February 11th, 2011
03:50 PM GMT
Protests have now spread far beyond Cairo and Alexandria, labor unrest is boiling over in factories and major port areas and former business titans and parliamentarians are being told not to travel – add it all up and it’s not the ideal backdrop for re-booting the region’s most populous country.
While the business world is looking for key signs of the wheels of commerce starting to move again with the re-opening of banks, core fundamental issues are more worrying by the day.
Initial forecasts from some of the region's leading economists are starting to look at revising their growth figures. From Banque Saudi Fransi-Credit Agricole: economic growth of 5.3% now revised down to 3.7%. To be candid, that seems quite conservative, if this attempt at a controlled transition begins to unravel. The country is currently losing more than $300 million a day in revenues.
The Civil Aviation Authority reported a sharp drop in tourist traffic. The tourism sector is the number one foreign exchange earner - bringing in around $13 billion annually. One luxury hotel owner in a Red Sea resort said that occupancy rates are running at less than 10% and they could take six months to rebound. The military “needs to be transparent with people," he said, adding, “There are so many questions but no answers."
The key question for investors is how the military will re-define its role. Will it carry the ball until well after elections and serve as a midwife to a more inclusive government like the one that has emerged in Turkey?
Egypt’s recently appointed cabinet, led by Prime Minister Ahmed Shafik, tried to take every opportunity to articulate a message that economic reforms will continue after a five-year running start. Since 2005, Egypt secured nearly $50 billion of foreign direct investment. Those seeking the next round of global brands may find it more difficult to make their sales pitch.
The market, still the largest in the Middle East, remains at the crossroads of the Gulf States and Europe and has a multilingual, young and educated workforce. But who will lead this force?
Is it Ayman Nour of the Ghad Party or Mohammed Badie of the Muslim Brotherhood? Or will Amr Moussa of the Arab League come back on the scene with a different party affiliation (he was incredibly popular when he was Foreign Minister about 10 years ago). And what about Mohamed ElBaradei. The latter two are known entities within international diplomatic and investment circles - the first two are not.
We know very little at this stage about their economic platforms, like whether they would advance and broaden reforms, keep Egypt open to international investment and continue to operate the Suez Canal as it is today. It is a cash generator of $5 billion annually. There are 67 industrial zones in Egypt, many around Port Said, and Port Suez - but they have become breeding grounds for striking workers who feel they have been dealt a bad hand
A Gulf investor who holds investments in Egypt told me it is important for the military and the various parties around the table to reform as quickly as possible. He referenced an old Arabic saying: Since they are drowning together, they should rescue Egypt together.
A shift in the approach, he concluded, is vital. The priority of all the stakeholders, including President Mubarak, has always been on "regional stability." That, he noted, needs to move to "sustainability" - for long-term investment, job creation and the rule of law.
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