today as a result of the tragic killing of 51 Egyptians).

The early signs look promising: the stock exchange made its biggest gains all year, rising 7.3%, the long queues for fuel seemed to have miraculously disappeared and the hope that an economist (now slated as London School of Economics-educated Ziad Bahaa El Din) would be made prime minister shook off any doubt that the army was overreaching its role.

In fact, the stock market rose only because of positive sentiment from local traders, while foreign investors sold heavily. Meanwhile, Egypt’s fuel crisis has not gone away and remains a genuine problem, but the panic that drove thousands to fill their tanks has subsided. And the business community is still holding its breath and counting on the army to keep to their strict six- to eight-month timeline for a handover to a civilian government.

It’s unclear who is calling the shots here and uncertainty is no good for business. 

The only silver-lining to the removal of Morsi is that negotiations with the International Monetary Fund had hit a stumbling block and perhaps, with the Muslim Brotherhood’s political arm, the Freedom and Justice Party out of the way, some progress can be made.

Over all however, Egypt’s economic outlook is much worse than it was a week ago.  Credit ratings agency Fitch became the latest to downgrade Egypt, saying political tensions are likely to set back the country’s economic recovery.

Egypt is unlikely to exceed growth of 3% next year, analysts at Fitch say.

It is baffling to see so many high profile businessmen and women describe what is happening as a positive for the country.  The military merely seized on an opportunity to overthrow an elected president in a coup (yes, some of you disagree, don’t shoot me) which has created more division than any time under Morsi.

 

Farah is a business journalist and founder of Rebel Economy, a blog focused on how regional economies are rebuilding after the Arab Spring. 

This post originally appeared on Rebel Economy.

 

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  • Ahmed Bata

    “It is baffling to see so many high profile businessmen and women describe what is happening as a positive for the country.”

    Let me attempt an answer. The overthrown regime was plotting a course for Egypt towards a theocracy, with a majority opposing such a progression. This majority was being oppressed by the brotherhood-backed regime, which refused to seek a middle ground, and was stacking the deck in its favor for future elections (gerrymandering, prosecuting dissidents, paying for political services, alliances with other Islamic governments funneling undeclared money to the regime, etc). Many of those who voted for Morsy as the lesser of two evils, have since regretted their decision. The current course, we hope, will follow a path similar to Turkey, with only a limited role for religion in politics. Those who don’t like this new course are still able to worship freely, and are only stymied in their effort to force a change upon the rest of us, that is inherently undemocratic, namely, rule by a “Murshid”, or “Caliphe”, a leader who has intrinsic power not vested to him, nor subject to review, by the people.

    Any decent ruler, upon seeing the majority of his electorate asking for him to resign, will at the very least call for early elections. That would have preserved the rule of law. Instead, Morsy’s response before being deposed was a speech that threatened the electorate and the Army.

    • multilis

      Libya has by same logic moved towards theocracy compared to previous “dictator”.

      The new regime is doing the same things you accuse old one of, stacking deck in future elections, no middle ground, snipers killing those that oppose, no longer allowed any form of protest, even if peaceful.

      The supreme court was appointed by the old regime/dictator so some logic to Morsi not wanting to be under them.

      It is not proven if “majority” really favor current situation compared to old as there is risk to lives of those that disagree. (Would you answer a poll saying you disagree with army government if you fear army may secretly add you to a list of those to oppress? For years the other faction was illegal and attacked by army, and they naturally fear that again, especially with army snipers shooting to kill)

      Normally if you think your side was right in having protests to overthrow the first guy, you allow other side to do similar without fear of being killed by snipers if they aren’t being violent. Until you have some sort of fair election not really proven either way who has majority.

      (If you think it was ok to get rid of last government because of their conduct, you should set a better example of tolerance than the last one rather than even worse. Under Morsi there was not same level of shoot to kill and break up every protest as now and every opposition leader arrested)

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  • uou>

    Since most of us are not bankers or wealthy businessmen, you are asking the wrong people. Those who get richer off of a system that benefits them alone are not reflective of reality.

  • sam enslow

    The US always frets about its Military/Industrial Complex. In Egypt it is over the top. The Army must start to focus on the security of the nation and gradually rid itself of Army, Inc. This should probably take a generation. But, for now, there are many things, so far not discussed, that must be done that cost little or no money to repair the economy to the benefit of ALL – not just what in America would be called “Wall Street”. I will list a few:
    1. Accept that salaries are earned. They are not “gifts” or something one “wins.” Workers must produce to earn their pay, and when they produce, the should see a part of this efficiency in increased salaries. This is one reason the number of government employees must be cut in about half. Moving pieces of paper from one pile to another produces nothing.
    2. Their must be pride in work. In Egypt many will work for little money just to be called “manager.” A fake “effendi” status is here considered more important than actual accomplishment.
    3. Hiring and promotions must be based on merit and achievement – not family connections, bribes, and all the other matters that influence employment in Egypt. One needs to be able to apply for a job with the knowledge that he will get the job based on skills, not on who his father is or someone’s idea on his social standing or moral character. Questions on religion or other matters not related to the job must be forbidden.
    4. Labor laws, worker safety laws, etc. must be enforced. Petty “sweets” hurt this economy far more than large scale corruption.
    5. Government must be streamlined and made efficient. Go to a government office and you should not have to wait while the staff finishes its breakfast. Procedures must be simple and “one stop” shopping enforced. If one wants to start a small or large business, it should not be necessary to spend months running from one office to the next.
    6. The legal system must be streamlined. A dispute taken to court, especially those involving “little” money must be resolved quickly – not years later.
    7. Contracts are contracts. They are not the opening of negoitations.

    • Ahmed Bata

      None of your proposals require much capital, only human effort. And that, we should have plenty of. By the same token, the army has an excess of personnel, because of mandatory service. Why not put them to work on the economy? Maybe they can be used in synergistic endeavors that make use of expertise and equipment they need any way, such as large infrastructure projects…

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