Sisi’s failing Egypt highlights the crisis of the Middle East

Traditionally since the time of Nasser, Egypt – based both on its demography and military might – has been first among equals in the Middle East, a perennial great power without which regional stability would not be possible. However, following the chaotic final years of the Mubarak era, and the shambolic interregnum of the Muslim Brotherhood that followed, Egypt has slid off the economic map, endangering its status in the region.

The numbers don’t lie

Things have gone from bad to worse under the comically inept rule of President el-Sisi and the economic numbers tell the tale. Starting a business in Egypt requires permits from 78 different agencies, hardly worth the bother. Tourism receipts, the lifeblood of the Egyptian economy, declined to $7.8 billion in 2014, down 22 percent from Sisi’s first year in office and 40 percent from the last year of Mubarak’s reign.

As of September 2015, the country’s foreign reserves declined to a miniscule $16.4 billion, enough to cover only three months worth of imports. In early October 2015, Egypt’s official jobless rate stood at an unhealthy 12.7 percent and was an alarming 35 percent in terms of youth unemployment. As over half the population falls into this fragile demographic, Egypt’s endemic and crushing economic woes will make it perennially unstable.

Egypt’s public debt is about 90 percent of GDP, way too high for an Emerging Market. Likewise, its budget deficit is an utterly unsustainable 11 percent of GDP. The only way the country has been able to subsist is due to help from Saudi Arabia, which has given Cairo billions worth of loans to prop up the feckless regime.

There is no sign of these loans ending, nor is there any sign they will ever be paid back. What has happened is that the greatest perennial regional power has become a mendicant.

If the Sisi government can come to see capitalism as more than a state piggy bank designed to keep his military cronies sweet, the endless potential of the country could yet be realized

Dr. John C. Hulsman

It doesn’t have to be this way

But there is one huge bright spot on the horizon, a possible game changer that could just yet right Egypt’s present trajectory into irrelevance. At the end of August 2015, the Italian oil firm ENI announced the discovery of a vast gas field off the Egyptian coat. According to a number of estimates, the Zohr field has the potential on its own to turn the country from a net importer to a net exporter of gas by 2020.

So as ever, this maddening, fascinating country is engaged in what seems to be a perpetual race between realizing its mammoth potential and falling victim to its own self-inflicted wounds. If the Sisi government can come to see capitalism as more than a state piggy bank designed to keep his military cronies sweet, the endless potential of the country could yet be realized, and Egypt can regain its natural place as the most important country in the region. However, given the economic illiteracy of the Sisi regime up to now, don’t bet on it.

Balance of power

It became clear over 2015 that the regional balance of power has been shifting relatively in the region. There are two major and important outliers, with Turkey supporting one side and Russia the other.

With the relative demise of Egypt, this roughly evenly divided balance of power has shifted. The recent island controversy roiling Cairo illustrates the power difficulty. Cairo is in the process of returning two islands it has had jurisdiction over to the Saudis, their rightful owners. This seemingly unremarkable swap has generated intense controversy in Cairo, precisely because of Egypt’s weakness and dependence.

The charge has been levelled at the Sisi government that they are giving back the islands in lieu of repaying their debts to Saudi Arabia. While this is entirely untrue, it does show the degree of wounded pride in Egypt at its fall from grace. Due to both its demography and its military tradition, Cairo has long been seen by outsiders as the most important military and political power in the region. Its dizzying economic fall from grace has dramatically affected the balance of power in the region.

Answering the sphinx’s riddle of whether Egypt can right itself is a pivotal question not just for the country itself, but for the region. For a Cairo that regains its place as a great power would provide balance for the Middle East as a whole.

An Egypt that economically drifts into irrelevance means that the regional balance of power is likely to remain volatile, which is dreadful news for all of us who wish the long suffering Middle East a better day.
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Dr. John C. Hulsman is the President and Co-Founder of John C. Hulsman Enterprises (www.john-hulsman.com), a successful global political risk consulting firm. An eminent foreign policy expert, John is the senior columnist for City AM, the newspaper of the city of London. Hulsman is a Life Member of the Council on Foreign Relations. The author of all or part of 11 books, Hulsman has given 1500 interviews, written over 510 articles, prepared over 1280 briefings, and delivered more than 470 speeches on foreign policy around the world.

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Last Update: Wednesday, 20 May 2020 KSA 09:47 - GMT 06:47
Disclaimer: Views expressed by writers in this section are their own and do not reflect Al Arabiya English's point-of-view.
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