By Una Galani/Reuters Breakingviews
DUBAI: An Islamist-led parliament is set to replace Egypt’s failed authoritarian secular one. Economic necessity should keep extremism at bay. But the Muslim Brotherhood’s long-term agenda, and the surprise success of ultra-conservative Salafis, will put investors on edge.
Investors were only just coming to terms with the rise of the political wing of the moderate Muslim Brotherhood movement. Its Freedom and Justice Party is pre-eminent — results from the opening round of parliamentary polls give it 37 percent of the vote, the largest showing of any party. But there are new forces in play.
The Brotherhood’s broad vision for Egypt doesn’t look too bad. It wants a free-market economy and civil state led by the broad principles of Islamic law: freedom, justice and development. A push for tax and subsidy reforms is shared across the political spectrum. And the Brotherhood hints it would like to renegotiate rather than tear up the peace deal with Israel.
True, the movement has failed to clearly articulate its position on alcohol and bikinis on the beach — important issues for tourism which used to make up one-tenth of the economy, with most visitors coming from Europe. But forecasts that Egypt’s deficit will be 11 percent of GDP in the fiscal year ending June 2011, coupled with its dwindling foreign reserves, means it needs foreign aid and outside investors.
The first big risk, outlined by the Brookings Institute, is that the short-term pragmatic agenda of the Brotherhood may be different to the long-term one. By mending the economy, the Brotherhood could gain the political capital to eventually adopt a more conservative stance.
The second major worry for investors stems from the strong performance by the ultra-conservative Salafi Al-Nour party. It took 25 percent of the vote. The movement wants to see more vigorous implementation of Islamic law, to ban interest payments and prevent non-Muslims from holding executive positions. They will now get a big voice in writing the country’s new constitution. Minorities from women to Coptic-Christians risk being marginalized.
The Brotherhood and the Salafis both say they don’t have any plans to form a coalition with each other. But the ultra-conservative group could act as a hardening influence on the political agenda. If the Brotherhood responds by moving closer towards the hardline Islamists, long-term investors in Egypt will have cause for concern.