On the false hope of investor conferences

Once again, Egyptians must sit back and listen to their government convince them that they need to pin all of their hopes on marauding capital in the form of multinational companies, investment banks, sovereign wealth funds and foreign-led joint ventures.

The lack of economic vision, beyond making sure high-level investors are comfortable, is a surefire way to ensure that the policies that led to the conditions directly preceding the January 25 revolution will be reproduced.

Prime Minister Ibrahim Mehleb has announced the Cabinet’s approval of the long-awaited Investment Law. The law has one main goal: attracting foreign investors. It looks to create a one-stop shop for investment procedures and concerns in Egypt, increasing procedural and judicial clarity along with relaxing red tape, tax breaks and other non-fiscal incentives for investors. Some of these incentives reportedly include public sector responsibility for costs such as the infrastructural development of specific facilities, as well as employee training and skills advancement.

The law was always meant to be a centerpiece for the Egypt “Economic” Development Conference (EEDC) that began in Sharm el-Sheikh on Friday morning.

I put “economic” in quotations, because the conference isn’t really about that. Since the emergence of Mubarak’s neoliberal-minded class of politicians and government, there has been a systemic campaign of deceptive and harmful misinformation disseminated by the government. From the late Prime Minister Atef Ebeid’s Cabinet through to Mehleb’s Cabinet today, the state has strived convince Egyptians that international investment, trade and capital injections together somehow hold the key to economic prosperity. 

One does not need to dig too far back in history to understand that, if anything, investment-centered economic development may actually be detrimental if it’s not accompanied by actual reforms that take the rest of the economy into account.

Between 2007 and 2009, the World Bank touted Egypt as the world’s top reformer. This was because the government had introduced many of the bank’s prescriptions, many of which will also be included in the current Investment Law — tax breaks, incentives and so on. The state also began a gradual withdrawal from the economy, decreasing subsidies and allowing the private sector to move into traditionally state-run — or at least state-regulated — areas.

This period offered great opportunity for some, but placed a great strain on others. It certainly offered opportunities for a globally connected class of investors who were close to the government. It also meant that many international investors looking to venture into the Middle East and North Africa (MENA) region’s largest market now had an open door. A brief look at the expansions of sectors such as real estate and finance during that period makes that abundantly clear.

While these opportunities were taken advantage of by a small and limited class, the average Egyptian was facing rising costs of living, and wages were not increasing to match. Food, transportation and electricity costs were increasing as inflation hit 11 percent and 12 percent. The state’s liberalization policy, which opened up the country to foreign investment — and did so successfully, despite overwhelmingly benefitting the crony capitalist class — was not accompanied by a marginally adequate set of economic development policies that would give the majority of the population a means to cope with the pains of the transition.

Minimum wage was maintained at archaic and almost laughable levels. Once-protected workers were now left to fend for themselves as employers were granted more leeway in employment policies, and the public had very little oversight on the obscure process of privatizing public companies and selling public land.  The informal economy is estimated at around 40 percent of gross domestic product (GDP), according to the Egyptian Center for Economic Studies (ECES), but there are no clear plans on how to formalize the sector, leaving millions of workers without true legal protection.

Egypt is certainly in real need of a profound change in both its investment laws and business practices. The country ranks 112 out of 189 in the World Bank’s “ease of doing business” rankings for 2015. The index ranks countries based on very practical business-related procedures, such as starting a business (73), enforcing contracts (152), dealing with construction permits (142), access to electricity (106), credit (71), protecting minority investors (135) and other criteria, which are then aggregated and averaged. Egypt ranks lower than many other African states, like Zambia (111), Botswana (74) and Ghana (70). As far as the MENA region goes, the only countries Egypt ranks higher than are the ones facing significant internal strife — Libya, Yemen, Syria and Iraq — with the exception of Jordan (117) and Algeria (154).

However, while the Investment Law does address a majority of the issues Egypt ranks poorly on, the onus will be on the government to ensure that it executes the law fully and fairly. For a country that consistently ranks high among the world’s most corrupt countries, it remains to be seen how the government will be able to convince the investors it’s so desperate to court that the age of public sector corruption and cronyism is over. 

This task seems to have been made all the more difficult by the indefinite postponement of the parliamentary elections.

After Georgia’s 2003 “Rose Revolution,” then-President Mikheil Saakashvili — who was faced with the need to overhaul an incredibly corrupt government — initially decided to revamp the entire police structure. He rebuilt major state headquarters with glass facades to symbolize a new era of public sector transparency. Whatever the ultimate results of this move, at the time it was poignant enough to convince the world that Georgia had turned a corner and that serious steps had been made to ensure its sustenance.

President Abdel Fattah al-Sisi has yet to make such a decisive move to combat institutional corruption. Perhaps he should.

Given the lack of public oversight, and a government that has failed to offer any kind of long-term economic plan, what will have changed for investors after this conference? When asked about his economic platform during a pre-election interview, Sisi declined to answer, speaking only of a plan to employ a few thousand young men in the agriculture sector. He has since played up the role of the Suez Canal development corridor and the “economic” summit as statements of his intent to reform the country’s ailing economy.

The conference has scheduled some keynote speeches by government officials to address pressing economic issues. The main working sessions, and the ultimate outcome of the conference, will be assessing “who decides to invest in what?”

Businessmen and coveted investors will surely be offered enticing and genuine business opportunities with the promise of short-term gain. This has the potential to stimulate certain sectors, and to allow for a certain amount of wealth accumulation. It could also be a component of, or a healthy contributor to, economic development. 

But unless more is done to ensure widespread, sustainable and socially just economic development, in the end, the investors themselves will be the only real beneficiaries. 

Mohamed Elmeshad 

You have a right to access accurate information, be stimulated by innovative and nuanced reporting, and be moved by compelling storytelling.

Subscribe now to become part of the growing community of members who help us maintain our editorial independence.
Know more

Join us

Your support is the only way to ensure independent,
progressive journalism