Egypt News: 3 Reforms That Can Get the Country Back on Track

This article was co-written wtih Darby Arakelian.

Asking Egypt’s military to restore Mohamed Morsi because Morsi won an election is like asking a baseball pitcher whose hobby is pitching spitballs to straighten up because it’s the honorable thing to do. Whatever one may think of the General Abdel el Sisi’s decision to topple Morsi, there’s no turning back. Sisi cannot assume that if the Muslim Brotherhood regains power, it will respect democratic processes and refrain from taking violent action against the military, much as Turkey’s Prime Minister Recep Tayyip Erdogan has already done against his own military. Indeed, Edrogan has already denounced el Sisi’s crackdown on militants as “genocide” against his own people

President Barack Obama has rightly expressed concern with the breakdown of democracy as well. But we have said before and repeat: It is up to Egyptians to take responsibility for their own future. The U.S. cannot ordain Egypt’s future for it. We have some leverage through the International Monetary Fund, from which Egypt seeks a $4.8 billion loan. Yet the IMF at this juncture has announced it will abandon negotiations for such a loan until the transitional government gains recognition from the global community.

Moralizing is fine but the U.S. needs to encourage Egypt’s leadership to accomplish two principal goals. First, el-Sisi must avoid the blunder made by leaders such as Pervez Musharraf in Pakistan and the mid-20th century military dictators of South Korea: failing to take concrete steps to achieve political legitimacy. In those cases, the solution required a free and open election. El Sisi confronts a more nuanced and complicated problem. It’s not at all clear that the dysfunctional, secular opponents of the Muslim Brotherhood could win an election. Prior to the last election, it was the Islamists who did their homework. When the National Democratic Institute sent trainers to instruct Egyptians on how to win an election, the secularists treated the training casually. The Islamists did their homework.

The results were telling. The first portent surfaced in March 2011, when 77% of Egyptian voters supported a new constitution that the Muslim Brotherhood supported and secularists vigorously opposed. The results should have galvanized pro-democracy activists. Instead they remained incohesive. Mohammed Morsi’s 52% win surprised no objective onlooker. What disappointed observers was how ruthlessly Morsi, who took his orders from the Supreme Council of the Muslim Brotherhood, moved to quash democratic processes and institutions. In the meantime, Egypt’s economy went from bad to worse, dropping from 7% growth in 2008 to 2.5% in 2012.

Something had to give. The result was more upheaval. Egyptians realized that an Islamist government led by Morsi would eventually lead to eroding rights for all Egyptians. El Sisi, now that he has taken power, must take steps to build new coalitions that include stripping Islamists away from their confederates in the Brotherhood —something that is difficult but doable — and conducting the outreach, consultation, and engagement that will enable him to stabilize Egypt and stop the bloodshed. The nightmare would be for Egypt to turn into another Syria.

Former State Department official King Mallory has offered ideas for steps that el Sisi might take to jump-start the economy. Critics may charge that the polarized dynamics of the country make it impossible to act. But concrete ideas are missing from the discussion. In a conversation I had with Mallory, he proposed three ideas.

First, the U.S.should use its leverage to persuade el Sisi to privatize the two state-owned banks. Small- and medium-sized businesses account for 80% of new jobs in Egypt. Creating jobs requires capital. Egypt needs to clean up its act and stop making loans to deadbeat state-owned enterprises run by political hacks. They need a 20% cash recovery on the bad loans and to start making loans on merit. That will help infuse capital into the markets and create jobs.

Second, reform Egypt's electrical network and turn it into investor-owned utilities. Mallory argues, "There are vast pools of capital in the region that would invest in Egyptian electricity." That requires private-sector ownership of utilities. The government must address the poor. But it could replace subsidized electric rates with cash-transfer payments to pay electric bills. That will remove another brake on creating jobs.

Third, clean up Egypt's customs service to cut red tape and tap the Suez Canal zone as an engine of growth. Inexpensive Egyptian labor can process raw materials and semi-finished goods from the south into the zone and re-export them to Europe and the rest of the Middle East region.

Realists like Mallory harbor no illusions about getting much done in Egypt’s current situation. But he’s offered ideas that kick off a positive discussion and they merit exploration. Egyptians have to work out their own politics. But the alternative to hard-nosed action that produces concrete results is chaos, instability, and perhaps civil war. Egypt wants U.S. support. We should provide it if Egypt's willing to take the right steps to help itself.

James P. Farwell is a national security expert who has advised the U.S. Special Operations Command and is the author of Persuasion & Power (Georgetown U. Press, 2012). Darby Arakelian is a former CIA officer and a national security expert. The opinions expressed are their own and not those of the U.S. government, its departments, agencies, or COCOM.