Few parts of the Revolution's programme have been as much criticised as its economic development policies. Socialist economist, former economic advisor to Nasser and minister of planning under Sadat Ismail Sabry Abdalla defends the Revolution's economic achievements in conversation with Hala Sakr What we are looking for is a "balance sheet" of the July Revolution 50 years on. Could you describe the situation in 1952? From 1945 to 1952, Egypt lived through a period of instability. Terrorism was also in the picture -- and not just at the hands of the Muslim Brothers. Two prime ministers had been assassinated, as well as the head of the political police and the head of the Criminal Court. On the other side, Ibrahim Abdel-Hadi's government assassinated Hassan El-Banna, leader of the Muslim Brotherhood, which was nothing but terrorism. The King's Iron Guards also killed several army officers. The country was in chaos. The police officers went on strike in April 1951. When the body responsible for security goes on strike, what does this indicate? Corruption was horrendous, and there were many scandals. Even the Wafd, the majority party, had completely lost its integrity by 1950. Mustafa El-Nahhas Pasha had grown old, and Fouad Serrageddin was in control. Its fall became obvious when a picture of El-Nahhas Pasha kissing King Farouk's hand was published in Al-Ahram. The Wafd always stood on two pillars: independence and the Constitution. The Constitution had been a popular issue, and the 1923 Constitution, formulated after the Belgian one, was quite good. If it had been implemented, we would have been true liberals. But independence of the sort we had led us nowhere. The glory of the Wafd -- besides the national cause -- lay in its commitment to majority rule, democracy and its ability to limit the power of the Court. This was finished by the time El-Nahhas kissed the king's hand. Even abrogating the 1936 Anglo- Egyptian Treaty in 1951 was merely manipulative; they did not fully realise the impact of the abrogation, nor did they prepare for its consequences. They only went ahead with it when they learned that the king intended to dismiss the government on October 8, since they were looking for a way of embarrassing him. If the king had not agreed he would have been in trouble, and so Naguib El-Helali advised him to give his consent, telling him that the move would lead to the Wafd's collapse. Then came the Cairo Fires and the fall of El-Nahhas. The whole situation was on the verge of explosion, and civil conflict or war seemed a possible danger. Therefore, the movement of the young army officers on July 23 was a gift from heaven to bring about the necessary changes without shedding one drop of blood. The Egyptian people with their political sense gave their spontaneous support, and opponents of the movement were isolated from the masses. As Communists, we knew that the country was at risk because the establishment was either powerless or corrupt. People were searching for another Saad Zaghloul or Ahmed Orabi, but everyone had lost hope in the existing establishment, which was incapable of responding to popular demands. Resentment was the prevailing sentiment. At the same time, no existing political force was qualified to call for general elections with popular support. How did you respond to the Free Officers' movement? At that time, I had returned from France, where I had gone to study, and was teaching at the newly established Alexandria University. We were all enthusiastic and wanted to surpass Cairo University. We formed the Gam'iat 'addaa hay'at al-tadris (Association of University Staff), and our society was among the first to send a telegram in support of the Revolution. There was a consensus that toppling the king had been a positive act, and one that should be hailed as such. In the Communist Party, we called for fraternity between army and people, and we also called for popular demonstrations, though the Officers forbade these, fearing the results. We were very apprehensive at the thought of the Free Officers being in control, yet we kept our criticisms to ourselves. The execution of Khamis and of Baqari, two workers at the Misr Textile Company in Kafr Al-Dawwar accused of inciting riots in August 1952, was a catastrophe for us. Those who executed workers could never be truly progressive, and when the Officers' regime released political prisoners, this applied only to the Muslim Brothers and not to the Communists, whom they called "enemies of society." Thus, we opposed the regime until 1956, when the Suez Canal Company was nationalised. By the way, the Egyptian Communist Party was the first political party to call for the nationalisation of the Canal before 1952, and we had also called for the nationalisation of cotton exports, which were almost entirely in the hands of foreigners. For us, the nationalisation of the Suez Canal Company with all its repercussions was a turning point. After Mossadegh's failed 1951 attempt to nationalise the Anglo-Iranian Oil Company in Iran, the word "nationalisation" had scared Third World leaders. So when Egypt succeeded, Nasser became a hero. Then came Egypt's recognition of Communist China, followed by the Bandung Conference of Non-Aligned Countries. This train of events washed away any suspicion that the Americans had had anything to do with the July Revolution, though we knew that originally the Officers had been in communication with the Americans. What happened in Egypt in 1952 and afterwards showed that we, the communists, did not monopolise revolutionary thought; there were revolutionaries apart from us. Nasser's own thinking was also developing. He had no well-established doctrines; what he had were clear goals. He was pragmatic and believed in trial and error, and this was clearly stated in his 1962 National Charter. He never claimed to have a guiding theory, but some people have a tendency to turn anything into a sacred text, approaching the Charter as if it were a holy book, even though Nasser himself said that it would be revised after 10 years. There were two basic sides to his character. On the one hand, there was genuine patriotism regarding Egypt's independence and development, together with a deep respect for its people. On the other, he was genuinely biased towards the poor. Who else in the Socialist Union or in the government thought about day labourers, for example? Only Nasser. That was why he was called Habib al-malayin (Beloved of the Masses). The Egyptians used to distinguish between Nasser and the government, and they would complain about the government to Nasser, for Nasser was theirs, one of them. When did the first attempts at independent development in Egypt start? Egypt did not hear the term "development" until 1952, when the Revolution put forward economic development, along with social justice and national identity, as its main aims. At first, the Free Officer regime thought that development could be achieved by encouraging Egyptian capital to invest, and they thus issued the Investment Law in 1952 as the Revolution's first law, wanting to establish new industries. There were many projects stored in ministers' drawers at this time. When the Revolution founded the National Production Council early in 1953, the Aswan Iron was floated on the stock exchange as a joint-stock company. However, the Egyptian bourgeoisie abstained from buying shares in it, and the government had to cover the whole cost of the capital. Then they tried to establish a foreign trade company, but again nobody stepped forward with funds. They founded another company for internal trade, but nobody financed it. Generally speaking, the banks would not finance development projects. The Governor of the Central Bank at the time even criticised government spending on investment, saying that it was not the government's role to invest in development and saying that it would lead to inflation. They tried to appoint people to Banque Misr, including Ahmed Fouad, who became the bank's chairman, but he was unable to change things. It was a total boycott. So the first phase after the Revolution consisted of putting forward the issue of development and searching for new investment in industry. Industrialisation was part of the political culture of our generation, and it was a common dream for all of us. Then came a second phase during which the State directed the economy following the nationalisation of the Suez Canal Company and its successful operation under State control. The Egyptianisation laws were also passed at this time, whereby foreign firms were taken into Egyptian ownership. The Revolution's enemies were sequestrated, starting immediately after the Tripartite Aggression. The Military Mobilisation Authority put an engineer in charge of the foreign companies the government had sequestrated, limiting these to French and British companies, or only to those companies owned by the aggressors. The government started to own shares in many different companies, and the Economic organisation was founded in 1957, with Hassan Ibrahim, a Free Officer, at its head in order to signal its importance. In reality, Sedqi Soliman was in charge, and I was the Institution's first employee, responsible for economic affairs. This organisation was to function as a holding company for mixed (state-private) companies and Egyptianised foreign property. The new Economic Organisation controlled a good share of the financial sector, which it had taken over from nationalised foreign banks and insurance companies. At that time there were 165 insurance offices in Egypt affiliated to foreign companies or to joint-stock companies such as Misr Insurance, in which 40 per cent of the capital was British. We took over 70 companies, turning down shops and publishing houses, since these were not our business, and although the economy at this time was under State direction, the State still wished to encourage the private sector through such businesses. The role of the Economic Organisation was to run the Egyptianised shares taken by the State. However, the organisation's authority vis-à-vis other shareholders was often weak. For example, if the Institution held 60 per cent of the shares of a bank, its own code prevented it from assuming control of the board. We were only allowed representation equivalent to our percentage of the capital, in order to give the private sector space. If we held less than 25 per cent of the capital, we were treated like other shareholders. If the State held 25 per cent it had the right to object as a minority. If we held an absolute majority of more than 50 per cent of the shares in a company, we were only allowed the number of board members equivalent to our share of the capital, though we had the right to appoint the board chairman. The Institution continued to operate under these rules, managing the Egyptianised shares in companies that had passed into State hands until the Revolution's nationalisation programme was expanded, starting in 1960. Banque Misr and the companies it owned were nationalised in 1960, becoming 100 per cent Egyptian-owned. Aziz Sedqi presented the first Egyptian industrialization programme, leaving most industry in the hands of the private sector. He approached the Economic Organisation for comment on his ideas, but we did not accept everything. We rejected small projects, and we rejected other projects for economic reasons, for example the manufacture of automobiles in Egypt. This would have been simply a matter of assembly, and the feed- industries were lacking. We would have needed at least nine industries to make the parts to be assembled before venturing into this field. In addition, we would have needed to sell at least half a million cars a year to make the industry economic. As a result, the Ministry of Industry founded the Nasr Institution to run the projects we rejected, and Banque Misr, which owned a number of the companies, became the Misr Institution, so we ended up with three institutions, each with its own group of companies. The First Five Year Plan ended in 1965. Under its terms, the private sector was given a lot of space, but by the end of its first year it did not carry out its responsibilities, and it used up the equivalent of LE 150 million of public money in construction and other contracts. That was the reason behind the nationalisation of Egyptian companies in 1961. How do you assess the 1961 'July Socialist Laws'? They were extremely intelligent. The financial sector and imports were completely nationalised, but other companies, mainly in construction, were only partially nationalised and their boards were allowed to run them, as before. In a third group no individual was allowed to hold shares in any one company worth more than LE 10,000. The enterprises were identified by name. There was no single rule cutting across the whole economy. Who masterminded the nationalisation process in 1961? These were political decisions taken by Nasser himself. The list of companies to be nationalised was prepared mainly by Abdel- Moneim El-Qayssouni, but I want to stress the reality of the economy's impact on Nasser. He was no theory man, but he had a strong political sense and was extremely intelligent. He was also an avid reader and was the only president who educated himself while in power through his vast reading. People in power tend to consult intellectuals without really bothering to involve themselves, but Nasser had two advantages as a reader: he read very fast, and he had a very good memory. As a result, he recreated himself intellectually, though the contacts he enjoyed with the great leaders of the time, men like Nehru, Tito and Chu en Lai was of extreme benefit to him also. Nevertheless, he was not a theorist, being very empirically minded and preferring to judge things on how they worked in practice. What remains of this experiment today? Today's situation is the outcome of 25 years of sabotage, with the public sector having been denied any new investment since Sadat. Machines have become old, and we are now going through a period of de-industrialisation with aging factories that cannot compete internationally. The private sector is only involved in complementary industries, and 80 per cent of their intermediate goods are imported. Does this mean that the industrial sector was in good shape in the 1960s? Yes, and this was the case until the mid-seventies. The Egyptian economy showed an average growth rate of 6.7 per cent in the ten years between 1956 to 1966. After the 1967 War, there was increased military spending and rumours of economic crisis. Thoughts of open-door policies like those that were later introduced under Sadat were in the air. Al-Qayssouni presented a report to the cabinet stating that the gains that had been achieved were sufficient and that Egypt was in need of foreign investment and should start opening up to the world. Nasser was against the idea, but he was in minority both within the cabinet and in the Higher Executive Committee of the Arab Socialist Union (ASU). He decided to consult Fouad Mursi and myself as socialist economists. In December 1967 we gave him our views, asking why Israel was fighting us -- certainly not to occupy Egypt, we said. What Israel wanted was to destroy our ongoing economic development, and therefore if we now stopped our development programme this would be giving Israel exactly what it wanted. Development must continue, even at a slower pace, we said, and consumption could be reduced, even with the army getting what it needed. In fact, Egypt's economy between 1968 and 1973 put in a good performance, with an average growth rate of three per cent. "The attempt at independent development did not fail; Egypt still lives on what is left of it. The High Dam, for example, saved us from the famines to which Africa was exposed. What Nasser achieved for Egypt cannot be done away with." Who was running the economy at that time? We should remember people like Abdel-Aziz Hegazi and Sayed Gaballah. Though Egypt experienced seven lean years between 1967 and 1973, since we had lost revenues from oil, the Suez Canal and tourism, what these two men achieved is nothing less than another High Dam. Nobody felt there was a crisis; there were no food shortages, and the slight increase in taxation did not raise objections, with people subscribing to the war bonds. At the same time we were rebuilding our army. The army that fought in 1973 was not the same one that had fought in 1967. In 1973, 27 per cent of our military forces consisted of university graduates who were better qualified to deal with modern weapons. Would you consider 1974 to be a turning point? Before 1974, Sadat's legitimacy as president stemmed from his having been Nasser's choice for vice-president. After the October War in 1973, however, things changed. Nevertheless, I continued to work with Sadat. Investment Law No. 43 was formulated primarily to attract Arab capital, because Arab oil wealth had already started to increase markedly. Sadat asked us to include foreign capital as well, which we did, but we added conditions: foreign capital had to be brought in from outside the country and not borrowed from Egyptian banks; foreigners had to bring in new technology and to export part of their products. The law was discussed in detail, and I had some reservations about it. One concerned the Law's second article, which stated that any project, whether Arab or foreign, should fall within the context of the State Plan, failing which the Plan could be modified to take such a project into consideration. As minister of planning, I was not ready to tolerate projects that I knew nothing about popping up out of nowhere. Abdel-Aziz Hegazi, the prime minister backed me, and I succeeded in striking out this article. In 1977, however, Abdel-Moneim El-Qaysouni amended the law taking out the initial restrictions. When did you leave the ministry? I declined to join the Mamdouh Salem cabinet that succeeded Hegazi's in April 1975, the reason being that I did not agree with the new economic policies. Abdel-Aziz Hegazi and I both agreed that we needed to encourage the private sector: the public sector was in control of the macro-economy, and hence there was very little possibility that our basic goals could be distorted. We wanted to attract Arab investment and to encourage Egyptians working in the Gulf to invest in Egypt. These goals were not realised because the kind of open-door policy that eventually materialised frightened such people away. Egypt had few businessmen, and few suitable projects for foreign investment. Instead, consumption escalated while investment was at a standstill. Savings pose the most difficult problem in a poor country, many Egyptians leaving to work in the Gulf for that reason. As of today, the US 3 billion that Egyptian expatriate workers send home every year is spent on current expenses, with nothing being invested. How would you assess the Revolution's agricultural programme? Agriculture today has become a way of absorbing unemployment, but in order to modernize agriculture you have to replace manpower by machines. Improving traditional crops is also important: when the British were in Egypt the only research centre they set up was the Cotton Research Institute, which aimed to improve the crop and find new and better varieties. Agricultural is neglected and is regressing. Generally speaking, the development of industry reduces the percentage contribution of agriculture to GDP, but the problem is that even industry is not properly managed. The main sectors are trade, banking, construction, finance and services, and even this last sector is backward, with efforts only being put in if big money is involved. The telephone system has been improved, but the railways have been completely neglected. Neglecting the railways does not only lead to heavy human tolls, but it also undermines their crucial role in transportation. We still use lorries to transport commodities from Cairo to Aswan, which is horrendous costwise, pollutionwise, and so on. In Cairo, LE 25 billion was spent on traffic tunnels and fly- overs that do not really solve the problem of urban congestion, but simply postpone it or transfer it to a different point. These projects serve car users, who do not exceed one million of Cairo's total population of 12 million. The only project that has been established to serve the rest of the population is the underground metro, a project that was decided upon in the seventies. In your opinion, why did Egypt's attempt at independent development fail? It did not fail; Egypt still lives on what is left of it. The High Dam, for example, saved us from the famines to which Africa was exposed. What Nasser achieved for Egypt cannot be done away with. Today, the Al-Tagammu' Party's programme gives a very good definition of independent development as a transitional period before a socialist solution is arrived at. Independent development aims at broadening the nation's ability to formulate its present and its future. When we talked about investment, we wanted to give the public sector what it lacked, particularly in modern technology which was developing very quickly. The old factories should have been renovated and upgraded. But what has happened since to our textiles industry, for example, has been catastrophic. This used to be a very successful industry. Cotton is the only product in which Egypt has a compartive advantage. Today, only 650-700 thousand feddans of cotton are being cultivated, almost half the area under Nasser. The crop is not cared for properly, the farmers hate it because it does not yield profits, and the government imposes burdens on those cultivating it. What remains of the Revolution's achievements in 2002? The main thing that remains is education, despite its deterioration. One of the main problems facing development in Third World countries is the lack of trained personnel, for example, engineers. But Egypt does not lack such personnel; on the contrary, it even has unemployed engineers, which indicates that the country does not have a serious development programme. Education enabled Egyptians to work in the Gulf and to send home money that could have been invested in development; however, as it is, our present market economy is not attractive to anyone, Egyptians included. Instead, all the money earned abroad has been placed in foreign banks, or invested in real estate. This money should have been invested in Egypt in manufacturing.
