/ 21 January 2007

Egypt reform moves forward

Three decades ago, millions of Egyptians took to the streets across the country to protest the government’s removal of subsidies on basic commodities in an explosion of violence that shook the regime to its core and appeared to end any further talk of economic reform.

Yet 30 years later to the day, in the ballroom of one of Cairo’s glittering five-star hotels, a gathering of Egyptian businessmen and government officials was congratulated for lifting subsidies and attracting foreign investment.

”This government has demonstrated a continuing commitment to economic reform that has made noticeable progress in the areas of taxes and subsidies,” said United States Chamber of Commerce president Tom Donohue on Thursday at the monthly luncheon of the American Chamber of Commerce in Egypt.

”You’ve been very busy, you are doing very well,” he added, in a nod to the reformist government of Prime Minister Ahmed Nazif which since 2004 has done more than any previous government to do implement free market reforms.

Though it effectively forestalled the issue of addressing Egypt’s ruinously expensive subsidies for decades, the 1977 demonstrations in which at least 70 people died were the death knell for popular activism in Egypt.

”Those who raise prices are the agents of colonialism,” shouted leftist activist Kamal Abu Eita into a megaphone at a sparsely attended protest commemorating the riots’ anniversary in a low-income neighbourhood not half a mile from where the businessmen toasted economic reform.

Hemmed in by hundreds of black-clad security police, the protesters comprised about 200 political activists — fewer than the number of people eating seafood salad and veal medallions at the lunch.

Passers-by spared a quick glance for the protest before scurrying about their business under the harsh gaze of burly security officers.

”It’s all just so tired,” said one cab driver as he steered his car through congested streets away from the demonstration. ”So they demonstrate and tomorrow nothing changes.”

In recent years, the prices of basic commodities have soared as the government peeled back fuel subsidies and freed the exchange rate.

Inflation has tripled from 3% in December 2005 to nearly 12% in October 2006, and last July the government hiked the price of petrol by 30%.

”The Nazif government reform has worked, there is no denying it,” said Samir Radwan, managing director of the Economic Research Forum, noting a 6% annual growth in 2006 and a six-fold increase in foreign direct investment to $6,1-billion over two years.

”But they [the reforms] are only one year old, so they have not trickled down to the ordinary citizen,” he added.

These straitened circumstances, however, show no signs of producing anything like the mass protests that rocked every major city in 1977.

”Today people are too tired from chasing after morsels of bread,” said the cab driver. ”Back then people worked hand in hand, and they looked out for each other.”

In the wake of Egypt’s defeat by Israel in 1967, a new spirit of activism, largely inspired by leftist ideas, seized the country and there were waves of student demonstrations and strikes.

”The Egyptian people for the first time were convinced that we must have a democratic regime,” recalled Hussein Abdel Razeq, secretary general of the leftist opposition Tagammu Party.

”At that time from 1967 to 1976, we had many demonstrations in Cairo University and other universities asking for democracy.”

As part of the attempt to open up the economy, the government signed on to an International Monetary Fund structural-adjustment programme for loans in exchange for reforms.

On January 17 1977, the cancellation of more than $250-million in subsidies was announced, triggering riots that were only brought under control three days later when the subsidies were reinstated.

”The understanding then was the government would look after you,” said Radwan. ”Suddenly the government decided to do away with the subsidies and float prices and the shock was very strong given that culture.”

”Now in 2007 the whole issue of liberalisation has been internalised, people are getting more and more used to the fact that they have to fend for themselves,” he added.

Human-rights organisations also report that security services deal harshly with those hoping to organize new protests. ”Talk to anyone in the streets,” said one demonstrator who preferred not to be named. ”Everybody here is intimidated.”

But Radwan is optimistic that the reforms will soon trickle down to provide relief in the form of more jobs. Until then, however, the government will be very careful to keep subsidies in place on bread and cooking gas.

”You have to be very careful with the Egyptian people — there is a tacit contract, a red line,” to provide basic needs, he said.

”If this red line is crossed then something can happen like 1977.” – Sapa-AFP