Egypt and the new international groups

Mohamed Fayez Farahat
Tuesday 22 Oct 2024

Egypt’s membership of new international groups recognises the country’s economic potential and its important place in the emerging markets, writes Mohamed Fayez Farahat

 

Egypt has been exerting significant efforts in managing the various crises in the Middle East, a region that represents its immediate geopolitical environment and serves as the first line of defence for national security.

These efforts are particularly critical given the diverse sources of threat and instability that have become structurally inherent to the region. Concurrently, Egypt is working to promote its national interests and enhance its influence within the global economic system. It is to the credit of Egypt’s leadership that these efforts to safeguard national security, despite their immense importance, are not being pursued at the expense of advancing the country’s economic interests on the international stage.

The strategy of enhancing Egypt’s position within the global economic order involves multiple pathways. One of the most prominent is Egypt’s integration into new international economic and financial groups, which began emerging in the late 20th century and accelerated after the dissolution of the former Soviet Union and the rise of China.

These developments have reshaped the global distribution of economic and financial power. Egypt strategically positioned itself as a founding member of the Asian Infrastructure Investment Bank (AIIB) in August 2016 and the New Development Bank (NDB) in March 2023. The most notable milestone, however, was Egypt’s accession to the BRICS group, effective January 2024. Additionally, Egypt has been invited to participate in several G20 group meetings.

This strategic alignment holds significant implications. First, Egypt’s engagement with these international groups cannot be understood in isolation from the early insight of its decision-makers into the scale and direction of the global strategic shifts that preceded the transformation of the international order.

These international groups, and the financial institutions they support, are clear indicators of structural changes in the global system. They reflect the redistribution of economic and financial power and the shift in the relative influence over economic decision-making from traditional international groups, such as the G7, and the Bretton Woods institutions, such as the World Bank, the International Monetary Fund (IMF), and the World Trade Organisation (WTO), towards emerging economic and financial organisations.

This shift is evident in these groups’ growing share of global GDP, international trade, and global markets. More importantly, these new groups and financial institutions are increasingly shaping the debate on reforming the global economic and financial system, including discussions on the need for new international payment systems.

The rise of these new international groups reflects a profound and gradual transformation from the Bretton Woods system, characterised by centralisation and a bias towards the interests of the first wave of post-World War II industrial powers, towards a more networked system. This new system is marked by greater complexity, inclusivity, and more distributed decision-making processes, offering a better representation of the interests of emerging powers.

All this is occurring without violent confrontation within the global order, aside from occasional Western attempts to stall this transformation.

Egypt’s early integration into these processes has allowed it to actively participate in shaping the new global economic and financial order. This participation grants Egypt significant advantages that it would have missed had it delayed or refrained from engagement. The importance of this approach is further underscored by the fact that these groups serve as the primary platforms for emerging and mid-level powers in the global economy.

This involvement signals a clear recognition by these powers of Egypt’s economic potential and its capacity to join the ranks of emerging economies. These international groups meticulously assess the strengths of Egypt’s economy, and decision-making within them is guided by rigorous economic and financial considerations regarding the development and growth prospects of both current and prospective member states.

Moreover, Egypt’s integration into these new  groups offers substantial economic and financial benefits. This is due not only to their economic and financial resources but also to certain key distinctions between them and the Bretton Woods institutions.

First, these new groups and their financial institutions place significant emphasis on development, particularly on infrastructure investment, poverty alleviation, and human development, unlike traditional financial institutions, which have historically focused on financing economic and financial reform programmes.

Second, the philosophy underpinning them is distinct. In contrast to the Washington Consensus, which has historically governed the relationship between the Bretton Woods institutions and the developing economies by imposing a set of principles for economic and financial reform, the new groups do not adhere to this consensus. Instead, they prioritise infrastructure investment and real economies as primary drivers of economic growth and new trade.

They reject the notion of a one-size-fits-all development model, acknowledging that no single solution exists for addressing development challenges. Moreover, they dismiss any form of political or economic conditionality. Overall, they offer far more favourable terms for emerging and developing economies compared to the Bretton Woods institutions.

Egypt’s decision-makers deserve credit for pursuing this global economic integration without engaging in adversarial relations with traditional financial organisations and institutions. Egypt maintains balanced relations with both old and new groups, maximising its opportunities to benefit from all of them.

This approach underscores the wisdom of Egypt’s decision-makers, as these new international groups contribute to global stability. They represent an additional step towards deepening the networked structure of the international system, moving it away from the dominance of any single power.

Furthermore, they play a crucial role in fostering reciprocal interactions within the global order, moving it beyond the hierarchical structure that emerged after World War II. Lastly, they are making significant strides towards the equitable distribution of wealth and benefits within the global economic system, providing a greater voice for emerging powers and economies to express their interests.

These groups are thus the primary arenas for the rising and mid-level powers of the global economy, which implicitly acknowledges Egypt’s economic potential and its qualifications to join the ranks of emerging markets.

* A version of this article appears in print in the 24 October, 2024 edition of Al-Ahram Weekly

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