Wednesday,18 October, 2017
Current issue | Issue 1128, 27 December 2012 - 2 January 2013
Wednesday,18 October, 2017
Issue 1128, 27 December 2012 - 2 January 2013

Ahram Weekly

Confidence lost

Ibrahim Saif looks into the role of the private sector in post-revolution Egypt

Al-Ahram Weekly

Since the 2011 revolution business confidence in Egypt has deteriorated in response to a sluggish economy and rapid political change. Weak security has added to the country’s woes, as has uncertainty about how laws and regulations are to be formulated and enforced. This ambiguity has resulted in reduced levels of private investment and foreign direct investment (FDI). The decline threatens to complicate Egypt’s economic transition and restrict the government’s manoeuvrability at a time when public expectations are running high.
So far, the government has taken some limited steps to reassure the private sector. These include its willingness to sign an agreement with the International Monetary Fund (IMF); the establishment of committees to coordinate between the president and the private sector; and the reduction of ambiguities concerning public-private partnerships. However, these steps have failed to assuage uncertainty about the direction of economic policy; nor have they managed to instil confidence in the private sector. Lack of a clear economic vision and the ambiguous economic agenda of the Muslim Brotherhood regarding the role of the private sector, macro management and the expanding budget deficit impede private sector initiatives.  
The established private sector of pre-revolutionary days has failed to articulate a new role for itself in the transition period and beyond. Nor has it managed to agree on a unified set of demands to facilitate its interactions with other stakeholders. This reflects the heterogeneity of the private sector, as well as its hesitancy to act while the political situation remains in a state of flux.
A number of new business groups and associations have emerged since the ouster of Hosni Mubarak as president. These groups have a broader mandate: they are politicised, brandish the slogan “social justice” and adhere to the so-called Renaissance Programme adopted by the Muslim Brotherhood and President Mohamed Morsi. It is not yet clear how relations between the old and new business organisations will evolve.
Moreover, the relationship between newly-created political parties and the business community has not, so far, proven constructive. Most political parties, both old and new, have adopted an agenda that advocates a market economy while giving more attention to social justice. These general policy statements usually fail to specify what is really meant by either “market economy” or “social justice”. Hence, they lack a clear position on controversial issues such as taxation, minimum wages and privatisation. Moreover, these political parties have failed to forge alliances with social forces such as labour unions working on the ground, which could have expanded their social and political base.
In Egypt, there is a widespread negative perception of the private sector due to its association with the malpractice of the Mubarak regime. Some political parties, civil society organisations and media outlets have helped promote this negative image, accusing the private sector of unwillingness to assume a pro-active role during the transition period. In several cases, the media has contributed to that by equating the private sector with corruption. It has also been difficult to distinguish the private sector as an actor from the process of privatisation. Within this challenging environment, the Egyptian private sector is now seeking to improve its standing in the transition process, a process which should help kick start the country’s economic growth.
To move forward, stakeholders – including the private sector, the government and civil society organisations (CSOs) — must all take steps toward reform. First, the private sector needs to get its act together and agree on a unified economic vision within a set timeframe. Second, it should expand its efforts to reach out to a broader constituency. Third, it should involve small and medium enterprises (SMEs) in the decision-making process. Finally, the private sector should launch initiatives promoting corporate social responsibility (CSR) at the community level and adopt a clear position on minimum wages, taxation, subsidies and competition regulations.
Meanwhile, the government must reduce policy uncertainty and minimise its intervention in the credit market, while also adopting a more transparent approach to public finance, and promoting decentralisation to empower local communities. It also needs to start reforming public sector institutions that deals with investors and limits officials’ discretion.  
CSOs should continue their efforts to promote good governance and facilitate social and political dialogue between various stakeholders. They can help identify priority areas for the private sector to support through CSR initiatives, in particular, initiatives targeting areas that suffer from bottlenecks in education, water and electricity provision which would have an immediate impact and contribute to improving the private sector’s image.
Unless the private sector confidence is restored and they start investing in Egypt, it will be difficult to see how the country can move forward. Restoring confidence is an outcome of policy and can be achieved.   

The writer is senior associate at Carnegie Middle East Centre.

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