Analysis: Lack of economic policy deters local, foreign investment

As Egypt’s transitional government struggles to define an economic policy that appeases demands for democracy and social justice and brings back investment to an economy edging on a recession, business officials say the country cannot withstand a longer transition period marred with uncertainty.

“We need clarity, and we are not getting that,” said Karim Helal, board member of Cairo-based firm CI Capital. “The biggest challenge this government has is creating productive jobs, otherwise we’re going to have a massive explosion.”

“We have 700,000 graduates … every year. If we don’t find jobs for them, we will have another revolt,” he added. “When you have a growing youth population in an emerging economy coupled with unemployment and inflation, you have a ticking time bomb.”

Eight months after the popular uprising that ousted former president Hosni Mubarak and demanded social equality, job creation, and an end to corruption, the transitional government continues to face pressure on the political and economic fronts.

In the midst of ongoing strikes by workers, teachers, doctors, and engineers, officials struggle to bring back business to a withering economy. However, time is running out.

“The actions and the developments since the revolution are very much in contradiction with the needs of the public,” said Magda Kandil, executive director of the Egyptian center for economic studies. “We can’t afford the luxury to delay the transition period any longer just because some parties are not prepared for elections.”

Last Friday, Minister of Finance Hazem El-Beblawi reached out to US investors at the American Chamber of Commerce, reportedly stating that this year, “foreign investments amounted to zero.”

"We need the support of everyone," the state news agency quoted him as telling the biggest business lobby, the US Chamber of Commerce. "Some of our friends, because of the uncertainty, they are taking an attitude of wait and see.”

But, at a time when courts are annulling business deals signed under the previous regime, promoting Egypt’s business climate to foreign investors becomes a daunting challenge.

“Foreign direct investment came on the heels of local investments. You need to encourage local investments first because no foreign investor is going to invest in a country where its own people are reluctant to invest,” Helal said. “To do that, you need to address the two main issue causing everyone to press the pause button; the political and economic identities.”

Helal added that the country is currently going through a political and economic identity “crisis” – a sentiment echoed in diplomatic circles.