Experts debate economic repercussions of Egypt’s transition

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CAIRO: Officials from the European Bank for Reconstruction and Development (EBRD) convened in Egypt on Monday to discuss projects that can help the country along during the critical transition phase.

While there was general consensus on the importance of stability to economic recovery, there was some disagreement on what the transition process entails and what should be expected during this period.

Bringing together top business officials from around the country as well as the Egyptian Junior Business Association and the Ministry of Planning and International Cooperation, the aim of the Transition to Transition (T2T) initiative is to understand the short- and mid-term priorities for Egypt.

“It is a good sign that EBRD is here today,” Amr Abdel Latif, executive director of the Egyptian Exporters Association, told Daily News Egypt.

“They are here to understand the kind of problems Egypt is facing in order to build future projects that can help the country in this new period.”

According to expertise from former leaders in Central and Eastern Europe, moving to a transparent and accountable government reaps attractive economic growth; maintained by equality, government accountability and social reforms.

“We have to keep in mind that transformation is a complex issue,” said Jan Fischer, former prime minster of the Czech Republic and the current EBRD vice president, in the opening session.

“After 20 years, my country is still in a transition,” he said. “The process involves intertwining economic and political issues, legal changes, as well as social aspects. You can change social laws, you can change privatization laws, this is the time where this happens.”

However, when referring to Egypt, the former prime minister mentioned that lagging in the transition does not help the sensitivity of the situation. “Being behind schedule is not good — change is good, but constantly changing your mind is not,” he said, referring to the political process in Egypt over the past nine months.

Fischer said one of the Egypt’s main priorities should be to “stabilize the labor market.”

“The relation between civil society and establishments in the country is vital,” he said. “Communication between the two must be developed…establishments must reach out to civil society because they are the capital and the essence of the country.”

One of the main issues that sparked Egypt’s revolution was the lack of communication between government and civil society, resulting in years of inequality and social injustice that culminated for generations the rule of ousted president Hosni Mubarak.

Fayza Aboul Naga, Egypt’s minister of planning and international cooperation, said that the first lesson the interim government has learned is the importance of social justice.

“It is not impossible to achieve social justice while maintaining a growth on the macroeconomic level, this growth can and must trickle down to all levels of society,” she said.

Although the interim government has faced numerous challenges, she said they are trying to do better in the coming period.

“No institutions were created to help us in this transition. We had to rely solely on ourselves,” Aboul Naga said. “There are still riots, strikes, and various demands from civil society, but the worst is behind us,” she added optimistically.

Varying outlooks

Mohamed Ali, a participant in the EBRD initiative and general manager of Cairo-based firm Arab Investment, did not share the same optimism.

“We won’t see real improvements until a president and new cabinet come in. We haven’t been seeing any concrete decisions being taken over the past nine months,” he told DNE.

Ali stressed that the government’s “weak” stance has hurt business and potential investors.

“The same optimism was shown by officials in the former government before the revolution, and the only real way to go forward is to speed up this transition,” he said.

“This is what we need and this can only happen when the military council hands over power to a [civilian] president because a weak government that is afraid to make decision is not what we need right now.”

Standard & Poor’s (S&P) recently described the outlook for the Egyptian economy as “negative,” downgrading long-term foreign currency sovereign credit rating to ‘BB-‘ from ‘BB’ and long-term local currency rating to ‘BB-‘ from ‘BB+.’

The forecast was attributed to negative projections arising from an extended transition period. Earlier in October, Fitch Ratings also downgraded Egypt’s long-term default and currency outlook ratings to “negative.”

Aboul Naga said the current critical state of the country cannot withstand further strikes or protests because this is the time to move forward and forget the past, even though it’s a “difficult thing to ask of people.”

“When people strike, they not only do not work, but they keep others from working,” she said.

Earlier this month, after the country witnessed its bloodiest violence since Mubarak stepped down in February, in protest of how they government responded to Maspero event, Hazem El-Beblawi, Egypt’s second finance minister in this interim government, attempted to step down from what he called a “weak and incompetent administration.”

His resignation was refused by Egypt’s de facto president and head of the ruling military council, Field Marshal Mohamed Hussein Tantawy. El-Beblawi also pointed out that the current government failed in securing the country.

Aboul Naga, however, had a different message.

“We are bringing back security to the country, but we must keep in mind that our police force was broken since the revolution,” she said. “The police force have lost over 4,000 vehicles, which were damaged or burned, and we must understand it is hard for them to get around like before with this kind of loss.”

Although Aboul Naga stressed that people must discontinue striking and protesting in order for the country to go forward, former minister of Poland had another approach when it came to this issue.

“The basics of capitalism must not be questioned,” said Jan Krzysztof Bielecki, former PM of Poland. “But what is in question today are the inequalities; social justices and social participation must be redeemed.”

Speaking from his experience, Bielecki said the transition to democracy brings a period of instability. He also added if the country is serious about democracy and reconciliation, then equal participation in Egypt is a must, referring to the participation of "Islamists" and the Muslim Brotherhood in the political process.

You cannot just say “no protests and no strikes, we need stability now,” he said, it does not work that way.

Herb Williamson, who works in agricultural development in Upper Egypt’s Qena district, told DNE about his fruitful business encounters.

“When I go out in the field with these farmers, the political issues never come up,“ he said. “It is all business and I take that as a positive sign because what we are trying to do with our project is involve the farmers.”

Williamson, who is a consultant in the development project, has been working with low-income farmers in Qena since February after Mubarak stepped down, helping the farmers grow more crops by providing the help and resources they needed. His project also partnered up with two farmer associations in Upper Egypt.

“We are trying to do is involve the farmers, this way they will have more business, a chance to have a share in a growing company, and a better future with better lives for their families,” he added.

Williamson believes the issue of politics may not come up in what he calls his “small circle” because these are farmers who are being included in the business process.

“The key in this phase is to bring in social justice, include as many people as you can and economic growth will come; this inclusiveness will bring in the trickle effect,” he said. “But it does not happen overnight, it takes time.”

Participants in the forum included representatives from the US embassy, Inertia Invest, youth activists, professors of economics from Cairo University, as well as the Federation of Egyptian Industries.

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