Egypt

Hope For Stability Unites Egypt's Rich and Poor


Hope For Stability Unites Egypt's Rich and Poor

In a small dusty village in the Egyptian governorate of Sharqiya, about 60 miles northeast of Cairo, Hanan Ibrahim rises at 6 a.m. to open the tiny shop her husband owns on one of the village’s few roads. She works until 11 p.m. every day, except Friday, to support their three children. Ibrahim has been nervous since the Jan. 25, 2011 uprising.

The last 16 months have wreaked havoc on the country’s already strained economy. She says crime has increased and prices have gone up. “This affects everything, and makes me worry for my children,” confides the 28 year old, who wears a niqab, the full Islamic face veil.

The family’s small, fly-infested shop is not much bigger than a single room. Stacks of soap, detergent, and candy line the shelves and a lone refrigerator keeps bottles of soda cold in the stifling heat. Rising prices have meant fewer customers, and Ibrahim says the family now makes barely enough money to live off its profits.

Sharqiya has been a longtime Muslim Brotherhood stronghold. The 84-year-old Islamist group has established itself as a grassroots organization that steps in where the state is absent, running clinics and charities across the countryside. That’s why on the final day of Egypt’s two-day presidential election runoff , Ibrahim says she will be casting her vote for Mohammed Morsi, the Brotherhood candidate. Morsi, who also hails from Ibrahim’s village, is facing off against Hosni Mubarak’s ex-prime minister, Ahmed Shafiq. “He’s a man of God and he has good ethics,” she says. “Would he really abandon his own people?”

Regardless of who wins Egypt’s first competitive presidential election, the most important order of business will be satisfying a nearly universal yearning for a return to normalcy after a catastrophic 16 months for the economy. While hopes for some amount of stability run high, there’s also a sense that tough times lie ahead.

On June 15, Fitch Ratings downgraded Egypt’s sovereign credit rating deeper into junk status after the Supreme Constitutional Court issued a ruling that effectively dissolved Egypt’s first freely elected parliament in six decades. That decision will complicate the next government’s task of coming up with $22.5 billion to finance the recently released 2012-2013 state budget, most of which goes to civil salaries, subsidies, and debt repayment, according to a report from the Carnegie Endowment for International Peace.

Egypt’s foreign reserves have fallen 40 percent since January 2011. To cover the projected crunch, the country has been negotiating with the International Monetary Fund for a $3.2 billion loan, but internal politicking has delayed a deal. The loan’s current terms are far more stringent than when talks with the IMF began six months ago. Still, it’s difficult to see the new president having any other choice to head off the predicted economic spiral.

“Nobody is going to be wild about it, but at some point they’re going to have to face the music about this because there’s going to be no other options,” says Michael Hanna, a fellow at the Century Foundation in New York. “No one is going to invest in Egypt” in the absence of an IMF agreement, Hanna says.

The economy will grow around 3 percent in 2012, according to Carnegie Endowment’s forecasts, while growth in the last decade under Mubarak averaged 5 percent a year. About half of the country’s 84 million people live on about $2 a day, the United Nation’s poverty line.

Egypt’s presidential candidates have offered vaguely different takes on how to combat the country’s economic problems: The Brotherhood’s plans are mostly free-market driven, with a promise to improve social services and greatly reduce unemployment. Shafiq has promised larger infrastructure projects and debt relief for farmers.

Some activists are calling the entire election a sham, threatening further political instability when the results are announced next week. Moreover, low turnout at the polls may conspire to deprive the winner of a strong popular mandate.

Escalating its political standoff with the Muslim Brotherhood, Egypt’s military caretaker government issued an interim constitution late Sunday night defining the new president’s authorities, giving itself control over the budget and who will write the country’s next constitution, according to the Associated Press. The Brotherhood has already refused to accept last week’s suspension of parliament, furthering the risk of continued street protests and legal battles as the country once again is under military law.

Many voters acknowledge that, regardless of which candidate prevails, it will take a while before the economy turns around. “It doesn’t matter who will win, this problem will continue and will continue for a long time,” says Alaa Arafa, chief executive officer of apparel maker Arafa Holding and chairman of the Egyptian Garment Exporters Association. Arafa voted for Shafiq, whom he sees as a bulwark against Islamists and the man who can better handle the economy.

Arafa says his company’s profits fell 40 percent last year, as strikes and lack of consumer confidence stalled production at his factories. More than anything, he says, Egypt needs stability and the president needs good, competent economic advisers.

“The most important thing today for me is confidence and profitability. We have to be sure we’re moving in the right direction,” Arafa says. “It’s not the end of the world, but the thing we need to have is stability, security and the other things will be a result.”

Topol is a Bloomberg Businessweek contributor. Follow her on Twitter @satopol.

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