Helping Egypt move toward democracy, maket economy

WASHINGTON, D.C. ― Egypt’s revolution toppled a dictator in February, but the country’s future as a stable, functioning democracy remains uncertain. The West is, of course, limited in its ability to shape the transition process. Nonetheless, the potential for constructive influence remains considerable, and it should be responsive to those in Egypt who favor liberal ideas, democratic institutions, and broad distribution of the benefits of economic development.

The upcoming parliamentary elections are but an early stage in a long (perhaps decades-long) struggle to define the new Egypt. Will Egypt gravitate toward Islamic theocracy or adopt a secular government that respects minority rights? Which economic policies ― statist, liberal, or some combination of the two ― will best ensure social justice and broad distribution of prosperity? Can civilian control of the military be established? Will the regional security structure formed around the United States, Egypt, and Israel survive?

The November elections will not resolve these fundamental questions, and whether a workable constitutional framework will develop is uncertain. A parliamentary system of government will likely emerge, including a prime minister and a cabinet, with the strong possibility that the presidency will be politically overshadowed, particularly if the presidential election is delayed. The central unknown is the composition of the ruling coalition.

It appears unlikely that a single party will emerge from the election with enough parliamentary seats to govern on its own. So a coalition government will be necessary. The political arm of the Muslim Brotherhood (the Freedom and Justice Party) currently is the best-organized party, and may be in the strongest position to form a majority coalition, including Salafist elements.

By contrast, secular liberal parties have yet to develop effective organizations or project compelling visions for the future. Although sentiment favoring a secular state is considerable, a coalition that can serve as an alternative or counterweight to the Muslim Brotherhood will be difficult to assemble. In the near term, the most likely counterweight could be a liberal coalition with a heavy component of former members of deposed President Hosni Mubarak’s National Democratic Party (NDP) ― that is, those who have not been discredited by their association with Mubarak.

Election rules favor those who were organized before the revolution. Approximately one-third of the new parliament will comprise “non-party list” candidates. Established networks based on family, local loyalties, and tribal affiliations will be key determinants in voting. These circumstances may favor “non-party list” candidates associated with the Muslim Brotherhood and the former NDP, particularly in rural Egypt.

Post-election shifts in the composition of coalitions could complicate the situation, making governance even more difficult. Power-sharing among coalition partners will be an intricate affair, including behind-the-scenes deals with the military, which will insist on measures to safeguard its interests.

The political atmosphere in Egypt remains volatile. Expectations of economic improvement are extremely high. The initial elected government may pay an early political price for failure.

The starting point for the West in trying to assist Egypt’s transition must be recognition that patient, long-term engagement will be required. The effectiveness of this engagement will depend primarily on the persuasiveness of the West’s policy prescriptions, rather than on the volume of financial assistance.

G8 countries have already pledged support to post-Mubarak Egypt, including economic aid, debt relief, and loan guarantees. These steps are important, though delivery will be prolonged and the likely impact modest, at least in the near-term. Egypt has already declined support from the International Monetary Fund.

But, apart from an IMF-backed reform program, if the Egyptian government’s policy framework is right, resources will flow from the private sector, including foreign investment supportive of job creation and economic development. This is the message that Egypt needs to grasp and embrace. G8 governments should urgently and repeatedly undertake quiet, structured, and consistent communications with Egyptian counterparts about the economic reforms needed to bring about prosperity.

It is far too early to judge the strength of internal forces promoting liberal economic policies. The need for economic growth could intrinsically push policymakers toward market-oriented economic policies (sensitive to considerations of “social justice”) and an open investment environment.

Powerful forces within the Egyptian business community are silent at the moment, but in time will reassert themselves. Many business interests with job-creating capacity want the continuation of market-oriented reforms begun a decade ago (which produced impressive growth rates), but support broadening prosperity and rooting out corruption. Moreover, an independent media might tend to reinforce pro-market and democratic sentiment.

Indeed, Western governments should continue to use their channels to the Egyptian military and future civil leadership to encourage them to uphold the rule of law, to act with restraint, and to respect free expression. Regional security arrangements will also require careful maintenance.

Finally, countries supportive of a democratic Egypt should focus on encouraging the institutional and social underpinnings of democratic process and market reform. This depends on the development of a robust civil society, tolerant of open debate, and healthy liberal political parties, as well as active participation by women and an independent media.

By Olin L. Wethington

Olin Wethington, a former U.S. assistant secretary of the treasury for international affairs, heads a business advisory firm focused on emerging markets. ― Ed.

(Project Syndicate)