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Egypt Unrest Undermines Welcome to Business

Push for New Investment Comes Amid Chaos Over Film

By Aaron Ross

(Page 2 of 2)

Cairo — Egypt is in urgent need of outside capital. The transitional period has seen its foreign currency reserves drop by more than half as foreign direct investment and tourism have nose-dived amid ongoing political turmoil.

Eric Trager, fellow at the Washington Institute for Near East Policy and a sharp critic of the Brotherhood, argues that U.S. encouragement of business development in Egypt without laying out clear expectations for the new Egyptian government is a mistake. “The administration’s general approach towards Egypt has been as if Egypt is a charity, not as if Egypt is a strategic partner from which we expect much in return,” he said.

According to Trager, Brotherhood leaders’ rhetoric on issues such as religious freedoms and relations with Israel should raise serious red flags. “When you ask them ‘Are you pro-business? Are you going to keep the qualifying industrial zones?’ — joint ventures with Israel that bring in roughly $2.3 billion a year — they say: ‘No, no, no. It’s more politically costly than economically beneficial.’”

But American government and business officials insist that a quick economic recovery is critical to political stability in Egypt and, by proxy, U.S. interests in the region. “A strong, successful Egypt is good for the region, good for America, good for the world,” Nides said.

Said Sadek, a professor of political sociology at The American University in Cairo, likened the Brotherood’s neoliberal policies to those of the former president Mubarak. He added that he could not envision the current government altering Egyptian foreign policy in a substantive way. Any changes, he said, will be purely cosmetic.

“[Morsi] wants to have a relationship with Israel, but instead of having the Israeli officials photographed coming to meet him, now Israeli officials visit, but without the camera,” Sadek said. Likewise, Sadek dismissed concerns that Brotherhood officials would resist doing business with Jewish or female executives, pointing to the Brotherhood leadership’s long-standing ties with a wide range of American business and financial institutions.

The Brotherhood, from which Morsi and many of his top advisers hail, has advocated a free-market and free-trade agenda that, while controversial in Egypt, has helped ease foreign investors’ concerns. Its leadership is populated by wealthy businessmen like chief strategist Khairat El-Shater, a millionaire who made his fortune in textile and furniture trading. Shater memorably told Bloomberg last year, “We believe in a very, very big role for the private sector.”

An agreement on the $4.8 billion IMF loan would go a long way toward further reassuring investors. In his Chamber of Commerce presentation, Qandil expressed confidence that the loan would be finalized within the next couple of months.

But in fact, discussions have been held up since last year over internal rifts within the Egyptian government. The loan faces stiff domestic opposition. In order to obtain it, the government would likely have to agree to deep cuts to popular subsidies on which many poor and working class Egyptians depend.

That indecision is just one reminder of the uncertainty that still pervades Egyptian politics. Despite Morsi’s recent actions, question marks abound. The precise relationship between the civilian and military leadership remains unclear, a constitution has yet to be drafted and the country is without a parliament after it was dissolved in June under court order. New elections are expected later this year.

Qandil acknowledged this reality when he remarked that while he considers Egypt’s “confusion period” to be over, the transition continues. But the promises of calm waters ahead are clearly still tentative, as demonstrated by the hundreds of outraged Egyptians who swarmed around the U.S. embassy just as the U.S. business leaders were departing.

Contact Aaron Ross at feedback@forward.com