Which way ahead?
Experts are unsure which economic model Islamist President Mursi will follow, though it is unlikely to mark a radical shift from existing policies, writes Nesma Nowar
Mohamed Mursi's inauguration as Egypt's first democratically elected president has raised many questions concerning the outlines of his administration. One of the pressing concerns is how an Islamist president is likely to run the country's economy.
Many economic challenges lay ahead, including modest growth rates, high rates of unemployment, poverty, rising inflation and a gaping budget deficit. Experts believe that the measures Mursi would take to address these challenges depend on the economic model he adopts. But what is this model?
Owing to his Islamic background, observers believe that an economic system with an Islamic slant is what is probable. According to Mursi's electoral platform, he agrees with the open economy and private-led growth, scaling down the role of government while guarding the social dimension. He has said little about the role of Islam in economic policy, beyond proposing a zakat (charity) fund to help poor Egyptians. It would be financed by a two per cent tax.
Some experts argue that Mursi eyes the Turkish economic model of an open export-oriented economy, while others believe he has in view the Malaysian model where Islamic banks play a significant role.
Omnia Helmi, acting executive director of the Egyptian Centre for Economic Studies (ECES) believes that the new government, which is about to be formed, will reflect how Mursi plans to manage the economy. She believes that he will not opt for a closed economy but on the contrary embrace free market principles.
Helmi does not believe there would be a change in orientation from the economic policies Egypt has been following for almost three decades. Islamic finance, meanwhile, is expected to play a larger role under Mursi's administration, according to Helmi. However, she said, it would not substitute for current forms of finance. "It is not feasible or logical to substitute the current system with an Islamic economic system," Helmi told Al-Ahram Weekly. "But it could be used as a supplementary tool to enhance the country's economy."
Concerning which economic paradigm Mursi is likely to follow, Helmi stated that Mursi is more likely to follow the Turkish model. "At the end of the day each model has its pros and cons."
According to Fathi Sakr, professor of economics at Cairo University, the Turkish and Malaysian models are both applicable and could be embraced equally by Mursi. He excludes the idea of adopting the Iranian model because "it is a closed economy that did not achieve any success."
Sakr pointed out that there are similarities between the Malaysian and Turkish models, as they both sought to establish equity among citizens and enhance education. One privilege of the Turkish model, according to Sakr, is that Turkey succeeded in becoming a major exporting country while bringing the army under government control, reducing its autonomy. Like Helmi, Sakr believes that the role of Islamic finance will be enhanced under Mursi.
Sakr agrees with Helmi that it is unclear at this time which direction President Mursi will go. He stated that Mursi did not yet move beyond his electoral vows; that he is currently being subjected to many pressures from different parties with whom he should compromise. This is in addition to the people's heightened demands, which he should meet in the first 100 days in office.
Farag Abdel-Fattah, professor of economics at Cairo University, also believes that the economic policies Mursi would follow would not differ from those adopted by the former regime. He argues that the Muslim Brotherhood, from which Mursi hails, is a business-oriented group. Abdel-Fattah said that if the Turkish and Malaysian economic models are to be followed, they should be adopted while taking Egypt's context into account.
Over the last three decades, former president Hosni Mubarak's government adopted market economy policies that enabled seven per cent growth rates for several years until the world economic crisis hit in 2008. The bulk of Egyptians gained little from such high growth rates, however, while the wealthy class close to Mubarak's family benefited dramatically, widening the gap between the rich and the poor.
Regardless of which economic policy Mursi will follow, he has first to set the ground for development. According to Sakr, Mursi needs to gain the trust of all Egyptians, showing them that he does not have any political leanings when it comes to wealth creation and distribution. Also, restoring security is vital for economic development.
Sakr believes that economic development is likely to take off after the new constitution is written, and new parliamentary elections are held. For Helmi, restoring trust between citizens and various state institutions is crucial to achieving economic development. She states that in the recent period, people's trust in the country's institutions was shaken. "If there is no trust, there is no development."