Egypt's Brotherhood looks to private sector to boost economy

Reuters, Wednesday 6 Jun 2012

Islamist group will move fast on a long-awaited IMF loan if its candidate Morsi proves successful in presidential election, putting rapid economic growth ahead of ideology

Khairat El-Shater
Khairat El-Shater, the Brotherhood's first choice for president until he was disqualified, is the driving force behind the groups' 'Renaissance' project(Photo: Reuters)

Egypt's Muslim Brotherhood has drawn up a strongly free-market economic plan and pledges to move fast to negotiate a loan from the International Monetary Fund (IMF) if it forms a government after this month's presidential election.

Rivals portray the Brotherhood as a nebulous organisation obsessed with religion, but its wide-ranging plan, details of which were revealed during the build-up to last month's first-round presidential vote, projects a pragmatism that puts rapid economic growth ahead of ideology.
The Brotherhood's Mohamed Morsi will face Ahmed Shafiq, the last prime minister of ousted leader Hosni Mubarak, in a presidential run-off on 16 and 17 June, the climax of Egypt's first free leadership contest after 16 months of military rule.
Since it swept up the most seats in a parliamentary vote that concluded in January, the Brotherhood has been at loggerheads with the army-backed interim government, delaying urgent policy solutions to drag the economy from the brink of crisis.
During its last years, Mubarak's government pushed free market policies that fuelled 7 per cent growth for several years, until the 2008 global economic crisis shaved away two or three percentage points.
But the surge of new wealth was seen disproportionately benefiting a small group of people close to the government and the president's family while pushing up prices and hurting the poor.
A Morsi win would not heal Egypt's political divisions - liberals, leftists and others are deeply suspicious of the Brotherhood's intentions - and it could take weeks to form a cabinet.
The next hurdle will be the fraught task of writing up a new constitution to replace the current interim constitution which is vague on the division of powers between president and the parliament.
For over a year the Brotherhood has been putting together a detailed economic and social programme called El-Nahda (The Renaissance).
Khairat El-Shater, who was the Brotherhood's first choice for president until he was disqualified by the state election committee, is the driving force behind the project.
He says the sorry state of Egypt's economy and the government's heavy debts, which he put at LE1,140 billion ($189 billion), gave the country little choice but to rely on private companies and investors.
"The issue is not an option for Egyptians in the coming period," he said in an interview in April. "The Egyptian economy must rely to a very, very large degree on the private sector. The priority is for Egyptian investors, then Arab then foreign."
He said the country needed expensive new power plants to meet rising electricity demand as well as water treatment plants, roads and bridges.
"Where will we get the money to finance these projects?" he said.
Egypt's uprising hammered the economy by chasing away tourists and foreign investors. The economy contracted by 4.3 per cent in the first quarter of 2011 and flatlined in the following three quarters.
The interim government has gone through more than half of the country's foreign reserves. It has borrowed to finance its budget deficit at ever-increasing interest rates as local banks stretched their lending ability to the limit.
The Brotherhood would be keen to start talks on an IMF loan as soon as possible.
"We want to begin negotiations with the IMF ... We are not against the IMF, but we are against the lack of transparency by the (current) government," said Amr Abou Zeid, a development adviser to the Nahda programme.
He said the Brotherhood would also look at loans from the World Bank, and he did not rule out it seeking a bigger package from the IMF than the $3.2 billion in finance that the current government has requested.
"We will move fast. We have a very high level of expertise in public finance issues," Abou Zeid.
The Brotherhood conceived the Nahda programme in the late 1990s when it had little chance of gaining power. But after the uprising that toppled Mubarak, it began serious planning and began work on the economic portion of the Nahda programme in March 2011.
Shater heads the Nahda's secretariat, which in turn oversees a series of working groups with hundreds of experts, many not Brotherhood members, who draw up plans for various areas of the economy and society as a whole.
These include security and social issues such as education and health. The Nahda teams have visited more than 25 countries, among them Singapore, South Africa and the UK, said Ashraf Serry, a secretariat member.
"Until 2011 the most we could do was put down ideas. It could not become a practical or realistic programme. But after the revolution the chance came to make it a reality and we went to the strategic phase," Serry told Reuters last month.
Another of the countries they visited was Turkey, whose AK Party is often cited as a role model for the Muslim Brotherhood.
Soon after coming to power a decade ago, Turkey's AK party turned to the IMF for a larger-than-expected aid package to assist its economic reforms, and for years it was considered a global model for how to implement an IMF programme and adhere to fiscal discipline, economists say.
Like Morsi, Shafiq says he would encourage foreign investment but he indicates he would uphold Egypt's tradition of broad state intervention in areas from minimum wages to guaranteed prices for farmers.
Shafiq said he would keep the Egyptian pound's exchange rate stable "with total determination". The pound has plumbed seven-year lows in the wake of the uprising and uncertainty about who will be the country's next president but has been kept in check by central bank support.
Morsi talks of giving the central bank a mandate to have "a fair valuation of the pound against other currencies."
Like Shafiq, Shater talks of lifting subsidies on industry but not, in Egypt's dire current economic straits, on the wide base of population that uses gasoline and diesel.
The Brotherhood says it will also seek to create an Islamic finance industry to raise capital for its programmes under the Nahda plan.
"The normal banking sector is not capable of financing these types of projects, Abou Zeid said.
"We are not thinking of Islamic banks. Islamic banks are cosmetics of conventional banking. We are speaking of Islamic private equity funds, Islamic infrastructure funds, Islamic agriculture funds, Islamic venture capital funds."
Abou Zeid said these would help the Brotherhood attract fresh money to the country.
"There has been $200 billion in investments in Egypt in the last five years. We will have to at least double that, or at least a 50 per cent increase."
The government would direct these to a series of development projects, including many aimed at raising living standards in poorer parts of the country, the Brotherhood has said. 
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