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Ineptitude and Economic Decay in Egypt

Can Egypt overcome its staggering chronic underperformance?

November 8, 2004

Can Egypt overcome its staggering chronic underperformance?

The last time Egypt offered the Arab world intelligent leadership, the country was run by a minority class of party-loving Shiite Muslims. An Iraqi Jew was the most influential man in the country —and a fraternity of warrior-eunuchs commanded the army.

Egyptian markets were open, lightly regulated and tariffs — where they existed — were low. The country was home to the world's most prominent scholars and scientists.

The most respected physicians in Europe received their degrees from Egyptian universities. That was just over 1,000 years ago, under the Fatimid Dynasty. Today, Egypt leads by not leading.

The Egyptian economy stays afloat on the combined strength of its natural and man-made blessings: the Suez Canal, foreign aid, energy reserves and the Nile. Of those, only the canal is here to stay. Even the mighty Nile is shrinking as Egypt's population grows.

The government talks about modernizing its agricultural base and of using its water resources more efficiently, but instead has invested billions of dollars in roads and suburban projects. They were well intentioned, but poorly planned. Many of the housing units are empty. Egyptians call them El Fil El-Abyad — "the White Elephants."

Nowhere in the Arab world is the gap between rhetoric and reality so great as in Egypt. The country is officially democratic, but election results are routinely manipulated and dissent stifled — sometimes brutally.

It is simultaneously a secular republic and home to a thriving radical Islamic order. It was the syllabi of Egyptian madrassas that incubated some of the minds behind September 11.

The second-largest bloc represented in parliament is the Muslim Brotherhood, a group officially outlawed by the government, but too popular to keep out of the legislature. Cairo proclaims itself a leader in the Middle East peace process and a friend of the United States — even as its state-owned press reeks of anti-Jewish and anti-Western agitprop.

The Israeli "embassy" in Cairo is perched atop a filthy, 14-floor office building, its tattered flag barely visible from the ground and hanging in limp protest to a hollow peace.

During Fatimid times, between the 10th and 12th centuries, merchants of all religions traveled freely, without standardized travel documents or identification cards. Today, many Egyptians who frequently travel to Israel are subjected to official intimidation.

In the 25 years since the Camp David Peace Accord, Egypt and Israel have jointly developed only one enterprise of any significance — the $1.2 billion Midor oil refinery off the Alexandrian coast. It was pioneered by Merhav, an Israeli company that finances infrastructure projects worldwide.

Midor's success was due largely to the efforts of Alexandria's governor. He is an uncommonly fearless Egyptian civil servant who drove the project through thick red tape and fierce political opposition.

In Egypt, not losing can be just as good as winning — and there is no setback a little spin and self-delusion can't overcome. The October 1973 war with Israel, which ended in devastating defeat for the Arab armies, is celebrated as a national holiday.

The 1956 Suez crisis made Abdel Nasser — the country’s president at the time — an Arab icon even as Israel, France and Britain routed his forces. Troops returning from defeat by Israel in 1948, when Egypt was a monarchy under King Faruk, were hailed as victors. This was too much for the military to stomach — and it was one of the reasons its officers revolted against the throne in 1952.

Long before the Second Intifada, which began in September 2000, and the war on terrorism had their collateral effects on the regional economy, the Arab world's largest economy sputtered from official sloth and corruption.

The government stands by its official estimates of steady growth even as bankers, economists and businessmen agree the country has been in recession for the last three years.

In the annals of global enterprise, Egypt is a stunning mediocrity, a profound slacker, a towering dwarf. Following the October 1981 assassination of Anwar Sadat, the new government of President Hosni Mubarak led a conference on how to repair Egypt's struggling economy.

Over two decades later, a consensus has yet to be found. Faced with the choice of either liberalization at the expense of state control or state control at the expense of an open society and more efficient economy, Mubarak chose not to choose.

Adapted from the book MULLAHS, MERCHANTS AND MILITANTS by Stephen Glain. Copyright (c) by the author. By arrangement with Thomas Dunne Books, an imprint of St. Martin’s Press, LLC.