Editor’s Note: This piece was written originally to be published on the 17th of May, 2013. Two months have passed since, and Egypt has undergone a sea change since then. In spite of this, we hope that this opinion piece will offer some academic food for thought.
By Abdulaziz Al-Mossalem, 17th July, 2013 (Originally, 17th May, 2013)
After the toppling of Egyptian president Mohammad Hosni Mubarak and the election of the Muslim Brotherhood, tourism and foreign investment in Egypt fell. Coupled with the increased perception of business risk after the overthrow; the thoughts on economic development were divided between those who thought that the region is on the verge of a start-up boom, and others that are wary about investment in the state. The brotherhood’s impact on business opportunities will depend on several variables. Most important of which is their ability to maintain transparency in decision making, and preparedness to push for inclusiveness. I argue that the potential for improvement in the economy is significant given the readiness of entrepreneurs; however the brotherhood’s political capacity will be the real determinant of whether potential start-ups can be utilised.
Unfavourable Prospects?
Jane Kinnimont, the senior research fellow on the Middle East and North Africa at Chatham House, notes that the Mubarak government was unable to liberalize the investment climate in Egypt. Despite attempts to do so, domestic businesses were dominated by “corruption and cronyism which left entrepreneurialism out.” With the coming of a new government arises a possible opportunity to have the domestic business plans allow for a wave of start-ups. The sponsorship from MIT and Google for a start-up competition in 2012 demonstrated that there is no shortage of domestic business plans which the new government can utilise.
The start-up success will depend on whether the government will create the appropriate environment for these potential start-ups to bring in investment. The current decline in investments can be attributed to the lack of transparency, and the brotherhood’s moralizing inclination. It should be noted that the moralizing inclination is not to be compared to the puritanical trend which took place in the Islamic Emirate of Afghanistan, but more simply should be viewed as how inclusive the brotherhood can be of others and their ideas which may not conform to the brotherhood’s doctrine.
Transparency
With regards to the lack of transparency the brotherhood has been perceived by many as the old system’s new guard, minus the subtle secular orientation. Morsi’s attempt to grant himself sweeping powers, by temporarily exempting the judiciary from reviewing his decrees in 2012 has, coupled with the tortures and “extra judicial deaths” created the wrong impression among Egyptians. The brutality of some of the police officers towards the civilians after the election was responded to by sentencing only a couple of police officers. The police generally remain immune to being held accountable because the old elites still makeup a large part of the bureaucracy. This has effectively turned the undecided Egyptian into an opponent of the brotherhood.
The potential investor seeing the tension on the ground, in addition to the increasing budget deficit, youth unemployment and deteriorating currency would hesitate on the decision to invest in the state. While there are some clear opportunities for the foreign investor, such as the planning of Sukuk issuance by the new Egyptian government, the brotherhood’s political capacity appears to fail in measuring up to the reform people were expecting after Muabarak. The Sukuk bill waiting for approval by the parliament could raise, according the Egyptian finance minister, 10 billion dollars for the state due to the high demand for Islamic bonds. The bill however has been criticized for its potential to have the creditor seize the assets (and the Suez Canal has frequently been used as the example prior to amending the bill), once the state fails to pay off its debt. The amount the sovereign would raise has also been thought to be exaggerated. Negotiations on the technicalities of the bill will remain on-going until the election of parliament during summer.
Moralizers
The failure to measure up to expected reform has been noted by many commentators. Thomas Friedman for example explained a couple of months ago that the brotherhood should try and prove that it is inclusive and fair towards all Egyptians, and not feed the existing suspicion that the brotherhood are committed to endorsing their own support base. The reason being is that a significant portion of Egyptian capital, worth billions of dollars, has been invested outside of Egypt because of scepticism and fear of the brotherhood’s intensions. Those sceptical of the brotherhood are largely the Coptic Christians and the cronies of the Mubarak era.
In my assessment, Morsi has succeeded in pushing for a level of inclusion and reasonableness shown in the new constitution which was thought to be beyond the brotherhood’s limits. Article 30 of the constitution is perhaps the clearest sign of the brotherhood’s willingness to depart from the parochialism Hassan el-Banna (and to a limited extent, Sayid Qutb) established for the brotherhood. Article 30 states “Citizens are equal before the law and are equal in general rights and duties without discrimination between them based on gender, origin, language, religion, belief, opinion, social status or disability.” However the question then becomes whether what has been announced is enough. While on paper the brotherhood’s views are harder to scrutinize than expected, in practice the fear is that there will arise the expropriation problem between the shareholders which used to plague the old regime. A continuation of the old system would mean that the dominant share holder in a corporation would, through influence on the manager, divert resources from the corporation to benefit the dominant group in Egypt at large while side-lining the (for example) Copts and cronies of the former regime.
The fear of the retroactive application of the law on the cronies is another issue. Friedman explains that a general amnesty to all “who don’t have blood on their hands” is one of the best things Morsi could do to start a clean page inclusive of all. The Coptic Christians and beneficiaries of the former regime will be sure to assess the reasonableness of the brotherhood in their policy making. Specifically, they want to be sure that all Egyptians start off on a level playing field. This is essentially what makes any doctrine reasonable, the ability to accommodate others with dichotomous views despite the inclinations one has. Concerns about gender equality are another issue. The brotherhood has not been, throughout their history, the biggest supporters of gender equality and empowerment of women. In fact the case can easily be made for the opposite. It is for this reason that Morsi’s announcement, that his two vice presidents will be a women and Coptic Christian, was met with cautious optimism.
Conclusion
The brotherhood’s capacity to accommodate the entrepreneurs in the state will depend on their ability to turn the political scene into something stable and attractive for the investor. To do this the brotherhood will need to ensure that they are perceived as pushing for more transparency and inclusion of all. I explain that while the brotherhood does appear to have succeeded in abandoning the parochialism their brand of political Islam is associated with, the brotherhood’s opponents still remain suspicious which has maintained billions of dollars outside of Egypt. One thing the brotherhood can do to invite these investments is grant amnesty to some of their opponents to show that revenge is not an intension of theirs. This move coupled with a clear abandonment of the Mubarak era impunity towards the ministry of interior would create a more attractive scene for the investor.
Bibliography
- Chicago Tribune, “MIDEAST DEBT-Egypt sukuk issue would find buyers, end of year likely.” Last modified 2013. Accessed March 21, 2013. http://articles.chicagotribune.com/2013-03-06/news/sns-rt-egypt-sukukl6n0bwa60-20130306_1_sukuk-islamic-finance-gulf-investors.
- Christopher Schroeder. CNN Money, “In the Mideast, entrepreneurs flourish.” Last modified 2012. Accessed March 21, 2013. http://finance.fortune.cnn.com/2012/09/07/middle-east-startups/.
- Chris Wright. Euromoney, “Islamic Banking: Egypt Approves Sukuk Bill as Financing Crunch Hits.” Last modified 2013. Accessed March 21, 2013. http://www.euromoney.com/Article/3148034/Islamic-banking-Egypt-approves-sukuk-bill-as-financing-crunch-hits.html.
- Clement Moore Henry, and Robert Springborg, Globalization and the Politics of Development in the Middle East, (Cambridge: Cambridge University Press, 2011), 73. See also Friedman.
- Joshua Stacher. Foreign Affairs, “Morsi’s Guns The Officers Backing Egypt’s President.” Last modified 2013. Accessed March 21, 2013. http://www.foreignaffairs.com/articles/138804/joshua-stacher/morsis-guns.
- Test Paper – Economist Intelligence Unit. Opportunity in the Aftermath of the Arab Spring. 26 April 2012.
- Thomas Friedman. “The Belly Dancing Barometer.” The New York Times, Feb 19, 2013. http://www.nytimes.com/2013/02/20/opinion/friedman-the-belly-dancing-barometer.html?_r=0 (accessed March 21, 2013).
Abdulaziz Al-Mossalem is an international relations scholar who has worked as a journalist in Kuwait. He is currently pursuing his doctorate at the The Fletcher School of Law and Diplomacy at Tufts University.
Filed under: Arab Spring, Articles
