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At Egypt's Economic Conference, Development and Human Rights Are Uneasy Bedfellows

The once-glitzy seaside resort of Sharm el Sheikh this weekend became the venue for Egypt's rulers to launch the attempted reinvention of their nation.

by Tom Dale
Mar 16 2015, 12:55pm

Photo via Reuters

The once-glitzy seaside resort of Sharm el Sheikh, ordinarily packed with sunburned Russian tourists, this weekend became the venue for Egypt's rulers to launch the attempted reinvention of their nation.

On the agenda were plans for a gleaming new capital in the desert, the celebration of pro-business reforms, and multi-billion-dollar pledges from Gulf kingdoms and investors in real estate and energy.

Not on the agenda: any talk of human rights, nor much of the sort of investments that will create jobs for Egypt's legions of underemployed youth.

But the government was determined to put on a good show. 1000 local taxi drivers were kitted out with new suits and ties for the occasion.

As a measure of the hype, 84 percent of Egyptians had heard of the conference, 13 percent more than knew the name of the previous interim president after his year in office.

What became known as the Egypt Economic Development Conference was proposed last June by the late King Abdullah of Saudi Arabia to help rescue the sputtering Egyptian economy.

The Arab world's most populous nation had been limping along for decades, even before four years of chaos — a revolution, a coup, countless protests and several mass killings — kicked it into the dust.

Related: Anatomy of a Killing: How Shaimaa al-Sabbagh Was Shot Dead at a Cairo Protest.

Abdullah, together with the monarchs of Kuwait and the United Arab Emirates, were determined that economic discontent would not open the door for the Muslim Brotherhood, their regional foes, to make their way back into Egyptian politics, and have already backed the government of President Abdel Fattah el Sisi with billions of dollars in aid.

Gas and skyscrapers

Four Gulf monarchies, Saudi Arabia, the UAE, Kuwait and Oman, pledged a combined $9.5 billion in investment, and $3 billion in Central Bank deposits to help prop up the flagging currency.

A total of $33 billion in private sector investment was agreed over the three days, more than the government's recent target of $10 billion, but less than the $100 billion originally touted.

Nearly two thirds of that figure came from three giant energy investments, agreed in principle by the British BP, the Italian ENI and the German Siemens International, valued at a combined $20.6 billion.

Much was made of a plan for a new Dubai-style capital, said to be worth up to $45 billion.

Sisi was jubilant. "You have no idea how happy you've made the Egyptian people," the army chief-turned-president told a packed auditorium.

But economists warned that the focus on energy and real estate would not solve what could be Egypt's most pressing problem.

"I think it's very important that you see job creation," Simon Kitchen of the investment bank EFG Hermes told VICE News. "You can argue about why the 2011 revolution happened, but it is fair to say that unemployment and declining living standards was a big part of that — particularly youth unemployment."

"If you are to avoid that sort of instability in the future, you need to see job creation on a big scale. Around 700,000 people in Egypt enter the labor force every year, and so you need to create sustainable jobs for those people — not just construction jobs without a future."

Unemployment in Egypt now stands at 13.3 percent, higher than it did in 2010.

Energy investment is necessary to stop the blackouts which have hampered industry, but notoriously creates little employment. Construction jobs tend to be temporary and low quality.

The conference prospectus listed 31 Energy and Mining projects and 32 Housing and Utilities projects, but under the Trade and Industry heading were just six manufacturing projects. Written alongside each was "business model to be defined."

Omar Shenety, an analyst at the Multiples Group consultancy, told VICE News: "When you build a residential compound, you get to employ a few people for the period of time during the construction, you get to support the construction industry. But once the compound is released, it is done, and the billions of dollars that have been in the banking system are frozen in buildings and lavish villas."

Ambitious plans for new cities, like the proposed new capital, have been part of Egypt's economic imagination for decades, but they have never fulfilled the shining promise of their architects' brochures.

The outskirts of Cairo are littered with the concrete skeletons of half-finished buildings, empty villas held as investments rather than homes, and satellite towns without basic infrastructure.

Egypt, with its relatively cheap workforce and gateway position on the Suez Canal has long led economists to talk up its potential as a regional manufacturing and logistics hub.

But the country has largely failed to make good on its potential, choked by bureaucracy, an over-valued currency, and an unpredictable business environment.

Kitchen, of EFG Hermes, hailed a new investment law, cuts to the energy subsidies which have weighed down the state budget, and the government's announcement that it would commit to a 22.5 percent corporation tax for the next decade as reforms which would encourage further investment.

Business disputes have begun to be resolved more quickly, he said.

Shenety observed that some energy investments would be unlikely to get going until a parliament was elected to ratify the deals. In the last four years Egypt has had a parliament for only a few weeks — in 2012 — as elections have been delayed by political manoeuvring and legal quibbles.

A message of support

Several Western nations sent high profile delegations, marking their acceptance that the Sisi administration is here to stay, and prompting criticism from some human rights advocates.

"Economic development must go hand-in-hand with respect for human rights — but while the Egyptian government presides over a wave of human rights abuses, the UK's 'business as usual' approach is giving it the imprimatur of approval," said Maya Foa of the London-based organisation Reprieve, which advocates for prisoners in Egypt, in a statement.

No one has been held accountable for the killing of more than 800 protesters at a Muslim Brotherhood sit-in in August 2013. Mass trials of regime opponents regularly lack due process, and torture is rife.

Many Western diplomats argue privately that economic development is as important a guarantor of democracy in the long run as rights to legal due process.

Kitchen and Shenety both said they did not believe that the government's human rights record would do much to alter investors' calculations.

"Investors in general are not very keen about human rights, but they are keen about social and security stability," said Shenety. "They want to make sure that a revolution isn't coming in six months or one year. They want to make sure that there is not going to be a hunger revolution with hungry people going out into the streets."

He cautioned that the publicity surrounding the conference may have created high expectations.

"Millions of poor people who do not make a good living hear about billions of dollars to come to the country, they will expect their lives to be much better tomorrow, but in reality, we know because we work in the investment field, that such agreements to get into action will take years, not weeks or months."

Follow Tom Dale on Twitter: @Tom_d_