Group items tagged

Egypt’s problems stem from the weakness of the private sector and the "rent-seeking" of state officials. The solution is to open Egypt’s markets to the outside world, lift restrictions on investment in key sectors of the economy, liberalise ownership laws, end subsidies to the poor for food and other necessities and increase market competition.

The mechanisms of this conditionality are discussed further below, at this stage, it is simply important to note that there has been an unassailable link established between aid and the fulfillment of neoliberal reforms.

This policy shift, however, does not represent a turn away from the logic of neoliberalism. Rather, it actually serves to reinforce this logic, by tailoring institutions to the needs of the private sector and removing any ability of the state to intervene in the market.

In the case of Egypt, the discourse of institutional reform has allowed neoliberal structural adjustment to be presented not just as a technocratic necessity – but as the actual fulfillment of the demands innervating the uprisings.

his fundamental message has been repeatedly emphasised by US and European spokespeople over the last weeks: this was not a revolt against several decades of neoliberalism – but rather a movement against an intrusive state that had obstructed the pursuit of individual self-interest through the market.

The political demands heard on the streets of Egypt today – to reclaim wealth that was stolen from the people, offer state support and services to the poor, nationalise those industries that were privatised and place restrictions on foreign investment – can be either disregarded or portrayed as "anti-democratic".

Precisely because Egypt’s uprising was one in which the political and economic demands were inseparable and intertwined, this effort to recast the struggle as "pro-market" is, in a very real sense, directly aimed at undercutting and weakening the country’s ongoing mobilisations.

There are two common elements to all the financial support offered to Egypt to date – an extension of loans (i.e. an increase in Egypt’s external debt) and promised investment in so-called public-private partnerships (PPPs).

n other words, contrary to popular belief, more money actually flows from Egypt to Western lenders than vice versa. These figures demonstrate the striking reality of Egypt’s financial relationship with the global economy – Western loans act to extract wealth from Egypt’s poor and redistribute it to the richest banks in North America and Europe.

Of course, the decision to borrow this money and enter into this "debt trap" was not made by Egypt’s poor. The vast majority of this debt is public or publically guaranteed (around 85%), i.e. debt that was taken on by the Mubarak government with the open encouragement of the IFIs. Egypt’s ruling elite – centred around Mubarak and his closest coterie – profited handsomely from these transactions (estimated in the many billions).

It is actually a debt swap – a promise to reduce Egypt’s debt service by $1 billion, provided that money is used in a manner in which the US government approves. This debt swap confirms the relationship of power that is inherent to modern finance.

The US is able to use Egypt’s indebtedness as a means to compel the country to adopt the types of economic policies described above.

Unless these loans are refused and the existing debt repudiated, Egypt will find itself in a cul-de-sac from which there is little chance of escape. Foreign debt is not a neutral form of "aid" but an exploitative social relation established between financial institutions in the global North and countries in the global South.

OPIC’s mandate is to support US business investment in so-called emerging markets; it provides guarantees for loans (particularly in the case of large projects) or direct loans for projects that have a significant proportion of US business involvement and may face political risk.

In the case of Egypt, this is likely to take place primarily through the use of US government funds to establish public-private partnerships (PPPs). A PPP is a means of encouraging the outsourcing of previously state-run utilities and services to private companies. A private company provides a service through a contract with the government – typically, this may include activities such as running hospitals or schools, or building infrastructure such as highways or power plants.

OPIC’s intervention in Egypt has been explicitly tied to the promotion of PPPs. An OPIC press release, for example, that followed soon after Obama’s speech, noted that the $1 billion promised by the US government would be used “to identify Egyptian government owned enterprises investing in public-private partnerships in order to promote growth in mutually agreed-upon sectors of the Egyptian economy.”

Anyone who has any illusions about the goals of the EBRD’s investment in Egypt would do well to read carefully the EBRD 2010 Transition Report. The report presents a detailed assessment of the East European and ex-Soviet republics, measuring their progress on a detailed set of indicators. These indicators are highly revealing: (1) Private sector share of GDP; (2) Large-scale privatisation; (3) Small-scale privatisation; (4) Governance and enterprise restructuring; (5) Price liberalisation; (6) Trade and foreign exchange system; (7) Competition policy; (8) Banking reform and interest rate liberalisation; (9) Securities markets and non-bank financial institutions; (10) Overall infrastructure reform.[5] Only countries that score well on these indicators are eligible for EBRD loans. A research institute that tracks the activity of the EBRD, Bank Watch, noted in 2008 that a country cannot achieve top marks in the EBRD assessment without the implementation of PPPs in the water and road sectors.

Moreover, fully embracing the pro-market ideological discourse discussed above, the Egyptian government promised to relax control over foreign investments through committing “to overcoming the previous shortcomings of excessive government centralisation. In addition, we will build on existing initiatives to achieve a greater level of decentralisation, especially in terms of local planning and financial management”.

As the decades of the Egyptian experience of neoliberalism illustrate all too clearly, these measures will further deepen poverty, precarity and an erosion of living standards for the vast majority. Simultaneously, the financial inflows will help to strengthen and consolidate Egypt’s narrow business and military elites as the only layer of society that stands to gain from further liberalisation of the economy. The expansion of PPPs, for example, will provide enormous opportunities for the largest business groups in the country to take ownership stakes in major infrastructure projects and other privatised service provision. Alongside foreign investors, these groups will gain from the deregulation of labour markets, liberalisation of land and retail activities, and the potential access to export markets in the US and Europe.

These measures also have a regional impact. Their other main beneficiary will be the states of the Gulf Cooperation Council (Saudi Arabia, Kuwait, United Arab Emirates, Bahrain, Qatar and Oman), which are playing a highly visible and complementary role alongside the IFIs. Saudi Arabia has pledged $4 billion to Egypt – exceeding the amounts promised by the US and EBRD.

As with the investments from Western states, these financial flows from the GCC are dependent upon the further liberalisation of Egypt’s economy, most likely through the mechanisms of PPPs. Indeed, Essam Sharaf, Egypt’s interim prime minister, and Samir Radwan, finance minister, have both travelled frequently to the GCC states over recent months with the aim of marketing PPP projects, particularly in water and waste water, roads, education, health care and energy.

In essence, the financial initiatives announced over recent weeks represent an attempt to bind social layers such as these – Egypt’s military and business elites, the ruling families and large conglomerates of the GCC, and so forth – ever more tightly to the Western states. The revolutionary process in Egypt represented an attack against these elements of the Arab world.