x Abu Dhabi, UAESaturday 22 July 2017

Egypt's fate in tourism and foreign investments

Egypt's political establishment is being urged to focus on addressing the economic grievances that fuelled the Arab Spring.

The plight of restaurant workers in Sharm El Sheikh reflects the larger crisis of the economic stagnation that looms over Egypt, nearly two years after it fuelled a revolution against Hosni Mubarak. Peter Macdiarmid / Getty Images
The plight of restaurant workers in Sharm El Sheikh reflects the larger crisis of the economic stagnation that looms over Egypt, nearly two years after it fuelled a revolution against Hosni Mubarak. Peter Macdiarmid / Getty Images

As protesters continue to flock to Tahrir Square in Cairo, Egypt's political establishment is urged to focus on addressing the economic grievances that fuelled the Arab Spring.

"We neglect the idea that those people rose up because there is a lack of development, and there are no jobs, or even means to create opportunities for young people," said Mohamed El Orabi, who was briefly the country's foreign minister last summer.

The country's opposition has called for renewed protests in Cairo and elsewhere, prolonging a crisis that flared up at the beginning of the month.

The latest upheaval leaves the country embroiled in conflict nearly two years after Hosni Mubarak was forced from power, and little has been accomplished in improving the lives of ordinary Egyptians.

"We are in the same position, and we didn't achieve any kind of progress. I hope we will overcome all those political difficulties and try to concentrate our efforts on the economy," said Mr El Orabi.

The political turmoil is holding back vital revenue streams, says the former minister, as tourism and foreign investment have dwindled since the revolution.

"Tourism is one of the main industries in Egypt, and we should pay attention to this industry," said Mr El Orabi. "If we maintain our security and stability in Egypt, tourism [will] come back to our country."

A resurgence of tourism would lead to an immediate infusion of billions into the troubled economy.

Stability is also needed to attract foreign investment into the country, as is a sound legal framework that encourages capital inflows.

"So far the situation is not so rosy in Egypt," said Mr El Orabi.

A US$4.8 billion (Dh17.63bn) loan by the IMF will restore some investor confidence, he believes. The loan was due to be paid out this month, but was delayed after the president Mohammed Morsi scrapped plans for tax increases that are regarded as essential for an agreement with the fund.

The government also faces huge challenges in the energy sector, where unsustainable subsidies on petrol and natural gas are placing a heavy burden on state coffers, accounting for 20 per cent of the federal budget.

The huge demand for natural gas in particular is limiting Egypt's export capacity. The state-owned Egyptian General Petroleum Corporation faces a bailout due to unpaid receipts to international oil companies, and a bid round for the development of additional gas reserves has not got off the ground.

Mr El Orabi believes that subsidies will be curbed eventually.

"It should be an incremental process because the people cannot suffer more than what they are suffering now," he said.

A slow rollback of subsidies will not diminish the demand for gas in the near term, and growing consumption at home will have implications for exports.

"I think the internal market will witness increasing appetite, and this might affect our commitments to the international markets," said Mr El Orabi.

Egypt earlier this year scrapped a controversial export agreement with Israel. Under the Mubarak-era deal, gas was sent across the border, accounting for 40 per cent of Israel's consumption.

fneuhof@thenational.ae