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Egypt: More Chaos, More Uncertainty

Unknown, un-uniformed assailants attacked unarmed protesters outside Cairo’s Ministry of Defense on Wednesday. Eleven people were killed and more than a hundred wounded before police units arrived. In response to the Interior Ministry’s inability to send forces to the scene in a timely fashion, several presidential candidates halted their campaigns, their parties boycotted meetings with the country’s military leaders, and many people across the country mourned the new “martyrs.”

The scenes of chaos are a reminder that Egypt’s future is uncertain, and its political scene tense. Nevertheless it is still the state of the economy that should provoke the most worry. There are a number of economic indicators of difficulties to come.

Foreign investment: Despite the recent turmoil, among all African countries, including energy-rich Nigeria, Egypt was second only to South Africa in foreign investment projects between 2003 and 2011. But investors are alarmed. Police have smashed into businesses without warrants, arrested businessmen without subpoenas, confiscated money and paperwork, and put businesses in government control. The SCAF (Supreme Council of the Armed Forces) is acting on populist anger against elements of the old regime that have so far flown under the radar. Many foreign-owned companies have also come under increased scrutiny and pressure from the government. But the SCAF has realized it might have overstepped: in early January, before the new parliament had taken office, it decreed that businessmen who came into lucrative industries as a result of political connections under the Mubarak regime could avoid prosecution by “repaying” the government. Worryingly, negotiations on an IMF loan worth more than $3 billion have still not been settled; the IMF is waiting for consensus between the SCAF and the Islamist-dominated parliament in Cairo. That loan package will only go so far: Other loans from Gulf states and the EU are in the offing, but they depend on Cairo securing the IMF loan first.

In the meantime, risk — economic, political, security — is the enemy of foreign investment. Egypt is rich in risk right now, if not in much else.

Tourism: Egypt’s economy depends greatly on foreign visitors. After a dismal drop in tourism in 2011, many Egyptian officials are growing increasingly optimistic about the return of visitors. The tourism minister said at a recent conference in Dubai that he aims to attract 14.5 million tourists in 2012, close to the 2010 figure of 14.7 million.

But will scenes of riots and mayhem in downtown Cairo encourage Europeans to return? And will Europe’s continuing economic problems ensure a steady stream of holiday makers heading for Egypt with money to burn? Those forecasts could turn out to be unrealistic.

Meanwhile, unemployment is higher than it has been in 2 decades. In the final quarter of 2011, growth slowed to 0.4 percent from 5.6 percent a year earlier, and is expected to remain sluggish in 2012 (2.7 percent). Inflation remains very high (9 percent in March).

It is still very unclear what kind of government Egypt will have in six months to a year’s time. What is much less unclear, sadly, is that economic issues will make the life of that government very unpleasant.

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  • gracepmc

    Not to worry Sir. They have our money and Senator Kerry has been dispatched to help with their electoral process.

  • John Burke

    Any Westerner who visits Egypt as a tourist needs psychiatric attention.

  • J R Yankovic

    “Foreign investment: Despite the recent turmoil, among all African countries, including energy-rich Nigeria, Egypt was second only to South Africa in foreign investment projects between 2003 and 2011.”

    Let’s see now: Roughly 20 years (from 1952) of business-unfriendly “Arab socialist” military regimes, plus another 40 years of increasingly business-friendly pro-Americanist military regimes. What did the two eras have in common? Little that I can make out, other than a “love of Arabs,” a detestation of that ghastly 70-year-preceding period of British colonial hegemony (starting to look better with every passing month), and a horror of anything resembling representative government (which also came very neatly to an end in 1952). And lo, here we have the balance sheet. I say chalk it up – at least in crucial part – to that most ambitiously globalist Dulles-Rockefeller-Brzezinski agenda known with more historical than literal accuracy as Trilateralism. Some of us remember its first flushes of enthusiasm: How it was going to make the world safe for enlightened corporatocracy, etc. I don’t know how far it has succeeded in its initial aims. But it has definitely made the world a thriving breeding-ground for new players of every local and global description. Now let’s see what they in turn make of Egypt.

  • Cunctator

    Given all this, isn’t it “fantastic” that the people don’t support al Qaeda!!! (I am being terribly sarcastic.)

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