Business Magazine

The Need for an Economic Vision for Egypt

Posted on the 29 November 2011 by Center For International Private Enterprise @CIPEglobal

Egyptians wait at a polling station

Record numbers of Egyptians turned out Monday and Tuesday for the country's first democratic elections in decades. (Photo: Ahmed Jadallah/Reuters)

When Egyptians headed to the polls to begin the process of electing a parliament, the transition of their country to democracy remained uncertain. Political instability, which has dampened investment, consumer confidence, and tourism, has made many Egyptians wary of what the future may hold for them.

Last week, Egypt’s stock market dipped to its lowest point in over two and a half years. Egypt’s foreign reserves had already dwindled, potentially heralding an impending financial crisis. The Egyptian pound had depreciated, making many goods more expensive for Egyptians. Fearful of an uncertain future, Egyptian consumers have cut down on their spending. Tourists, who were once so ubiquitous in Cairo, Luxor, and Aswan, have been spooked by scenes of violence and have stayed away.

On Monday, Gallup released a poll showing that the number of Egyptians who believe that their conditions will improve as a result of the resignation of their former president has declined steadily. In September, a bare majority of Egyptians expressed confidence in the promise of their future. That number may be smaller today.

Despite the need for political and economic leadership and vision, the approach of Egyptian policymakers to the country’s economic problems has largely been reactive and piecemeal. They have raised salaries for public employees and made permanent previously temporary contracts for thousands of public officials. Pinning its economic hopes on alleviating corruption, the government has vigorously prosecuted thousands of cases of corruption alleged to have taken place during the previous administration. A coherent strategy for empowering the private sector to create the jobs needed to answer widespread calls for dignity has yet to emerge.

More troubling, the institutional channels through which diverse elements of Egypt’s political and civil society may participate in the conversation about the country’s future remain unformed. Ideally, the parliamentary elections would produce a representative body capable of building consensus among broad sectors of Egyptian society and using it to build policy.

Due to an extremely complex election law and the unrest that has formed a background to this round of voting, however, it is unclear whether these elections will produce a body capable of claiming popular legitimacy and wielding significant power. Even if a strong parliament emerges, three and a half important months will have passed before the three rounds of voting finish and the new parliament assumes power.

Outside the political arena, civil society should serve as another channel through which Egyptians can participate in their transition by generating ideas and holding their government accountable. Thus far, however, the ability of Egypt’s civil society to participate meaningfully in the transition has been limited. Feeling that more formal channels of communication offer them little power to shape the country’s future, many have returned to the streets.

An economic recovery in Egypt would not only provide a greater number of Egyptians an enhanced opportunity to achieve the dignity for which they have sacrificed so much, but would also infuse confidence in their nascent democracy. Yet the political and economic wariness that Egyptians are currently expressing will not merely disappear of its own accord. Rather, Egyptian leaders must articulate a political and economic vision for the country that appeals to Egyptian society in all its diversity.

Earlier this month, the Carnegie Endowment’s Ibrahim Saif wrote a paper laying out what Egypt’s leaders can do to stabilize the economy and ultimately create inclusive growth. While some of Egypt’s economic reforms will require the backing of a popularly elected government, Saif argued that moves aimed at stabilization should not wait.

In order to stabilize Egypt’s economy, Saif called on its interim leaders to:

  • establish security,
  • lay out a more clear economic and political roadmap,
  • work more closely with the full range of the private sector including small- and medium-sized enterprises,
  • adopt transparent and inclusive mechanisms for policymaking,
  • guarantee funds for small- and medium-sized enterprises, and
  • funnel the flow of foreign grants and loans into the construction of infrastructure and low-cost housing.

Egypt’s economy has reached a critical stage. Attracting foreign investment, restoring domestic consumer confidence, and rejuvenating the tourism industry cannot wait for the emergence of an elected parliament or president. Failure or inaction could undermine confidence in democracy.

A strong, broadly based Egyptian economy is fundamental to the country’s stability and lasting democratic governance. Yet the argument that Egypt needs its people to listen to its leaders, while the process remains exclusive, is a specious one. Widespread economic development coupled with democratic governance will create stability, not the other way around.

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