Already a Bloomberg.com user?
Sign in with the same account.
Only a few months ago, Khairat El-shater was languishing in an Egyptian prison, put there by the Hosni Mubarak regime. Many of his businesses were shuttered. Now the Deputy Supreme Guide or No. 2 leader of the Muslim Brotherhood, Egypt’s dominant political-Islamic group, shuttles between meetings at one of his once-closed offices in a grimy building in the Nasr City district of Cairo. His visitors include bankers and foreign investors from the U.S. to Australia. “They all have many questions about one issue: What impact will the Muslim Brotherhood have on the investment climate?” says El-shater.
Founded in Egypt in 1928, the Brotherhood has helped spawn Islamic groups across the globe, including the militant Palestinian movement Hamas. The Brotherhood’s founder, Hassan Al-Banna, preached the adoption of Islamic law as the way to lift the yoke of Western domination. Because of its popular appeal and occasionally violent tactics, the group came into conflict with secular Arab states such as Syria and Egypt, where the Brothers were persecuted intermittently from the 1950s until the Arab Spring. The Egyptian Brotherhood has long since disavowed violence.
Analysts think the Brotherhood’s Freedom and Justice Party may well emerge as a power in Parliament once elections are held. (The party says it won’t field a presidential candidate or seek more than half of Parliament’s seats.) “The Brotherhood is the largest political force,” says Samer Soliman, an assistant professor of political economy at American University in Cairo. The Brothers’ swift rise has riveted global investors. The fear, says Naguib Sawiris, a Christian and Egypt’s best-known businessman, is that the Brotherhood will encourage “better relations with Hezbollah and Hamas, more hatred of Israel, and a love-hate relationship with the U.S.”
Thanks to the Brotherhood’s history as an underground organization, outsiders don’t know whether the Brothers will be a force for moderation or a divisive element in a traumatized Egypt. Cairo investment bank EFG-Hermes recently brought 14 managers of foreign institutional funds based in the U.S., the U.K., Africa, and the Middle East to see El-shater. “I believe the meeting dismissed some investors’ concerns about an extreme economic policy,” says Wael Ziada, EFG’s head of research. He says some of the investors “were positively surprised to find some of the ideas shared by the Brotherhood to be mostly capitalist in nature.”
The Brotherhood supports private enterprise, a stock market, and engagement with the global economy. “We believe in a very, very big role for the private sector,” says El-shater. The Brotherhood also wants “to attract as much investment as possible.”
The group says it would direct more investment than the prior regime toward industries, agriculture, and information technology to create jobs. It wants to trim the budget deficit, projected at 8.6 percent of gross domestic product, and increase the use of Islamic bonds. The bonds technically don’t pay interest, which is forbidden by the Koran. Although the Brotherhood doesn’t question Mubarak’s pro-business reforms per se, it does object to the social injustice that resulted. The Brotherhood’s agenda “is a generally free-market-oriented program,” says Shadi Hamid, director of research at the Brookings Doha Center in Qatar. “I found it surprising because that is not the way the winds are blowing in Egypt.”
El-shater’s own status helps. His businesses range from furniture to clothing to bus assembly to pharmaceuticals. He estimates that he employs 2,000 people. “The Brotherhood is trying to reassure investors by saying, ‘Look, we are business owners and professionals,’ ” says Elijah Zarwan, an analyst at the International Crisis Group.
Not all investors are comfortable with what could be an increasingly Islamic society. “Who is going to invest in a country like Iran?” asks Sawiris. Others worry what a stricter observation of Islamic codes would do to business. “Tourism could be in conflict with some of the Brotherhood’s ideas,” says Aladdin Saba, chairman and CEO of Cairo investment bank Beltone Financial. Many businessmen, though, assume the Brothers will show restraint when it comes to tourists enjoying cocktails at their hotel. “I don’t think they would jeopardize” tourism, Saba adds. They’ll need to compromise in running the economy as well.
The bottom line: Egypt’s recovery from its current slump may depend on the willingness of the Muslim Brotherhood to adopt market-friendly policies.