Major investment by the likes of big family business could help bring political stability to Egypt as it grapples with a transitional military government following the ousting of the Muslim Brotherhood, according to a professor of political economy – as long as charges of cronyism are avoided.
This month second-gen head of Orascom Construction, Naguib Sawiris, announced he would be investing billions in his native country following the ousting of President Morsi and the Muslim Brotherhood, who were installed following the Arab Spring uprising of early 2011.
Speaking to Reuters, he said he was confident Egypt’s temporary government “understands its current role and is aware of what its priorities should be in the coming months”.
As a Coptic Christian, Sawiris had been particularly alienated by Morsi’s regime. He said he would be seeking business opportunities in the hotel and tourist industries in particular and would be investing “like never before”.
Dr Jean-Pierre Lehmann, emeritus professor of International Political Economy at Swiss business school IMD, agreed that, in the short-term, tourism would be important for generating jobs and growth – if security and confidence could be restored.
He said investment by the likes of Sawiris in the country would contribute to political, social and economic stability, but said it was a “catch-22” situation.
“The catch-22 is that more investment would reduce risk – and create much needed employment – but the level of risk at present [including the risk of civil war] will deter investors.”
Lehmann said a number of big businesses were probably relieved by the departure of the Muslim Brotherhood – which was forced out by the army following mass anti-government protests last month – but explained they may not have as much confidence as Sawiris.
He told CampdenFB: "I think big business will seek various ways to support the transition and try to aim for a liberal and secular political outcome, but this does not necessarily translate into a big influx of investment."
He said while family business investment could contribute to the nation’s stability, it would not be sufficient in itself and foreign direct investment would also play a role in job creation, as well as big public works projects.
And he warned that perceived cronyism within family business was one of the many reasons leading to mass demonstrations in Tahrir Square during 2011’s Arab Spring.
Ezz, the big family-controlled steel group, for example, was closely linked to former dictator President Hosni Mubarak's regime and rapidly grew into one of the largest steel producers in the Middle East, before its founder Ahmed Ezz was convicted of money laundering and building a monopoly following the Arab Spring.
Lehmann said the rule of law was critical to combatting cronyism and restoring the country’s political stability.
“Egypt has been a hopelessly divided society for the last few decades along income lines, ethnicity, religion and perhaps especially city-rural areas,” Lehmann said. “It has been a brutal society with the business elite complicit.”