Security fears dampen Egypt optimism

23 April 2015

With $130bn worth of investments pledged, Egypt must tackle the security situation to ensure projects go ahead and confidence returns

  • Security likely to dictate how foreign investment fares
  • Ansar Beit al-Maqdis continue to target security personnel
  • Former President Mohamed Mursi receives 20 year prison sentence  

On 21 April former president of Egypt, Mohamed Mursi received a 20 year prison sentence, and while there was little media coverage of the decision in the country, international press were quick to slam the trial, with human rights agency, Amnesty international, calling the verdict “a travesty of justice”.

In light of the sentencing this week, security remains a priority for a government desperately trying to restore stability and confidence for both citizens and international investors alike.

In March, with the support of the UAE and Saudi Arabia, President Abdul Fattah al-Sisi invited the international investment community to Egypt’s Economic Development Conference (EEDC) in an attempt to re-introduce the country’s ailing economy to the business world.

The conference was held in the coastal city of Sharm el-Sheikh in the Sinai Peninsula, not far from where the majority of terrorist attacks have taken place over the past few years.

Most assaults have been in northern Sinai, and while it is difficult to attribute the violence to a single group, many attacks have been claimed by Ansar Beit al-Maqdis, which has pledged its allegiance to the Islamic State in Iraq and Syria (Isis). There have also been several smaller improvised explosive device (IED) attacks in Cairo, the Nile delta and Upper Egypt.

While Egypt remains relatively stable compared with neighbouring Libya and other countries across the region such as Syria, Iraq and Yemen, it has struggled to alleviate attacks that may deter foreign investors.

The rise of Islamic extremism over the past three years has exposed significant political fault lines in the region. As such, during the EEDC Saudi Arabia, Kuwait and the UAE pledged $4bn each to Egypt, while Oman promised $500m. Qatar, which was a prominent supporter and financier of ousted Muslim Brotherhood president Mursi, was conspicuous by its absence from the stage in Sharm el-Sheikh.

Egypt has the support of GCC powerhouses Saudi Arabia and UAE in fighting the threat of violent extremism, a notion that has provided Al-Sisi with the confidence to step up a domestic campaign against terrorism.

And despite continued concerns about security, Egypt managed to secure approximately $130bn-worth of financial agreements during the economic conference. The priority now is to ensure the country can manage the security situation in order for international companies to proceed with planned projects.

“The attacks are likely to continue but the investment community understands that Egypt is working towards the required stability,” says Angus Blair, president of Cairo-based research agency Signet Institute. “The majority of attacks have been on security personnel and investors recognise this.”

Blair says that it is a matter of companies amending the risk matrix, and that Egypt still offers an attractive market across a number of sectors.

While international media has predicted a spike in attacks following Mursi’s sentence, major cities across Egypt have seen a drastic decline in street protests and general public disobedience against the government. “People just want to get on with their lives,” says Blair.

Although militant groups in Sinai continue to threaten the country’s stability, it is difficult to make a connection between groups such as Ansar Beit al-Maqdis and the Muslim Brotherhood.

“Attacks are sporadic and random, they often have an underlining economic and social motive rather than a wider political goal like you see in Libya,” says a prominent member of the banned April 6 Movement, who has chosen to remain anonymous.

Although the army has lead the rhetoric against extremist violence in rural areas, it has been the interior ministry and Egypt’s secret police who have lead the fight in highly populated urban areas across the country.

“There is only so much we can do from a security point of view, the government has a role to play in improving education and encouraging civil cohesion,” says a lieutenant colonel of the Egyptian police working in the Al-Arish area, which has been the focal point of attacks in northern Sinai.

In February, Egypt’s Central Agency for Construction, which works under the country’s Housing Ministry, announced that it is to pump $203m into infrastructure and housing projects in the Sinai Peninsula.

A welcomed move for a region that has historically been neglected by previous governments leaving a local population often feeling disenfranchised from Cairo.

Al-Sisi has managed to move forward with much-needed economic reforms, yet it remains unclear whether he will be able to replicate the success of the EEDC when thinking about social and political reforms that will play an equal role in fighting extremism and violence.

International companies who have either never operated in Egypt or pulled out following the 2011 uprising have been optimistic about the resurgence of the Egyptian market although many remain apprehensive and fear a worsening security situation. But many have indicated that right now, Egypt plays a watching beief in their portfolio, citing concerns about security and the safety of employees.

It therefore becomes vital that Egypt presses ahead with the first line of projects in order to set a new precedent; that the country is able to provide a stable business environment for foreign investors.

Attacks to date in 2015

  • 29 January Al-Arish – 40 soldiers killed near Rafah border attack
  • 26 February Cairo – IED bomb kills one injures three in retail centre
  • 3 March Cairo – IED bomb kills two and injures nine outside Egyptian high court
  • 10 March Al-Arish – Suicide car bomb kills one and injures 25 police officers
  • 2 April Northern Sinai – Two men ambush armed forces base killing 15 and injuring 19
  • 5 April Cairo – IED bomb kills one police officer in affluent area of Zamalek
  • 9 April Northern Sinai – Missiles and bombs kill nine residents
  • 11 April Northern Sinai - Ansar Beit al-Maqdis releases video showing the beheading of one solider and one civilian
  • 12 April Sheikh Zuwaid – IED explosion kills five soldiers; Northen Sinai – Suicide car bomb kills six and injures 44


Sources: MEED; Aljazeera news; Al-Ahram newspaper; Middle East News Agency; Egypt’s State Information Service

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