FreshCulcha

A Message to Egypt: The 'No' Syndrome

This is a message to the youth of Egypt and to the forces of its revolution. You have a historic moment ahead of you on Saturday. It is historic both because you have not had a free vote in your lifetimes but also because it will make history, whichever way you vote. This should make you think more carefully about your choice in the referendum than just the last poster you saw or person you spoke to.

On January 25^th you started a process even if you couldn’t see the end. You overthrew your president and demanded a whole new system, democracy. I write to you as a member of one of the oldest democracies in the world: Great Britain. Democracy is an institution that is built, one floor at a time and it is made for all groups in society. We didn’t become a democracy over night; it took us hundreds of years of many attempts and reforms. You will do it much quicker but you must not rush. This is the biggest threat to Egyptian democracy. 

Everyone knows that Egypt needs a whole new constitution. The constitutional amendments that you vote on will give you that. The question is whether you want the new constitution before or after you vote for a President and Parliament. I encourage you to vote ‘yes’ on Saturday so that the people you vote for, who represent you write your constitution. So that whomever you vote for will have a voice and influence over what your new system will look like.

Voting ‘yes’ would mean three main things:

1. Egypt’s President will only serve for 4 years with a maximum of 2 terms.
2. Forming Political Parties will be easier.
3. The next Parliament and Shura Council will create a committee to write a whole new constitution.

 Many of you are worried that voting ‘yes’ now will be the end of the process, that the new constitution will never be written and that the revolution will be over. You live in a country where things are often promised but not done and where there is no trust in politicians. Many of you are not willing risk the whole revolution and path to freedom and will vote ‘no’. Then what happens?

Will you give a pen to Tantawi and ask him to write you a constitution? When he does, you will vote for it and people will say ‘no’ because they will feel it does not represent them. The religious will want more Sharia and the secular will want no religion in the state. The poor will want more benefits and the rich will want more business. The unions will want more for workers and so on… The protests will start again in Tahrir Square; only this time instead of being united everyone will want something else.

To vote ‘yes’ on Saturday is to take a risk. But you hold a part of that risk. If your government does not keep to the constitution and refuses to write a new one Tahrir Square is open- go there, unite and hold them to their promise. But the road to democracy has started and the next government will have to follow the new amendments when it gets voted in. I give you the amendment you will vote on in Arabic and English. Remember it, vote for it and hold your politicians to it:

يجتمع الأعضاء غير المعينين لأول مجلسي شعب و شورى تاليين لإعلان نتيجة الاستفتاء على تعديل الدستور لاختيار الجمعية التأسيسية المنوطبها إعداد مشروع الدستور الجديد خلال ستة اشهر من انتخابهم و ذلك كله وفقا لأحكام الفقرة الأخيرة من المادة 189.

“The Members of the Magles ElShaab and Shura Council will meet and subsequently announce the results of the constitutional ammendements: to select a constituent committee commissioned to prepare the new constitution within a year of its formation. It is therefore to be in accordance with other paragraphs from article 189.” 

When you go to vote on Saturday remember that there are always reasons to say no. Look for one to say yes. 

Economic Roundup: Market Catches up with Local Optimism

The Egyptian stock exchange, now notorious for its long closures, false reopening dates and general spontaneity has surprised investors once again. On Tuesday morning, trading was suspended for the third time since the stock exchange resumed activities a week ago. This time however the reason was very different and much more encouraging.

Egypt’s stock exchange maintains an automatic stop on trading when prices move by more that 10%. This practice has been evoked several times both before and after the revolution as a reaction to plummeting share prices. However the market has now been on a three-day rally forcing a suspension in trading for the first time today because of a 10% rise in prices on Tuesday morning.

Telecoms and banking led the market as prices corrected themselves to what Egyptian investors are considering more sensible value. It is important to note that foreign investors account for just below 50% of trades placed. Their willingness to buy into what they feel is a value market will surely be seen as a sign of encouragement for Egypt’s economy. The EGX 30 Index now lies above 5,400 and its worst performer is Ezz Steel who’s Chairman is now under fraud investigation relating to the former Mubarak government. Additionally, the Bourse Chairman recently suggested that these ‘circuit-breaker’ regulations might be relaxed, potentially paving the way for further rises. 

Parallel to this, Egypt’s ever-evolving political and economic situation continues to develop. Recently, a law relaxing the regulations concerning the formation of political parties was adopted. This has received mixed reactions since it still forbids any party to base itself on religion. This has angered extremist Salafist sects and the Muslim Brotherhood who have set up the Freedom and Justice Party and declared it to have a religious ‘framework’ rather than foundation. Economists have warned that if the Brotherhood plays a big role in the next government, Egypt’s vital tourism industry could suffer. Part of the Brotherhood’s platform is the banning of alcohol and prohibiting unwedded men and women from mixing, two issues of great concern to Sharm El Sheikh tourists.

Finally, Egypt’s post-revolution economic investment partnership with Saudi Arabia continues to strengthen with a newly announced energy sharing deal. Under the jointly owned project, Egypt will send Saudi Arabia electricity during afternoon hours and Saudi Arabia will send Egypt electricity in the evenings, based one different usage pasterns in the two countries. The Egyptian government will invite tenders for the power link in April. 

Reopening of the Cairo Stock Exchange

This week the long awaited reopening of the Cairo Stock Exchange finally took place. After 55 days, 5 delays, a national revolution and the resignation of its Chairman, the Egyptian Stock Exchange finally opened its floor to trading in a day that saw a flurry of activity. 

The last time the exchange was open was January 27^th directly after the Tunisian revolution and two days into the Egyptian mass protests. Egypt’s EGX 30 index dropped by 10% and trading was suspended. Seventy billion Egyptian pounds ($11 billion) were wiped off in one day’s losses. No one expected the events to unfold as they did and that the exchange would remain closed for this long. Indeed it is with a heavy heart and much reluctance that Mohammed Abdel Salaam, new Chairman of the Egyptian Bourse, resumed trading on Wednesday. Significant pressure was placed on the Exchange by Morgan Stanley Capital International Index regulations, which stipulate that if the exchange had stayed closed for any longer it would have lost all capital from foreign investors. Clearly this would have hugely exacerbated the already inevitable slump in share prices. 

In the days leading up to Wednesday’s reopening, Egyptian authorities were sending mixed messages. The Finance Minister called for people to "Keep your nerve. Don't sell en masse. All indicators say that the economy will recover quickly”. Meanwhile the new Chairman of the Bourse said: "It's in your interest not to sell. Be patient. God looks after those who are patient." However as the time drew nearer, rumors that the exchange would automatically suspend activity if shares dropped by 10% were being confirmed.

Indeed it took only 16 seconds on the morning of March 23^rd. Shares dropped 9.93%, the EGX stood at 5,085.63 and trading was suspended. Later that day trading resumed and closed below 5,000; the stock market has not been open since.

Several opinions have emerged both about the reasons for this decline and its future movement. Firstly, some have pointed out that during the revolution banks faced a liquidity crisis and placed orders to sell their shares. Therefore the backlog of pending orders was executed at once on the morning of March 23^rd, automatically sending prices tumbling: Hence the view that the market is artificially undervalued. This opinion is enhanced by individuals such as Said Hirsh (Capital Economics) who expect listed companies to buy back some of their stock and investors to take advantage of a cheaper market. Thus the expectation that prices will stabilise shortly. CI Capital’s assessment is that “EGX 30 is likely to fall to within a range of around 4582-3989 (points) upon its reopening.” This equates to a 19-29% drop.

However some are less bullish about the prospects of market recovery in the near future because of the wounded economy, lack of political leadership and exodus or legal investigation of the country’s wealthy elite. Indeed foreign investors will notice the ongoing regional unrest, which is sure to keep some funds away from Egypt. The Investment bank Hermes has predicted a slow recovery following what it believes will be a 20-30% drop in share value.

One thing that all analysts agree on is that the stock market’s recovery will depend on the future of Egypt’s political process. If the country can elect a new, uniting and inspiring president who revitalises the stunted economy with fresh initiatives, the market will react positively and foreign investment will surely rise. If Egypt’s politics declines into sectarianism, infighting and the resumption of protests, its economy will fall into years of stagnation and mediocrity. The early signs are positive: Egypt adopted new constitutional amendments in a recent referendum paving the path for new elections. This is particularly symbolic since Egypt’s youth largely voted ‘no’ in the referendum but have vowed to respect the ‘yes’ result nonetheless in the name of democracy. One can only hope this unity prevails in the face of even tougher challenges ahead.

Economic Roundup: Foreign Investment

This week AlMasry AlYoum ran a front-page story on the level of foreign investment in Egypt during the recent revolution. Egyptian newspaper editors are not starved of choice these days when choosing front page articles. With corruption scandals uncovered daily and an upcoming constitutional referendum in a country that has almost never seen a free vote, why did Egypt’s bestselling paper chose to lead with foreign investment?

The answer lies in a strange partnership between Egypt’s progressive economy and the Saudi establishment. A group of high-ranking Saudi businessmen have announced the launch of a Saudi Bank in Egypt to be based in Cairo. The bank is to invest in the development of Egyptian industry to the tune of 100 billion Egyptian Pounds ($17bn). This news is a major boost to Egypt’s economy which has taken a hit due to the recent turmoil. However it suggests that investors are bullish about Egypt’s future and expect the change in the country to lead to strong economic growth and high prospects for business. A more open and less regulated society seems likely to induce a boom in employment. Egypt is a country where a huge potential workforce could be the powerhouse to its economy.

Saudi Arabia is clearly optimistic about this business potential and leads the Arab World with investments inside Egypt. Currently 2,500 Saudi companies operate in Egypt with a running capital of up to $5bn. But the Saudi’s are not the only ones funding Egyptian development projects. It is reported that total foreign investments including those from Europe and America remained steady throughout the Egyptian revolution.

Indeed Hilary Clinton’s recent trip to Cairo intended to “listen more than talk” came with a package of good news. The US has pledged $90m in immediate overseas private investment assistance. Kerry Littlewood (CEO at the Overseas Public Investment Corporation) said "By catalysing investments in small and medium enterprises, infrastructure, and other key sectors, OPIC hopes to bolster the private sector's role in helping to transform the region."

Additionally, US Congress is due to discuss a bill aimed at significantly funding small and medium sized businesses in Egypt. John Kerry (co-sponsor of the bill) noted Egypt’s booming population requiring millions of new jobs a year “just to keep pace with the influx of new workers” and saw it as the USA’s national security imperative to support Egypt’s economy.

 With the return of one million Egyptian nationals from Libya virtually overnight, the Egyptian state (already unable to provide basic public services) is beyond overstretched.  It therefore comes as no surprise that Egypt’s top newspapers take both great pride and relief that Egypt’s economy is deemed worthy of foreign investment. 

Written on 18th March 2011

Egypt’s Economic Activism

Egypt’s Economic Activism The economic mood in Egypt today mirrors its political reality. Namely, people see their future in economic mass movements. The revolution has been of the young, educated, aspiring classes with no bridge to cross after university and no bright example to emulate or job to aspire to. Politics passed the point of stale some time ago and inspiration for these people vanished. It comes as no surprise therefore that the economy is a priority issue amongst Egyptians. But they have their own unique vision of how to change it.

The first thing you will notice upon living in Egypt is the phenomenal number of people doing nothing. Every few shops is an ‘Ahwa – Egyptian coffee house where men will sit, talk, sip coffee and casually waste away hours upon hours of their day. This is not a single event; it has become a lifestyle. The Egyptian Shabbab (youth) are incredibly proactive here and committed not to resign themselves to the ‘Ahwa Lifestyle of the generation that precedes them. In a country of 85m people with potential workforce of 55m, most of whom are restless youths itching to achieve something productive, the potential is enormous. The key to unlocking this potential is now being discovered. Whereas the dream of every Egyptian boy or girl was once to move to America or Europe, now it has become to build this country through their own revolution, upon the foundation the great civilization that it used to be.

In Alexandria, universities are still shut from the beginning of the protests. Students are working in groups to clean up the streets, provide security and bring the city back in order. In parts of Alexandria now the streets have never been cleaner. Additionally they are being creative, setting up small money raising projects to revitalise the poorer areas of town.

This is symbolic of the solution to a problem being referred to here as the shrinkage gap. Wealth was being controlled by around 5% of the population who bought up national assets and public sector projects for a fraction of their worth from the state and paid the remainder in bribes to government officials, particularly Gamal Mubarak. These wealthy businessmen made much of their money by accruing yield rather than creating jobs and stimulating business. As a result, everyone but the Egyptian elite faced rising prices and lower purchasing power, making them in real terms poorer each year.

Young Egyptians want to close this shrinkage gap through entrepreneurship, innovation and launching new businesses. This revolution allowed them to show their ability to organise security, law enforcement and necessary services. Now they want to bring this to the workplace. The new finance minister is aware of this eagerness and his test will be whether he can couple Egypt’s well-capitalised banks with the country’s young and ambitious workforce.

The Egyptian stock market, fearing huge losses as soon as it starts trading, is still delaying its reopening date. It is interesting that a national initiative to raise money from ordinary people to support the market, was resoundingly rejected. Ordinary people know that the stock market the game of those at the top of the shrinkage gap – neither their concern nor their responsibility. The popular disengagement from the stock market is indicative of the type of economy Egyptians are looking to build. We are told that the Cairo stock exchange is due to open in a few days. It may be forced to give up efforts to avoid a crash in prices and reopen at a fraction of its recent value.

National unity is emanating from Egypt as people work towards rebuilding their economy together with their political system. Leading Egyptian newspaper Al Masry Al Youm published this morning figures showing that foreign investment in Egypt did not decline despite the recent political turmoil. Perhaps investors are as bullish as Egyptians about the economic potential of this new activism.

Written on 11th March 2011

Economic Roundup: Corruption and Change

For 30 years wealth, business and commerce in Egypt have been state-centric and any private projects have necessitated the corrupt and bureaucratic approval of government officials. The recent and ongoing economic news in Egypt concentrates on the unravelling of Mubarak’s assets, business interests and commission accumulated from national contracts.

Al-Jarida (Kuwait) published documents obtained from Egypt’s interior ministry showing Mubarak’s two sons taking a combined 7.5% ‘commission’ from an Israeli-Egyptian gas deal worth $2.5bn. The Mubarak family is currently in Sharm El Shiekh with Hosni Mubarak due in Cairo shortly for an investigation into his corruption (reported to total $70bn in embezzled funds).  Gamal Mubrak who tried to leave by private jet was grounded by the military and joins a list of former Egyptian politicians (including his father Hosni) now banned from travelling abroad and pending trial.

Egypt’s fragile economy, which had been growing at over 6% per annum prior to the revolt, is beginning to find its feet again. Most businesses have now reopened and are trading, banks have resumed their services and consumer confidence is optimistic along with national mood. However the market struggles in the face of a security void with the army unable to provide universal cover for local law enforcement. The police force and state security are seen as branches of Mubarak’s oppressive system and are detested by the people. In many places they have not returned to protect the cities, many of them scared of reprisal attacks from the public. In Alexandria there is still no real police presence and in Cairo they must stay in groups for fear of their own safety.

Egypt’s economic recovery in the medium term will be dependent on four new political appointments: Essam Sharaf replaces Ahmed Shafiq as Prime Minister. He is a popular choice of the people and participated in the recent demonstrations. He is a US-educated civil engineer with reformist ambitions and a strong anti-corruption record. He holds a firm stance against normalisation of ties with Israel before the Israeli-Palestinian issue is solved. Egypt has also appointed Mansur al-Issawi as Interior Minister. His pledge “to restore confidence between citizens and the police” will be crucial if business, trade and investment are to resume before elections due later this year. Additionally, Nabil El Arabi will be responsible for stimulating FDI as foreign minister and Mohammed Abdul Ghorab takes a vital role as head of the Oil Ministry. 

A general assessment, Egypt’s economy is transitional one with a huge mountain to climb in jobs, education and security. Business will not boom until the three are addressed sufficiently. However Egypt new government is making the right sounds for the moment with new Prime Minister Sharaf saying: “We stress that our economy is liberal, in the right direction, within a framework of social justice.”

Written on 7th March 2011

British Priorities

David Cameron has caught world attention recently by being one of the most outspoken leaders on the brutality against and suppression of Middle East protestors. In particular his willingness to consider real military options against the Qaddafi regime (beyond a no-fly zone) show some courage. However Cameron’s government has now twice neglected the undisputed priority of foreign policy: the safety of your own nationals.

Those of us with British passports in Egypt have spent days and weeks under strict military curfew with no contact from the consulate, embassy or Foreign Office. Whilst we sat glued to televisions showing the French, Turkish, Greek, Russian, American and even Finnish evacuations of nationals, our embassy in Cairo was not answering and our Alexandria consulate was virtually closed. In spite of a countrywide communications blackout most of us in Alexandria made it out of the country via commercial means during the beginning of February, just as demonstrations were intensifying. However the 30km road to the airport that houses the high security jail of Alexandria (out of which the inmates had escaped) was unprotected, lawless and the scene of passenger car lootings. Whilst the American and Greek nationals were escorted by private security, our lousy consul-general was totally unprepared and unable to organise this.

Fortunately for the Foreign Office at least as much as for us, no British civilians in Egypt were kidnapped, seriously injured or killed. This has masked the gaping hole in our diplomatic system, only slightly exposed by the far worse crisis in Libya. In towns such as Benghazi, British citizens are also indiscriminate targets of aerial bombardments by Qaddafi’s airforce; adhering to a curfew does not guarantee your safety. In such situations, a British Passport must be worth more than the paper it is printed on. Whilst Hague waffles about British ships sitting off the coast of Libya, once again British Nationals are the last ones stranded – this time in a violent revolution marred by sporadic massacres.

I hope that every ambassador and consul-general learns a sobering lesson from this scandal. It must be the first task to draw up a comprehensive, flexible and country-specific evacuation plan that can be executed immediately, especially in Africa and the Middle East. Failing to do so is failing to protect the millions of Brits who travel there every year. If Cameron is to pursue an ethical, humanist and universal foreign policy, his government mustn’t forget its primary elected responsibility over British nationals. 

Arab Democracy: Creative Solutions

You only have to hold a two-minute conversation in England about the Middle East protests to hear the words Muslim Brotherhood or Islamism. The worry has been expressed to different degrees by characters ranging from Hilary Clinton to Alan Dershowitz and from Sky News to Hosni Mubarak. In its basic form the fear is this: If we allow real multi-party elections in the Middle East, Islamist parties will take power.

Indeed they also have examples: Hamas in Gaza and Hezbollah in Lebanon. But for policy makers in Washington, London and Europe to be making these observations as if they are bystanders to events over which they have no control, is to absolve themselves of doing the job we pay them to do. Barack Obama is not a journalist; he is US commander in chief, President of the United States and possessor of all the powers afforded to his office. Where is his input to make sure this doesn't happen in the rest of the Arab World?

It is still unclear whether Obama has formally declared himself on the side of the protesters in Libya, Yemen or Bahrain. Here is an opportunity to be on the right side of history; to be remembered by the future leaders of these countries as the nation that helped the revolution, not the country that lethargically, reluctantly and belatedly reacted to their struggle. To avoid Islamism you must proactively back those groups that reject it too. Those of us who loathe the Muslim Brotherhood would be better placed to aide the establishment of rival parties than to ignore the middle 70% of Egyptian society who want neither Mubarak nor Muhammad Badie. 

We have large embassies and numerous diplomats around the Arab World. Why are we not opening our doors to groups wanting to form political parties, giving them guidance and experience on how to do so? The Egyptian military has recently declared the rewriting of their constitution. Why isn't America (holder of the greatest constitution) helping them write it? We are democracies. We know how to do this because we've done it before. Credit must go to David Cameron for being the first leader to land in Egypt. Let us hope he brings real results and partnership. 

It is our moral and strategic obligation to allow people to overthrow their governments but then partner with them in building free societies. If Obama adopts a more creative approach to Middle East protest movements, he will find himself real allies in the Arab Word rather than ones that will surely be deposed. 

 

Fear not to support

Whilst the West stood tight lipped, the Arab street acted; and whist we were lost looking for words to express the unknown, they were beyond caring. The Egyptian people realised they neither need nor want America's permission to bring down an arrogant and oppressive regime.

Perhaps it is a symptom of our insecurity about what Britain stands for that we hesitate to openly support the quest for freedom, liberty and justice wherever in the world it surfaces. But despite our caution to only back the protestors once they have won (an act of immense cowardice and lack of principle), the Arab street has not cared and is now filling across the Middle East. We have been given another chance.

All eyes on Iran. The Green movement of Iranians is the bravest of all opposition movements in the Middle East. In 2009/2010 it poured out in its millions onto the streets of Tehran but Iran is not Egypt. The brutal theocracy in Iran sent out squads of Basij thugs to indiscriminately shoot, maim, beat up, torture, hang, rape and terrorise all those in sight. Yet incredibly, the more this went on, the more young Iranians took to the street and risked their own lives. But as time went by they began to question whether America was with them or not, puzzled by the silence of the Obama administration. Their morale ran out in the face of their state's thuggery, murder and cannibalism.

The Iranian opposition is back on the streets as of yesterday. Lets show them this time its not in vain. Let them know you support their struggle for freedom and demand your leaders to do so too.