Coping with hard times

12 April 2002

While other Arab leaders squabbled in Beirut on 27 March over the proceedings of their summit conference, President Mubarak of Egypt stayed in Cairo and held talks with his advisers about the budget for the new financial year. Given the state of the Egyptian economy, the ordering of his priorities could be seen to have a certain logic. However, regional politics also plays an important part in Egypt's economic fortunes, and, by staying away from Beirut, Mubarak appeared to be running the risk of impairing Egypt's status as a major force in the Arab world. It was indeed largely thanks to that perception of Egypt's importance that the World Bank was able to organise an international donors' conference in Sharm el-Sheikh on 5-6 February at which the government received pledges of $10,300 million in aid to be disbursed over the next three years.

Mubarak has spoken at length on the reasons for his surprise decision to skip the summit. The gist of his argument is that he was instrumental in persuading Palestinian leader Yasser Arafat not to accept the Israeli conditions for his being allowed to leave Ramallah to attend the summit. If Arafat had gone, Mubarak argued, there was every chance that Israeli Prime Minister Ariel Sharon would not have let him go back. In that event, the summit would have descended into chaos.

On this basis, Mubarak declared that he had in fact 'saved' the summit, but he had decided to stay at home in solidarity with the beleaguered Palestinian leader. With Israeli forces now hemming Arafat into a single room, Mubarak's solidarity is needed more than ever - if only to placate the thousands of Egyptian protesters pouring out on the streets of Cairo and other cities to express their fury at Israel's actions against the Palestinians. However, what Mubarak can do in a practical sense to deal with the Palestinian disaster remains open to question. The 3 April decision to limit diplomatic contacts with Israel to topics that will serve the Palestinian cause was a gesture with little actual content.

Mubarak has lined up behind the Saudi peace initiative, but the very fact that the Arab states now have a clear collective vision on the issue means that Egypt's role as a special channel between Israel, the Palestinians and the US is less important. Mubarak also has plenty of problems to address at home.

One of these is the rickety state of Egypt's transport system, cruelly exposed by the 20 February train disaster. The government's immediate reaction to the train fire, which killed 373 people, was typical of its defensive mentality. As Prime Minister Atef Obeid surveyed the burned-out wreckage of Train 832 he made the preposterous assertion that 'all our trains are in good shape and at the highest degree of efficiency and they are reviewed completely and regularly'.

The embattled 69-year-old premier was sharply criticised for his remarks a few days later during parliamentary debate on the disaster. Among the usual array of opposition MPs, whose anger with the government has been steadily rising as the economic recession deepens, was Fayeka el-Rifai, a former vice-governor of the Central Bank of Egypt and one of 10 MPs directly appointed by President Mubarak. She pointed out that the government had blocked plans to refurbish railway cars with non-inflammable fibreglass fittings, and she expressed astonishment at the decision to appoint as the new chairman of Egyptian National Railways the man who had previously been in charge of maintaining the organisation's rolling stock.

The train disaster prompted the resignation of Ibrahim el-Demiri as transport minister. El-Demiri took on the job in 1999, inheriting the department from the veteran Soliman Metwalli, who had held sway over transport and telecommunications since the early 1980s. El-Demiri was one of a new breed of departmental ministers who had been keen to press ahead with ambitious reforms and new projects. However, El-Demiri has had little to show for his efforts over the past two years. The railway system has been shown up as being of lethal danger to its passengers, and the changes El-Demiri has wrought in the management of the civil aviation sector have achieved little of substance. A debate about building a new airport west of Cairo ended with the conclusion that the government should revert to its much-criticised plan for expanding the existing airport, a project that has been stalled for almost 10 years.

Mubarak has used El-Demiri's resignation as an opportunity to hive off civil aviation from the Transport Ministry. The new Civil Aviation Minister is Shafiq Zaki, formerly commander of the Egyptian Air Force - a post once occupied by Mubarak himself. Another of Mubarak's colleagues from his air force days - Mohamed Fahim Rayan - is lodged firmly in the post of chairman of national carrier EgyptAir. Notions such as open skies and the adoption of imaginative solutions to the problem of Cairo's inadequate and shoddy airport have been fiercely resisted by Rayan. The pedigree of the new minister suggests that his views will not be significantly different.

The new transport minister is Hamdy el-Shayeb, who was previously head of the state-owned oil and gas construction company Petrojet. He will at least bring to the job practical experience of project execution, which could be an asset when it comes to building the third line of the Cairo metro.

The changes in the transport area, forced on Mubarak by the train disaster, follow a reorganisation of the economic policy portfolios at the end of 2001. This came in the context of the end of the second term of Ismail Hassan in the office of governor of the Central Bank of Egypt. Hassan's departure and his replacement by the well-regarded Mahmoud Abul-Ayoun was initially welcomed, by the banking community at least, as signalling a more flexible approach to exchange rate policy. However, Abul-Ayoun lost much of that goodwill with an ill-advised effort to curb imports. This left him politically damaged, and appears to have put paid to hopes that the Egyptian economy would benefit from being given a sense of direction by a powerful, independent central bank chief.

The reorganisation also entailed the abolition of the economy ministry, limiting the formal orbit of Youssef Boutros Ghali to that of foreign trade. Boutros Ghali has been intimately involved in Egypt's reform programme since returning home in the mid 1980s after a stint with the IMF. He has insisted that the change in his status should not be construed as limiting his role, as the promotion of exports is one of the government's most important strategic challenges. However, it does mean that the government has been left without an economic policy champion. Finance Minister Midhat Hassanein has won praise for his effective management of the budget, but he has not played a conspicuous part in wider policy issues.

The net effect has been to bring the focus back to Obeid. Well-liked, and with a shrewd understanding of the inner workings of the Egyptian system, Obeid has still not been able to throw off the image of a crisis manager. He was given the premiership in October 1999, just as the economy was starting its downward spiral. He has conducted a running battle with the exchange rate, done his best to get on top of the budget deficit and sought to maintain some momentum with the reform programme. However, his government has looked too often as if it is fighting a losing battle. Obeid promised at the end of 2000 to bring in a raft of new legislation, but the only major new law to have made it onto the statute books is the mortgage law, which has been several years in gestation. New tax and labour laws are now going through parliament, but it is by no means guaranteed that they will be passed before the long summer recess.

Obeid tried to put a positive gloss on his government's achievements in his presentation to parliament of his government's programme at the start of the current session, but he received short shrift from MPs who were clearly dissatisfied with his performance.

The Cairo business community has made clear its belief that it is time to bring in someone younger to take charge of the government. From the current team, one of the figures mentioned as a possible candidate is Ahmed Nazif, the Communications & Information Technology Minister. Another figure who has shown quiet and effective application to the job is Ali el-Saaedi, who came into the cabinet as minister for electricity in 1999 and has since been reassigned to the industry portfolio.

However, Mubarak is thought to be reluctant to make changes while regional political tensions are so high, and Obeid is likely to be kept on at least until the end of the summer. Mubarak himself is now 74, and his current presidential term, his fourth, runs until 2005. The debate over his succession has gone quiet in recent months, as the state of the economy and regional politics have become the main preoccupations. But the issue remains central to Egypt's medium-term prospects.

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