Back to Square One?

Tahrir Square Legacy in Egypt Elections

The end of January 2018 heralds a new phase in the run-up to the Egyptian elections, as democracy activists and economic observers disagree over Egypt's future.

Seven years after the beginning of Egypt’s “Arab Spring,” incumbent President Abdel Fatteh el-Sisi has de facto won the country’s first “democratic” elections since the 2011 ouster of Hosni Mubarak.

President el-Sisi was briefly the only contender for the position after human rights lawyer Khaled Ali bowed out of the race in January, criticizing the elections as unfair.

Ali’s dropping out followed the imprisonment of opposition leader Sami Anan, and Ali himself had also previously received a suspended jail term. Both convictions have been characterized as a means of preventing the contenders from challenging el-Sisi.

Though Mousa Mostafa Mousa announced his candidacy hours before the deadline for nominations was reached on January 29, the scope of el-Sisi’s political power suggest an easy win for the sitting president.

Beyond stopping his high-profile political opponents, Egypt’s president has cracked down on protestors, journalists, and human rights defenders and protestors, restricting rights to freedom of expression, association, and peaceful assembly, according to Amnesty International’s 2016/2017 report.

In 2016, World Justice Projects’ Rule of Law Index calculated Egypt’s score at 0.37 on the zero-to-one scale in which a higher score translates to stronger rule of law. The average in the MENA region was 0.52.

The state didn’t fare much better in Varieties of Democracy’s political corruption index. According to its so-called “V-Dem data”, aggregated analysis of political corruption’s pervasiveness in Egypt measures 0.86 on a scale in which closer to one corresponds to higher corruption. Again, Egypt’s score is considerably worse than the region’s 0.58 average.

But though both these organizations and the opposition consider the elections to be the legitimization of military government, economic outlooks from the World Bank and the IMF have a more positive outlook for the country.

Economically, Egypt’s situation seems more complex. In the 2017 fiscal year (FY17), the country implemented a macroeconomic reform program, backed by a USD12-billion Extended Fund Facility from the IMF. The critical aims of the reform package include a floating exchange rate, fiscal consolidation, and increasing industrial activity through the removal of bureaucratic inefficiencies.

The flexible exchange rate regime, which caused a spike in inflation, in combination with the VAT scheme to increase revenue have hit Egyptians rather hard.

Purchasing power has dropped significantly with the devaluation of the Egyptian Pound. At the same time, the weakened pound has increased investment interest in the North African country. Though targeting USD10 billion in FDI for FY17, the Central Bank reported a 14.5% jump in FDI to reach a total of almost USD8 billion.

In 1Q2018 alone, the country recorded foreign investments of USD3 billion. Perceived instability following the 2011 revolution appears to be fading.

Pressure from inflation is also eased by efforts to improve the trade balance, now shifting toward increased industrial activity and more exports.

However, the results of such efforts have not been as good as expected.

The New Suez Canal project, which was expected to boost business activity through development of a new waterway in 2014, has yet to produce the desired revenue lift. In fact, revenues measured USD462.1 million in August 2015 but had dropped to a recorded USD447.1 million by July 2017.

Egyptian officials explained away the decline as a consequence of lower oil prices and decreased global trade. According to the Suez Canal Economic Zone (SCZone), 8% of global trade passes through this Eurasian trade route. Moreover, the Zohr natural gas field, which was just recently brought online, has unlocked new opportunities for Egypt’s energy sector and will likely heighten traffic through the canal.

They are also quick to point out that the broader range of canal development activities are not yet complete. Along with the new canal, the Suez Canal Authority is also aiming to contribute to national economic development through its new special economic zone.

In an exclusive interview with TBY, President el-Sisi explained that work was underway on the infrastructure to turn the corridor into an international investment destination and global logistics hub.

Many in Egypt are thinking back to the Mubarak years as the political climate worsens, showing that any economic benefits proceeding from the stability of an authoritarian regime may not be enough to quiet dissent. High inflation and the thus-far unrealized positive effects of economic reform for the average Egyptian citizen are further adding to the friction.

But it is difficult to imagine an Egypt where the 2011 revolution didn’t happen, and macroeconomic indicators, with the exception of inflation, are quite encouraging.

By no means is the country back to square one, but the mixed legacy of Tahrir Square could make 2018 a difficult year for Egyptians.