Despite providing a real opportunity for the Egyptian people’s desire for more political freedom, the 25 January revolution also exposed a number of vital problems. These matter more to future prosperity and stability in Egypt and the region than the overthrow of president Hosni Mubarak.
Continuing violence is increasingly sectarian, while the economic impact of the unrest worsens the structural obstacles to growth, leaving little hope of improvement for those who revolted against poor living conditions, food inflation and high unemployment.
Sectarian violence between Coptic Christians and Muslims has surged. A number of clashes in recent weeks in the Imbaba district of Cairo killed at least 15, both Copts and Muslims. Reports of non-intervention by security forces have prompted fears that Egypt’s interim military government is incapable of imposing order, particularly as non-sectarian crime has also risen sharply in recent months.
But the most pressing problem for the interim government remains the economy, as in most of the Arab Spring countries: “We are very much concerned by the rise in expectations... Sometimes the demands are justified and sometimes they are unrealistic,” finance minister Samir Radwan said this week.
Due to the recent instability, the economy contracted by around 7% in the first quarter of this year. Tourism revenue, the largest component of gross domestic product (GDP), declined by 80%, while the stock market tumbled 32% prompted by security fears. The International Monetary Fund (IMF) has revised its growth estimate to 1% this year after 5.1% growth last year, while the Institute of International Finance (IIF) expects a decline in GDP of 2.5%. Yet strong growth is required simply to keep pace with a rapidly growing population and rising inflation.
In response, the World Bank is expected to lend around $2.2 billion, while Egypt has asked IMF for help in curbing an estimated $10-12 billion gap in government funding. Despite fears that the military-led government may be less inclined towards economic liberalization and privatization than the former regime, the new loan deals can be expected to enforce a resumption of economic reforms, which had been gradually started under the previous regime.
With an average of 20% of Egyptians living in poverty (and up to 70% in some rural areas), however, any austerity measures and some economic freedoms such as removing subsidies may prove as inflammatory for a new government as the current sectarian violence.
There are also continuing fears that Islamist movements such as the Muslim Brotherhood, or more extreme Salafists, may take advantage of unpopular economic policies to gain traction in the newly open political scene. Religious groups, particularly the Brotherhood, were largely left behind by the pace of the anti-Mubarak demonstrations, initially led by a loose coalition of bloggers, youth activists and opposition party supporters. However, given its superior organization, combined with its reputation for social welfare, the Brotherhood may become an attractive option for those increasingly disillusioned with the slow rate of change—even though the majority of Egyptians do not agree with the group’s ideology.
Representative government may perhaps repress the endemic corruption that was one of the themes of anti-government demonstrations. However, as demonstrated elsewhere— most notably in Lebanon and Iraq— democracy does not directly translate into prosperity and stability: indeed, politics often hampers economic freedoms and trade, the removal of regulations and the withdrawal of subsidies to favoured sectors—all the things that allow people to prosper. In fact, many Arab Spring protesters demanded more subsidies and more jobs from government.
If a future elected government of this massively influential Arab nation does not grasp the economic nettle, Egypt’s underlying weakness will continue to fuel instability and inter-communal conflict: failure will resound throughout the Arab world.
Alan Fraser & Ben Crossland are Middle East and North Africa analysts for the international risk-analysis and security firm AKE Ltd, London
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