A return to nationalisation in Egypt a huge ‘disincentive to investment’: US

Salma El-Wardani , Sunday 22 May 2011

Egypt’s new aid package and its conditions, the Arab-Israeli conflict and the omission of key US key allies from Obama's speech: all came under discussion at a media roundtable with the US ambassador to Egypt

Margaret Scobey
Departing US Ambassador to Egypt, Margaret Scobey, during Saturday's roundtable discussion

“A return to nationalisation will be a huge disincentive to investment,” the United States ambassador to Egypt said in a media roundtable held at the US embassy on Saturday.

“I think Egypt has to make its choice and find an economic policy that would solve its prompt problems; to create jobs and social justice," said Margaret Scobey, answering a question from Ahram Online on whether Egypt’s growing appetite for nationalisation and public sector involvement would affect US aid policy towards the country.

“Yet I think the public sector cannot [solve its problems],” she said. “History proves privatisation has been very healthy, helpful and successful in helping many countries transform to democracy.”

Although she stressed that Egypt alone will choose the best path for its economy, Scobey seemed wary of any shift from the free market policies traditionally advocated by the US.

“People want decent jobs… social justice, and I think it’s unlikely that public sector having the upper hand can be a way forward,” she said. “On the contrary, the free market and the private sector provide people with innovative ways to work.

“The States will anyway position itself in support of emerging democracies throughout the region.” she said

During Obama’s Thursday speech, he announced the US will relieve up to US$1 billion of Egypt's in a debt-swap deal, prompting concerns from economic commentators and analysts that assistance would mean stringent conditions on investment.

Asked whether the debt-swap package means the US will dictate ways of investment, Scobey said: "We will have some consultations with the government to see how they need to implement it."

She added that the US government is in most cases the largest -- or at least one of the largest -- shareholders in all development banks and therefore has a large say in how their resources should be directed.

“We have worked very hard with the IMF, with the African Development Bank, with the World Bank, to ensure that Egypt will have access to the financial resources it needs in the short-term and the medium-term to be able to get through this period of transition,” said Scobey.

“Egypt has some outstanding debt to the United States. It’s quite old. It goes back frankly to the 1970s. It has been rescheduled many many times,” she said. “So we have put together a proposal to the Egyptian government, and we will give details to them in the coming days, of how we can relieve Egypt of these debt repayments for the next three years at least.

“We have also come up with a, frankly, newer idea -- if Egypt seeks this -- of how we can guarantee a loan in the American financial markets for very low cost, that could allow Egypt to raise up to a billion dollars for infrastructure projects.  Again, the details have to be worked out, but with both of these approaches, we can help Egypt realise significant fiscal space and extra resources to help the coming few years when it’s going to be obviously a great support and help to the Egyptian economy."

She added that the US will work to ensure that Egypt can have access to the technical expertise and financing of the European Bank for Regional Development.

1967 borders

The issue of the Arab-Israeli conflict was also raised during the discussion.

“Moving this conflict toward a negotiated solution remains critical to us,” Scobey said. “He [Obama] reiterated again, the status quo is not on the side of Israel, it is not on the side of the Palestinians, and it is certainly not in US strategic interests.”

During his speech, Obama became the first American president to say the negotiations between Palestine and Israel should be based on 1967 borders with agreed land-swaps.

At the same time, he made it clear that the US understood that any negotiated solution would have to recognise Israel’s need for its own security.

“I believe he [Obama] strongly felt that by putting forward US views on two critical issues, that it could encourage the parties to get back to negotiations. The United States is still willing, with its Quartet partners, to take an active role in promoting those negotiations. So that’s what our president tried to do," said Scobey.

Where were the US's allies?

Obama's speech made no mention of key US allies in the region, including Saudi Arabia, Jordan, Morocco and most of the Arab Gulf, a gesture many analysts believe was made to avoid irritating regimes already feeling vulnerable to political turmoil and protests. It may also have been meant to reassure governments skeptical of the US’s willingness to back allies in times of internal crisis, following the fall of long-term ally Mubarak.

“The USA has been calling for reform in all Arab countries including Saudi Arabia, and your ousted government for years, but nobody was listening,” the ambassador said in answer to Ahram Online's question as to why key US allies were omitted.

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