Geopolitics

Egypt’s Economy On The Brink Of Disaster

Three months after Mubarak’s ouster, foreign investors and tourists have deserted the country, while the Arab spring has raised people’s expectations higher than ever.

Egypt's construction sector is at a standstill
Egypt's construction sector is at a standstill
Florence Beaugé

CAIRO – On the banks of the Nile, carriages and feluccas are waiting desperately for tourists. Despite ridiculously cheap rates offered by travel agencies, foreign visitors are hard to find. A few steps away, the tall, charred building that once served as the headquarters of the Democratic National Party, Egypt's former ruling party, is a reminder of the violence of recent events.

It is now three months since Hosni Mubarak was overthrown, and the Egyptian economy is in a critical state. The country that just a few months ago was struggling to get back on its feet after the financial crisis, and hoping for 7% growth in 2011, now has to make do with an estimated growth of 1%. The International Monetary Fund (IMF) is projecting 4% growth for Egypt in 2012, but the absence of political stability renders the situation very uncertain.

Meanwhile, the Egyptian economy is operating at only 50% of its capacity: the tourism sector is waning, factories are paralyzed by strikes and sit-ins, exports have taken a steep plunge, and the construction sector is at a standstill. Since February, the country has been losing $40 million (28,5 million euros) each day, and foreign investment is "nearing zero," warned Marshal Hussein Tantaoui, head of Egypt's ruling military council.

Fear of a derailment of the democratic process

In Egypt, as in Tunisia, the new government (which has promised to relinquish power after this autumn's legislative and presidential elections) has a hard time meeting the rising economic demands of its population, half of whom live on less than two dollars a day. In the last few months, plans have been made to establish 700,000 public sector jobs, and public sector pay and pensions have been increased by 10 to 30%, despite the risk of aggravating an already soaring budget deficit. Sky-high inflation (12%) contributes to the tense social climate, to the point that some commentators such as Hichan Mourad, editor in chief of El-Ahram Hebdo, fear that the "democratic process might be derailed."

"We don't yet have real independent unions in this country. So people take to the streets for legitimate reasons, but sometimes for unrealistic ones too," says Samir Soliman, economics professor at the American University in Cairo. Some may call for better wages, others demand a proper dwelling for their children, and Copts (who make up 10% of the population) want to stop being "second-class citizens." According to Issandr El-Amrani, analyst and author of the highly successful blog The Arabist, Egyptians are "keen on making petitions," but their claims are not "very clear." They want to show that "this is only the beginning of their revolution," and that they are determined to "go even further."

Saoud Omar, union member and a long-time militant for workers' rights, emphasizes the fact that the Egyptian contestation movement goes back further than this year, and that it could continue for a long time. "Everyone blames workers, as if they were responsible for Egypt's woeful economic situation," he says. "But their claims are justified: they are working in appalling conditions and all they get are miserable salaries. The strikes they organized in 2006, for the very same reasons, were even worse than those we are seeing today."

In the business world, anxiety runs deep. Many are furious about the loss of their privileges from the Mubarak era. Others, such as Azer Farag, president of the engineering company EGTS, fret about the risks of the current transition period: spiralling inflation, gaping deficit (expected to reach 8.4% of gross domestic product in 2011) and external debt (74.9% of GDP).

"We have largely built our economy on fluctuating resources, such as tourism. The result is that all those working in the sector, most of them temporary workers, no longer have any income. The same thing goes for the 18 million people working in the informal sector," he says. Mr Farag blames the former president Mubarak for "not even having been capable enough to give Egypt what Ben Ali bestowed on Tunisia": proper education and health-care systems, and a secular state.

Mounir Makar, CEO of a company specialized in organic products, worries about the current "witch-hunt" climate, in the name of anti-corruption. Bosses have been imprisoned, sometimes based on simple denunciation or press campaigns. Properties have been seized, and companies closed. "There's a risk that this hunt could discourage big Egyptian investors from helping kick-start the economy", he worries. "Now, the private sector provides 70% of jobs."

In the impoverished Cairo neighborhood of Imbala, Copts and Muslims are united by the same poverty, despite the recent sectarian violence. "We were told that the revolution would change people's lives, but nothing has changed for us. We want to work!" says Ahmed, a 35 year-old Muslim construction worker. His neighbor Hani, 32, a Copt and father of four, works in the informal economy "one day out of ten, on average."

"It is the upper-middle class who chased Mubarak from power. There was no hunger riot, as one might have expected," says businessman Azer Farag. "But if such an event were to happen one day, it would be a hundred times more dangerous than what we have just witnessed."

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Spencer Tunick Nude Installation in Israel

Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

👋 Salam!*

Welcome to Monday, where the UK pays homage to slain MP David Amess, Myanmar frees thousands of prisoners, and Facebook gets ready to build its "metaverse." Please fasten your seatbelts: Worldcrunch also takes stock of the long-lasting effects — good and bad — the pandemic has had on the air travel industry.

[*Azeri - Azerbaijan]

🌎  7 THINGS TO KNOW RIGHT NOW

Myanmar to free political prisoners: Myanmar's junta chief Min Aung Hlaing has announced the release of 5,636 prisoners who had been jailed for protesting the coup that ousted the civilian government in February 2021.

• Powerful Haiti gang behind the kidnapping of U.S. missionaries: The notorious 400 Mawozo gang is believed to be behind the kidnapping in Haiti of a group of Christian missionaries, including 16 U.S. citizens and one Canadian. The brazen kidnapping on Saturday comes as crime is spiking since the killing of President Jovenel Moise in July.

• UK to pay tribute to David Amess: British lawmakers will pay homage in parliament to colleague David Amess, who was stabbed to death Friday in what was described by the police as a "terrorist incident." Officers arrested a 25-year-old suspect whose father, Harbi Ali Kullane, worked as a media adviser to a former prime minister of Somalia.

• COVID update: Russia has registered more than 34,000 cases of new infections in the past 24 hours, a new record since the start of the pandemic. Meanwhile, police in the northeast Italian city of Trieste used water cannons to clear striking dockworkers protesting Italy's new requirements that all employees be vaccinated.

• At least 26 killed in floods in India: Torrential rain has triggered floods and landslides in India's southern coastal state of Kerala, killing at least 26 people.

• Facebook to hire 10,000 in EU to develop "metaverse": The U.S. social media giant plans to hire 10,000 workers in the European Union over the next five years to build a "metaverse," a virtual reality version of the internet that the company touts as the future.

Punishing parents for children's bad behavior: After limiting gaming hours for minors, China is now considering legislation to reprimand parents if their children exhibit "very bad behavior" or commit crimes.

🗞️  FRONT PAGE

Colombian daily El Espectador dedicates its front page to Alex Saab, "owner of the secrets" of Venezuelan President Nicolas Maduro. The Colombian businessman, wanted by U.S. authorities for allegedly laundering money on behalf of Venezuela's government, has been extradited from Cape Verde to the U.S. where he is scheduled to appear in court today.

#️⃣  BY THE NUMBERS

4.9%

China's economy registered its slowest pace in a year as the country faces a looming energy crisis with power shortages and increasing pressure on its property sector. Gross Domestic Product (GDP) for the period between July-September rose 4.9%, the weakest numbers since the third quarter of 2020 and significantly lower than forecasts. The world's second-largest economy faces a debt crisis linked to the China Evergrande Group debt crisis, while energy shortfalls have dropped factory output to its weakest since early 2020, when heavy COVID-19 curbs were in place.

📰  STORY OF THE DAY

7 ways the pandemic may change the airline industry for good

Will flying be greener? More comfortable? Less frequent? As the world eyes a post-COVID reality, we look at ways the airline industry has been changing through a pandemic that has devastated air travel.

⛽ Cleaner aviation fuel: With air travel responsible for roughly 12% of all CO2 emissions from transport, and stricter international regulation on the horizon, the industry is increasingly seeking sustainable alternatives to petroleum-based fuel. In Germany, state broadcaster Deutsche Welle reports that the world's first factory producing CO2-neutral kerosene recently started operations in the town of Wertle, in Lower Saxony. The plant, for which Lufthansa is set to become the pilot customer, will produce CO2-neutral kerosene through a circular production cycle incorporating sustainable and green energy sources and raw materials

.🛃 Smoother check-in: The pandemic has also accelerated the shift towards contactless traveling, with more airports harnessing the power of biometrics — such as facial recognition or fever screening — to reduce touchpoints and human contact. Similar technology can also be used to more efficiently scan physical objects, such as explosive detection. Ultimately, passengers will be able to "check-in" and go through a security screening anywhere at the airports, removing queues and bottlenecks.

✈️ The billion-dollar question: Will we fly less? At the end of the day, even with all these (mostly positive) changes that we've seen take shape over the past 18 months, the industry faces major uncertainty about whether air travel will ever return to the pre-COVID levels. Not only are people wary about being in crowded and closed airplanes, but the worth of long-distance business travel, in particular, is being questioned as many have seen that meetings can function remotely, via Zoom and other online apps.


➡️ Read more on Worldcrunch.com

📣 VERBATIM

"The crimes committed that night are unforgivable for the Republic."

— Emmanuel Macron became the first French president to commemorate the killing of as many as 200 Algerian independence protesters by Parisian police in 1961. For 40 years, French officials ignored the massacre, which took place a year before Algeria gained its independence from France after an eight-year war. In 2012, French President François Hollande acknowledged the killings for the first time on a visit to Algeria, and Macron took it further by attending Sunday's commemoration at the site where the events happened in the French capital. Still, many had hoped the French President would go further and take responsibility for a "state massacre," for a crime many historians consider the most violent repression of a peaceful demonstration in post-War Europe.

📈💥  IN OTHER NEWS

​Low trust, high risk: The global rise of violence targeting politicians

The deadly stabbing of British Parliament Member David Amess confirms an ongoing study on trust and governance in democracies around the world: It's bad. In The Conversation, James Weinberg — the study's author and a lecturer in Political Behavior at the University of Sheffield — writes:

⏪ The assassination of Amess, who was stabbed to death in his constituency on Friday, is a tragic moment for democracy. What makes it even more devastating is that such a catastrophic failure is not without precedent or predictability. Labour MP Jo Cox was shot at her constituency surgery in 2016. Before her, another Labour MP, Stephen Timms, survived a stabbing in 2010. And Andrew Pennington, a Gloucestershire county councilor, died in a frenzied attack in 2001 while trying to protect local Liberal Democrat MP Nigel Jones.

☝️ Beyond these critical junctures in the public debate about politicians' safety, elected representatives must live with an increasingly insidious level of popular cynicism that threatens violence on an almost daily basis.

🇬🇧🇳🇿🇿🇦 Not only are these experiences of abuse or threats of physical violence felt across both sides of the political aisle in the UK — they also appear to be growing more common in other democratic contexts where the climate of politics has been presumed to be both calmer and more volatile, from New Zealand to South Africa.


Read the full piece from The Conversation, now on Worldcrunch.com

✍️ Newsletter by Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

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