Egypt has a problem with foreigners. More accurately, Egypt has a problem because there aren’t enough foreigners investing or traveling in Egypt anymore.After the revolution began last year, foreign investment dried up, fast. Tourists disappeared and haven’t really come back. The two groups—investors and travelers—are extremely important sources of money for the Egyptian government and the entire economy itself. With elections this week, investors are waiting to see what kind of government begins to take shape in Cairo. All presidential candidates have said they favor free market-focused economic policies, and all of them understand the importance of foreign investors and tourists to the Egyptian economy.To illustrate just how important, here’s the FT:
Investment plunged after the revolution early last year, with businesses taking $482m out of the country in 2011, a dizzying drop from the $6.4bn of inflows it saw in 2010. There are no figures for 2012, but analysts say investment remains on hold as foreign companies wait to see the results of the presidential poll.
“They need to see what will be the tax rate, energy prices and labour laws,” Mr Kitchen said. “Also for the first time arguably we will have a fragmented political system. So how will parliament deal with the president? Will they disagree over cutting energy subsidies, privatisation and salaries? All these questions are up in the air.”
It’s not just foreign investors who have moved money out of Egypt. The Coptic minority and Egyptian businesses with links to the old regime have also seen the wisdom of stashing their money overseas until things settle down in Cairo.Whatever new government the Egyptians elect will have to make some important decisions fast. Will European tourists be able to go topless at Egyptian resorts while swilling alcoholic cocktails? Will businesses linked to the ancien regime get some kind of amnesty? Will a business friendly tax and regulation system tell foreigners that the welcome mat is out? Will the Coptic minority be made to feel secure? Will relations with Israel be calm enough so that foreigners won’t worry about the prospect of war? What kind of relationship will the new Egyptian leaders carve out with the Gulf Arabs, in whose oil rich countries many Egyptian expats work and from whose coffers come much of the investment and aid that Egypt needs to get back on its feet?There are some signs that Egyptian public opinion is moving in a more pragmatic direction as the election approaches, but the signals are hard to read. Whoever the Egyptians vote in, and however the various factions and parties in the new power structure sort out their roles and responsibilities, the tight economic and political constraints within which Egypt will move lay out a challenging agenda and a difficult path.It isn’t easy to rule a country with an exploding population, rising expectations, low skills, and few resources—all in the midst of a global economic slowdown.