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Magda Kandi, Egyptian Center for Economic Studies: Egyptian Economy may not be as bad as some would make it out to be

July 02, 2012

Two of the biggest challenges facing Egyptian President Mohamed Morsi are improving the economy and countering the entrenched interests of the nation's military. The two are deeply entwined.

Morsi is under pressure to move quickly to create some tangible improvement in the daily lives of his fellow Egyptians, who are suffering from high unemployment, rising prices and shortages in basic commodities.

Economists have been encouraged by the economic platform pushed by Morsi, based on the Muslim Brotherhood's Renaissance Project.

"They clearly subscribe to a free market economy and they clearly appreciate private ownership," said Magda Kandi, executive director of the Egyptian Center for Economic Studies. "But they would like to complement this with the kind of rules and regulations that would streamline the operations, so we would not be running into problems similar to what we had before the revolution when the fruits of the growth were not well distributed."

As uneven as the distribution of wealth was under the old government, the interim period of military rule may have been even worse. Uncertainty and unrest kept both foreign tourists and investment at bay, hurting millions who relied on related industries.

"We actually suffered under the military rule because of lack of stability, we were hoping that under a military regime, in the transitional period, that stability would be better enforced, and security would be better enforced such that the economy would do better than what we did," said economist Kandil.

The election of Morsi boosted Egypt's economic prospects, with the stock market rising on news of his victory and the prospect that, for now, protests will subside.

But tensions remain between the elected government and the military, which has claimed for itself considerable new powers including oversight of defense and the budget.

Those two powers go to the heart of the military's concerns. Estimates vary on the extent of the military's economic enterprises, which range from mining to microwaves, pavement to pasta. There are no official figures, but former diplomat and presidential candidate Abdullah al-Ashaal puts it as high as 40 percent of the Egyptian economy.

"This economic institution inside the army is making the army another state within the state itself. So we have virtual state which is called Egypt, we have a real state that is called army. So this cancer has to be removed. Otherwise I don't think any democracy can be established," said al-Ashaal.

This backbone of the economy may not be as bad as some would make it out. Economist Kandil says that over the decades, the military has proved itself efficient in terms of meeting deadlines, effective management, and affordable prices for ordinary Egyptians. But as the nation moves forward, some people are questioning this decades-long arrangement.

"They are concerned about the implications of this share, the large share owned by the military, and if the military is to be squeezed out of the political process, which one would expect in a democratic environment, what are the implications for their shares in the economy and whether they would be willing to yield to the democratic process," said Kandil.

From the actions of the military so far in this transition, it would seem Egypt is destined to remain a mixed economy for some time.

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