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The Political Economy of Reform in Egypt

Published online by Cambridge University Press:  29 January 2009

Denis J. Sullivan
Denis J. Sullivan
Affiliation:
Deparment of Political Science, Northeastern University
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Extract

The Egyptian economy has deteriorated since the early 1980s. In response to periods of economic crisis, the International Monetary Fund (IMF), the United States Agency for International Development (USAID), and actors within the Egyptian government have been pushing President Hosni Mubarak to reform the economic system. Similar, but less obvious, efforts at reform are found throughout Egyptian society; private organizations are providing services–education, job training, health care, and day care–in the face of governmental unwillingness or inability to make these services available as promised

Type
Articles
Information
International Journal of Middle East Studies , Volume 22 , Issue 3 , August 1990 , pp. 317 - 334
Copyright
Copyright © Cambridge University Press 1990

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References

Notes

Author's note: Many thanks to Peter von Sivers and Leila Fawaz for their suggestions, upon which I have relied heavily to improve this article; to the anonymous referees for their comments; and to Stephanie, JoAnna Noor, and Grace C. for their love, patience, and indulgence.

1 See especially Alan, Richards, Egypt's Agricultural Development, 1800–1980: Technical & Social Change (Boulder, Colo., 1982);Google ScholarAhmad, H. Ibrahim, “Impact of Agriculture Policies on Income Distribution,” in Gouda, Abdel–Khalek and Robert, Tignor, eds., The Political Economy of Income Distribution in Egypt (New York, 1982).Google Scholar

2 This is an amount appropriated by Congress, but only about $12 billion of this has been spent. Military aid to Egypt in this period has also been around $14 billion.

3 World Development Report, 1984.Google Scholar While there is a correlation between levels of foreign aid and economic growth, causality has not been determined. When economists at AID–Egypt attempted an econometric analysis of aid levels and growth, they produced a lengthy report on the viability of the economy (in particular the agricultural sector), but the question of a causal link between aid and growth was inconclusive. Interview with economist at AID–Egypt, , 11 1986.Google Scholar

4 President Hosni Mubarak began using this term, azma (crisis), in 1984 in his public addresses. The U.S. Embassy in Cairo also uses this label in its pronouncements concerning Egypt's economic situation.

5 This is hardly democracy, however. Aside from the obvious fact of an uncontested presidency, political parties are all but excluded from representation in the Majlis al–Sha⊃b because of the government's inclusion of an 8 percent clause: for any political party to take a seat in the Majlis, it must win at least 8 percent of the national vote. In 1984, only the New Wafd party, in alliance with the Muslim Brotherhood, won opposition seats; in 1987, the alliance between Labor, Muslim Brotherhood, and Liberals plus the Wafd won opposition seats.

6 The decision by the High Constitutional Court to accept various challenges to the 1984 election results and the electoral laws upon which the NDP won in that year's election are interesting case studies of this judicial independence. See Fauzi, Najjar, “Elections and Democracy in Egypt,” American–Arab Affairs, 29 (Summer, 1989).Google Scholar

7 See especially Samīr, Rahwān, “Ishtirākiyya am ra'sumāliyya” [Socialism or capitalism?], al–Ahrām al–Iqtihādī, 11 10 1984, for an assessment of this debate in Egypt and for an outline of its arguments.Google Scholar

8 See Paul, Jabber, “Egypt's Crisis, America's Dilemma,” Foreign Affairs, 64, 5 (Summer, 1986):960–80.Google Scholar

9 lnterview with MOA undersecretary, 22 February 1987.

10 A similar argument is often heard about food aid to Nigeria and other countries, where large amounts of cheap food led to a major change in consumption patterns, making residents dependent on foreign sources for basic essential commodities.

11 A top official of Egypt's Principal Bank for Development and Agricultural Credit is another staunch opponent of USAID's demand that Egypt open its doors to beef imports. He also heads a beef cooperative and obviously does not want the increased competition that would come from unlimited imports.

12 Officials at MOA and USAID (and even some at USDA) felt that the USDA contractors for the data–collection project, funded by AID from 1980 to 1987 at a cost of $5 million, failed to fulfill the project goal of collecting and analyzing data on Egyptian agriculture.

13 He finished the meeting by saying, “We have a system of research with some problems. Data are collected on an ad hoc basis and the results of erroneous data are erroneous decisions. The existing system has gaps which reflect on policy decisions. My office is to fill in those gaps. To do so, we will call on the expertise of my colleague's research center, universities, outsiders, etc.”

14 He is already in charge of two USAID–funded development projects that have put over $40 million at his ministry–s disposal.

15 For instance, George Simmons, in research on Egypt's population–planning efforts, identified several agencies entrusted with halting and reversing the spiraling birth rate in Egypt. The agency given the most authority (and of course the biggest budget) under Sadat was headed by Jihan Sadat's personal gynecologist (Center for Near Eastern and North African Studies luncheon, University of Michigan, October 1985).

16 Sources: al–Ahrām, USAID–Egypt, and USAID–Washington. Procurement prices are set by the government and used by it to buy products from farmers. Delivery quotas are mandatory and fixed amounts of crops must be sold by the farmer to the government. Procurement prices are at least 25 percent lower than the open–market price at harvest time. Simon, Commander, The State and Agricultural Development in Egypt Since 1973 (London, 1987), p. 182.Google Scholar

17 The heads of six or seven agricultural governorates voiced their concerns about, and indeed their opposition to, Minister Wali's proposed reforms for various agricultural products. These governors feared that the proposed price increases would lead to increased competition between their governorates, and while there certainly would be improved efficiency in production, this would likely result in decreased prices for these crops in the long run, with fewer returns coming back to individual governorates. These governors say they are already suffering enough since the national government is facing ever–increasing budget and trade deficits and is, thus, withholding investments and funding for basic services from the twenty–six governorates in Egypt. The contents of this meeting were relayed to me by an aide to Minister, Wali, 5 02 1987.Google Scholar

18 Yahya, Sadowski, “The Sphinx's New Riddle: Why Does Egypt Delay Economic Reform?,” American Arab Affairs, 22 (Fall, 1987).Google Scholar

19 Middle East News Economic Weekly, 2 11 1984.Google Scholar

20 The claim of disincentive is made vigorously by USAID officials in Cairo and Washington. The agency has been trying, for several years, to put an end to PL 480 Title I food aid to Egypt, as it has for much of the developing world, on the grounds that it stifles wheat production in recipient countries and perpetuates these countries' dependence on foreign sources. See chapters 3 and 4 of my American Economic Aid to Egypt, 1975–87.

21 ln the midst of the 1986–1987 IMF talks in Egypt, Ganzouri suggested that “the Egyptian people have suffered a great deal this year [1986], but next year will be better.” In this same interview, he acknowledged that the IMF prescription for solving the economic crisis was “95 percent similar to the Egyptian prescription. Having counted everything, including cost of living, we could not accept anything other than the Egyptian prescription,” interview in al–Muhawwar, 26 12 1986, pp. 22–25,Google Scholar as quoted in FBIS Daily Report, 31 12 1986.Google Scholar

22 Former Defense Minister Abu Ghazala, long considered the power behind the throne in Egypt, was rumored to be the likely vice president after a successful trip to the United States in June 1986 (al–Ahālī, 25 06 1986, p. 1).Google Scholar

23 Despite the various changes of prime minister by Mubarak, these individuals have been deputy prime ministers since 1985: Wali, Ganzouri, Abdel–Halim Abu–Ghazala (defense minister until April 1989), and Foreign Minister Esmat Abdel–Meguid.

24 FBIS Daily Report, 19 05 1986,Google Scholar report from the Beirut daily al–Safīr, 17 05 1986, p. 1.Google Scholar

25 See El, Sayed Yassin et al. , “Innovation and Development: The Case of the Egyptian Bureaucracy,” presented at Middle East Studies Association, Chicago, 11 1983. The authors conclude that training sessions for Egyptian bureaucrats can be one of the most effective ways of improving the performance of otherwise inefficient employees.Google Scholar

26 These comments were related to me by someone present at the meeting.

27 It is not only AID officials who act as go–betweens for Egyptian bureaucrats, and it is not only Egyptian officials who are in need of go–betweens. While conducting this research, I often found myself being asked to pass along messages or to report on events in other ministries. In an interview with a science officer at the U.S. Embassy, I mentioned a USAID annual report that was available to anyone, and the science officer asked if I could get him a copy, since USAID had not sent him one, despite his numerous requests for it.

28 Interview with MOA official, Cairo, 4 November 1986.

29 Interview with MOA official, Cairo, 9 November 1986.

30 Interview with official of MOA's USAID Affairs Office, 29 January 1987.

31 The Ford Foundation, for example, relies on local talent and resources in its foreign–aid projects. The Italian government's aid agency in Ethiopia focuses on building institutional capacity. ANERA, the American Near East Refugee Association, is working with Palestinians to build institutions and to develop an economic and social infrastructure on the West Bank and Gaza Strip in the absence of government efforts to help them.

32 Interview with Ministry of Irrigation official, Cairo, 19 November 1986.

33 Joel Aberbach et al. discusses the “politicization” of the bureaucracy in their discussion of bureaucrats in Western democracies. This reality is apparent in non–Western societies as well, and the problem it generates is that even if bureaucracies are given the responsibility of promoting change, as in Egypt's case, “during periods of political indecision [bureaucrats] do not really govern the country, they simply continue routine operations, maintain the status quo, and protect their own interests…. There [is] no lack of ideas, plans, proposals, but in the absence of a determined political will, these plans remain dormant” (“Introduction to Bureaucrats and Politicians in Western Democracies,” in Louis, Cantori and Andrew, Ziegler Jr, Comparative Politics in the Post–Behavioral Era [Boulder, Colo., 1988], p. 296).Google Scholar

34 At $3 billion annually, Israel receives more money than does Egypt, but this is essentially a cash grant to Israel and no projects are involved, as they are in Egypt and elsewhere.

35 See my Ph.D. dissertation, “American Economic Aid to Egypt, 1975–1987” (University of Michigan, 1987),Google Scholar chapter 4. For Pakistan, see Scott, Gates, “The Limits of Conditionality: An Examination of Individual Incentives and Structural Constraints” (Ph.D. diss., University of Michigan, 1989).Google Scholar

36 This sense of frustration was described repeatedly to me in interviews with USAID officials in Washington and Cairo between 1986–1987 and 1989. Scott Gates found very much the same sense of frustration, manifested in something different than withdrawal as in Cairo, with USAID officials in Pakistan. See our dissertations, cited n. 35.

37 Some scholars use the term tashīī⊂ al–qisā a1–khāsh (encouraging the private sector) while others suggest privatization means bay⊂ al–qihā⊂ al–⊂āmm (selling the public sector). Other terms that are used include tamlīk (bestowing ownership) and takhsīh (from the root kh–h–h, or private).

38 Perhaps the most visible and atypical (because it is quite lucrative) Islamic association is the Mustafa Mahmud Mosque and Society, located in the middle–class section of Muhandiseen in Cairo. The health center and hospital, which are part of the mosque, provide top incomes for many of its doctors. The general impression one gets of this society is that it is essentially “capitalism with an Islamic face.”

39 Of course, such entrepreneurial initiative can, in fact, fail. The obvious case is that of the Rayan Islamic investment conglomerate, which for years had been promoting itself to the Egyptian public as the most profitable and sound of investment companies. When the government tried to regulate its activities, as it does with other investment enterprises, the truth came out that the claims of 22 to 25 percent return on investment were, in fact, fictitious. Rayan executives were merely using new investors' money to support their claim to old investors (the classic “pyramid” scam), and the firm could not meet its financial obligations and collapsed in early 1989. Thousands of Egyptians, many of them lower middle class, lost all their savings.

40 For instance, connected to the Mosque of Sayyida Zaynab in Cairo is a hospital (mustashfā). Funded in the late 1970s, this hospital has four beds and treats anywhere between 100 and 200 patients per day, between the hours of 5 P.M. and 8 P.M., though there is a doctor on duty 24 hours a day. In 1989, a patient paid £ 2 for a physical examination. The Mosque of Sayyida Zaynab pays the doctors for operations, costly medicines, and other treatments beyond the capacity of the patients to pay. The doctors work for government hospitals in the mornings and come, in the evenings, to Sayyida Zaynab or one of the other mosque/hospitals around Cairo that are affiliated (loosely) with Sayyida Zaynab (e.g., Rod al-Farag, Shubra, Qalya, etc.). These eighteen mosque hospitals are developing an informal network of sharing doctors, referring patients elsewhere for more appropriate treatment, and so on.

41 Interview with Catholic Relief Services official, Cairo, 2 August 1987.

42 Michael Hudson recognized that most Arab governments lacked legitimacy and were attempting to correct this lack using various techniques and ideologies. Post–1952 Egyptian governments probably suffered least from such crises of legitimacy, but this may now be slowly changing, an important question for further research. Michael, Hudson, Arab Politics: The Search for Legitimacy (New Haven, Conn., 1977).Google Scholar

43 See Richard, Barrett and Martin, Whyte, “Dependency Theory and Taiwan: Analysis of a Deviant Case,” American Journal of Sociology, 87, 5 (1982);Google ScholarJohn, Boli–Bennett, “Global Integration and the Universal Increase of State Dominance, 1910–70,” in Albert, Bergesen, ed., Studies of the Modern World System (New York, 1980);Google ScholarPeter, Evans, Dependent Development: The Alliance of Multinational, State and Local Capital in Brazil (Princeton, N.J., 1979).Google Scholar

44 See Robert, Kaufman, “Industrial Change and Authoritarian Rule in Latin America,” in David, Collier, ed., The New Authoritarianism in Latin America (Princeton N.J., 1979).Google Scholar Also see Jyotirinda, das Gupta, “A Season of Caesars: Emergency Regimes and Development Politics in Asia,” Asian Survey, 18 (1978), who points out that emergency regimes in Asia are not necessary for economic development given that their achievements do not justify their existence.Google Scholar

45 Fouad, Ajami, The Arab Predicament: Arab Political Thought and Practice Since 1967 (Cambridge, England, 1981);Google ScholarAlan, Richards, Egypt's Agricultural Development, 1800–1980 (Boulder, Colo., 1982);Google ScholarJohn, Waterbury, The Egypt of Nasser and Sadat: The Political Economy of Two Regimes (Princeton, N.J., 1983).Google Scholar

46 Nazih, Ayubi, Bureaucracy in Contemporary Egypt (New York, 1980), p. 51. Yassin et al., “Innovation and Development,” corroborate Ayubi's findings on how and when innovation can appear and how andwhen it is stifled, which occurs much more frequently in Egypt.Google Scholar

47 Ayubi, , Bureaucracy, p. 54.Google Scholar

48 Michel, Crozier, The Bureaucratic Phenomenon (Chicago, 1964), pp. 196–97.Google Scholar