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Friday, 22 November 2019

The economics and politics of infrastructure

As political tensions declined in Egypt after the 30 June Revolution, the government opted for a policy of infrastructure investment as a way of restoring security, writes Ziad Akl

Ziad Akl, Wednesday 18 Sep 2019
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Investment in Egypt saw a phase of stagnation after the political tensions that occurred in 2011. As the political unease started to be reduced after 30 June 2013, the government started to see the necessity to develop a direction and strategy for the state’s investment policies. Infrastructure was the main field that the state targeted at that time. 

Infrastructure investment has dual tracks, one economic and one political. These tracks must be tailored to the context in which they are applied. Egypt at that time was coming out of two consecutive revolutions, with an economy that was suffering and a lack of vision on how the state would invest. The choice was to invest in infrastructure, a field that had been ignored for a number of years due to political unrest or the lack of willingness of former administrations. 

Making this choice had economic and political implications, which would have eventually been reflected on both tracks. The decision was towards heading for infrastructure investment, with its long-term and belated rewards. Both political and economic gains have different implications for Egypt’s citizens that need to be analysed in separate sections. 

In terms of the economy, investing in infrastructure is oriented towards a long-term vision. In a rhetoric-based vision, investing in infrastructure aims to produce economic gains after a period of time, maybe a few years. The main idea is to adopt a long-term vision and compose a number of targets. Reviving the internal economy takes priority over attracting foreign investments. 

Former president Mohamed Morsi and Muslim Brotherhood rule had done lots of damage to the Egyptian economy, specifically when it came to the state’s ability to fulfill ordinary citizens’ daily needs. Critical services like the provision of electricity, gas or oil were regularly cut, and they were also not properly overseen by the state. This created fears for many regarding the services they could expect to receive from the state at that time. 

Morsi’s rule also created a lot of changes in people’s perspectives on the role of the state in their lives. This was a psychological factor that interacted with other political ones to force the new post-revolutionary regime after 2013 to change its strategies regarding the economy. There was a stark choice between short-term gains and long-term ones. The decision was swift, and it opted for investing in infrastructure. 

Taking the decision to go for infrastructure investment puts any state in a critical position. It was possible for the Egyptian state at that time to use the monies it had in various sectors, but an overall strategy was also implemented. The infrastructure investments had several positive effects on the economy. Rebuilding roads, focusing on housing projects and thinking of mega-projects like the Dabaa nuclear plant for generating electrical power, or the New Suez Canal, were among the projects that were at the top of the list of priorities.  

Economically, these projects have few instant gains, however, meaning that they will not yield financial rewards over a short period of time. However, state investment in infrastructure delivers a message to those who plan to engage in foreign investment that Egypt has potential. The other economic benefit is that such mega-projects engage a huge number of workers and labour, which in turn creates an overall state of activity within the economy. Moreover, investing in infrastructure reflects a willingness to engage in later projects that will use the newly developed facilities. This reflects the long-term strategy the state adopted after 2013.

Politically, there is a different trajectory regarding investment in infrastructure. Most of the infrastructure investments have been made by Egyptian hands. However, there have also been a few projects that have seen international cooperation, and these partnerships will reflect on Egypt’s international relations and its overall role in the region. 

Investing in infrastructure also has a political role that is closely related to countering the new pattern of terrorism that Egypt has been witnessing. This new form of terrorism that Egypt has been fighting since 2013 aims at targeting the ability of the state to ensure people’s security, meaning that the purpose is not necessarily to gain territorial control or increase the number of casualties but to create a sense of insecurity within Egyptian citizens themselves. Investing in infrastructure and proving that the state is still operative and active as an institution is one of the tools to counter such a terrorist strategy. 

Infrastructure projects give a sense of safety to citizens, and they are part of what we could call human security. The economic, political and even social impacts of such projects have the ability to convey a feeling of security to citizens and to reassure them that the state still enjoys the capacity to plan and carry out such plans in reality. 

It is true that long-term investments, specifically in infrastructure, could be a source of economic hardships. But here we have to notice how specific the political context that Egypt has seen since 2013 has been. Egypt was in a phase when its political options were reduced after 2013, meaning that critical decisions had to be taken. The economic and political implications of those policies had consequences, but the insistence of the state on applying its policies was an integral dimension of their success. 

Nevertheless, the question remains as to whether the state will be able to coordinate between the political and economic implications of these strategies in order to secure the maximum number of benefits.  


The writer is a senior researcher and director of the Programme for the Mediterranean and North Africa Studies at the Al-Ahram Centre for Political and Strategic Studies.

 *A version of this article appears in print in the 19 September, 2019 edition of Al-Ahram Weekly

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