Hosni Mubarak has been re-elected to his fourth term as Egypt's president. With no other candidate pu...
The president, therefore, remains supreme and there is no other contender for the role in sight. However, frequent public appearances by Mubarak's son Gamal has increased speculation that he is being groomed as his successor. There are also rumours that Mubarak may appoint two vice-presidents - a civilian and a military officer.
Immediately following his 're-election', President Mubarak issued directives to his new government demanding stricter standards of honesty, greater openness and more concern for the poor.
He has also appointed Atef Obeid as prime minister, who is credited with maintaining the privatisation programme. This, combined with the removal of a number of ministers adamantly opposed to privatisation, appears to emphasise Mubarak's determination to prioritise economic development.
News of Obeid's appointment saw Cairo's stock market jump by 10%. However, it should be put in perspective. While there is general praise for Mubarak's attempts to rejuvenate the economy - long under the grip of state control - the relatively positive economic results have yet to trickle down to the vast numbers of poor.
Although banned by the authorities, the success of the booklet 100 Reasons to say No to Mubarak, released by the Muslim Brotherhood and the Labour Party, is an indication of high levels of dissatisfaction with the political system. In an interview with the Washington Times, however, the president stated that constitutional and political reforms were not on the agenda.
It is the economy that has the government's attention. The privatisation of Egypt's utilities is moving ahead, with US and European investment banks well represented in the six consortia bidding to advise on the proposed sale of Telecom Egypt. Other steps are being taken to privatise the state-owned power companies after their taxation debts are settled.
To date, 40% of public sector companies have been privatised, bringing the country E£11.8bn. It is hoped that all public sector companies will be privatised by 2001. Those companies that are unattractive to foreign investors are to be restructured pending their sale.
Prior to the election, much was made of the increase in per capita income from $427 in 1981 to $1,410 in 1999. With a growth rate in recent years of around 5%-6% over the last few years, low inflation at 4.3%, and a 1.3% current account deficit, Mubarak has reason to feel bullish.
Nevertheless, there are increasing demands for a devaluation of the Egyptian pound. A research paper released by HSBC Investment Bank argues that this should be the government's main priority - a demand the government rejects. The bank maintains that the currency is overvalued, having appreciated by 50% since 1990 owing to the government's decision to keep the currency pegged to the dollar.
The new prime minister has dismissed the call for devaluation but it appears that pressure has been mounting for over a year, as the shortage of dollars caused by rising imports and lower than expected currency receipts from tourism in 1998 come to light.
The government argues that the shortage of dollars will be offset by an expected rise in tourist receipts this year. However, this is unlikely to happen. While the number of visitors has increased by 36% in the first six months of 1999, income from tourism has failed to reach the levels achieved before the November 1997 Luxor massacre.
The situation is further complicated by the fact that the central bank has tightened restrictions on Egyptian banks' access to foreign exchange. While official reserves have fallen by 10% in the past year to $18.1bn, it is the foreign exchange assets of the state-owned commercial banks that have been used to finance the balance of payments deficit. This has resulted in a 70% drop in foreign exchange reserves to around $3bn.
The crisis is fairly serious. Three months ago, the shortage of dollars created a significant black market - so much so that the central bank was required to make available $2bn. The episode has also led to increased calls for greater liberalisation in the banking sector. At present, the state controls just over 70% of the sector.
Added to the assessment of the grey area dynamics that continue to impede foreign investment are the criticisms of the FDI, which claims that foreign investors seeking to enter the Egyptian market are hindered by bureaucracy and red tape. Increasing the level of transparency, therefore, is vital in order to increase Egypt's attractiveness to foreign investors. Central bank figures for inward investment show a decline of $393m in 1998/9 compared with the previous year.
Before President Mubarak's term of office comes to an end, his administration urgently needs to pay close attention to the economic well-being of the population. Their patience cannot be taxed further, as the dark shadow of the Islamic fundamentalists still remains. Mubarak and his government ignore this at their own peril.
Naeem Rahman is analyst at Merchant International Group
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