(Updates with tax increase on investors, companies in 14th paragraph. See EXTRA and MET for more on Middle East unrest.)
June 2 (Bloomberg) -- Egyptian billionaire Naguib Sawiris is leading businessmen back into politics after the revolt that toppled President Hosni Mubarak also brought the downfall of several wealthy entrepreneurs.
The head of mobile-phone network Orascom Telecom Holding SAE, Egypt’s third-biggest listed company, is blunt about his aims. His newly founded Free Egyptians Party will promote capitalism, “attract honest businessmen who create jobs” and challenge the Muslim Brotherhood, the frontrunner in September’s election, Sawiris said at a May 14 public debate in Cairo.
“We don’t agree that the word businessmen should be an insult,” said Sawiris, who’s worth $3.5 billion according to Forbes magazine.
Many of the millions of Egyptians who took to the streets demanding Mubarak’s removal blamed the country’s tycoons as well as its president for ills such as corruption and poverty. After Mubarak’s Feb. 11 overthrow, graft investigations along with labor and political disputes brought many businesses to a standstill, sent Egyptian shares plunging and reduced foreign investment to a trickle.
The economy shrank 7 percent in the January-March period from the previous three months, as exports and tourism revenue slumped and companies went bankrupt, Finance Minister Samir Radwan said on April 20. Growth may slow to 1 percent this year, the lowest since 1992, the International Monetary Fund says.
That’s the backdrop for what contestants say will be Egypt’s first free election. While Sawiris’s party and rivals haven’t drawn up detailed policies yet, they’re starting to hand out leaflets and place ads on television and in the press.
Sawiris isn’t the only business leader to get involved. Hisham el-Khazindar, co-founder of private equity firm Citadel Capital, is among the financiers of the Justice Party, and Nabil Deabis, whose family business ranges from education to the media, is forming a party called Modern Egypt.
Their shared problem is “how to rebuild the image of wealthy entrepreneurs,” Moustafa el-Husseini, author of “Egypt on the Brink of the Unknown,” said by telephone. “Part of this is to portray themselves as the last line of defense against Islamists and chaos.”
It’s a theme that Sawiris hammers on. At the May 14 Cairo debate, he said like-minded parties should form a coalition to face the Brotherhood, the biggest opposition group under Mubarak. Ten days later in Rome, he said he would give a “large part” of his time to politics in Egypt “so it’s not hijacked by extremists.”
While that may appeal to some voters, Sawiris and his ilk still need to promote policies that don’t widen the gap between the rich and poor or feed the suspicion they are using politics for personal gain, say analysts including Moustapha Kamel el- Sayyed, a political science professor at Cairo University.
It’s a goal that eluded the millionaires-turned-politicians who shaped the economic policies of the past decade. The government of Ahmed Nazif, who is now in prison pending a trial on corruption charges he denies, attracted record investment from companies such as BP Plc and Italy’s Intesa Sanpaolo SpA.
Egypt’s benchmark EGX 30 stock index has dropped 24 percent this year as revolts swept the Middle East. The measure had gained about 400 percent between July 2004, when Nazif took office, and the end of 2010.
That boom under Nazif, though, wasn’t matched by rising living standards for most Egyptians. Government data show that about 40 percent of Egypt’s 80 million people live at or below the United Nations poverty line of $2 a day.
In a sign the current government may have different priorities, Radwan, a former development economist, announced a new 10 percent capital gains tax late yesterday and increased the top tax rate on corporate profits. The EGX30 fell 2.7 percent today, the most in six weeks.
Critics of the Nazif government, including the Brotherhood, also say it doled out cheap land to real-estate companies to build luxury homes, and failed to protect the poor from inflated food prices, which have risen about 20 percent in the past year.
Conflict of interest is another issue. “The presence of businessmen in political life is legitimate,” el-Sayyed said. “But in the past period you had people in charge of ministries” who also owned companies in the same line of work. Without measures to prevent that, “the door is open to use wealth to get political influence illegally.”
Former Housing Minister Ahmed el-Maghraby was sentenced to five years in prison on May 26 after he was charged with selling state-owned land at below-market prices to Palm Hills Developments SAE, a property developer in which he has a stake. Former Tourism Minister Zoheir Garranah, who owned a tourism company, got a similar sentence May 10 on profiteering charges.
Rules for the formation of political parties drawn up in March by Egypt’s interim military rulers don’t limit donations, adding to concerns that wealthy Egyptians may influence decisions.
“This is the real issue,” Wael Khalil, an activist who works at an IT company, said in an interview. “We are all aware of the Brotherhood and the fundamentalists while nobody is paying attention to this.”
The sharpest disagreements between the Brotherhood and business-backed parties such as those of Sawiris and el- Khazindar may be over social policy rather than the economy.
The Brotherhood, which is not allowed to campaign as an overtly religious group and has set up the proxy Justice and Freedom Party, calls for a free, competitive economy in its draft platform. It counts some wealthy members among its top leadership, including Deputy Leader Khairat el-Shater, whose businesses include a chain of furniture stores.
Sawiris’s Free Egyptians Party and similar groups are appealing to voters who see the Brotherhood’s refusal to endorse the candidacy of women and Christians to the presidency as a sign that it would try to impose Islamic lifestyles.
It’s something Ingy Ghali, 24, came to hear at the Cairo debate. “I am worried about the penetration of fundamentalist thought,” she said.
Mohamed Talaat, 29, a corporate executive, said he had already backed Sawiris. “The problem in the past was corruption, not capitalism,” he said in an interview. “I am a liberal and a capitalist and there is nothing wrong with that.”
Sawiris shares his view. “Busy writing the economic program of the party,” he wrote on his Twitter account on May 22. “Not sure left-wingers will like it.”
--Editors: Digby Lidstone, Ben Holland.
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