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October 28, 2008

Egypt's Uncertain Future

For a country with a long and glorious past, Egypt faces a very uncertain future. Until oil money relocated the center of Arabic power and prestige to the Persian Gulf, Egypt had enjoyed a prominent leadership position in Middle Eastern politics. Always considered a lynchpin for any peace deal with Israel, Egypt has received billions of dollar in aid from the United States. Tangible results from all that money are hard to find. The Economist reports that "with most of its people struggling, and reform blocked, Egypt faces and uncertain and possibly dangerous future" ["Will the dam burst?" 13 September 2008 print edition]. For an economy heavily reliant on tourism, this is not a good situation.

"A blinkered visitor might choose to see nothing of Egypt but posh beach resorts and gleaming factories, and hear of little but strong economic growth and a stable, secular government committed to reform. In the Smart Village, a campuslike technology park on Cairo’s western outskirts, construction cranes glint in the mirrored glass of office blocks bearing multinational logos such as Microsoft, Oracle and Vodafone, as well as those of fast-expanding home-grown IT firms. Beyond its perimeter, past a strip of hypermarkets, fast-food outlets and car dealerships, stretch thousands of acres of new suburbs, complete with gated communities, golf courses and private schools. Twenty years ago, the highway that stretches 200km from there to Alexandria ran through empty desert. Lush fields now line the entire crowded, six-lane route, many planted with drip-irrigated garden crops for lucrative European markets."

The article says that the tourist spots are the "good face" that Egypt likes to show the world. There is, however, a darker side.

"Remove the blinkers, and the flood of impressions could be starkly different. A glance down one of the narrow, rubbish-strewn alleyways of brick tenements where half of Cairo’s people actually live may reveal a crowd of head-scarved housewives pushing and cursing in an early-morning queue for government-subsidised bread. Such daily humiliations are punctuated by bigger tragedies which, all too often, prove to be the consequence of government negligence. [In early September 2008,] a cliff collapsed on the eastern edge of the capital, hurling giant boulders into a warren of flimsy slum dwellings that had been erected, illegally, in defiance of dire warnings that the site was unsafe. The rockfall buried dozens, perhaps hundreds, of residents alive. Locals complain that long-promised alternative housing had been given to friends and relations of government officials, rather than the needy. The fact is that most of Egypt’s 75m people struggle to get by, their ambitions thwarted by rising prices, appalling state schools, capricious judges, a plodding and corrupt bureaucracy and a cronyist regime that pretends democracy but in fact crushes all challengers and excludes all participation. The visitor might well conclude that by damming up the normal flow of politics, Egypt’s rulers risk bringing on a deluge. Given rising resentment against the government and a generation-long resurgence of religious feeling, and given the simple fact that Hosni Mubarak, Egypt’s president of the past 27 years, is now 80 years old with no clear successor, it takes little imagination to conjure up an Islamic-tinged revolution sweeping away the autocratic state created in the wake of Egypt’s last big dynastic upheaval, the officers’ coup of July 1952 that overthrew King Farouk. Considering Egypt’s position as the most populous, politically weighty and geographically pivotal Arab state, the ripples could spread wider, too, upsetting the region’s already fragile power structure."

The article notes that a number of books have recently been published predicting revolution and instability in Egypt. Even the U.S. has lodged official concerns with the Egyptian government about the lack of democracy there, yet such complaints have fallen on deaf ears. With legitimate political expression blocked, civil disobedience is on the rise.

"Spontaneous protests have erupted with alarming regularity, ranging from factory strikes to land disputes to urban riots over food prices that have risen even faster than the current, unnerving overall inflation rate of 23%. So far such outbursts have remained disjointed and localised, allowing the government to parry them with a mix of carrots and sticks. Brutal policing has silenced some activists. Wage increases—such as a 30% rise for government workers in May—and a promised widening of state subsidies for essential goods have soothed a few tempers. Yet the common refrain in Cairo salons is of how similar the mood is to the pre-revolutionary atmosphere of 1952. Then, as now, the gap between a very rich few and the teeming mass of have-nots seemed to yawn ever wider. Then, 2,000 vast estates occupied half of Egypt’s fertile land, while millions of illiterate peasants toiled as sharecroppers. Today, 44% of Egyptians still count as poor or extremely poor, with some 2.6m people so destitute that their entire income cannot cover basic food needs, let alone other expenses. ... Lurking in the background then, as now, was the shadowy force of the Muslim Brotherhood. Having helped prepare the ground for the 1952 coup, the Brothers may have expected reward from the army officers in charge. Instead they were hounded and imprisoned, and allowed to resurface in Egyptian politics only 30 years later. Their suppression radicalised some Islamists, helping spread jihadist ideas such as those that inspired al-Qaeda. Yet the core of Brotherhood supporters remained committed to a strategy of peaceful change."

In two posts in which I reviewed recently published books on how to deal with fragile and failed states [More on Dealing with Failed States and Fixing Fragile States], a core theme in both has been the importance of the "sovereignty gap." The sovereignty gap is the difference in services between what citizens of a sovereign country have the right to expect their government to provide and what it actually provides. Egypt clearly suffers from a significant sovereignty gap. Elsewhere when such gaps exist, any group that comes in and tries to provide the missing services sets itself up as a powerful social and political force. The Muslim Brotherhood either hasn't learned that lesson (even though it has powerful examples nearby in Palestine's Hamas and Lebanon's Hezbollah organizations) or it doesn't command the resources necessary to provide such services.

"Since the 1980s the Brotherhood has emerged as the strongest force in a political opposition mostly made up of tiny, fractious parties. ... Yet the Brotherhood displays some of the same flaws as its oppressors. Its leadership is also ageing and opaque, and has proved slow to respond to events. Recent changes in its hierarchy, arranged behind closed doors, have seen the promotion of conservative ideologues at the expense of younger reformers. Perhaps more important, the Brotherhood’s diminishing capacity to deliver benefits to constituents has prompted pragmatists, the probable silent majority in a country with an incomparably long and justifiably sceptical political memory, to look elsewhere for patronage and protection. And there is another clear obstacle to the Brotherhood’s progress. The 10% Coptic Christian minority, made nervous anyhow by sporadic outbreaks of sectarian violence, wholeheartedly rejects the Brothers, while fear of further sectarian unrest makes many Muslim Egyptians wary of them, too."

The Economist's article implies that there is still reason to worry even though the Muslim Brotherhood hasn't emerged as the revolutionary force it had hoped to become. For the most part, the government appears broken. However, the article takes care not to paint all Egyptian politicians with the brush of corruption and incompetence.

"The government itself, a behemoth with 6m employees, appears divided. Its ministries sound like those in other states, but many are run like medieval fiefs. The army, police, secret police, justice, the lucrative petroleum industry and foreign relations fall under the purview of the presidency, which tends to view all of them through a prism of state security and regime survival. This relegates to the hard-working prime minister, Ahmed Nazif, a diminished portfolio restricted to economic and social policy. Since his appointment in 2004, Mr Nazif and his team of technocrats, many of them Western-educated businessmen, have enacted long-delayed economic reforms. A dramatic slashing of tariffs and taxes, along with crucial changes to investment rules, has helped push the overall growth rate from below 4% to above 7%. Exports have more than doubled, from $9 billion in 2003 to $24 billion last year, with trade volume growing from 46% to 66% of a GDP that is expected to top $150 billion this year. Revenues have been boosted not only by high oil prices and the coming on stream of sizeable gas exports but, more significantly, by a doubling of income from the Suez Canal, a surge in industrial exports and a doubling of tourist arrivals, which reached a record 13m last year. ... Foreign direct investment has also accelerated, reaching $11 billion in 2007—five times the 2004 level—and a probable similar amount this year."

While some of the financial news is good, it is also (as noted earlier) one of the sources of discontent. There have been few if any noticeable benefits for those at the bottom of the economic pyramid. Encouragingly, there does seem to be a growing middle class. Unfortunately, it is not growing fast enough to keep pace with Egypt's growing population -- even though the country's population growth rate has slowed.

"Many complain that while Egypt’s industrialists have profited mightily, new wealth has failed to trickle down. Unskilled wages do remain dismally low, yet plenty of evidence points to broadening prosperity. Sales of private cars, for instance, have quadrupled since 2004 as a whole new class of Egyptians has taken to the ever-more-clogged roads. Franchise outlets sprout not only in wealthy parts of Cairo, but in dowdy provincial towns where state-run department stores once offered the only dusty glimpse of glamour. Amid a claimed fall in unemployment from 11% to just over 8% between 2003 and 2008, shortages of skilled labour have rapidly boosted white-collar wages. Indeed, some businessmen reckon that the biggest damper on growth just now is the dismal quality of Egypt’s university graduates."

Too often political leaders get fixated on investments in everything but their people. The result, as clearly seen in Egypt, is that the country's human capital becomes an anchor to development instead of an asset. There has been some progress, but the article calls it "wobbly."

"Ten years ago, for instance, 63% of Egyptian men remained unmarried at 30, a frightening indicator in a tradition-bound society where marriage is seen as a prerequisite for independence and adulthood. That figure fell to 45% in 2006. This shows that the cost of marriage, which typically includes the purchase and furnishing of a house, remains prohibitive for many, but it also suggests that the level of youth frustration may be dropping. Crucially, too, for a country whose inhabited area is barely the size of the Netherlands, the rate of population growth has slowed, from 2.3% a year in the 1980s to 1.9% today. And although Egyptians moan, with reason, about accelerating inflation, consumers have been spared the sting of global commodity-price spikes. Bread, the staple food, is still widely available at a subsidised price equal to one American cent a loaf, a fraction of its real price. Bottled cooking gas sells at one-sixth of its cost to the government. And despite a recent hike in petrol prices, a litre still costs one-eighth of its average price in Europe."

Aside from basic staples, overall inflation is hurting the average Egyptian. The article lists several policies implemented by the government to try and help the average citizen, but it also notes that the government is becoming increasingly authoritarian.

"The crackdown on the Muslim Brotherhood comes in the context of a broader shift towards greater authoritarianism, and in direct contradiction to promises of political reform. Before he started his fifth term in office, in 2005, Mr Mubarak promised more democracy. But despite some advances, for instance in allowing a more critical, privately owned press to flourish, his regime has systematically whittled away civic freedoms. In May, for instance, the government abruptly extended for two years the official state of emergency, saying that new antiterrorism laws were not yet ready. The emergency laws, which are meant to be applied only against violent threats to the state, have in fact been wielded against every manner of dissent. In one form or another they have been in force for all but three of the past 50 years. More recently, in an effort to tackle the indiscipline and deaths on Egyptian roads, the government passed a traffic law that applies stiff fines and prison sentences for minor infractions. The public is outraged at the higher bribes that police now command. Despite the occasional disciplining of officers, the regime’s security forces operate with scant accountability. Charges of torture are commonplace. Court action is slow, and subject to both manipulation from above and bribery from below. Citizens therefore resort to private vendettas and the state resorts to security measures, such as sending in riot police, rather than social policies to make things better."

All of these developments have meant that Egypt has lost stature, especially with U.S. politicians. For years, U.S. politicians have hoped that Egypt would lead the way toward democracy and prosperity in the Middle East. Instead, Egypt appears to be heading blindly into an unknown and uncertain future.

"Egypt now has few supporters in Washington. Its influence in the region is also diminished. Egypt has recently struggled simply to effect a ceasefire between Israel and Hamas, the Palestinian Islamist party that seized power last year in neighbouring Gaza, or to calm the squabbling Palestinian factions. ... What concentrates both American and Egyptian minds just now is not what Egypt’s president will do, but what happens after he goes. ... There is little doubt who [Mr Mubarak’s National Democratic Party] would choose for its own presidential ticket. The party’s vast patronage network, which began as a legacy of one-party rule in the socialist 1960s, has been slowly taken over by a newer breed of businessmen loyal to Mr Mubarak’s 44-year-old son Gamal, who chairs its policy committee. Yet although the younger Mr Mubarak has been an earnest champion of economic liberalism, the word among Cairo’s chattering classes is that he lacks popular appeal, representing precisely the business elite that ordinary Egyptians have come to loathe. More important, it remains an open question whether Gamal Mubarak has the support of the army, police and intelligence services. Some assert that this 'deep state' would not countenance an inherited presidency, preferring instead to promote a more trusted figure from within, in a Putin-like shift to ungloved control. As yet, however, no such person has developed the kind of public profile that might be expected of a likely contender. Indeed, one of the reasons for the elder Mr Mubarak’s endurance, aside from his aversion to risk, has been his skill at sidelining potential rivals and playing the various security branches against each other."

One would think that the unsettled state of succession in Egypt would be cause for great concern. A leaderless Egypt would be worse than one led by an authoritarian regime. But, surprisingly, The Economist doesn't foresee great unrest in Egypt's future.

"In another country, the murkiness of the succession, at such a time of severe social strain, would be a cause for grave alarm. Many Egyptians are, in fact, worried. Yet the consensus is still that, in line with previous transitions between Egyptian presidents, serious unrest is not likely to accompany the change, whether it is brought about by the rules, or in breach of them. The security establishment, assuming it remains unified, is large and ruthless. The frailty of Egypt’s economy, with its reliance on tourism and foreign investment, makes a powerful argument for pursuing continuity rather than taking radical departures. And the mix of Egypt’s geostrategic importance with its weakness suggests that it could continue to rely on generous foreign patrons. The country’s future administrators may be tempted to make populist gestures, and would likely reap a quick reward of loud public relief, after too long under familiar rule. They might even opt for a tactical alliance with the Muslim Brotherhood. But the fact is that, whoever runs Egypt, the task of housing, feeding and schooling all those millions, let alone overhauling the country’s myriad crumbling institutions, will leave little energy for other adventures. No wonder that most Egyptians, when asked what is in store for their country, tend to use the open-handed shrug with which they meet life’s daily mysteries, and invoke the protection of God."

Egypt is too large and too important a nation for the international community to respond to uncertainty there with an "open-handed shrug" or hope in God's beneficence. It sits astride two continents and is guardian of the one of the world's great canals. But before the international community can help Egypt come to grips with its future, it must determine who is in a position to lead such an effort. The current U.S. administration is not only a lame duck it long ago lost any traction it had with the Muslim world. Perhaps the best course would be for moderate Muslim nations to work with Egypt. Their future is as much in jeopardy as Egypt's if it becomes a hotbed of revolution and unrest.

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