CAIRO – Another year down the drain for Egypt’s economy. Three years since the January 2011 revolution, and little has been done to salvage what’s left of the crumbling economy, weighed down by the burdens of political turmoil and mismanagement.
Now, a growing fear of terrorism has been added to the many economic ailments.
I had started to think about what 2013 meant for Egypt’s economic conditions (bad things), and maybe attempt an outlook for the coming year (gloomy at best). Then the government threw a curve ball and dubbed the Muslim Brotherhood a terrorist organization.
What’s in a label? And what ripple effects does it have?
There’s no use arguing here over the political virtues or hollowness of such a decision. That’s an analysis better left to political pundits, and I’m not one.
But a label as heavily laden with consequences as this cannot be divorced from the broader context. It is sure to have implications beyond its political nature, ones that are economic, social, and even cultural.
What added risks are associated with a state that has declared it is battling a terrorist group made up of hundreds of thousands of members who live amongst regular citizens? As an outsider, as a tourist or an investor, how does this figure into your risk calculations?
It may be too early to tell. Or maybe it’s too much of a loaded question for now.
As 2014 begins, I put the question to several of my most trusted and reliable analysts and industry insiders. I wanted to gauge the potential economic implications of the government’s decision to call the Brotherhood a terrorist group, as well as the subsequent actions taken against its members, supporters and assets.
In what may be the most prompt and honest responses, one of my sources wrote me back, saying, “Will have to pass on this loaded question, and instead just wish you a happy 2014.”
Another replied, “Sorry, but I have no clue at all.”
Both work in Cairo-based private equity firms, where assessing risk and forecasting the future plays a big role in determining strategic investment decisions.
It’s not common for people in the business world to throw their hands up in the air and admit that they simply do not have an answer. But considering the issue at hand, it came as no surprise and the honesty was greatly appreciated.
However, the lack of clarity on where the country is heading is in itself a reflection of the biggest economic problem we are currently facing: a foggy forecast with low visibility.
Actions, not words
Just as we’re wrapping up one bleak year, it looks like the economy needs to brace itself for yet another, despite attempts to build confidence by stating otherwise. When it comes to the economy, confidence and perception will take you a long way, but they must be backed up by viable opportunities, as well as a level of certainty and predictability. After all, risk must be assessed and managed.
Karim Helal, economist and chairman of Abu Dhabi Islamic Bank (ADIB) Capital, simply replied that the new label will have “very little impact, if any” on the economy.
Angus Blair, founder of Signet Institute, a Cairo-based think tank, said, “The indirect effect is the action taken against the group and its response to those actions as to whether it dampens the investment sentiment or not. So that is difficult to quantify. It is a very difficult question to answer.”
I clarified that I was asking more what it means for a state to suddenly be battling “terrorism,” as opposed to changing a political course. Will the “terrorist” label make investors and tourists even more wary than before?
“The issue is not the state taking legal action against one group and its effects,” he replied, “but what the overall ‘noise’ there is, and whether there are terrorist acts. Investors are fully aware of security, as well as human rights issues, but it is a rise in terrorist acts which would act as the greatest deterrent to new investment.”
If we keep using terrorist acts as a loose term, is it not to be expected that the group’s members and supporters will continue to reject this newly minted label? At the very least, do we not expect ongoing protests and demonstrations to be confronted with more heavy-handed security measures and, in turn, outbreaks of violence? Instability on the streets? Further rounds of aggression?
Will the label stop the bombing of security institutions, for which the Sinai-based jihadi group Ansar Beit al-Maqdes has claimed responsibility? Will it quell the looming threat of violence against citizens?
And what if the terrorist designation does not offset the economic consequences of all the above? How, then, do we deal with deeper economic stagnation?
Wael Ziada, head of research at regional investment bank EFG-Hermes, said the effect would be negative. But before offering further explanation, he clarified that he has vehemently criticized the Muslim Brotherhood for “failing miserably on the political and economic fronts,” and for “making us go through what we’re going through at the moment.” He understands the need for the government to “calm things down,” and understands that there are concerns that things are not calming down.
The four-finger salute used by backers of the Brotherhood — Photo: Guido van Nispen
On the other hand, he says, the Brotherhood and their supporters are a significant group, with “possibly one million members, at least ... What is the measure we have used to determine that they are all terrorists?”
“They have economic interests,” he said, “even if small, through schools and businesses, and the state is trying to dry up their economic resources. This has a direct social impact.”
However, he added, “In the grand scheme of things, you cannot say that the economic impact will be significant. It will be at the level of service positions for obviously tactical social and political agenda that serves the MB.” The state, in turn, might not yet have the means on an institutional level to compensate for the lack of these services.
“The most serious indirect impact is that, effectively, you do not wish to go down any form of a reconciliation route. This will continue to result in an extremely volatile political situation, which will put a lot of weight on serious economic reform,” said Ziada.
The government has gone to great lengths to assure observers that the economy is, against all odds, nearing the right track. On New Year’s eve, ministers spoke at a televised press conference to update Egyptians on the state of affairs.
Deputy Prime Minister Ziad Bahaa Eddin said that the first six months of 2013 (the second half of deposed President Mohamed Morsi’s year in power) saw stagnation, a shortage of basic commodities, Egypt’s isolation from the global economy, and other negative things.
The second half, he went on, saw improved stock market performance, a flush of financial support in the form of Gulf aid amounting to $12 billion and two stimulus packages spent on infrastructure projects that target poorer segments of society and restocking Egypt’s basic commodities, namely wheat and fuel.
I might be wrong, and it might be too early to tell, but if it’s merely positive indicators we’re after, then all we’ve done is rewind back to 2010 when positive growth, foreign direct investment (FDI) and stock market performance did little to alleviate the struggles of the poor. Delayed structural reforms and tough decisions on unpopular subsidy and tax policies are unlikely to be tackled anytime soon.
Looking at the numbers, the economy grew at a meager rate of 2.2% in the fiscal year ending in June. The government is aiming for a 3.5% growth rate for the current fiscal year; the Central Bank of Egypt (CBE) has begun cutting interest rates in a bid to boost growth and cut borrowing costs.
Still, even achieving this rate will not do much to create enough jobs to bring down unemployment, which has risen above 13%.
Signs of hope
A much-needed source of hard currency and job creation, FDI is down drastically from a high of $12 billion before the January 2011 uprising. It has not recovered due to the continuing political instability and lack of clarity when it comes to governance.
Still, the results of a survey of leading fund managers in the region conducted in late December by Reuters showed growing optimism about an economic recovery, despite the ongoing political uncertainty.
“As the Egyptian government’s decision to list the Muslim Brotherhood as a terrorist organization last week showed, the country is still struggling through a difficult transition back to civilian rule,” Reuters reported. “But most fund managers are assuming a drastic deterioration of public security will be avoided and are focusing instead on signs that billions of dollars worth of aid from Gulf states are starting to revive the Egyptian economy.”
Alongside that, local and foreign investors, as well as analysts and economists, will surely be looking for signs of political stability in order to spur the economic recovery. They will be observing the process of conducting a referendum on the new draft of the constitution in mid-January, and will then follow events closely as Egypt holds parliamentary and presidential elections (we still do not know which will come first).
Security, again, is key to ensure a smooth voting process.
Alaa Ezz, secretary general of the Federation of Egyptian Chambers, says the “terrorist” label is a “double-edged sword with an economic impact that goes both ways.”
“The positive is very clear. It closes a chapter and will assist in speeding up the highly needed stability for investments and tourism to come back and the economy to rebound,” he said.
But the downside is “the terrorism reaction we were witnessing ... that might have some very short-term impact on tourism more than investments.”
As a reply to both that and the earlier wishes for a happy 2014, all I can say is, here’s to hoping.
In San Diego, California, a researcher tracked how in the city's low-income neighborhoods that have traditionally lacked dining options, when interesting eateries arrive the gentrification of white, affluent and college-educated people has begun.
SAN DIEGO — Everybody, it seems, welcomes the arrival of new restaurants, cafés, food trucks and farmers markets.
What could be the downside of fresh veggies, homemade empanadas and a pop-up restaurant specializing in banh mis?
But when they appear in unexpected places – think inner-city areas populated by immigrants – they're often the first salvo in a broader effort to rebrand and remake the community. As a result, these neighborhoods can quickly become unaffordable and unrecognizable to longtime residents.
An appetite for gentrification
I live in San Diego, where I teach courses on urban and food geographies and conduct research on the relationship between food and ethnicity in urban contexts.
In recent years, I started to notice a pattern playing out in the city's low-income neighborhoods that have traditionally lacked food options. More ethnic restaurants, street vendors, community gardens and farmers markets were cropping up. These, in turn, spurred growing numbers of white, affluent and college-educated people to venture into areas they had long avoided.
This observation inspired me to write a book, titled The $16 Taco, about how food – including what's seen as "ethnic," "authentic" or "alternative" – often serves as a spearhead for gentrification.
Take City Heights, a large multi-ethnic San Diego neighborhood where successive waves of refugees from places as far away as Vietnam and Somalia have resettled. In 2016, a dusty vacant lot on the busiest boulevard was converted into an outdoor international marketplace called Fair@44. There, food vendors gather in semi-permanent stalls to sell pupusas, lechon (roasted pig), single-sourced cold-brewed coffee, cupcakes and tamarind raspado (crushed ice) to neighborhood residents, along with tourists and visitors from other parts of the city.
Informal street vendors are casualties.
A public-private partnership called the City Heights Community Development Corporation, together with several nonprofits, launched the initiative to increase "access to healthy and culturally appropriate food" and serve as "a business incubator for local micro-entrepreneurs," including immigrants and refugees who live in the neighborhood.
On paper, this all sounds great.
But just a few blocks outside the gates, informal street vendors – who have long sold goods such as fruit, tamales and ice cream to residents who can't easily access supermarkets – now face heightened harassment. They've become causalities in a citywide crackdown on sidewalk vending spurred by complaints from business owners and residents in more affluent areas.
This isn't just happening in San Diego. The same tensions have been playing out in rapidly gentrifying areas like Los Angeles' Boyle Heights neighborhood, Chicago's Pilsen neighborhood, New York's Queens borough and East Austin, Texas.
In all of these places, because "ethnic," "authentic" and "exotic" foods are seen as cultural assets, they've become magnets for development.
A call for food justice
Cities and neighborhoods have long sought to attract educated and affluent residents – people whom sociologist Richard Florida dubbed "the creative class." The thinking goes that these newcomers will spend their dollars and presumably contribute to economic growth and job creation.
Food, it seems, has become the perfect lure.
It's uncontroversial and has broad appeal. It taps into the American Dream and appeals to the multicultural values of many educated, wealthy foodies. Small food businesses, with their relatively low cost of entry, have been a cornerstone of ethnic entrepreneurship in American cities. And initiatives like farmers markets and street fairs don't require much in the way of public investment; instead, they rely on entrepreneurs and community-based organizations to do the heavy lifting.
In City Heights, the Community Development Corporation hosted its first annual City Heights Street Food Festival in 2019 to "get people together around table and food stalls to celebrate another year of community building." Other recent events have included African Restaurant Week, Dia de Los Muertos, New Year Lunar Festival, Soul Food Fest and Brazilian Carnival, all of which rely on food and drink to attract visitors and support local businesses.
Meanwhile, initiatives such as the New Roots Community Farm and the City Heights Farmers' Market have been launched by nonprofits with philanthropic support in the name of "food justice," with the goal of reducing racial disparities in access to healthy food and empowering residents – projects that are particularly appealing to highly educated people who value diversity and democracy.
Upending an existing foodscape
In media coverage of changing foodscapes in low-income neighborhoods like City Heights, you'll rarely find any complaints.
San Diego Magazine's neighborhood guide for City Heights, for example, emphasizes its "claim to authentic international eats, along with live music venues, craft beer, coffee, and outdoor fun." It recommends several ethnic restaurants and warns readers not to be fooled by appearances.
Longtime residents find themselves forced to compete against the "urban food machine"
But that doesn't mean objections don't exist.
Many longtime residents and small-business owners – mostly people of color and immigrants – have, for decades, lived, worked and struggled to feed their families in these neighborhoods. To do so, they've run convenience stores, opened ethnic restaurants, sold food in parks and alleys and created spaces to grow their own food.
All represent strategies to meet community needs in a place mostly ignored by mainstream retailers.
So what happens when new competitors come to town?
Starting at a disadvantage
As I document in my book, these ethnic food businesses, because of a lack of financial and technical support, often struggle to compete with new enterprises that feature fresh façades, celebrity chefs, flashy marketing, bogus claims of authenticity and disproportionate media attention. Furthermore, following the arrival of more-affluent residents, existing ones find it increasingly difficult to stay.
My analysis of real estate ads for properties listed in City Heights and other gentrifying San Diego neighborhoods found that access to restaurants, cafés, farmers markets and outdoor dining is a common selling point. The listings I studied from 2019 often enticed potential buyers with lines like "shop at the local farmers' market," "join food truck festivals" and "participate in community food drives!"
San Diego Magazine's home buyer guide for the same year identified City Heights as an "up-and-coming neighborhood," attributing its appeal to its diverse population and eclectic "culinary landscape," including several restaurants and Fair@44.
When I see that City Heights' home prices rose 58% over the past three years, I'm not surprised.
Going up against the urban food machine
Longtime residents find themselves forced to compete against what I call the "urban food machine," a play on sociologist Harvey Molotch's "urban growth machine" – a term he coined more than 50 years ago to explain how cities were being shaped by a loose coalition of powerful elites who sought to profit off urban growth.
I argue that investors and developers use food as a tool for achieving the same ends.
When their work is done, what's left is a rather insipid and tasteless neighborhood, where foodscapes become more of a marketable mishmash of cultures than an ethnic enclave that's evolved organically to meet the needs of residents. The distinctions of time and place start to blur: An "ethnic food district" in San Diego looks no different than one in Chicago or Austin.
Meanwhile, the routines and rhythms of everyday life have changed so much that longtime residents no longer feel like they belong. Their stories and culture reduced to a selling point, they're forced to either recede to the shadows or leave altogether.
It's hard to see how that's a form of inclusion or empowerment.
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