(To be published in Arabic for Arabi21)
So, is the Egyptian economy doing well or not? Do investors want to come to Egypt? If Sisi is doing everything for the sake of business, why does it seem like the economy is doing so poorly? Aren’t foreign companies closing their operations in Egypt? Doesn’t the closure of General Motors mean that the international business community has lost confidence in the regime?
Yes, I can see how it may be confusing.
We can’t be blamed for thinking that the economy should be doing well if businesses are doing well; it seems logical that there is an interdependent relationship between corporate profitability and the health of the overall economy. When we see and experience poor economic conditions around us; when there is high unemployment, increasing poverty, business closures, and so on; it seems fair to assume no one is making money, and the owners of capital must be jumping ship.
But this assumption does not recognize the fact that corporations operate on a logic of their own. Remember, the corporate model is not designed for promoting economic health; it is a mechanism for extracting as much wealth as possible from as many sources as possible, and delivering that wealth upwards into the hands of corporate owners and shareholders. The corporate model is a mechanism for creating and broadening wealth inequality in society. The relationship between profitability and overall economic health is not interdependent; it is symbiotic in the most adversarial way, like a parasite’s relationship with its host organism.
So, yes, the Egyptian economy is deteriorating, and Egypt is among the top 5 countries in Africa attracting Foreign Direct Investment. The more it deteriorates, the more attractive it will be, and the more FDI flows into Egypt, the more the economy will deteriorate; because what is FDI? It is a syringe pushed into the veins of your economy, that you think will inject a vaccine, but which, in fact, sucks out your blood. When a foreign company expands its operations into your country, whether by opening its own facilities or partnering with a local firm as a subsidiary, the more it increases its market share, the more money flows out of your economy; it’s quite straightforward.
And what do you think makes a profit-driven corporation choose to invest in your country? High wages, low unemployment, strong local currency, competitive domestic industry? Why on earth would they want that?
The global owners of capital depend on international financial institutions like the World Bank and the IMF specifically to create conditions beneficial for investment in countries like Egypt. The report that General Motors and LG closed their facilities because of Egypt’s low foreign currency reserves, may or may not be accurate (both companies have denied the reports), but what is clear is that, if there were closures, they were brief, and the facilities are currently operational.
It needs to be pointed out that the foreign currency shortage occurred primarily because Egypt was obliged to make massive payments on debts to foreign firms and institutions over the past 2 years (nearly $700 million to the “Paris Club” creditors, $350 million to BG Group, and bulk payments to other energy companies to pay down an almost $5 billion debt); in other words, the shortage was imposed. Why? To weaken the economy, to force the value of the Egyptian Pound to be determined by market forces instead of government-managed monetary policy, and, yes, to pressure the government to acquiesce quickly and completely to the economic policy demands of the global owners of capital. The apparent temporary closures of GM and LG were, essentially, a strategic maneuver to advance these objectives, which is why you have Prime Minister Sherif Ismail emphasizing the “importance of completing efforts to overcome all obstacles facing foreign investments in Egypt and to implement a comprehensive economic reform program in accordance with a strategic vision to improve investment”. The ‘comprehensive reform program’, being, of course, the World Bank-IMF policy diktats.
So, yes, investment continues to flow into Egypt, foreign corporations are profiting, and no, that does not at all mean that the economy will improve, and you should not expect it to.