Mubarak, the second son of President Hosni Mubarak, is a new kind of Egyptian leader. Unlike his father, a former air force commander, he has opted for a business career. After receiving his bachelor's degree and MBA from American University in Cairo, he worked for Bank of America in both Cairo and London before setting up a private equity firm called MedInvest. In the past few years, he has been raising his profile in Egypt and is often talked about as a future President, although he denies having such ambitions.RACE AGAINST TIME. What is certain is that through activities such as his foundation, which also runs a course for executives with Harvard Business School, he has become a politically adroit advocate of long-overdue reforms. Mubarak has backed increased foreign investment for Egypt, crucial changes in the foreign exchange rate regime, and a two-year-old effort to open up the information technology and telecommunications industries. Local executives give him some credit for Egypt's thriving mobile phone sector and for the recent fast growth of its small but promising Web service and software industries.
All of the reforms that Mubarak backs are aimed at boosting economic growth, creating jobs, and keeping Egyptians from joining radical groups, mainly by giving them a stake in society. But the Egyptian economy, which expanded rapidly in the mid-1990s, has slowed dangerously in recent years. With Egypt likely to take a further hit from the September 11 terror attacks in the U.S., Mubarak and other reform-minded Egyptians find themselves in a race against time. If unemployment, now 20%, continues to rise, and if many of the 600,000 people coming into the workforce each year are unable to find jobs, there is a risk of a social explosion. "All the people ask how this government can be stable," says Esam El Arian, a leading member of the outlawed Muslim Brotherhood, an Islamic opposition group.
Although Egypt desperately needs change, reformers like Gamal Mubarak face an uphill battle. Power in Egypt is mostly in the hands of men in their 60s and 70s who made their careers under the Arab socialism of Gamal Abdel Nasser. Gamal's father, President Mubarak, and his close aides are extremely conservative. For example, over the past three years the government wreaked havoc on the economy by trying to preserve an overvalued exchange rate. The central bank spent about $7 billion, a third of Egypt's hard currency reserves, defending the Egyptian pound. Interest rates rose to the teens; the money supply sharply contracted.
The squeeze on dollars needed to finance imports became so bad last summer that businesspeople desperate for greenbacks sent aides scurrying to black market moneychangers with briefcases full of cash. Executives also took their complaints to Gamal Mubarak. That eventually produced results. In intense meetings in early August, Mubarak helped persuade Prime Minister Atef Ebeid and Economics Minister Youssef Boutros Ghali to agree to a devaluation and a controlled float of the currency. As a result, the hard currency squeeze has eased, and interest rates have come down."STEP FORWARD." Such episodes convince many Egyptians that Gamal has his father's ear on economic matters--though the older Mubarak doesn't follow all his son's advice. In public, Gamal is careful to work through institutions such as his foundation and the Egyptian Center for Economic Studies (ECES), an economic think tank with a free-market tilt. The ECES has barraged the government with studies on everything from privatizing utilities to floating the exchange rate. "He uses these organizations as a platform," says Taher S. Helmy, a partner in Helmy & Hamza, a Cairo law firm associated with Chicago's Baker & McKenzie. "When he talks, people listen."
As in any Arab country, rumors circulate in Cairo that the President and his family may benefit personally from government business. A Cairo financier says when Mubarak was at Bank of America in the 1980s, he likely won government approvals faster than competitors for a lucrative program of swapping Egyptian trade debt for equity in companies or export goods. Still, "it was a fairly level playing field," the financier says.
Longtime associates of Mubarak say he is careful not to abuse his status as the President's son. To avoid the appearance of conflict of interest, for example, he didn't raise the money for his private equity fund himself. Instead, he left that job to Cairo investment bank EFG-Hermes, which manages the fund and crunches the numbers on possible investments. Mubarak sits on the investment committee of the fund, which is now worth about $100 million--roughly twice its value when it started in 1997. Investors consider that a reasonably good performance, especially since the Cairo stock market has fallen 70% since its peak in February, 1997. The fund has put its money into high-tech Egyptian companies such as Misrfone Telecommunications Co., an unlisted subsidiary of Vodafone that is planning to go public. Mubarak is now interested in widening the fund's activity to surrounding countries. "There is a lot of hidden value as capital markets open up," he says.
But these days, Mubarak says he devotes half of his time to business, with the rest spent on public service. He operates out of spacious but modestly decorated offices high in an ugly concrete building in the north Cairo neighborhood Heliopolis. Plainclothes security men stand guard in the dust-caked street outside. Apart from his economic ideas, Mubarak has been trying to remake his father's political party--the National Democratic Party--for what he says will be a more open political era. However, Egypt still has a long way to go toward being a real democracy. Last year's parliamentary elections were marred by strongarm tactics, and the opposition won only 27 out of 415 seats. Mubarak calls the elections "a big step forward" but adds: "Have we reached our ultimate goal? Obviously not."
Mubarak's high profile, combined with his 73-year-old father's refusal to designate a successor, has led to speculation that the younger man might be in line for the top job or another high office. Brushing off such talk, he says he isn't interested in a Cabinet position and can be more effective outside the government. But what he terms "rumors" continue to buzz. "The best thing that could happen would be for him to play a more significant role in this country," says lawyer Helmy. In truth, where Gamal Mubarak ends up will depend on how the latter days of his father's rule play out and whether his reforms work. The economy looks gloomy now, but Mubarak is building a following among ambitious young people. Maybe someday their views will count. By Stanley Reed, with Susan Postlewaite, in Cairo