The following represents findings from an MEI delegation trip to Egypt that took place between October 5 and 9.   The delegation met with government, civil society, youth and business leaders, and heard a variety of views on the country’s challenges. What follows is a presentation of the views we heard, not an MEI assessment.

General Situation

Despite the conflict in northern Sinai, trouble on the Libyan border, and occasional terror attacks in urban areas, daily life in Cairo, Alexandria and most parts of Egypt appears largely normal.  Major steps have been taken in the economic sphere, but the population has yet to reap the fruits of strong economic development.  The President still enjoys wide public support.  There is little enthusiasm for the parliamentary elections, but the parliament might be able to move forward some key laws and re-introduce some political space into the country. 

Elections, Parliament and Political Parties

Most interlocutors expected elections with fairly low turnout and with an elected parliament that would be generally supportive of the president.  Nevertheless, the parliament has significant authorities under the new constitution, and its mere presence would present complications and new realities within the political status quo. 

There are over 100 declared parties, but only about 10-15 of any significance.  The MB are banned and their supporters are boycotting the proceedings.  The Salafi parties are participating and it will be interesting to see how well they do.  Among the non Islamist parties, there are three broad groupings: parties that are openly pro-Sisi; parties that are pro-system but not necessarily pro-Sisi per se (e.g.  Ahmed Shafik); and parties of the leftist or liberal stripes.  Most of the candidates running are independent businesspersons or local notables; many are former NDP members.   There is a reserved quota, of about 70 seats for youth, and a similar number for women.   Of the 100 activists recently pardoned by the president, 70 were from liberal and/or leftist political parties. 

Youth in general are alienated from the current political status quo.  They will largely boycott the elections.  Some of the MB’s youth have drifted into radicalization. The secular nationalist youth that spearheaded the January 2011 revolution have gone in different directions: some are still committed to politics and public action, despite the jailing of many of their number; others have moved away from politics to explore possibilities in business and entrepreneurship, or in culture and the arts, or simply in cyberspace.  Youth have not been able to put together a significant and sustained political organization.

The MB are in a very difficult situation.  They lost much support during their year in power, and they have lost further since their ouster, as the media have blamed them for much of the insecurity that Egyptians have been suffering.  Nevertheless, they still have a significant minority following.  Organizationally their leadership is in a bad way, outflanked by extremists and crushed by the government.  Their social service institutions have been taken over by the government.  Some interlocutors said that eventually the government and the MB will have to reconcile, but this is not going to happen soon.

The new parliament will be a disparate body of individuals with no clear political majority or minority.  It will largely take its cue from the presidency for the time being.  But still it will introduce new dynamics.  Most significantly, it will likely have to review and issue new, or adjusted laws, in key areas such as the NGO law, the protest law, the local administrations law, the anti-terrorism law, and laws relating to places of worship and coexistence.

Some interlocutors indicated that the parliament might be able to play a role in reaching out to excluded members of the political process and maybe even initiating a national dialogue including elements of the MB at some later date. 

The road toward human rights and democratization has been slow and disappointing.  But the US should welcome the election of a new parliament; and even though this parliament will be neither very effective nor very powerful, it is a step forward.  The US and other democracies should work with the new parliament to find ways to enable and empower it and increase its capacities.  It can represent one pathway toward more political openness.

President Sisi

The president still enjoys wide support.  He has the backing of the main security and civilian institutions of the state, as well as the bulk of the business community and the media.  Among the general public, pro-state and pro-army sentiment—which rebounds in Sisi’s favor—is high.  This is partly because most Egyptians yearn for stability and security after the last four years, and partly because most recoiled against the failed one-year rule of the MB and don’t see a promising alternative in the bickering politicians of the liberal or leftist parties. 

He comes from a military background and is new to the world of economics and politics.  But he has taken a number of important steps in the economic sphere: reduction of energy subsidies, a new investment law, a new civil service reform law, the new Suez Canal project, etc.  His main priorities are security and economics; he regards politics as a second level imperative.  Nevertheless, parliamentary elections will have an impact on his rule; although most members of the new parliament will be supporters, the parliament will add a layer of politics and complexity to what was purely a command-style decision-making system.   His pardon of 100 youth activists was a small step in the right direction; much more needs to be done.

The president continues to push his campaign to moderate the religious Islamic narrative.  He is pressing al-Azhar to examine its teachings and play a moderating and leadership role in Egypt and the Sunni world.  The Grand Imam of al Azhar recently addressed the House of Lords in the UK and was set to address the Italian parliament; the president has invited Pope Francis to visit Egypt. 

Government

There is a wide gap in power between the presidency and the government.  The country’s portfolios are distributed within the government but real power in most cases still resides with the president.  As a result, ministers hesitate to take initiatives or take bold decisions for fear of being caught out of step.  This is described in the country as ‘trembling hands’ syndrome among high government officials.    What new government will be put in place after the parliamentary elections, and how the presence of a parliament will affect the government’s powers and performance is yet to be seen.

The last government was sacked after the agriculture minister was alleged to be caught up in a corruption scandal.  The energy minister from that government was rewarded for his good work by becoming the prime minister in the new government; with the help of Siemens and GE, he had rapidly increased the country’s energy production and ensured a 2015 summer season without major energy cuts. 

Security

There still are occasional attacks inside Cairo or other urban areas, but these are limited in scope and impact.  The main security concerns are in northern Sinai and the western border with Libya.  In northern Sinai, Egypt has 150,000-200,000 troops battling ISIS affiliated terrorist fighters.  They have poor intelligence in the host communities and hence rely on stand-back tactics such as air and artillery attacks.  They are not trained for, nor have they adopted, a true counter-insurgency strategy; offers by the US to provide more guidance in this area have not been taken up vigorously.

The problem in northern Sinai is 30 years old and relates to a counterproductive history of relations between the tribes of northern Sinai and the Cairo government.  This has been made worse by political and smuggling relations between northern Sinai and Hamas in Gaza, and by the influx of more fighters to northern Sinai after the ouster of Morsi in July of 2013, and after the rise of ISIS and al Qaeda in Syria and Libya.   Both Libya and Sudan are sources of weapons flows toward northern Sinai, and Egypt still suspects Turkey and Qatar of being behind some of these flows.   

Israel is providing close cooperation and assistance with the Egyptian authorities over northern Sinai.  The Egyptian authorities don’t claim they are going to win this fight anytime soon, but they are committed to it.  Alongside the destruction and dislocation that is occurring, the army has announced a program of assistance and reconstruction for affected areas and communities. 

The Libyan border is 1,200 km long, and Egypt does not have the capacity to control it adequately.  The situation there is getting worse as al Qaeda and ISIS gain more sway in eastern Libya.  Egypt is using border control units, as well as units from the army and air force.    But they are requesting more assistance from the US in terms of Predator drones to be able to monitor the border more effectively and intelligence sharing from the US regarding terrorist activities across the border in eastern Libya.    

Economics and Business

Egypt’s social and resource realities remain challenging.  Egypt’s population is at 90 million and still growing fast at 2.4%; the population will double in thirty years.   Both arable land and water are scarce and dwindling.  Unemployment is officially at around 13%, but probably significantly higher; and much of that masks massive underemployment with many working families making less than they need to satisfy basic needs. 

The president generally recognizes the urgent need for major economic progress and he has taken significant steps; but he needs to move faster if Egypt is to attract the investments and reap the economic rewards it desperately needs. The momentum at the presidency, however, doesn’t translate fully to the government whose ministers often feel hesitant or afraid to act; then, the 7-million-strong bureaucracy often drowns projects and reform initiatives in mountains of red tape. 

The security services generally also warn against major economic reform, because every reform comes at some social cost, and the security services worry about the discontent and unrest that reforms might bring rather than their medium or long term economic benefits.

Doing business in Egypt remains very challenging, although the minister of investment is trying to create an effective one-stop shop and to streamline procedures.  Businesses still require approvals from over 60 government entities to get started.   Investors also face uncertainty over exchange rates, the legal and regulatory environment, the judiciary, and ability to repatriate foreign exchange. 

Nevertheless, many companies are bullish about the prospects of investment in Egypt, and many of the economic fundamentals are getting stronger.  Egypt’s large and young population offers a strong labor pool and attractive market; Egypt’s location and trade agreements offer markets in the region and Africa as well. Internet and cell phone penetration in Egypt is high, which is also a market opportunity. Transportation to, from, and within the country is improving not only because of the new Suez Canal project, but also with port, rail and road projects that are underway as part of a national transportation master plan.  3,900 km of road were built last year, equivalent to all the road building of the past 24 years.  

The energy situation has improved over the past year, and the recent massive off-shore gas find that should come on line in 3-4 years could provide a sustainable low cost source of energy for domestic consumption and production.  FDI has not yet reached the levels hoped for during the March conference, but it is on the rise.  The Egyptian stock market remains undervalued and has ample room for growth. 

The key sector of tourism still suffers from the occasional acts of terror that dominate global media when they occur.  From a high of 20 million tourists a year before 2011, tourist numbers dwindled to 2 million during the unrest of past years.  But in 2015 they are back up to 11 million.  Egypt still has enormous touristic assets in its unparalleled antiquities as well as its miles of pristine shoreline.   Investment is proceeding in the tourism sector, with a goal of reaching 30 million tourists a year by 2030.

When asked about the role of the military in the economy, most of the business leaders we met with explained that the military is taking the lead in managing big projects, but is opening up the implementation of these projects for bidding from the private sector.  They welcomed this arguing that the military could bypass the sluggishness and red tape of the mainstream bureaucracy and get things done in record time.  They gave an example of the recent Alexandria-Suez road project which the Army managed: 5% of the implementation went to military companies, 95% went to private Egyptian companies.  Before the army took it over, the road project had languished in the bureaucracy for years.  They report that Egyptian military companies own about 6-7% of the country’s GDP.

Relations with the US

The US has a vested interest in strong relations with Egypt because of the latter’s centrality and importance in the Middle East region.  Egypt has the assets of location, population and influence.   In terms of location, it is in the center of the Arab world and Middle East, home of the Suez Canal, and one of the central capitals of the Arab world, the Middle East and Africa.  80 US military ships traverse the Canal each year and 3,000 US military flights traverse its airspace.  The US military learns as much from the Egyptian military in exercises like Brightstar as Egypt does from the US; the learning happens at the Generals’ level, as well as among mid level officers and the soldiers themselves.

In terms of Population, Egypt’s 90 million account for a full one fourth of the Arab world’s population.  Egyptians live and work in virtually every other Arab country.   Progress or regression in Egypt directly impacts every other Arab society. 

In terms of influence, Cairo is the largest Arab capital, Egypt has the largest army, and it remains historically and culturally the weighty center of the Arab world.  What happens in Cairo matters.  Egypt’s centrality, as well as its media, communicate the Egyptian experience to the rest of the region.  Egypt can be an example of nationalism and moderation or a source of radicalization. 

There was general satisfaction among interlocutors at the progress that was made in US Egyptian relations over the past seven months.  President Obama lifted the arms freeze, Secretary Kerry led a delegation to the March economic conference and then came again in August to start the Strategic Dialogue with his Egyptian counterpart.  US weapons systems and training has been resumed, and there is tentative agreement to resume the joint Brightstar military exercises. 

Government officials expressed satisfaction at these positive developments, but indicated that they felt that the relationship should be still better. The Egyptian military expressed satisfaction about the resumption of military aid as well as relations with the US DOD.  They indicated that Egypt could benefit from further equipment from the US, including Predator drones (armed or unarmed), other surveillance aircraft (C-12 or Blimps), and at-distance explosives detection equipment.  Egypt also would like more intelligence sharing from the US, especially about terrorist movements and activities in eastern Libya near the Egyptian border. They emphasized the importance of the IMET officer training program and regretted that it was apparently being scaled back.  They welcomed the decision to revive Brightstar, the joint US-Egyptian military exercises suspended in 2011.

Liberal political leaders urged the US to remain closely engaged with the Egyptian government.  They feel that this can only have a positive effect on human rights and democratization compared to the influence of other countries like Russia or Saudi Arabia.

Regional Policies

In 2016 Egypt will be head of the Arab Summit, head of the Islamic Summit, and occupying the Arab seat on the UNSC.   Although Egypt is not the dominant voice in regional affairs it was half a century ago, it is still an important player in the Arab and Islamic world.  President Sisi has not articulated any major regional role for Egypt to the Egyptian public, and the army is reluctant to attempt projecting military power outside its borders.  Sisi and his government are focusing on Egypt’s domestic challenges, but his administration has taken positions, and some initiatives, in regional affairs.  

In general, the president has emphasized that the war on terrorist groups is the defining priority in regional affairs.  In Syria, Egyptian officials said that they welcomed the recent Russian intervention in that it prevents the fall of the Syrian state to ISIS and al-Qaeda; but while they stand with the state against terrorist groups, they also believe that the Syrian conflict requires a political negotiation and resolution.  Toward that end, Egypt hosted two meetings of the Syrian opposition and sent out feelers to President Assad offering Egyptian mediation; the feelers were rebuffed.  They don’t think Assad can be part of a long term solution, but they think that outside powers should help the Syrians set up a mechanism in which they can decide that future for themselves, rather than negotiate over Assad’s fate from the outside.  While guardedly welcoming the latest Russian intervention, they worried about a return of destructive US-Russian rivalry to the Middle East.

In Yemen, Egyptian officials said they opposed the overthrow of the government by Houthi militias and worried that the undermining of the state would only strengthen al-Qaeda and other terrorist groups.  Egypt has sent naval and air units to assist in the fight to restore the government there; it cannot offer ground troops because Yemen is a national trauma in the memory of Egyptians.  Officials expressed satisfaction that the Hadi government is back at least in Aden, and they insisted that Iran must cease its support for the Houthis and a political settlement must be reached.

Toward Libya, Egyptian support for Gen. Haftar has waned, and Egypt is now backing the UN led attempts at a negotiated settlement. Officials hoped that a settlement could be reached soon.   A number of officials urged the US to get more involved, at least politically, in finding a resolution to the Libyan crisis, and that the Europeans had proven divided and ineffective.  Officials worried that the Libyan situation was getting worse and might soon look like the massive all-out war in Syria. 

A third intifada amongst Palestinians against Israeli occupation would put president Sisi in a very difficult position.  There did not seem to be much thought given to what Egypt would do in such a situation and what cards it held to move the moribund Israeli-Palestinian political process forward.