Just a few years ago, it looked like Egypt’s economic reforms–though still incomplete–had delivered prosperity to its people. But as the country celebrates the 50th anniversary of the 1952 revolution that delivered it from centuries of colonialism, it has found economic self-reliance far harder to achieve than political independence.
Back in the bountiful ’90s, cities sprouted in the desert, the growth of Egypt’s gross national product doubled to 5 percent, inflation dropped from 20 percent to 3 percent, and foreign debt to zero, according to United States State Department statistics.
Egypt was the darling of the neoliberal technocrats: its economists were shipped off to other developing nations as model specimens. In 1998, when Egypt was eligible for another IMF loan, it didn’t need it. The ’90s were “A brave new world for the country,” as the headline of one article posted on the government Web site put it at the time.
For a stark symbol of how things have changed since then, one need look no further than the World Trade Center in Cairo. Opened in 1990 at the start of a new era of privatizations and foreign investment-friendly deregulations, the buildings overlooking the banks of the Nile River quickly became a fashionable symbol of the successful fusion of Middle East meets West.
Today, visitors to Cairo’s World Trade Center can still smoke a hookah in L’Esplanade cafe surrounded by Nokia, Baskin Robbins and Mercedes Benz outlets. But now the building suggests a different conclusion regarding Egypt’s transition “from aid to trade,” in State Department lingo. Even street level store windows are papered over, casualties of the post-September 11 economic fallout that prompted a slowing in global trade and aggravated a decline in foreign visitors.
Indeed, the troubles started before last year’s attacks on New York and Washington. The 1997 massacre of tourists at Luxor temple by Islamist militants choked off tourism, one of the country’s biggest foreign currency earners; then oil prices dropped and the Asian economic crisis cut Suez Canal receipts.
The result has been profound: the recent Arab Human Development Report found that in 1998–the latest comparative figures available–Egypt had the third lowest GDP per capita in the Arab Middle East, after Syria and Yemen and lower even than sanctions-battered Iraq.
The situation has hardly improved since then. The country is in the throes of a three-year-old recession and the worsening Israeli-Palestinian conflict is frightening tourists away from the entire region. While Egyptian businessmen retain their optimism about a turnaround, the economy seems likely to get worse before it gets better. Standard and Poor has downgraded Egypt’s credit rating, and last month the United States, Egypt’s largest single trade market, announced that Cairo hadn’t pushed economic reforms far enough yet to merit the same type of free trade agreement as neighbors Jordan and Israel. The government even put up the Suez Canal as collateral on almost $1.5 billion in eurobonds. The IMF is dangling another $500 million loan in front of Egypt’s nose, but Cairo appears lukewarm on the prospect of meeting conditions that include further devaluing the pound.
Egypt’s transition from its experiments with socialism toward a developed economy has not differed much from the path of many other countries that gained independence after World War II. But in a volatile Middle East, Egypt’s economic stability has particular significance. As home to the largest population of the Arab states and the second largest economy after Saudi Arabia, it’s a key to regional stability and prosperity. Washington knows this, and has pumped $2 billion dollars in military and economic aid into the country each year in the hope its testy ally will help to protect American interests in the region.
The spigot of U.S. aid, however, is slowly being turned off. America began to downsize its foreign aid programs across the board in the late ’90s–a change with grave implications for Egypt, the second-largest U.S. aid recipient after Israel. In 1998, the United States announced its plan to phase out the bulk of U.S. aid to Egypt, which has totaled more than $24 billion over the past 25 years. Across the border, Israel is also facing cuts. But it is Egypt’s faltering economy and specific demographics that make it particularly vulnerable to the reductions.
Aid to Egypt will be halved by 2010, the year the Egyptian population–already at 68 million–is expected to reach 83 million. Economic growth would have to double to keep pace with the number of new entrants to the labor force each year. The thought of millions more unemployed and frustrated young Egyptians with nothing to do but sit around coffeehouses and fume about American support for Israel–or U.S. policies in other Muslim countries–is a frightening prospect for politicians on both sides of the Atlantic.
Egyptians, too, are aware of the dangers. The country’s independence celebrations–still going strong two weeks after the July 23 anniversary–has spurred endless intellectual debates on the merits of the economic liberalization program. “Government policy is not geared for the real economic development of the country,” writer and political activist Nawal El Saadawi told NEWSWEEK. “It is geared to the outside market, for the benefit of Europe and the United States and the multinational corporations. That has been our problem. Ever since King Farouk, millions of people have been betrayed by the government.”
Egypt’s technocrats, however, are less skittish. High in the WTC Cairo office tower, Ahmed Galal, a senior economic adviser for the World Bank who is currently on leave to serve as executive director of the non-profit Egyptian Center for Economic Studies, considers the country’s current problems to be just growing pains. “Even though the economy has been aching, I’m not as concerned as I would have been if it wasn’t for the liberalization programs of the early ’90s. The patient is somewhat healthy, so if you get a flu you can weather it.”
It’s true that there are still some good signs. Egypt’s economy is still growing by 2 to 3 percent a year; individual incomes measured in 1995 prices nearly tripled between 1975 and 2001 and the economy has diversified from its 1952 dependence on cotton to include revenues from oil, tourism and the Suez canal. But the growth rate is falling behind the needs of Egypt’s growing labor force, and the prospect of a U.S. invasion of Iraq poses the threat of another shock to the economy.
So far, the government seems confident about staying its course, whatever the current hardships. In June, the Egyptian Minister of Foreign Trade told the government-controlled Al Ahram newspaper, “We do not have a crisis. We have a slowdown that is significant. This is part of managing the economy. Sometimes it’s a little tougher than at other times. We’re working on it.” The reforms of the ’90s haven’t been rolled back, and are even being added to with measures like new corporate tax reductions, greater independence for the central bank, and an intellectual property law. “This country has enormous potential,” says Galal, the World Bank economist. “Egypt is following a curve that looks very much like all the other developing nations. Chile, Brazil, Mexico–this is going to be Egypt in 15 years.”
Nevertheless, this is a risky period for the government of President Hosni Mubarak. Recession-hit citizens may not have the patience for debates about economic theory. Unemployment here is in the double digits again for the first time since the 1980s, and chronic underemployment has always been a problem.
Still, Mubarak is in little danger of losing power. A brutal campaign of arrests and intimidation has crushed the militant Islamist movement that had long threatened to topple the government, and Mubarak continues to keep a tight fist around popular dissent by invoking emergency laws forbidding public demonstrations. The real danger, western-inspired economists say, is that public pressure by down-at-heel Egyptians could force the government to lose its resolve and start rolling back economic reforms.
Outsiders who would hurry Egypt along may do well to remember what happened to former President Anwar Sadat when he tried to satisfy the IMF by raising the price of bread and other staples 25 years ago: bloody rioting forced the president to back down on price control reductions. More recently, the same thing happened to Mubarak when he too tried to hike prices. But showing a canny, if belated, grasp of proper procedure in the Arab world, Mubarak reinstated the original price controls–then introduced a better-quality bread at a higher price. Gradually the new bread became the old bread and everyone was satisfied. Now his challenge is to convince his people that their inability to buy more of that bread is a small price to pay for their country’s long-term economic progress.
title: “Slippery Slope” ShowToc: true date: “2023-01-26” author: “Alfreda Easterling”
My only teammate, cross-country skier Mostafa Mirhashemi (he’s on the left, I’m in the middle), and I were slightly apprehensive when we arrived Feb. 6 at Chicago’s O’Hare airport. Olympic officials sped us through the check-in process faster than anyone else. We were so happy that we weren’t fingerprinted and our luggage wasn’t checked. The U.S. State Department asked the Immigration and Naturalization Service to waive the fingerprinting it usually requires of Middle Easterners. I understand if somebody wants to research my background. But I do not want to feel like a criminal. If they couldn’t tell the difference between an Olympic athlete and a terrorist, then coming here would’ve been senseless.
But I’m glad we made it because these Games represent many firsts. It’s the first time an Iranian team has competed in an Olympics in the United States, it’s the first time Mustafa and I have been in the Olympics and it’s the first time we’ve been to America. Everyone at the Olympic Village has made a special effort to make us feel welcome. We feel relieved that we are treated like every other athlete. Security is tight, as it should be, considering there are 83 nationalities represented here–and because since September 11, the American government has been worried.
The athletes we hang out with come from the countries that we often compete against, including Turkey, South Korea and Japan. We hope to make friends; the purpose of the Olympics is friendship among nations. All teams seem to be very respectful. We’ve had only positive experiences among all people in the village. The exception is Israel. We have not run into the Israeli team. Even if we did see them, we wouldn’t speak to them because they’re committing violence against Muslims.
Otherwise, the food is good, plentiful and from all over. I’ve tried everything–Italian and lots of vegetables. But I haven’t tried Japanese; I don’t think I could work the chopsticks. Sometimes I go out at night to Iranian restaurants in Salt Lake City, where there’s a large Iranian community. Now, I’m staying in Park City, a five-minute walk from the slope. Twice I’ve walked up and down Main Street, where people see my Iranian team jacket and walk up and ask for my autograph and want their pictures taken with me. I feel like a celebrity. Every place we walk into, people want to talk.
During the day, I train with people like the Macedonians. We break for lunch and eat pasta, fruit, chicken. But I especially love American food–soups and sandwiches and McDonald’s. My room at the Olympic Village is excellent. I share it with Mostafa and it has a view of downtown Salt Lake City and a king-size bed. I’m very happy in the Olympic Village, where people mostly sleep and hang out in the lobbies and talk, trade pins and call their families back home. I call my fiancee every day. In the morning I run and in the afternoon I train. No dancing before I compete.
America is very orderly. I’d heard that it was an advanced, technologically progressive country. But I had always thought that the Austrians and the Swiss were the best people in the world. Now I see the Americans are just like them–maybe even better. I mentioned this to my coach, Majid Seghatoleslami. He said that if you love Americans they will love you.
I think it’s great that Americans support their athletes by yelling and waving their flags. They enjoy their athletes, as well as other countries’ competitors. That’s why we’re sorry that President Bush included our home in “the axis of evil.” We knew that it didn’t represent what Americans feel about Iran. We were very sorry that he said this because we are opposed to terrorism. We have been victims of terrorism many times since the revolution. How could we possibly be considered terrorists ourselves?
It was a lot of fun skiing in the men’s slalom last week. Though I missed the gate in my race, I still achieved my greatest goal as an athlete here. I was so happy to carry the flag of my country during the opening ceremonies and wave it on American soil. I was so excited I had tears in my eyes. That was worth more than any gold medal.
