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Egypt's New President

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Egypt's New President JULY 2014 EGYPT’S NEW PRESIDENT: “I WILL NOT SLEEP AND NEITHER WILL YOU. WE MUST WORK, NIGHT AND DAY, WITHOUT REST.”1 By Ann M. Lesch Dr. Ann Lesch is emeritus professor of political science at The American University in Cairo and adjunct professor at Villanova University. The views expressed here are her own and do not represent the views of those universities. Abdel Fattah El-Sisi, anointed president by 97 percent of the voters in May 2014, addresses Egyptians as their elder brother, insisting on correcting their wayward behavior. He’ll make sure that they get up at 5 a.m. so they can work hard and he’ll ensure that they adhere to ‘correct’ Islamic practices so they stop harassing women. He will rein in consumption by installing energy-efficient light bulbs in every home, and he insists that Egyptians walk or bicycle to work. (He has even calculated exactly how much they will save by not buying fuel for their cars.) Above all, he prioritizes security – the war against terror – which requires national unity and state power. Security trumps the right to protest and the need for higher wages. With executive and legislative power concentrated in the presidency until the House of Representatives is elected next autumn, his compliant cabinet rushes to meet his demands. Indeed, he compelled the ministers to take the oath of office at 7 a.m. on June 17 and then chaired the first cabinet meeting, which lasted for seven hours. As El- Sisi rises by 5 a.m. for dawn prayers, he expects government officials to be at work by 7 a.m. and for the ministries to function 24/7. El-Sisi’s expansive love-for-the-people is tempered by his insistence on discipline, efficiency and productivity, as befits a man who was highly self-disciplined as a child and entered the military academy at age fifteen. To the president, “all Egypt should be like the army,”2 his model institution. Impatient with the poorly performing civilian bureaucracy, he places military officers in the ministries to supervise the disbursement of funds from Gulf states and ensure quick action. And he won’t hesitate to use the armed forces to implement projects, if the responsible ministry is too slow. He has bolstered Egypt’s highly centralized governing systems, not only continuing to appoint all the governors but also decreeing that he will appoint the presidents and deans of all the public universities. Given the upheavals in Egypt in the past three-and-a-half years, many yearn for a strong leader, hoping that he will put the country back on course. However, El-Sisi is careful to not raise expectations. He did not offer the miraculous 100-day plan that former President Mohamed Morsi foolishly declared. Rather, El-Sisi makes clear that the next two years will be difficult for everyone and even says that, given the dire socio-economic conditions, a whole generation will suffer. It will be their children and grandchildren who will prosper. This long-term perspective sometimes slides into Mubarak-like warnings that it will take years to build democracy, as the people are not yet ready. Thus, in the short-run, public demonstrations must be prohibited, in line with the November 2013 Protest Law. Egypt’s serious security problems in Sinai and the uncertainties in the Nile Valley, where improvised bombs 1 David D. Kirkpatrick, “Egypt’s New Strongman, Sisi Knows Best,” The New York Times, May 25, 2014. 2 Egyptian Chronicles, May 9, 2014, http://egyptianchronicles.blogspot.com/ target policemen and sometimes harm civilians, justify limiting access to public space and reinforcing governmental power. THE DEVELOPMENTAL IMPERATIVE El-Sisi stresses that large scale state-led projects will modernize the economy, increase employment, and provide vital infrastructure and services. This spring, the engineering department of the armed forces drafted a 300-page program, heavily focused on increasing access to electricity, fuel and safe transportation. El-Sisi also dusted off the 1985 plan authored by veteran arid-lands expert Farouk al-Baz to build cities in the desert, which El-Sisi expanded into a $140 billion project to build 48 cities, largely powered by solar energy. And he consulted the head of the World Economic Forum as well as Saudi hotel and media magnate Prince Alwaleed bin Talal, whom Mubarak had involved in the failed agricultural project in Toshka, west of Aswan. Most importantly, the United Arab Emirates (UAE) – seeking to shift from cash payments and petrol bailouts to project-based assistance – hired Strategy& (formerly Booz Allen) and Lazard financial services firm to work with officials in the Egyptian central bank and government ministries to craft a coherent development program. This will prepare for a Saudi-hosted donors’ conference in December, after which aid can be solicited on a bilateral and multilateral basis, including from the International Monetary Fund. El-Sisi hopes that this systematic approach will enable Egypt to stand on its feet, in the long run, and not rely on handouts from the Gulf states: “We don’t see this [reliance] as a good thing, frankly, and hope it ends as soon as possible.”3 The cabinet contains seasoned technocrats, who seek to develop solar energy projects, promote small-and-medium- enterprise (SME) investment, and complete Mubarak-era master plans, such as “Cairo 2050” and “Egypt 2052,” even though those plans created luxury gated communities and high-end business complexes that exacerbated social divisions. Although the ministries will be heavily involved in planning, El-Sisi may steer most contracts to the armed forces. Already, nearly all the Gulf-funded projects are being carried out by the military (often using conscript labor), including $1 billion from the UAE to repair and build bridges, tunnels, train level crossings, and housing throughout Egypt as well as projects along the Suez Canal. The military will implement the $40 billion agreement with UAE’s Arabtec Holding Company to construct a million housing units and will handle UAE-funded projects for drinking water, sanitation and electricity for a hundred schools and almost as many health units. El-Sisi also focused on the immediate fiscal crisis. A week before the start of the fiscal year on July 1, he rejected the cabinet’s draft budget for FY 2014-2015 – a budget that would have been the largest in Egypt’s history. He compelled the cabinet to cut expenditures by $4 billion so as to reduce the enormous deficit, increase gas and electricity prices, and reform the tax system. These were politically risky moves, which the Interior Ministry wanted to delay in order to avoid protests. But El-Sisi recognized that he must act quickly, capitalizing on his popularity. Pointing out that subsidy reforms were decades overdue, El-Sisi framed the changes as essential to the effort by the “war cabinet” to set Egypt on the “correct” path, prevent Egypt from “drowning” in its $420 billion debt, and fulfill the public’s trust that he would save the country. He called on the public to “work with me” in this effort to fix the economy. To underline the dire situation, the president stated bluntly: “the only constant source of foreign currency we have now is the Suez Canal.” 4 This means, for example, that without setting prices at a level that covers the cost of oil and gas extraction and refining, no one will invest in the petroleum sector and the Oil Ministry cannot repay the $6 billion it owes international companies. In addition, sales tax on cigarettes was increased by 50 per cent, on beer by 200 per cent and on wine and spirits by 150 per cent. Announced to the public as changes that would impact the wealthy more than the poor, the government also hoped that the inflationary impact would be brief. Nonetheless, the up-to-78 per cent increase in gasoline, diesel, benzene, and natural gas prices for individuals and industries immediately hit the poor and the lower middle class, who rely on cheap mini-vans for transportation. People braced for sharp increases in the prices of food and industrial goods. 3 Stephen Adler and Richard Mably, “Egypt’s Sisi asks for U.S. help in fighting terrorism,” Reuters, May 15, 2014, www.reuters.com/article.2014/05/15/us-egypt-sisi. 4 Quoted in “Egypt’s El-Sisi asks Egyptians to ‘work with him’ as energy prices increase,”Ahram Online, July 6, 2014, http://english.ahram.org.eg/News105699.aspx. El-Sisi conceded that he could not protect citizens from price increases in the private sector, but the military spokesman pledged to sell food at low prices in army-owned outlets and provide military buses to augment civilian routes. Other ministers promised to expand the range of food items offered cheaply through the new ration card system as well as increase the number of public buses and metro cars. El-Sisi also alerted the public that subsidies would end entirely within five years. Within hours, El-Sisi’s supporters mobilized in support – proof that the president has the political muscle to transform the subsidy structure and start to rein in debt, actions that none of his predecessors dared to attempt. The cabinet simultaneously announced a capital gains tax on profits and dividends as well as plans to reform the property tax and promulgate a new valued added tax (VAT) on consumer items. The capital gains tax, which should add $1.4 billion to government coffers, was long anticipated and did not cause serious pressure on the stock market. However, investors remain uncertain about the consistency of the rule of law and fear politicized actions against businesses.
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