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| THE MIDDLE EAST |

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THE FUTURE OF EGYPT'S 25 JANUARY REVOLUTION

Lessons from past experience

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By Ashraf Mishrif

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The Montréal Review, March 2011

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After almost six decades of autocratic rules that followed the 1952 revolution, Egypt has once again experienced another major revolution that led to the ousting of President Hosni Mubarak on 11 February 2011.

The 25 January 2011 revolution was ignited by neither army officers nor opposition political forces; rather it started by small groups of patriotic young Egyptians who successfully utilized information technology, mobilized the masses, gained the trust of the army, and shook the foundation of Mubarak's thirty-year old autocratic regime, an achievement that was unimaginable five or six months ago.

Although it is still in its infant, the January revolution marks the beginning of a new departure from the autocratic rule to a more liberal, democratic, fair and just political system. It is also hoped that this departure will lead to an improvement in the socio-economic conditions of millions of Egyptians; almost 40 percent of them live on or under the poverty line.

Compared with other Arab countries that are currently experiencing similar revolts against their ruling regimes, the Egyptian revolution has yet been the most successful in terms of peaceful transition toward democracy and laying the foundation of a more transparent, and accountable political system.

The success of this revolution could reaffirm the leading position of the Arab world's most populous country in the region as a model for political and economic development. This can only happen if the revolution completes its course and sets the country on the right path for democracy.

Indeed, some significant steps have been taken in this direction, including the removal of key figures in the previous regime from power and the amendment of the constitution, limiting the power of the president and his terms in office to a maximum of eight years.

But, there is still a lot to be done. Egyptians can learn from their past revolutions in order to avoid mistakes and lead the country to a better and prosperous future.

The first lesson to be learned from the 1952 revolution is the urgent need to transfer power from the military rule to a civil administration. Despite all the positive steps taken by the army, the Supreme Military Council is still in charge of running the country and its reluctance to abolish the emergency law raises doubts about its long term intention.

Some analysts argue that the army has been at the centre of the political life in Egypt since 1952 and is unlikely to easily give up this role. This concern should not be taken lightly as history shows that the army officers who succeeded in riding Egypt from the corrupt political establishment in 1952 failed in managing the country's transition to a democratic, just and prosperous future.

Of course, Egyptians do not want to replicate the 1952 revolution, especially when it comes to the management of the economy. Past experience shows that the military-enterprise relationship has long been broken. In fact, it was the suspicion of private enterprises of the intention of the military government that deteriorated Egypt's economic conditions in the 1950s and 1960s. This affected negatively the country's economic performance, which in turn led to decrease in the gross national product from EGP 44 million on averages between 1945 and 1952 to only EGP 27 million during the years 1953-1957.

The second lesson is for Egypt to move fast towards free market economy. Economic history shows that th e impact of extensive government interference in economic affairs under President Nasser was highly damaging, as Egypt lost approximately 92 per cent of her total foreign capital investment, which totalled only EGP 8.7 million (EGP 5.2 million went into the petroleum industry) in 1961 compared with EGP 100 million in 1948.

The economic conditions did not improve significantly under Sadat and Mubarak, who adopted hasty, semi liberal economic policies. With Egypt currently suffering from scarce financial resources, high levels of unemployment, high inflation and widespread poverty, the country cannot afford the absence of foreign capital, which reached US$11.6 billion in 2008 before dropping by almost half in 2010.

In fact, the greatest risk of losing the US$49 billion of inward investment accumulated between 2004 and 2010 is increasing the economic risk and political uncertainty associated with political transition.

Unless the government moves fast to reassure private enterprise of its commitment to free market, the right to private ownership, and the rule of law, a possible departure of these huge capital flows could greatly undermine Egypt's foreign reserves which is estimated at US$35 billion; increase trade deficit which is currently US$21 billion; and force the country to rely heavily on loans, increasing significantly foreign debts that was reduced by 59 per cent to US$29.8 billion in 2008 from its levels in 1990.

Attempts to rely heavily on external loans to compensate for Egypt's financial losses as a result of the uprising can increase foreign debts, as well as putting the government under extreme pressure by keeping up payments in order to maintain its credibility in international financial markets.

Egyptians should remember that it was Nasser's heavy reliance on loans and credit facilities from the Moscow, Washington and Bonn, which reached EGP 186 million, EGP 68.1 million and EGP 53.1 million, respectively, in 1961, that put Egyptian government under intense pressure as interest charges and payment of principle placed a great strain on the economy in subsequent years.

The third lesson is to avoid radical foreign policy changes in the short term. Given the current political and economic conditions of the country, Egypt 's foreign policy should be formulated entirely on the basis of economic and commercial interests. It is understandable that western countries have huge political and strategic interests in the country; these interests can be best protected by increasing their trade and investment, with Washington turning its military aid into economic one in order for Egypt to meet the demands of its growing population.

This argument appears more logical at this stage as China is now more willing and capable than ever before of becoming the new donor of Middle Eastern countries. Having a more balanced foreign policy seems the best option for Egypt . Cairo should not undermine the interests of western powers, which, in turn, ought to remember that it was their refusal to finance the High Dam in 1955 that forced Nasser to forge ties with Moscow, an act that changed the political and economic structure and outlook of the Middle East during the Cold War era.

The fourth and most important lesson is to improve and enhance the efficiency and credibility of Egypt's public institutions. The widespread corruption that has been institutionalised throughout the different layers of government bureaucracy must be fought intolerably hard. The policy of continuous marginalization of opposition political parties and civil society organizations must be stopped. Moderate political forces must seize the opportunity to present themselves as progressive forces capable of filling the current political vacuum and devising viable, outward-looking economic policies.

Mubarak's departure has not yet changed the political and economic landscape of the country. The revolution is far from over. What is very important at this stage is for the military to focus on what they do best: maintaining Egypt's sovereignty and protecting its land, seas and air from foreign intrusion. Egypt's young political leaders should be given the opportunity to devise a new governance system that is distinctive from that of the army-backed Turkish model or the police-state Russian model. The Egyptian model should be civilian and based on inclusiveness, fairness, transparency and accountability.

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Dr. Ashraf Mishrif is senior lecturer in political economy at King's College London. He is author of "Investing in the Moddle East" (Tauris Academic Studies, 2010)

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Investing in the Middle East: The Political Economy of European Direct Investment in Egypt

"In a world where foreign direct investment has become as precious an indicator of economic strength as exporting, Dr Mishrif's book uses the case of the Middle East to map out the political, economic and business issues which condition the success of nation states in attracting investment from overseas
investment which is as valuable for the knowledge it brings as it is for national finances. Diplomats and policymakers would do well to heed the findings of Dr Mishrif's work."

-- Professor Terry Mughan, Ashcroft International Business School, Anglia Ruskin University

"This wide-ranging use of primary materials makes this undoubtedly the most up-to-date, illuminating and important book dealing with Foreign Direct Investment in the Egyptian context. [This book] deals with a subject that is increasingly central to discussions in the subject area of Middle Eastern political economy and development studies. Indeed, it addresses directly what is probably the fastest growing area of Middle Eastern studies at the moment."

-- Professor Rory Miller, Department of Middle East and Mediterranean Studies, King's College London

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