Is post-revolutionary Egypt a land of opportunity for US investors?
Egyptian finance officials, in Washington to press the IMF and World Bank for debt relief, appeal to US political and business leaders to get off the sidelines and invest in the 'new' Egypt.
The short-term economic picture in Egypt and the rest of the Middle East may seem uncertain at best, with political instability, reforms, and even a war (Libya) shaking the region from Sana’a to Rabat.
But Egyptian economic officials in Washington this week are encouraging both the international institutional community and the private sector to look beyond the immediate challenges to the longer term opportunities they say a region in transition to democracy presents.
“Go ahead, wait and see, but I tell you, you are missing the opportunity!” says Samir Mohamed Radwan, Egypt’s minister of finance, explaining how he responds to anyone expressing caution about Egypt’s and the region’s prospects.
For the less purely dollar-and-cents minded, Mr. Radwan also suggests that the public and private worlds should want to lend a hand to help the Arab Spring flourish. “Now we have a president on trial in the Middle East without anyone firing a bullet, so I say, wait for what?” he says. “You should support this democracy, is what I say.”
Radwan and other Egyptian government officials are in Washington for the spring meetings Saturday of the World Bank and the International Monetary Fund. Debt relief and infrastructure development are on their minds.
While they are here, they are also meeting with US government officials, members of Congress, and representatives of the private sector, seeking assistance and investment for a “new” Egypt.
In a speech earlier in the week at the US-Islamic World Forum, Secretary of State Hillary Rodham Clinton announced that the US will offer Egypt $150 million in economic assistance to help get the country through its political transition.
Arab populations, and especially the young people who sparked the region’s transformative demonstrations, “expect democracy to deliver jobs, sweep out corruption [and] extend opportunities that will help them … take full advantage of the global economy,” Secretary Clinton said. In all, the US plans to make up to $2 billion available to help encourage private-sector growth in the region, she said.
$3.5 billion in debt
But the Egyptians are also looking for something else. “What we are asking for from our American friends is to give us debt forgiveness,” said Fayza Mohamed Aboulnaga, minister of planning and international cooperation, in comments at a forum Thursday at the US Chamber of Commerce.
The new Egyptian government is seeking about $3.5 billion in debt forgiveness from the United States. Some US officials and analysts have suggested that any reduction in Egypt’s debt is likely to wait until after the country’s first post-revolution elections later this year, as a means of spurring a fair and transparent electoral process.
And then, the US is likely to want to see just what kind of government the Egyptians deliver, some regional analysts say.
But Minister Aboulnega cautioned against the US and other economic powers sitting on the sidelines instead of aiding the transition from the outset. “If, God forbid, we go wrong in Egypt,” prospects for the whole region will be greatly diminished, she said.
Radwan acknowledges that the short-term prospects for Egypt’s economy are not good. Tourism has almost dried up, as it has in neighboring Tunisia, which is also undergoing a political transition. In addition, the government is being forced to boost spending as a result of steadily rising food prices.
As a result, he says, a growth rate of 3.5 percent before the political upheaval has plummeted to between 1 and 2 percent. Meanwhile, Egypt needs sustained growth of about 7 percent to create the jobs necessary to satisfy an often well-educated but under- and unemployed youth population.
Still, some representatives of the US business community are encouraging businesses to look beyond the short-term uncertainties to the opportunities a transitioning region presents.
“We see a lot of opportunity across an entire region that is undergoing significant change,” says Myron Brilliant, senior vice-president for international affairs at the US Chamber of Commerce. The bottom line for any US business investing overseas is “to make money,” he acknowledges, but he says the US private sector can do that even as its investments play a role in transforming what has been a lethargic, overly bureaucratic, and inefficient region.
“If these conditions are going to get any better, it’s going to have to be because the private sectors are part of the process,” he says.
A recent trip to Jordan convinced Mr. Brilliant that not only do opportunities await US business in such sectors as tourism, infrastructure, and health care, but that the Jordanian government and others in the region are aware that their transitions cannot just be political but must include changes in everything from foreign direct investment regulations and economic transparency to reducing trade tariffs.
Public sector role
One impediment to business expansion that discourages foreign investors is the overbearing role of government in economic activity. “In too many of these countries, the public sector plays too big a role in the economy,” says Lionel Johnson, the US Chamber’s vice-president for Middle East affairs. “They must change the ratio of public to private.”
But that won’t happen overnight, even in the most reform minded countries, these specialists admit. And waiting for it to happen before getting in the door may only leave the terrain clear for other economic powers – think China here – whose track record suggests little interest in fostering reform and democracy’s bloom.
“If we don’t step in,” says Brilliant, “you can be sure others are going to step in and seize the opportunities.”