Podcast: An overstretched Egypt and the seeds of future unrest

Transcript: Egypt is working hard to get back to a reasonable level of normalcy after Covid-19 has taken a big bite out of its economy. The highly controlled national media is full of positive stories, and certainly they need to be reported. For instance, this week, one state newspaper said flights between Armenia and Egypt have resumed as of 17 September. It is reported that more than 250,000 tourists have flocked to South Sinai and Red Sea resorts since Egypt reopened its tourism sector on the first of July. It is unclear who these 250,000 visitors are, but these are the numbers. There has also been a great deal of tourism promotion, such as reports and essays on the village of Dahab, a former Bedoui village nestled between the Red Sea and the rocky red cliffs of South Sinai. I am certainly in favor of Egypt promoting its tourism assets. THE SECTOR It contributes 15% to the country’s GDP and has immesurable contribution to the world’s heritage… And who does not want to visit the pyramids, cruise on the Nile, and relax on the Red Sea? The cities and urban areas are teeming with culture, arts and food. For a long while, Egypt was the beacon of the Arab world on all fronts. The foreign media is also reporting some positive news. French agency AFP reported on the resumption of camel racing in the South Sinai desert. But as there is a shortage of great news, we note a major focus on archeological stories. For instance, CNN reports on “mysterious mummies discovered in Egyptian well.” These archeological discoveries are all over the Egyptian media on the non-stop basis. Some media, however, have published lot more honest assessments. Arab News, for example, reports that Egypt is losing about $1 billion a month. It states that “some regions have seen a 90 percent reduction in tourism.” Again this is not a problem specific to Egypt, as it is affecting all major tourism destinations worldwide. But it is important that the super positive news carried by state controlled media and some of the foreign allies are vetted and verified. And so far, the excessive exuberance about tourism in Egypt this fall season is clearly misplaced. In the business sector, many foreign investors have been enjoying Egypt for a number of logical reasons. The country managed to convince the IMF to lend it billions of dollars, so there is cash flowing around, although at a steep price for the Egyptian people. One of the consequences of an economy in turmoil but still attracting foreign speculators is the readjustment of the Egyptian currency, and because it has lost considerable value, foreigners are more than happy to buy Egyptian assets. Here is very basic arithmetic. In late October 2016, one US dollar fetched roughly 8.8 Egyptian pounds. On January 20, 2017, or about two months later, a currency devaluation resulted in the US dollar exchanged at 18.82 pounds. That was a 114% increase in the amount of Egyptian money that one single dollar can fetch. So what does that mean in real terms? Just imagine that there is a business, a building, a valuable piece of infrastructure for sale in Cairo at the price of 8.8 million pounds in late 2016, equivalent to one million dollars. In early 2017, the depreciation of the pound now enabled people with dollars to buy that very same structure at about $480,000, instead of the million dollar mentioned earlier, or the equivalent to 50 cents to a dollar or half price. Now because Egypt has been battered by political instability the price of assets even in the Egyptian currency had to fall, amid collapsing demand. So as foreign speculators with plenty of dollars, the benefits are double: not only asset values have fallen in Egyptian pound, but now they are half price of that they were in US dollar terms. These are deep discounts that made many wall street investors and institutions that invest in sovereign debt are happy to grab. But setting aside speculators, so-called foreign investors and propagandists in Egypt who are eager to promote the image of country that is far from the truth, how are Egyptians and for those who really care about Egypt, coping and dealing with the realities on the ground, and anticipating its stability and its long-term prospect. Let me begin with the problem that everyone in the world is facing and that is the coronavirus epidemic. This week, the Egyptian government reauthorized the export of alcohol and its derivatives, surgical masks, and PPE used in the fight against the coronavirus, in an effort to show that the situation is under control. But the virus is nowhere under control. In all, official and unaudited data suggest that the cumulative infection figure as of 17 September exceeded 101,000 people. Again, the figure is unaudited and so it is fair to assume that the number of infected people is several times that number. The death toll now nears 5,700. Just on 17 September, there were 160 more people infected, based on government stats. And although peak deaths of 97 was recorded on 15 June, the current daily death rate on 17 September was 17. That is certainly a big drop, but the virus continues to weigh heavily on social and economic life in Egypt. As we are headed to the spring and winter seasons, Egypt is not ruling out a so-called second wave. On the security front, Egypt remains a major flashpoint of instability. The country’s security infrastructure is overstretched with multiple areas of conflicts, from north Sinai bordering Israel and Palestine, to the western desert bordering Libya and of course into the big urban areas that harbor a great deal of resentment against the Sissi government. The threat level is so high that from late July to late August, Egypt’s army killed more than 70 alleged jihadists in North Sinai, home of an insurrection against the government. The military also lost troops in the operation. On 21 July, another bloody confrontation in the Sinai region of Bir al-Abd ended with two soldiers and 18 alleged insurgents killed. On the western front of the country, things are also precarious. Presidential Spokesperson Bassam Rady stated back in July that during the past few years, the Egyptian armed forces have destroyed thousands of four-wheel drive vehicles on the Libyan border, assuming that those vehicles belonged to terror groups. Rady even stated the figure of 10,000 vehicles, even suggesting that in all, they transported more than 40,000 insurgents and foreign fighters. The instability in Libya has certainly been a complicating factor, but Egypt has been part of the problem in solely supporting the eastern Libya warlord Khalifa Haftar. Egypt should not expect to be spared if it decides to side with one faction of the Libyan conflict or any conflict, as a matter of fact. These are counterinsurgency operations that may or may not be publicized, but what is certain is that despite being overstretched on the domestic front, president Sisi made direct and repeated threats to open a new front within Libya proper, with the aim of helping his protégé, Khalifa Haftar in confronting the western government, supported by Turkey. In mid-July, Sisi said that his country “will not stand idle” against threats to the national security of Egypt. To project his opposition to Turkey into an Arab vs. Turk conflict, he even stated that Egypt will not stand idle against threats to “Arab countries.” Sisi held a meeting with a select group of tribal leaders from eastern Libya, who have been staunched supporters of Khalifa Haftar and who are keen on seeing a direct intervention from the Egyptian forces, with the risk of throwing the entire region into a major conflict. In fact, his comments came days after the eastern-based Libyan parliament, naturally aligned with Haftar, gave in-principle support to an Egyptian military intervention in the country. Regionally, Egypt has a big problem with its neighbors to the south, in particular Ethiopia, which has built a dam that allegedly threatens Egypt’s water supply. As of the end of August, negotiations on the so-called Grand Ethiopian Renaissance Dam (GERD) have stalled due to persistent disagreements between Egypt, Ethiopia and Sudan on a host of issues pertaining to the GERD project. Of course I would not fault Egypt for getting nervous about a structure that could starve it of water. After all, the Nile has always been tightly associated to the Egyptian history and has been a major source of stability and economic progress. But the issue is yet another flashpoint that adds to Egypt’s problems and its long-term outlook. On the ground, the quality of life in Egypt has vastly deteriorated. The coronavirus has certainly amplified the state misery facing millions of Egyptians. With limited resources for social help and aid, the Egyptian government is simply unable to provide any meaningful relief the poor and the vulnerable, including thousands of street children. But what the Egyptian government has excelled at is to increase repression and prevent any form of reprieve to take place, helping build more pressure in what could become the most dangerous powder keg in the arab world. To begin with, personal liberties have completely vanished. This summer, an Egyptian court handed a 15-year prison sentence for Ahmed Douma, a leading figure of the country’s 2011 uprising. He was charged of clashing with the political police during a protest in Cairo. Egypt police also arrested Sanaa Seif, a prominent activist, as part of an ongoing crackdown on dissidents. Such crackdown includes the arrest and sentencing to two years in prison of Haneen Hossam, Mowada al-Adham and three women after they had posted footage on video-sharing app TikTok. They were charged of violating public morals. The Egyptian government is unforgiving and has been accused by human rights groups of abusing judicial harassment to make the lives of activists miserable. Egypt has apparently perfected the use of pre-trial detentions, which allow it to keep people in jails for up to two years without a trial. Human rights groups call this “recycling judicial cases with the aim of prolonging the detention periods. In this Orwellian justice system, people are tried and re-tried over and over again, in a permanent process of harassment. The Egyptian authorities don’t limit their attacks to activists only, they even go after their families. Human rights groups, including Human Rights Watch and Amnesty International, this summer accused Egypt of “harassing and intimidating” the relatives of Mohamed Soltan, the son of a leading member of the now-outlawed Muslim Brotherhood. The targeting of the activists’ families is considered by rights groups as “reprisal raids,” with many having been arrested. The authorities in Egypt have essentially left no breathing room for the population to externalize their day to day pressure, essentially strengthening the powder keg that could explode in the form of social and political unrest. The rigidity of the Sisi regime and the military has reached such a high that even flying a kite is now illegal. Forget about using a leisure drone or binoculars, even the simplest kites cannot be permitted. An Egyptian lawmaker called the kites a ‘national security threat.’ No wonder why posting anything on Facebook could lead its author to prison. For the people who do not dare question the authority of Sissi and his supporters, it is more about day-to-day survival. And then again, things are extreme. The country’s basic infrastructure is continuously crumbling with the government unwilling to engage into a meanwhile reconstruction and modernization. This summer alone saw the collapse of a building on Kasr al-Nile street, near Tahrir Square in Cairo. Residents in the upmarket Cairo suburb of Zamalek, close to embassies, were forced to evacuate when their building showed deep cracks. Still this summer, there have deadly transportation accident, such as a train derailing near Shubra al-Khaima station and a boat sinking in the Nile river section of Beheira, killing four. So quality of life in Egypt has been going from bad to worse. So as we look into the future, how optimistic should we be about Egypt returning to its old glory as a leader of the Arab world? Sadly, the near-exclusive focus of the Sisi reign is on security, on strengthening the military’s grip on power and on repressing any form of dissent and opposition. In fact, most of the Egyptian economy is controlled by the military. The political opposition has been virtually dismantled and Sisi’s loyalists are everywhere. Last month, “For Egypt”, an electoral list comprised of 11 parties made up of pro-Sisi candidates, won every electoral district, essentially taking over the upper house that was disbanded after the military coup against Islamist president Mohamed Morsi in 2013. Most Egyptians did not even bother to vote, with authorities reporting a turnout of just north of 14%. Sisi’s pharaonic powers have been enshrined in a new constitution that boosted Sisi’s control over the judiciary and granting the army even greater influence in political life. Sisi could officially be in power until 2030. But even retired army officers are now banned from running for president unless the military authorizes them. That guarantees that Sisi has no competition even from within the military. So if we assume Sisi is in for at least 2030, do not expect a miracle to take place. Remember one thing: If history serves as a base to project the future, Sisi is not going to leave on his own will. Mohamed Naguib resigned from office in November 1954 after Gamal Abdenasser launched a brutal campaign against him accusing of being a supporter of the Muslim Brotherhood. Gamal Abdenasser did not leave office willy nilly, he died of a heart attack in September 1970, essentially ruling over Egypt since November 1954 or 16 years. His replacement, Anwar Sadat has had a miserable ending to, having been assassinate in October 1981. His replacement, Hosni Mubarak, also had a rather tumultuous ending, having been jailed and dragged into prison in 2011. Mubarak reigned for 30 years. Even the mighty Cleopatra reigned just 21 years. Mubarak eventually died in February 2020. His replacement, Mohamed Morsi, had the shortest tenure of all of one year, having been ousted by Field Marshal el Sisi. So as you analyze the trajectory of Egyptian president, you can easily project that the current one is not going to leave office as it were a democracy. And although the constitution now allows him to stay until 2030, I guarantee that the constitution will then be re-adjusted to allow a then-76 year old Sisi to remain in power. In closing, for those of you who work, live in and/or follow Egypt or if you have staff working there and want to stay continuously updated about critical incidents taking there, we are launching a mobile application called Shield & Alert. We make it available to you and your staff free for half a year. Just visit the app’s website Shield-Alert.com. The app has been designed for the iPhone and now working on android. If you need assistance, we are click away, just use the analyst support link on the website and someone will talk to you live. Thank you for listening and until the next podcast, goodbye.