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.

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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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Ghost in the machine

 
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By Christian Nielsen

As we spent so much of our life online, what happens to our virtual selves when we die? Do they disappear too, or do we become ghosts in the machine?

Tuesday 18 September 2012 / Updated 31 October 2014

Last year, a journalist colleague-cum-friend stopped answering e-mails. At first, I thought he was miffed because a few of the stories he had written came back with critical comments and the client was breathing down my neck to take him off the job.

I knew he was having some kind of difficulty at home and perhaps even financial problems, so I persevered for his sake. A couple of weeks later, I gave the green light for another batch of stories from him.

No response to the e-mail on the first day. This was  out of character for this guy because he usually picks up a new commission in a flash. Two, three, four days passed without word. I still thought he was smarting from the client’s rebuke so let it pass. But after two weeks or so something was clearly wrong.

First I tried to call him on his mobile. No answer. I tried his old number – his mother’s I believe. Again nothing. This was not the sort of guy to pass up work, I decided, and definitely not the type to sulk for weeks, so something was definitely going on.  It was time to start investigating.

I checked his website, Facebook and LinkedIn. Nothing unusual there – some relatively recent activity. I then did the only other thing I could think of to nip a nagging worry in the bud … Yep, I Googled his name + ‘obituary’. I know it sounds morbid, but if I haven’t communicated the circumstances well enough here, take my word for it that this search was not done flippantly.

Sure enough, the first or second hit was a note in a local newspaper that my colleague-friend of five years had passed away. No mention of how, only that the family expressed its gratitude to a certain hospice which may or may not suggest he had been ill for some time. And when I think about the declining standard of his work, it would make sense.

But the way this happened, or at least the way his ‘virtual’ community (me and perhaps other colleagues and employers) had to learn of his death is what concerns me the most about relationships online. Concern that we build up friendships or professional closeness over the years without any physical foundations or recourse, if that is the right way to express it.

I didn’t know his family, or even if he had one. I had an old landline when he first started working for me but that was superseded by email/LinkedIn and so on. So, once his mobile phone apparently expired or the battery ran out, that was it. His mother, wife, son, or whoever was close to him probably didn’t know his PIN to open it again and answer the worried calls.

What’s more, they probably didn’t know his passwords and access codes to the various social networking tools he used. When I say ‘probably’ I’m just trying to be careful because the guy passed away nearly a year ago and just last week I got a ‘recent activity’ notification from him on LinkedIn.

It’s especially creepy because I still don’t know 100% that he’s dead. Sure, all the evidence indicates it, but with just 0.01% doubt, when you get a nudge from someone online, it makes you wonder. So much so that I had to see what the recent activity was. It appeared to be someone he had invited to join his network had finally got round to accepting it X months later.

Of course this is possible. I opened a LinkedIn account some 10 years ago and conscientiously ignored any and all invitations for nine years, until the system got so insistent that it became easier to accept them all than go through the rigmarole of rejecting and worrying that I’d offended someone (yes, I’m not a digital native … these things worry us ‘physical world’ people).

Post-game plans?

It also makes me wonder if we are overlooking our responsibilities to family and friends (virtual and physical) by not having a … well … post-game plan in case we get knocked over by a bus tomorrow. At least when we owned CDs and other real physical assets it was pretty simple, with or without a will and last testament, your stuff usually just went to the nearest and dearest. But with ‘digital assets’ we’re not even sure we own them, let alone whether we have a plan for how to pass them down to our family or friends.

Take the recent Bruce Willis and Apple story, which may have been false but that’s beside the point because it highlighted the issue of intellectual property rights and digital assets like music downloads, and that we may be only buying listening rights during our tenure on this world. How does that encourage legal downloading and the sustainability of the music/entertainment industry?

Perhaps the smart, discrete, respectful thing to do is to prepare your exit plan from the virtual world as much as you are primed to do so for the physical world. For example, write down the main platforms you engage in and how your family or friend can access them to take possession of any so-called digital assets bequeathed.

Make sure the executor or trusted person has instructions or enough information to shut down the online accounts which otherwise, very disturbingly, live on as ghosts in the machine. And, of course, put all this information somewhere safe from prying eyes, but not so safe that it won’t be found if that bus does have your number on it.

UPDATE

What happens to your Facebook account when you die? (30 Oct 2014) This story echoes the need to “think ahead” about your digital last will and testimony and introduces a feature now available on Facebook, at least, allowing those left behind to ‘delete’ or ‘memorialise’ the account. Here is what The Guardian’s ‘AskJack’ blog has to say on these options:

“If you choose to delete the account, then all the comments, photos etc. will also be deleted, unless you take legal steps to preserve them. This is a privacy issue. Facebook says: “The application to obtain account content is a lengthy process and will require you to obtain a court order.

“If you choose memorialisation, Facebook changes a number of things: No one is allowed to log in to the account; You can’t change, add to or delete existing content, which includes adding or removing friends; Automated activities, such as daily quotes or horoscopes, are stopped; Memorialised accounts don’t appear in “public spaces” such as birthday reminders, People You May Know, or searches; Memorialised accounts can only be accessed by the user’s confirmed friends.”

Hope this little addition helps those faced with the unpleasant decisions on what to do with the ‘ghost in the machine’.

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The Mubarak regime’s legalised robbery

 
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By Osama Diab

Since the ‘Mubarak mafia’ were not outlaws but were the law, proving that Egypt’s lost billions were ill-gotten is an elusively difficult challenge.

Monday 17 September 2012

“Tell us Mubarak, how could a pilot make 70 billion?” protesters chanted during the 18-day revolution which ousted former Egyptian President Hosni Mubarak in February of last year. The chant was a reaction to reports that Mubarak’s family fortune could be as high as $70 billion.

I was part of a BBC investigation team that was formed to reveal unexposed facts about “Egypt’s Stolen Billions”. The team produced a documentary on unfrozen assets in the UK related to the Mubarak regime which was aired recently on BBC Arabic.

[youtube:http://www.youtube.com/watch?v=sA0mOBVvoG8&feature=share]

Decades of authoritarian corruption helped Mubarak and his family and friends accumulate tens of billions of pounds, leaving millions of Egyptians living in dire poverty. It is impossible to measure accurately the economic cost of Mubarak’s rule, but figures from the World Bank suggest that $134.4 billion (817 billion Egyptian pounds) worth  of public assets went missing over the past 30 years.

So far Switzerland has frozen $800 million and the the UK about $120 million in assets related to the Mubarak regime, but Egypt hasn’t yet seen a penny of it returned. To do so, Egypt must prove that the money was “ill-gotten” first.

“It is crucial that the recovery and return of stolen assets is lawful,” Alistair Burt, UK Minister for the Middle East and North Africa, said in an official statement published on the website of the British embassy in Cairo last week. “It is simply not possible for the UK to deprive a person of their assets and return them to an overseas country in the absence of a criminal conviction and confiscation order.”

However, this statement, even though it sounds reasonable, ignores the legal challenges involved in proving the wrongdoings of the Mubarak regime.

To identify the truth amid the many rumours surrounding this sensational issue, it was necessary for the team to find solid and documented evidence of the systematic impoverishment of Egypt at the hands of its former rulers, who received the official status of being a network of organised crime from the Swiss government in May, as the BBC team has discovered.

During my quest in Cairo, I sipped tea and ate liver sandwiches on street cafes with dissident government officials. We spoke to economists, lawyers, activists, members of parliament and bankers over more than six months. Their reactions to our investigation ranged from daily calls to offer assistance to suspicion I was a spy working for the Mubaraks.

They were all trying relentlessly to expose facts about the Mubarak regime’s corruption. The problem is that they were trying to prove it according to existing laws which were put in place by the Mubarak institutions.

The parliament – which is responsible for drafting and passing legislation – was completely dominated by Mubarak’s National Democratic Party through vote-buying, rigging and political intimidation.The cabinet was also dominated by businessmen belonging to the ruling party. Since 2004, the Council of Ministers was unofficially known as the “businessmen’s cabinet”.

Reda Eissa, an independent economic researcher, shows through his research how certain companies benefited from tax laws and breaks introduced by these institutions for their own benefit. Companies owned by figures close to the regime ended up paying almost no to very little taxes. The Six of October Development and Investment Company (SODIC), a real-estate giant by Mubarak’s in-law Magdy Rasekh, was paying about 0.5% in tax, according to Eissa’s study.

I found out from my sources that in Mubarak’s Egypt, the laws allowed some banks, such as the Arab International Bank (AIB), to escape the monitoring of the Central Bank of Egypt (CBE) or any other local authority. This meant that some Egyptian banks could transfer any sums of ill-gotten gains without the knowledge of the CBE. The transactions simply did not appear on any records accessible to the authorities as stated by the law.

The founding charter of the AIB, which was established as a joint project in 1974 between the governments of Egypt, Libya, Qatar, Oman and the United Arab Emirates, states that the bank falls outside the authority of local governments and is therefore exempt from taxation, exchange controls and the CBE’s auditing regulations.

The bank was the subject of many allegations for being a channel for suspicious money transfers before, during and after the revolution. More than a year after the revolution, the bank finally responded by stating on its website that it falls under the jurisdiction and supervision of the Central Bank.

The team was also able to meet many dissident bureaucrats who have gathered hundreds of documents and are still struggling with them in the Egyptian courts. These dissident bureaucrats provided the BBC with proof of another “legal” practice which allowed for the exploitation of the country’s wealth. The government, namely the ministries of tourism and housing, had the legal authority to allocate land by  direct order at prices they decided to whomever they chose without recourse to any proper tendering process.

The bureaucrats gave us evidence that in many cases the land was gravely undervalued and given to either Mubarak’s in-laws or close friends. The documents, of which some are official government reports, show that due to this undervaluation Egypt has lost tens, if not hundreds, of billions of pounds in revenues – even though the practice was perfectly “legal”.

“We talk about $200 billion that were stolen illegally, but if you discuss the lawful mechanism that was unethical, we are talking about a trillion dollars,” says Mohamed Mahsoub, the current Minister of Legal Affairs in the recently-appointed cabinet.

When a mafia-like group ‘owns’ a state with its legislative, judicial and executive powers, corruption no longer becomes illegal. This ‘organised crime’ network, fostered by the family of Egypt’s ousted dictator, was not operating outside the law, because they were the law – in fact, they were everything.

Laws were simply drafted by them for their benefit. Law enforcement institutions were also their own private property. Accordingly, any effort to prove the Mubarak regime money was ill-gotten should not focus on whether they brok laws of their own making. What is acquired on illegitimate grounds should, by extension, also be illegal. The focus instead should be on the much easier task of proving the regime was an unelected dictatorship which benefited financially from being in power, even if on paper, it was all “legal”.

Follow Osama Diab on Twitter

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Moving, not moving on?

 
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By Christian Nielsen

Moving house is a back-breaking master class in logistics. But it’s also an emotional rite – moving from what was to what will be, purging yourself of possessions and packing some away for good.

8 September 2010

I recently moved house. All things considered, it went smoothly. We shifted everything we owned from one place to another with military precision; boxes first, big stuff next, people in the car behind. It’s just logistics.

But so much of who we are or what we represent is embalmed in this stuff and the places where we ‘house’ it that this nomadic rite deserves closer inspection. Perhaps it’s not a simple logistics exercise, after all.

There are no shortage of websites and services offering advice on moving, from preformatted ‘to do’ checklists and stress exercises to formulaic messages to announce your new abode. Here’s a couple of classics:

“We’ve found what makes a house a home… Lots of love, plenty of laughter, and the presence of friends and family! Stop by our new house soon…  and often!”

“We’ve packed our things and moved to a new address, but all the friends we’ve left behind
are what we’ll really miss! Our new address is…”

“We’ve packed up boxes, lamps, and chairs… our home is somewhere new. We couldn’t leave and settle in without telling you.”

It’s wonderfully cheesy stuff. And if these soppy morsels didn’t mask more serious emotional issues associated with moving, I’d happily tear them apart. The fact that people need to build their very own yellow brick road from ‘what was’ to ‘what will be’ says a lot about the human desire to be rooted, or connected.

New research even suggests the act of frequent moving on children can carry emotional baggage right through to adulthood. Writing in the Journal of Personality and Social Psychology, scientists took an established fact – that children who move house often tend to perform worse in school and can have behavioural problems – and looked more closely at what might be happening behind this.

Serial movers, the researchers say, tend to establish fewer so-called “quality” social relationships, and the more they moved as children, the less “happy” they tended to be as adults – scoring lower on the “well-being” and “life satisfaction” scales.

But not everyone is affected in the same way, the scientists caution. Certain personality types like introverts and more nervous or high-strung characters tended to be affected worse by regular moves. Of course, some people may enjoy the variety of experiences it throws up.

It’s your move

About 12 weeks ago we signed a contract saying that we would move our belongings – including two small human ones – across town. The preparations started then. I won’t go into the details, as I’m sure everyone knows the drill, but I will comment on some of the unexpected things that this transition threw up. As I ventured into the hidden recesses of the old house to perform stage one of the campaign – throwing away stuff – I came to realise with every load to the container park how suffocating all this stuff had become.

After a few weeks of this, I began to see pockets of light filter into the cellar once again. I discovered remnants of previous moves gone wrong – the unopened boxes of five years ago. Table tennis bats reappeared and I remembered how much I liked playing it. CD collections – relegated by iPod to the draws – got dusted off ready for a return to the good old days of having something to read while you listen to the tunes.

From my wardrobe I learnt that I tried (and failed) a couple of years ago to be more dapper. The growing collection of prams, scooters and bicycles in the garage bore witness to my growing and changing family. Each layer of stuff, once peeled, revealed something new, and yet entirely familiar.

To throw or not to throw? It transpired that my life – in and out of boxes –could be summed up with this basic tenet. Mostly, the decision was to throw. I threw and threw and threw. So much was thrown out that I sit today in my new – admittedly bigger, greener, nicer – house with a half empty wardrobe, a half full garage, a half empty garden shed and a draining fear that this new-found liberty can’t be sustained.

With each passing week, and each casual trip to IKEA, I dread the cycle of accumulation starting anew. I wonder if a new household regime will be needed, something like a nightclub policy of ‘one in one out’. One new pair of shoes, one old pair off to the op shop. One new children’s slide erected, one child fostered out… okay so perhaps that’s a bit extreme.

I’m a firm believer in keeping emotions out of logistics. And I approached the recent move as such. But the weeks of purging and packing kept reminding me of past moves and past times. Against my will, the ‘physical’ gradually ceded to the ‘psychological’ during this move. I recalled fondly moving house as a student, where everything could be packed into one car or on the back of a bike, and never looking back.

It’s not like that anymore. And I haven’t got a clue how I feel about this. Perhaps it’s inevitable, as I accumulate more stuff – mental and physical – I can’t expect it to all fit into a small Ford. No matter how hard I try to throw away the vestiges of the past they resist. I tell myself I’m moving on as well as moving away, but my heart and back are just not as hard as they used to be.

This is the extended version of an article which appeared in Australia’s The Age newspaper on 5 September 2010. Published here with the author’s permission. ©Christian Nielsen. All rights reserved.

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