Sisi’s fridge and Egypt’s frosty economy

 
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By Khaled Diab

A gaffe by Egypt’s president about his refrigerator reveals just how much Egyptians have cooled towards Sisi and his chilling economics.

A sneak peak inside Sisi's fridge.

A sneak peak inside Sisi’s fridge.

Monday 7 November 2016

You could say that Egypt has had its very own Watergate. But unlike its American counterpart, this was not about tapes and spying and political scandal, but about water and a refrigerator and a scandalised social media.

At the first National Youth Conference in the upmarket resort of Sharm al-Sheikh, Egypt’s president Abdel-Fattah al-Sisi demonstrated to young Egyptians how he was “one of you” by informing them that, despite being the son of a wealthy merchant, “I lived for 10 years with nothing but water in my fridge.”

To many Egyptians, an empty refrigerator is a sign of affluence, as it could well indicate that its owner is well-off enough to eat out or order in. Besides, when Sisi was young, fridges were luxuries and so possessing one only to chill water would have struck many of his contemporaries as an extravagance they could ill afford.

But this is obviously not what Sisi intended. The president’s comments sought to inspire young Egyptians to aspire to achieve great things for themselves and their country through “self-esteem” and “independence”. But rather than motivating citizens to pull themselves up by their bootstraps and tighten their belts – with the poor doing the majority of the tightening – his comments caused social media to erupt in guffaws of laughter.

Like his two predecessors, Sisi is prone to making memorable gaffes and Egyptians, who use humour to shield themselves against the unbearable tightness of seeing their country fall apart, mock such pompous soundbites bitingly.

One wit on Twitter likened the Egyptian president to Sponge Bob because he could survive on a diet of water. Employing the “one careful owner” format of advertising, another user pretended to sell a refrigerator on Twitter which, he said, had been owned by the “doctor of philosophers”.

This is a far cry from the Sisi-mania which gripped millions of Egyptians when the former general ousted his unpopular predecessor Mohamed Morsi, who is still languishing behind bars on trumped up charges. Sisi’s initial appeal was constructed on a studied mystique of impenetrable silence, an illusion which was quickly shattered by his increasingly eccentric and unfathomable pronouncements.

The initial enthusiasm of many Egyptians to this self-appointed leader whom they believed would be a strongman who could steer Egypt to safety and security has given way to growing unease, alarm and opposition to Sisi’s repressive, arbitrary and increasingly erratic model of governance.

Thousands of Muslim Brotherhood members and secular activists, including many of the leaders of the 2011 revolution, are in prison, while freedom of expression and assembly have been seriously curtailed.

Beyond authoritarianism and oppression, there is the economic bottomline. Exhausted by the upheavals of revolutionary change and counterrevolutionary inertia, many Egyptians were willing to turn a blind eye to Sisi’s myriad abuses and brutality, buoyed by his pledge of security, stability and, above all, prosperity.

Instead, the economy has continued to nosedive, as reflected in the devaluation, and the subsequent floating, of the Egyptian pound and the shortage of hard currency which has seen the dollar exceed 16LE on the black market. This highlight both Egypt’s economic ill-health and the unfairness of the global trading system, based as it is on “reserve currencies”, which can easily cause a crisis in smaller economies to spin into a catastrophe.

Of course, not all of this is Sisi’s fault. Like Morsi before him, Sisi inherited a poisoned chalice from the three decades of Mubarak excess and mismanagement – cloaked in neo-liberal hocus-pocus which gave the illusion of growth even while the economy tanked and wealth was concentrated in ever-fewer hands.

In addition, the negative feedback of Egypt’s various crises, especially terrorism and insurgency, has led to the drying up of many of its main exports, most notably tourism, the levels of which have hit record lows.

However, Sisi has made matters considerably worse. In fact, it is hard to imagine a less productive path out of Egypt’s economic malaise than that pursued by the current president. Instead of focusing on bread-and-butter sectors, getting the wheel of industry turning or addressing Egypt’s numerous social and environmental challenges, Abdel-Fattah al-Sisi has spent his presidency herding white elephants, including the aborted idea of building a new capital city.

Sisi’s first mega-project, the widening of the iconic Suez Canal was bound to run into dire straits. Even I, no clairvoyant or expert, predicted as much. In its first year of operations, revenues from the expanded canal remained largely stagnant. Billions are also being wasted on a nuclear power white elephant, when the resources could be better channelled into more effective means to shore up Egypt’s energy shortage.

The president’s difficulties are being exacerbated by the gradual shrinking of Arab assistance. Although Egypt has relied on foreign aid to varying degrees since the Free Officers came to power in 1952, the years since the 2011 revolution have seen Egypt receive an unprecedented flow of aid from the Gulf allies of the moment, with inevitable strings attached. However, tumbling oil prices and Egypt’s wish to steer an independent course from its allies is leading to the drying up of this source.

After years of faltering on the edge of the abyss, I fear that Egypt’s economy is close to freefall. For the sake the country, I hope Sisi and his government have some real ideas about how to bring Egypt back from the brink.

____

Follow Khaled Diab on Twitter.

This article first appeared on Al Jazeera on 31 October 2016.

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Egypt’s pharaoh illusion

 
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By Khaled Diab

The idea that Egyptians are docile sheeple who need a pharaoh to shepherd them is a myth that dates back to the not-so-ancient times of the Nasser era.

Time magazine cover, 29 March 1963. http://content.time.com/time/covers/0,16641,19630329,00.html

Time magazine cover, 29 March 1963. http://content.time.com/time/covers/0,16641,19630329,00.html

Tuesday 7 June 2016

I am not pharaoh… After two revolutions, nobody who occupies this chair can become a pharaoh,” Egypt’s president Abdel-Fattah al-Sisi reportedly told a select group of intellectuals and thinkers a few weeks ago, insisting that he accepted and respected criticism.

Despite the president’s repeated assurances, Egypt has been in the throes of an intensifying crackdown since the weeks leading up to the fifth anniversary of the 25 January 2011 revolution.

This has had the counter-effect of galvanising a rising tide of dissent, as epitomised by the remarkable media and protest campaign spearheaded by the Journalists Syndicate to defend press freedom, call for the resignation of the interior minister and demand an end to repression.

The latest high-profile victims of the state’s clampdown is ‘Street Children’, a group of young satirists whose impromptu songs mocking Sisi and his regime, performed on street corners, have become an online sensation, attracting hundreds of thousands of views each.

After the initial arrest of one of their singers, known as Ezz, for allegedly “insulting” state institutions, the remaining members of the band were arrested soon after. The group seems to have upped the ante in their latest videos in which they ridicule “Sisi, my president”, the army and the security services – criticising the devaluation of the pound, the Suez Canal expansion and the transfer of two Red Sea islands to Saudi Arabia – and call on Sisi to “have some shame” and step down.

That a band of six young men armed with little more than their vocal cords should provoke such an autocratic reaction is bound to cement, rather than disprove, Sisi’s reputation as Egypt’s latest “pharaoh”.

Some see that as no bad thing. In America and Europe, many commentators are convinced that Egypt can only be ruled by a strong man and so crowning a new “pharaoh” was the only way to save Egypt.

This attitude has its native advocates too, not only among the political old guard but also among those who saw Egypt hanging over a precipice and concluded that the only way to stop it from falling into the abyss was to choose the pharaoh-president over people power.

One-upping other despot worshippers, former antiquities chief Zahi Hawass likened Sisi to a specific pharaoh, Mentuhotep II, who reunited Egypt after it split into two rival kingdoms.

This pharaoh-isation of Egypt’s leaders suggests that there is some kind of continuous, almost dynastic, line which stretches back to the dawn of history, leaving the impression that this is some kind of innate national trait.

There are those who subscribe to the pharaoh theory of Egyptian history in an ill-informed attempt to explain away modern autocracy. Some outsiders are driven by an orientalist conviction that Egyptians do not desire nor understand democracy,  while those who prop up Egypt’s dictators can sleep easy in the knowledge that this is ultimately what Egyptians want.

Proponents of the theory at home use it to dissuade Egyptians from rising above their station and to demonstrate the apparent futility of seeking to change what has always been so.

The trouble is this is largely a myth – inspired more by Abrahamic scripture than actual history – that started some six decades ago, namely with Gamal Abdel-Nasser, the leader of the 1952 revolutionary coup and the Egyptian republic’s second president.

But even this wasn’t inevitable. The Free Officers which Nasser led were initially committed to civilian rule and strengthening Egypt’s parliamentary democracy. And given the more than a century of struggle to build a modern, egalitarian and fair state which generations of reformers had been waging, this early commitment to democracy was unsurprising.

However, Nasser reneged on the Free Officers’ promise to transition back to elected civilian rule. In this, Nasser was driven by a fervent desire for his revolution to succeed and the  plain old-fashioned hypnotising lure of power. “If I held elections today, [Mustafa] al-Nahas would win, not us. Then our achievement would be nothing,” he said in a meeting shortly after the coup.

In this endeavour, he faced stiff opposition, namely from what he had assumed was his figure-head president, Muhammad Naguib, who wanted the army to return to its barracks after having accomplished their mission of unseating an unjust, British-backed regime.

Instead, Nasser placed Naguib under house arrest, abolished all political parties and started a brutal crackdown on secular and religious dissent, imprisoning liberals, communists and Muslim Brothers. “[Nasser] recognised that democracy was the clear enemy of the cult of character he was trying to establish,” posits journalist and revolutionary Wael Eskandar.

Nasser’s popularity on the Arab street, coupled with shrewd propaganda, enabled him to turn the newly established republic into his personal fiefdom rather than a state of institutions and checks and balances.

In this project, Nasser was inspired not by his ancient pharaonic ancestors nor facilitated by some native Egyptian subservience to the “pharaoh”. It was part of a 20th century trend of the larger-than-life dictator empowered by the advent of mass media. Compared with Stalin and Mao, Nasser was, nevertheless, a gentle pussycat.

Even during Nasser’s tenure, which combined popularity with brutality, many Egyptians refused to believe the lie that they were docile sheeple who needed a father figure – or in the case of Nasser, an amiable brother, cousin or charming boy next door – to shepherd them. In actuality, opposition was often brave and determined.

In a pattern that would repeat itself continuously over the decades, this forced the regime to find other channels to accommodate Egypt’s diverse and dynamic political currents, giving Egypt, even at its worse, more representative governance than most other Arab states.

Moreover, co-option was often, and remains, a more effective tool than coercion, leading many to hitch their cart to the wagon train. “There were many who embraced [Nasser’s] leadership as an active, not passive, choice because, rightly or wrongly, they envisaged themselves as making gains out of it,” points out Jack Shenker, the author of a major new book on the Egyptian revolution.

Today, the regime is also employing a blend of coercion and co-option to protect the state that Nasser built, and Sadat and Mubarak renovated. But without Nasser’s skill, charisma and monopoly of the media, and with a restive population that is no longer willing to buy yesteryear’s mythology, this enterprise seems doomed.

Sisi is right, no Egyptian president can become a “pharaoh” anymore.

____

Follow Khaled Diab on Twitter.

This is the updated version of an article which first appeared on Al Jazeera on  May 2016.

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Egypt’s dollar woes

 
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By Khaled Diab

Hopes are devaluation will resolve Egypt’s dollar crisis, but the situation could spin out of control without a global currency for international trade.

100le

Monday 11 April 2016

As Egypt’s economy continues to nosedive, the country has been gripped by a chronic dollar crisis in recent months, exacerbated by falling revenues from tourism and the Suez Canal.

The dollar shortage has fuelled inflation and severely hurt importers and domestic manufacturers who depend on imported raw materials or components. For instance, many imported medicines have become totally unaffordable and there is a shortage in locally produced generic alternatives due to the inability to import active ingredients.

The hard currency shortage has even affected the black market, with a number of reports in the Arabic media over hours-long searches for dollars at inflated prices.

To tackle the situation and to cool the overheated black market, the Egyptian Central Bank decided to devalue the Egyptian pound by 13 percent and to sell $198 million to commercial lenders at 8.85LE, from its previous level of 7.73LE.

The Cairo stock exchange, along with financial analysts, was jubilant at the news, recording its largest single-day rise, of 7%, since July 2013, and ending the week a massive 14% up.

However, the effect on Egypt’s long-suffering poor and vulnerable will be far less benign – their underpaid labour has also been devalued.

“Egypt’s poor are enduring the brunt of Egypt’s economic crisis,” observes Timothy Kaldas, a non-resident fellow at the Tahrir Institute for Middle East Policy, in a reference to the high inflation, removal of subsidies, and increased unemployment which have corroded living standards. “The devaluation will undoubtedly increase the cost of certain essential goods, particularly food.”

Continued and worsening hardship for the masses is also bound to hurt the regime. Support for President Abdel-Fattah al-Sisi was predicated on his much-hyped capacity to bring Egypt to a safe port of stability and prosperity.

So far, the Sisi regime has demanded of ordinary Egyptians to tighten their belts, while cushioning the wealthy, has given activists and critics a royal belting, and has been unable to keep a rein on spiralling terrorism and insurgency. In addition, despite escalating repression, industrial action continues to sweep across the country (Arabic).

And this disaffection and instability is only bound to grow if the regime delivers only immense pain and no gain.

The Central Bank’s devaluation and loosening of the official exchange rate may not be enough to salvage the situation if Egyptians continue to face dollar shortages and if those receiving remittances from abroad find better prices on the black market, argues Kaldas.

Central Bank Governor Tarek Amer has vowed to do whatever it takes to keep the currency market in check.

However, the early signs were not promising. Despite the devaluation and dollar injections, the Egyptian pound weakened on the black market, reaching 9.55LE to the dollar shortly after the devaluation, while the devaluation is further fuelling a property bubble. In early April, it stood at 10.30LE, according to Reuters, though the official rate has remained stable at 8.78LE.

This has led financial analysts to expect further cuts in the official rate, with the attendant pain it will cause ordinary Egyptians. JP Morgan forecasts that the Egyptian pound will be devalued by a total of 35%this year, with a projected inflation of 14%.

And as has been demonstrated elsewhere in the world umpteen times in the past, from Argentina to Germany, the situation could easily spiral out of control, if these measures elicit panic rather than confidence, or if speculators run the pound into the ground.

Beyond Egypt’s specific economic woes and poor governance, this points at a deeper, wider malaise: how the global trading system is stacked and loaded against smaller economies.

The main reason Egypt and other countries suffer from “dollar crises” is because the US dollar is the world’s dominant reserve currency and the main medium of international trade, though the euro has closed the gap in recent years.

Obliging smaller and poorer economies to trade in the dollar and other reserve currencies makes them vulnerable to the whims of the currency markets and forex speculators.

In addition, the dollar and euro distort trade in favour of the United States and Europe, enabling them to import and borrow far more cheaply than their fundamentals should allow.

But there are downsides for top-dog economies, such as making their exports less competitive and the inevitable trade deficits caused by the “Triffin Dilemma”. The unnaturally low cost of credit has played a central role in the US’s dangerously high public debt – on which it has come perilously close to defaulting – and contributed to the US subprime crisis and the European sovereign debt crisis.

The solution to this, in my humble view, is the introduction of a single global currency for the purposes of international trade. This would help remove the volatility of currency markets, end speculation, eliminate the currency black markets, and even the global economic playing field.

This is not a new idea. John Maynard Keynes, the legendary British economist, proposed just such a currency as the lynchpin of the post-war economic order, but was torpedoed by American opposition. Following the volatility and crises which have afflicted the global economy in recent years, China, Russia and other emerging powers have also called for just such currency reform.

A world trading currency would not only help stabilise and boost the global economy, it would also reduce the social fallout caused by dollar shortages and the immense inflationary pressures they create.

____

Follow Khaled Diab on Twitter.

This is the updated version of an article which first appeared on Al Jazeera on 28 March 2016.

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