Some years ago, Banque Misr, one of Egypt’s three public-sector banks, ran a campaign announcing that “Talaat Harb is coming back.”
The campaign aimed at evoking the spirit of the founding father of the bank, Talaat Harb, in order to encourage the setting up of new small and medium-sized enterprises.
Egyptian financier Harb was a pioneer not only in spearheading the establishment of the first fully Egyptian-owned bank, but also in starting Egyptian companies in multiple sectors.
From spinning and weaving, to cinema production, travel, cigarette production and mining, he used the bank as a platform to invest in various fields, spanning the full spectrum of the economy.
Harb’s idea of creating a national bank dates back before the Egyptian 1919 Revolution, but conditions were not favourable at that time, especially with the onslaught of World War I.
Only after the revolution did the bank come to life. As US historian Robert Tignor writes in his The Egyptian Revolution of 1919: New Directions in the Egyptian Economy, the new economic organisations and ideas accompanying and growing out of the revolution meant that the idea of establishing the new bank was now more appreciated.
According to Tignor, the large landowners of the time achieved what many Egyptians had wanted for four decades: the creation of a national bank.
The aim was to “enable Egyptians to have more influence in their own economy and to diversify economic activities”, he says, since before the establishment of Banque Misr the banks in Egypt were run by foreigners.
Banque Misr was founded in 1920 as an agricultural bank by a group of Egyptian landowners and had a start-up capital of LE80,000. In its first decade, the bank went through a series of expansions as the General Agricultural Syndicate of the time pushed the founders to form joint-stock companies in order to minimise or prevent speculation, decrease the middle men between cultivators and consumers, supervise the trading of crops, and establish agricultural cooperatives, according to US historian Mona Russell in her book Middle East in Focus: Egypt.
However, Russell says that the sole dependence on shareholders from one economic sector, namely agriculture, also constituted “a weakness and a threat to Banque Misr operations”.
It had to lower its dependence on landowners and work towards strengthening its ties with local merchants if it was to stave off the economic depression of the time, she says.
As a result, by 1925 Banque Misr had started to become an industrial bank and was responsible for funding many of the industries that still exist in Egypt to this day.
“The establishment and success of Banque Misr can be considered as Egypt’s second industrial revolution. Banque Misr succeeded in building and promoting companies in almost every sector,” Russell writes, adding that the older Banque Misr companies had a distinct feature — “they had been directly concerned with building companies that would promote Egyptian society.”
By doing so, Banque Misr was realising one of the demands of the 1919 Revolution: to industrialise the economy. The danger of depending on one crop, cotton, for income had long been realised, since fluctuations in demand and prices for Egyptian cotton before, during and after the war had been a major factor in the economic troubles of the time.
In 1929, as a continuation of its policy of economic independence following the instability after World War I, the Egyptian government agreed with Banque Misr on creating protective tariffs, giving preference to local products, even when they exceeded the cost of foreign duplicates by as much as 10 per cent, and giving preferential railway freight rates to local industries.
An ad announcing an exhibition of the products of Banque Misr companies and local factories
One of the positive effects of the war on Egypt was that it created an environment conducive to local production.
According to Samir Radwan, a former minister of finance, difficulties in exporting cotton because of fighting in the Mediterranean meant that cotton accumulated domestically and provided the opportunity to set up the country’s textiles and weaving industry.
In the years before the war, the then British proconsul in Egypt, Evelyn Baring, better known as Lord Cromer, would not allow any processing of the cotton crop except ginning, or separating the cotton fibres from the seeds.
When the textiles and weaving industry started after the war, other industries were also created that helped create jobs and stimulated the formation of a middle class that became more and more vocal in its calls for independence from British rule, Radwan told Al-Ahram Weekly.
During the 1930s, according to Russell, Banque Misr started to establish much-needed industries by inviting local and foreign investors to set up 28 new industrial and business projects employing some 250,000 workers with a combined start-up capital of approximately LE120 million.
“There was a great diversity in the projects funded by the bank. This was necessary to reduce the market risk of loss and to optimise revenues and profits,” she says.
Egyptian ownership of these companies ranged from 43 to 100 per cent, Russell shows, as foreign involvement was often encouraged to promote investment and was sometimes necessary for either funding or for expertise that could not be found in Egypt.
The period following the revolution also saw the establishment of three major lobby groups which grew in strength as time went on. The first Chamber of Commerce in Egypt was established in Cairo in 1919.
Over the three years following the revolution, the Cairo branch helped to establish a five further Chambers in Daqahliya, Gharbiya, Alexandria, Mit Ghamr and Zifta.
A poster of Al-Azima, one of Studio Masr’s first films
Harb played a vital role in forming and restructuring the new and existing chambers of commerce in the mid-1920s and helped them to focus on strengthening ties between merchants and industrialists while improving and encouraging national industries, Russell writes.
In 1926, a crisis in the cotton crop caused prices to drop significantly, causing critical losses for cultivators as well as merchants. The chambers of commerce were instrumental in pushing for the growth of cotton ginning, weaving and textile industries to consume the national cotton crop while promoting diversification.
They also favoured increasing railway freight rates and customs duties on similar imported products to help protect domestic industries, Russell says.
The post-revolution period also witnessed the creation of the Egyptian Federation of Industries, which worked to promote economic, social and political conditions conducive to Egyptian industrial development.
In 1929, it started inviting Egyptian industrialists to join in order to expand its activities and capital.
The federation had once been almost entirely dominated by non-Egyptians, but Egyptian industrialists then began joining in large numbers. In fewer than 15 years between 1925 and 1939, the number of Egyptians in the federation increased from roughly 12 per cent to more than 50 per cent.
Part of this movement was based on the Egyptian desire to be involved in rebuilding the country, Russell comments, adding that by joining the Federation of Industries “the petty bourgeoisie gained access to capital to start new ventures through Banque Misr or via the joint-stock companies it started.”
Investors also realised the benefits of the new industrial projects as a means to lower unemployment rates and to offer better social, health, education and infrastructure services to society at large.
In 1921-22, the Egyptian General Agricultural Syndicate was established as a lobby group of large landowners. “The purpose was to wrest from foreign merchants some measure of control over the financing and marketing of Egypt’s most important export crop, cotton,” Russell comments.
The establishment of these organisations reveals “a great deal about an emerging Egyptian middle class, its economic attitudes and goals, and its relationship with Egypt’s traditional source of wealth, the land”, she adds in her book on the economics of the period.
*A version of this article appears in print in the 7 March, 2019 edition of Al-Ahram Weekly under the headline: A blueprint for the nation