Al-Ahram Weekly On-line   Al-Ahram Weekly On-line
5 - 11 October 2000
Issue No. 502
Published in Cairo by AL-AHRAM established in 1875 Issues navigation Current Issue Previous Issue Back Issues

Front Page

The changing of the guard

By Pascale Ghazaleh

Pascale GhazalehPolitical gerontocracy notwithstanding, Egypt is witnessing a change. Some of the biggest players in the newest industries are barely more than babes in arms -- at least, in a society where the concept of youth encompasses middle age and often beyond. For the most part, these 30-somethings are riding the wave of the communications revolution, although some have taken a more traditional path to wealth, carving out virtual empires in agriculture or industry; and, along with technologies unheard-of even five years ago, they are bringing a set of new beliefs to the market. Equity, for them, refers to share values, not principles of justice; the national economy, while not quite a contradiction in terms, may well be an endearing anachronism.

In a matter of a few years, it seems -- the difference between those born in the 1970s, on one hand, and their elders, who hit adolescence and young adulthood as radical politics swept the world, on the other -- ideology has come full circle. The younger generation of executives, who will be moving and shaking the world not tomorrow but in a couple of hours at most (if the stock market holds steady), have clear ideas as to the virtues of global capital, the market's inherent ability to distribute wealth in the best possible way, and the efficacy of the trickle-down system in achieving what decades of welfare have not. While the peace process lurches on to its unhappy conclusion, they are busy arguing over the fine print; while illiteracy programmes struggle to make headway against the most absurd odds, they are putting Egypt on the Web.

Will the practical measures they are taking with such panache outstrip the hesitant policies entailed by the current "transitional" phase? The coming decade has several surprises up its sleeve. And no one, perhaps, will be more surprised than the current generation of movers and shakers, who may find the magic moquette pulled out from under their feet by their own Reebok-shod sons.

So just what is so special about the new tycoons? First, of course, their youth: many 30-somethings are founding their own companies (especially in cyberspace), or taking on positions of responsibility in "family businesses" that have little in common with the traditional understanding of that institution -- not your average corner grocer's, but a major investment banking firm. As an institution, however, these family enterprises share some characteristics with their humbler cousins: the implicit belief that one's relatives are more likely than outsiders to seek the company's benefit, and the knowledge that, when it's all in the family, self-interest and "the good of the firm" overlap, even if they do not always coincide. Thus, cousins or siblings can often be found in adjacent corner offices, complete with wrap-around windows.

Patronage operates beyond these relatively narrow confines, however; most of those interviewed here went to the same university, crammed for exams together, spent a couple of years in the States or Europe at around the same time acquiring law degrees or MBAs, and married into the same shilla or peer group. They will go on holiday together, or at least out to dinner -- that is, if they ever have the time.

Of course, this could simply mean that the present sample is skewed. It is -- and that very fact is quite eloquent. No conspiracy is at work here; but it seems a little odd that random requests for phone numbers of young tycoons (let's call them YTs, for brevity's sake) brought the same numbers out of one PalmPilot after another. Computer technology, investment banking, hotelry, agro-industry: they cover some of the most lucrative spheres of Egypt's emerging market. And where better to look for politics, indeed, than in the marketplace?

It is also a little strange, then, that, almost without exception, the YTs reacted thus when interviews were requested, and the topic -- the political views of young businesspeople -- was explained: "I'm really not interested in politics." Digging just a little deeper below the surface revealed that this was not necessarily the case. The disclaimer seems linked to three main factors: first, a narrow definition of politics as being exclusively the realm of politicians; second, an earnest desire to stay out of said realm, at least as far as appearances are concerned; and third, the feeling that "there are no options" as far as political involvement is concerned. "I'm not happy with the ruling party, but I'm even more dissatisfied with the opposition," one YT explained. "People are getting old. There's a big chance that, if Nasser hadn't died, he would still be our president. What is the government doing? The government is nothing but a bunch of people sitting in chairs and getting old and fat."

The assertion that politics doesn't matter, then, does not mean that the YTs have no opinions -- far from it. They are not always informed (many did not assume that the idea of a Middle East market included Israel or even Turkey; one, when asked about the Investment Law, was utterly bewildered), but they have firm convictions. Technically speaking, these could be described as radical, since they seek to overturn many features of the prevailing system; but -- and was this not expected? -- they are also deeply conservative in the most literal sense, because what many would really like is simply to see the government's declared policies pushed through to their logical conclusions as soon as possible. Who will do the pushing? Unbeknownst to the young executives, they will most likely be doing it themselves. Politics may be business, but who said business wasn't politics?

Say "businessman," and the image conjured up will no doubt be that of the stereotypical fat cat puffing on a Romeo and Juliet, belly squeezed behind the wheel of a large Mercedes. The YTs, in contrast, are generally a trim and attractive bunch: they play sports, dress well, and present fresh, orthodontically impeccable faces to the press. Some, however, suffer the ills that go with the territory: stress, lack of sleep and even hypertension or heart problems. And they're all under 40.

All are very aware of their relative youth, and see it as a positive point -- although their presence on the business scene is hardly sufficient to rejuvenate the country's political and economic power centres, they believe. Youssef Hammad, director of marketing for the Gouna Beverage Group and Orascom Hotel Holdings, finds there is "not enough new blood [at the decision-making level]. In the past five years, the world has changed. Five years ago there was no Internet; now there is... But we don't invest enough in the younger people. These are the people who come up with the ideas; it's when people are the most creative, less settled in their ways. I think there are not enough young people making decisions."

Time for some bonding: wheelers and dealers at the Cairo Stock Exchange
photo: Khaled El-Fiqi

Having reached adulthood during a time of change, furthermore, means that the YTs are far less likely to be intimidated or overwhelmed by developments, whether in their specific fields or in the market as a whole. One 31-year-old exclaimed impatiently: "Why shouldn't we be as advanced as our neighbours, with our labour, the new economic climate, such a free exchange of information going around the world? We have everything here that they have over there, plus a market, plus the opportunity."

This pioneering attitude seems to characterise several of the YTs. Some spent most of their lives, or at least their university years, abroad, and returned eager to seize what they saw as new opportunities being offered as the liberalisation programme got underway. Tamer Nassar is vice-president of SetCore, a company owned by his grandfather, Said El-Tawil. He and his brother expanded the company's activities and set up a cotton exporting business in a joint venture with a Swiss group in the mid-1990s. Nassar notes: "There's not many places in the world where you could come in, you know, in 1994 or 1995, and be one of the first people to trade something that's been traded from Egypt for over 120 years or something. You can't go to Texas and set it up, you know. But in Egypt you could." One businessman who works in document management added: "Especially in communications and new technology, there are attempts to clear the way for new things to be set up."

Not that such attempts are entirely to the YTs' satisfaction, however. All agree that far more is needed: more privatisation, more liberalisation, more laissez-faire. One explained: "I am a product of the Thatcher years, and I do think you have to let people get on, start ventures, create jobs." Hammad elaborates on the specific case at hand: "There are a lot of educated people who were abroad and came back to Egypt with certain hopes, gave up a lot because they thought the country was changing. There's huge improvement, but the pace of change and policies in general do not go far enough, and don't help young people. It's still the same big families that have been making money for the past 20 years making more money, but there are no new players."

On the opposite side of the spectrum are those like Dagher Al Sakr, commercial manager of Egyptian Metal Works, whose business has experienced the same shocks privatisation has inflicted on many traditional industries like metallurgy. "What's good for me is not good for others," Al Sakr admits. "On a very personal level, I was much better off when Egypt was not open, purely in my business. We manufacture metal parts, so it's all recycled. For 20 or 30 years, there were high import duties on metal imports into the country, and you could not export the scrap metal, so it didn't matter what the prices were overseas, because we as a company totally controlled the price of scrap in the country. We formed an oligopoly with a couple of others and we decided the price of scrap metal, so our product was significantly cheaper than the foreign equivalent." Now, both these factors have changed; the ban on exporting scrap has been lifted, "so when international prices go up we have to match them, or else we'll never find the scrap. The import duties have also been lifted almost entirely in our field on that particular product, so the foreign product enters the country at a relatively low price. Meanwhile, we've paid a higher price for our raw materials, so we have to sell our product at the same price as the foreign, which is of significantly better quality than ours."

By and large, though, it is the state's unwillingness to forge ahead more rapidly with the privatisation programme and implement bolder fiscal measures that frustrate many of the YTs. The liquidity crisis, for them, is simply a symptom of the prevailing caution. "The whole problem is, they're saying we want to get foreign investment in Egypt, we're going to do this and that, we're going to get new money, but they tend to forget the basics: we don't have a monetary policy," says Ahmed Sharafeldin, deputy CEO of Egyptian International Motors Group. "We don't know what the interest rate's going to be tomorrow. We don't know if the dollar is stable."

Elwy Taymour, managing director of e-services at EFG-Hermes Holding SAE, thinks the government "has not been forward-looking. They said 'we've been doing it for five years, it's worked before, why can't it work again?' Markets change, [but] the vision was lacking. I know that there are socio-political issues apart from the economic conditions that the government has to take into consideration and because of these issues, certain economic policies could not be implemented, but the socio-political being of this country is tied to the economy, and if they don't improve the economy there will be political, social and economic repercussions." Sharafeldin chimes in: "We have a government that thinks that if they don't do anything there's a good chance they won't make a mistake. They're just so worried they'll do something wrong that they're paralysed."

One young investment banker disagrees, admitting that his relative satisfaction with the pace of change may be a function of the stake he has acquired in the prevailing order. "Maybe the answer is keep a steady course and try to do the right thing," he muses. "It comes down to judgement, which in some matters I think government lacks; but in others I think they've done a pretty good job. Should they be doing more? Yes. I do not want to see the government spending a lot of money on different projects. I'd rather leave more room for the private sector in many areas."

So while few in Egypt still believe -- for whatever reason -- that the public sector is a viable institution, the YTs, in general, go much further. It is time to move on, they believe; and we should make it snappy. The same goes for most of the past half-century's sacred cows: the taboo of selling land or state concerns to foreigners, for instance, or cooperation with Israel. Nassar phrased it succinctly: "What is national pride? Having an auto industry that's completely substandard and that's not even Egyptian? What about selling land to foreigners? What are they going to do with it, take it and go?"

The YTs perceive foreign investment purely in terms of cost and benefit; the idea that it could lead to powerful transnational corporations (TNCs) dictating government policy, if it crosses their mind at all, seems like quite a good one. At least, they feel, it will bring much-needed expertise and hard currency into the country. The investment banker's view on selling public sector firms to TNCs is fairly representative: "It's good for the country, it brings in money and it improves your balance of payments. The acquirer will not be able to fire people in any event because that's the law, so you don't have to worry about job losses -- which are sensitive issues in lots of countries; and, most importantly, you bring expertise. If you can just get the right management, the people with the expertise, it does make a huge difference." The justifications the government puts forth for holding back on privatisation, he believes, are not valid. "I think the government often says devaluation is a political consideration, but that doesn't make sense. You'll have certain opposition newspapers and intellectuals who are jingoistic about things like this, who'll say 'we're selling the state to the foreigners,' but every day the government goes out and cracks down on people, ignores the rule of law, so I don't understand it. I think it's the mandarins. They have this fantastic system where they can't get fired, and it's a patronage network. If the government comes along and sells everything off, and everything in the economy becomes private sector, [they] will lose [their] purpose in life."

Taymour agrees: "I don't see anything wrong with selling to foreigners. If they give us the technology we need, the know-how we need, something that will improve our country -- why not? Direct investment is pouring into the country, dollars are pouring in, we have more money to do better things, we have roads to build, hospitals, infrastructure..."

Still, even the most rabid advocates of laissez-faire believe the state does have a role to play, in efficient tax collection, for instance, but most importantly in education and health. "Governments in civilised countries support the unemployed," says Sharafeldin. "The government should be responsible for social things that don't make business sense. Today, if you privatise education and health, what will happen to the people who can't afford it?"

Taymour, on the other hand, sees the ideal of free education and health services as misleading. "It's a very simple business rule: if you can subcontract something you should, because it will be done more efficiently. The government should provide for decent schools and so on, but it should be for money." The current situation, he adds, is not viable: "Education is for free, but in fact 90 per cent of the people are paying for private lessons. You do not have a proper educational system. The same goes for health care; there should be some subsidies. Then again, if people want to spend they should be able to do that. Nothing should be for free; it doesn't work. I'm not asking the government to know everything, and for that reason they should give the job to whoever knows how to do it best."

So while the young tycoons share some of the opinions that usually characterise young technocrats, they are not as apolitical as they would have you believe. Their strong belief in the importance of leaving most matters to the discretion of individual entrepreneurs cannot be restricted to one sphere; in fact, it applies to such matters as dealing with Israel. This fact has considerable implications in light of the official position on normalisation, but also when we consider the fact that the peace deal Egypt signed with Israel has never really meant anything to the vast majority of the population, who remain opposed to purchasing Israeli-made goods or visiting the country. For while the government finds it imperative -- or expedient -- to take such popular opposition into account, the YTs are not subjected to the same constraints. Nassar is perhaps the most pragmatic of all. "The reality is that Israel is now in this part of the world," he states firmly. "Definitely the future is that there will be cooperation, and there already is. So why deny it? These companies have already invested in Egypt, and are doing very well as far as I know. When [the political situation] is resolved, there will be more cooperation. You have to accept where you are."

For others, the idea of doing business with Israel is tied to the credo of the Internet generation: bring down the barriers. None of them were even born in 1967, so it makes little sense, they argue, to perpetuate ancestral hatred. Growing up abroad, furthermore, has meant that most of them had friends or acquaintances who were Jewish -- a factor they cite as important to their view of Israel "as an institution." Almost all, however, have given the matter quite some thought. Al Sakr explains: "I grew up not caring. Why should I personally have problems with Jews or Israelis? I come from a family you could describe as pragmatic. Why not do business with whoever, if it's good on a company level? I'm not nationalistic or patriotic -- not because I don't care about where I come from, but because I believe in a sense of morality regardless of where you're from. I won't take someone's side just because he's a countryman. If I can cooperate, then there are people on the other side who can do the same. [Our generation is] making policy now. I was hoping that hatred would disappear as fewer people whose brothers and sons died [in the wars against Israel] are around."

In recent years, however, he has undergone a very personal change of heart, and come to feel that "maybe there is something in Israel, the country, the institution, that really is evil. The suffering they have caused is completely inexcusable." This transformation has necessarily affected his professional outlook: "If I had the choice right now, I would refuse to do business with Israel and wonder why the hell I am not doing it. I would not allow myself to, but if I sat down and thought about it objectively I would. Purely for emotional reasons, I wouldn't. If I believe in a sense of morality like I claim I do, I cannot deal with them, although maybe one day there will be enough people on the other side that think the way I do and we will be able to coexist in a way that makes us all truly happy."

Sharafeldin, too, nuances his reply. "I don't want to forget. I don't like double standards. I definitely don't like what they're doing to the Palestinians. So am I going to go and invest in Israel? No. I'd rather go and invest in Gaza, the West Bank, Jordan -- Saudi Arabia, even. I'll not invest in Israel."

This paradoxically idealistic pragmatism typified many of the YTs' responses, which often come across as somewhat self-contradictory. Taymour has no problem doing business with Israel, "but I do have a problem if they come and say we're not going to give back Jerusalem, for instance. I can do business with anyone: with the Palestinians, with the Israelis, but on the political level it's a different story. Jerusalem has always been a very important city for both Muslims and Christians, and it will not be correct for the Israelis to have the city for themselves." Still, he feels, that is no reason to waste time or money. "I don't think this is double-faced," he says, "but the status quo has always been there, and for all we know it could stay there for the coming fifty years. If I'm going to stop my business because there's an ongoing peace process, then I'm not going to do business. You cannot just stand back because something is not moving. You have to move on."

Others, like Hammad, believe the problem lies not in a fundamental imbalance of power, nor even in the presence of an outpost of imperialism in the region, but in our own failure to do our homework. "The big ideas, the big companies in telecommunications are coming out of Israel," he says. "I think that ultimately they've invested in education. People are significantly more educated. Here, we think we are but we're not. I think that's a serious issue. It's not a matter of competition." Many spoke of the need to acquire know-how from Israel; as one entrepreneur put it, "I have no problem at all with taking their know-how and doing something here that would be of benefit. I see that as a great opportunity to learn from my competitor, or my better if you will."

As for Sharafeldin, he believes that relations with Israel necessarily affect the economy -- but not necessarily in the way the others mean. "Since the 1970s, the only times we were doing well were when [Sadat] went to Jerusalem, and the country was doing well because we were on good terms with the Americans, and again after the Gulf War; then with the negotiations. Every time money came into the country, there was a political reason, not an economic one. [Foreign investment] was our bonus, our reward. After the Palestinian issue is solved, I don't think we will be seeing that much money until we prove we're useful."

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