Daily News Egypt sat down with economist and strategic affairs expert Abdel Khalek Farouk, who stated that President Abdel Fattah Al-Sisi has no economic experience and that the people surrounding him are either army generals who are inexperienced or people from the stock market, as opposed to the development school. Unfortunately, Al-Sisi is compliant to them, he explained.
Given Al-Sisi’s inexperience, he thinks that the measures he took make him more courageous than former president Anwar Al-Sadat who retracted these measures in 1977, as well as former president Hosni Mubarak who slowed them down, Farouk emphasised. However, they were wiser than him, he added, saying that Al-Sisi is impulsive and arrogant.
Farouk told Daily News Egypt that any president should put personal interests aside if he wants to succeed, but what Al-Sisi is doing reveals that his social alliance with businessmen is above all other considerations.
He believes that the president wants to establish the New Administrative Capital in order to transfer the government there, protecting it from the impact of a possible popular revolution.
Farouk accused those government officials of allying with businessmen and stakeholders at the expense of the people. He also revealed that a number of public figures are meeting and coordinating in order to choose a consensual candidate to face Al-Sisi in the upcoming presidential election. This candidate will be announced in an international conference.
What do you think of the government’s recent economic decisions?
Floating the Egyptian pound aimed at reducing the exchange rate against foreign currencies, and this was one of the International Monetary Fund’s (IMF) requirements to complete the loan.
However, the pound’s value is only a symptom of the disease, not the disease itself. Unfortunately, the government is using the official discourse to talk about the US dollar crisis, presenting it as the core of the Egyptian economic crisis. The real reason behind the crisis is production in itself, and the erosion of the country’s industry and agriculture.
About 70% of our industrial requirements and 65% of agricultural requirements are imported. This affected the foreign currency reserves and widened the gap in the trade balance, which is what I call a cancerous gap, widening year after year.
In 1991-1992, the size of the trade balance deficit reached $8-9bn. Today, it amounts to $50bn, as we import for $80bn and export for only $30bn.
What can be done to bridge that gap?
The gap can be bridged by amending and developing the production sector. This has not been happening so far.
What other “cancerous” gaps do we have?
The deficit in the state budget is the other gap. It is growing and the state refuses to fix it, as fixing it would result in the businessmen paying a social and political price. The state does not want to approach the businessmen with the same slogans that Mubarak used, which led to the plundering of Egypt’s resources under the flag of attracting investors and encouraging them to stay.
But the Egyptian pound’s flotation put an end to the unofficial market and the US dollar exchange rate is gradually declining.
Floating the pound was an attempt to reduce its value. They believed that in the long-run, the currency would reach its fair price. Fact of the matter is though that in our case, we have no fair price. A fair price can be found in a normal economy with production capacity, which enables it of correcting itself when exposed to partial crises. However, in our case, this cannot happen, and therefore, the so-called fair price will be arbitrary. I believe that the price will reach EGP 12 against the US dollar.
But as long as the demand for the US dollar by traders and investors remains, the unofficial market will return and the pound will collapse again.
The government said that the decision to float the pound was not imposed by the IMF.
The government tricks people with these words. Talking about the inability of any entity to impose its policies on Egypt is not true. The state is too weak to resist because of its status and its fragile policies. That is why everything is imposed on them.
Do we have the ability to immediately start the economic reforms?
I have a strategy which holds alternative policies to implement these reforms, and we must have a political will and a social bias pattern that are different from the current state policies.
The problem is that those who are ruling the country are allied with those who have personal interests. Nevertheless, any state, especially Egypt, has strong latent capabilities. We are a rich country, and according to the figures, Egyptians had bought villas and castles between 1980 and 2011 worth at least EGP 415bn. Twelve major companies made profits of approximately EGP 300bn from these sales without paying any taxes.
Moreover, the Egyptians’ deposits in foreign banks were valued at $160bn in 2001, according to reports by the Central Intelligence Agency (CIA). Today, deposits are valued at over $250bn.
The problem should have been diagnosed with serious economic experts, not the so-called stock market people. After that, reform plans should have been developed to rebuild the agriculture and industry sectors, and the suitable persons for these policies should have been chosen. Nothing can save Egypt except for a coherent economic group.
I believe in planning the state’s role in the production sector, while encouraging the private sector that pays its taxes, and does not control the state’s bodies. If that does not happen, and Al-Sisi’s policies remain as they are, we will face extreme chaos. When that time comes, deploying the army’s forces all over Egypt in six hours will not help him. He is not more capable than Mubarak who had two armies. When things get real and serious, the poor people will leave the Central Security Forces and return back home, and the army will not face the people.
What is your vision for realising the economic reform programme?
On the path towards real reform, there are short-term plans. We have to cure the two large gaps—deficit in general budget and trade balance—by firstly reconsidering the present tax system. That would add an additional EGP 150-300bn annually, but businessmen evade taxes by making it seem like their companies are losing money or making little profit, or even circumventing to enter the tax exemption limit.
We need a fair, disciplined tax system and the presence of a supervisory authority from outside the Finance Ministry and the Tax Authority. That supervisory entity would have the authority to make exemptions and refer others to trial. This tax system would include, for example, all professionals in Egypt. The physicians who have clinics, the major consulting firms, the law firms—all of those either do not pay taxes or pay less than 1%. What fair system are they talking about, claiming that it achieves tax justice? Businessmen and all their companies pay less than 10% of the total collected tax. The rest is paid by public companies, the Egyptian General Petroleum Corporation, the Suez Canal, the Central Bank of Egypt, and its affiliated banks and employees.
We also need to restructure the oil and gas sector, which is corrupted. Restructuring it can save us EGP 20bn annually.
Additionally, we should restructure the mineral resources sector. Instead of leaving it to the contractors to loot it in coordination with the governors, we should establish a ministry for the mineral resources. That sector can provide no less than 100,000 jobs and contribute EGP 20bn to the Egyptian economy.
The elimination of special funds and accounts would also be a great step. These contain stolen money in every government body that is not included in the general budget, which also needs to be restructured. There is chaos in that budget.
Lastly, the government should reconsider its priorities in the field of projects, especially those projects which would only become important after 12 years. Reopening the halted factories would have been more beneficial in order for workers to find their living.
Do you mean the New Administrative Capital?
The president wants a New Administrative Capital to move the government away from the people in order for it to continue its operations if a popular revolution occurs. The only thing that moves the president in that direction is the security concern.
What is your take on the Supreme Council for Investment which should contribute to significant improvements in the Egyptian economy?
The Supreme Council for Investment is making the same mistakes as the former regimes. It gave tax and custom advantages to businessmen. It also gave them lands for free, while the state—which is suffering from a budget deficit—will pay the insurance instalments and train the workers. This is not a state, but a social alliance that is harmful and dangerous, and against the state’s interests.
You often talk about how some members of this social alliance are teaming up against reform.
This social alliance consists of senior army generals who are big merchants and monopolists. If I tell you their names, you will realise that they are generals from the intelligence, air forces, and army. They are joined by businessmen, members of the judiciary, and some university professors who are used as defenders of these policies, while giving the impression that they are civilians. This is a classist, social alliance that has been draining the country since the 1970s and is still doing so until today.
But that could harm the popularity of Al-Sisi while he is approaching the presidential election.
Al-Sisi has no economic experience and those surrounding him are either army generals who are inexperienced or people from the stock market, as opposed to the planning and development school. They consider any talk about planning and development as satanic and the return of socialism, nationalisation, and corruption.
Al-Sisi is compliant to them. Having no experience, he saw himself as brave when he took the decisions which Sadat failed to apply in 1977 and Mubarak postponed. In my opinion, his decisions were political suicide and the former presidents were wise, while he is impulsive and self-conceited. When such qualities are combined in a ruler, it becomes a disaster. His policies can destroy countries, similar to Argentina in 2001, when people attacked banks after taking to the streets with empty cookware.
His social orientation is clear, as he manipulated the Egyptians who placed a lot of hope in him. He threatened businessmen to give him money and they decided in their private meetings that no one can threaten them, and accordingly paid very little.
This man, like other army generals who graduated after 1973, did not fire a single bullet and came to enjoy the military privileges.
These generals are used to receiving and giving orders. The idea of a democratic diverse society does not exist in their mind or their schools.
Do you want to impose a tax on businessmen?
I do not support that. I want a fair tax system which takes money from taxpayers to rebuild their country. It is not a personal matter.
The president reduced taxes on businessmen in the Egypt Economic Development Conference in Sharm El-Sheikh and issued the Investment Law which was very bad. This law opposes the Competition Law, which was used to face corrupt officials. In fact, his policies protect corruption and corrupt officials, while Mubarak always talked about corruption and sent some corrupt officials to trial.
Al-Sisi is restoring Mubarak’s regime and his policies will lead us to economic and political collapse. His popularity actually vanished and the people are talking about him in a bad manner—even those who supported him. He has nothing but the security apparatuses, which I call “lower agencies”.
What do you mean by “lower agencies”?
The agents of lower agencies work in the media and various state agencies. Those working with the General Intelligence are estimated at 300,000 people while the state security agents are estimated at 400,000 people working in all state institutions. Those agents are still loyal to their agencies and they have different roles.
Are you referring to other entities apart from the alliance between the regime and businessmen?
Those working with the businessmen are another group. They believe that the president fulfils their hopes, while he is supposed to be free from personal interests if he wants to succeed and increase his popularity. The president’s actions revealed that his social alliance and interests are more powerful than anything else. Being part of this social, political, and financial alliance motivates him to take the current path which may lead us to collapse instead of real reform.
Where is the Egyptian opposition? Why did they not ally with each other? Why is the Egyptian left always divided?
The problem in Egypt is not only the leftist movement. The middle forces are fragmented because they are run by personal interests. We have many parties such as the Socialist party, Socialist People’s Alliance party, Egyptian Popular Current party, and Dignity party. I once tried to unite the Dignity party with the Popular Current party, and I failed as these parties have been infiltrated by security agents. Some elements in these parties always stand in the way of alliances before establishing them.
The Egyptian political movement is dominated by selfish figures, especially in the leftist movements. We have not had a united political powers struggle experience over the past 40 years. In fact, the parties always split and their weakness forces Egyptian society to follow either terrorist, religious groups or the “lower state”.
I am working with Ammar Ali Hassan on the idea of a collective alternative.
What is this alternative?
We are working on documenting this regime’s failure at the political, social, and economic levels.
We will choose the 100 most influential figures in Egypt, and those figures will announce the withdrawal of confidence from the president because he is incompetent in the administration of the state. Those figures will offer to participate in the state administration and choose a candidate to compete with Al-Sisi in the upcoming elections. The selected candidate will not represent himself but the collective conscience. We will support him in the elections and advise him to avoid repeating the same mistakes.
This initiative will support the alternate candidate and neutralise the military and security institutions, as well as prevent them from going too far in supporting Al-Sisi. Otherwise, they would face Egypt’s major icons. This can be considered a secure alternative.
Have you started this plan yet?
Yes, we are working on it.
Do the people trust the elite?
This is what we are hoping for.
From which party would you select the figures and the candidate?
We target all political forces.
What about the ideological differences?
We seek to evaluate the performance of the president. If we agree on the seriousness of his policies’ impact on the country, we will choose a civilian alternative to rule the country.