Political business

Why would a successful entrepreneur want to play politics? Omayma Abdel-Latif looks into the emerging class of businessmen-politicians
It is said that businessmen enjoy "extra immunities and privileges," that "the government is subject to their often irresistible pressure," and that, following the launch of the structural adjustment programme and economic liberalisation process in the 1990s, they enjoy a "marriage of sorts" with the state. Real estate tycoon , steel and iron industry chief (who also heads the People's Assembly's planning and budget committee), housing committee chief , former head of the American Chamber of Commerce (AmCham) Mohamed Shafiq Gabr, the Sawiris family and Rami Lakah all came to be known for their privileged relations with the powers that be and their ability to influence decisions related to privatisation and economic liberalisation issues.
Such an ability raised the question of the political clout enjoyed by this group at the top of the socio-economic scale, their influence on big politics, the width of their network of patronage and their easy access to resources distributed by the state. The questioning became all the more important since their public role grew steadily during the 90s, as they managed to carve out important niches in the state bureaucracy and set up alliances in the ruling party and the press. This culminated in their forays into politics, with several deciding to run in parliamentary elections.
In 1995, 20.7 per cent of the 179 deputies elected to the People's Assembly for the first time were businessmen. The Assembly included 66 businessmen, 59 of whom belonged to the National Democratic Party (NDP) and one to the Liberal Party; the other six were independents. Businessmen totalled over 16.5 per cent of all deputies. This led many observers to predict that the 1995 parliament heralded the beginning of the age of liberalisation in Egypt. And parliament lived up to this expectation, passing 19 market economy laws, thereby liberalising the banking and insurance sectors.
Last year's parliamentary elections divided the house into two camps: a majority with liberal tendencies against a minority which opposes liberalisation and privatisation policies. The NDP fielded 50 businessmen, out of which only 15 won seats. Another 10 entrepreneurs, running as independents, entered parliament. Businessmen amount to approximitly 9 per cent of the overall number of deputies.
Sources in the business community insist that the increasing number of businessmen in the assembly is neither indicative of any political clout nor representative of the business community as a whole. Said El-Tawil, head of the Egyptian Businessmen Association (EBA) thinks such a view reduces politics to an uncomplicated pattern of a minority of entrepreneurs controlling the decision-making process. "We, as a business community, do not take part in the decision-making process," El-Tawil told Al-Ahram Weekly. "The fact that six or seven businessmen play politics or have a growing public role is not representative of what the rest of the business community does as a whole," he added. EBA's 450 members represent the elite of Egypt's business community.
To support his argument, El-Tawil explained that the role of the AEB, established in 1970, and of the investor associations in the new cities does not go beyond defining the purely economic. "Even if we criticise the government's policies, it remains strictly limited to the economic spheres. We sometimes send memos to the prime minister stating our own views and he might take it into account or ignore it altogether," El-Tawil added. Munir Fakhri Abdel-Nour, head of the Wafd Party bloc in parliament, concurred, saying that the businessman-politician trend has been exaggerated by press reports and that it cannot go beyond a handful of names which represents only 0.5 per cent of the entire business community. "I do not believe it represents a phenomenon or that they are to be considered a pressure group, but then one has to define who is a businessman in Egypt's language today," Abdel-Nour told the Weekly.
Several economic observers disagreed, however, describing the businessmen-politicians as "a very strong lobby." There is, in fact, a near consensus that never in the history of Egyptian politics has the entrepreneurial influence on politics been so obvious as it has been in the last decade or so. Prominent economist and chair of the economics department at Cairo University Mahmoud referred to some indicators which, he believes, provide evidence of a strong lobby emerging which affects Egyptian decision-makers.
"That they become part of the entourage of the economy minister or the prime minister on foreign trips or that they get invited to attend ministerial meetings where important decisions are discussed is unprecedented in the history of Egyptian politics," told the Weekly. It is not, he went on, just about a handful of businessmen close to the circles of power. "Rather, it is an institutionalised phenomenon with pressures being exercised through institutions rather than individuals," he explained. Another indicator, he added, was that the powerful elements of Egypt's burgeoning private sector have chosen to bypass the older, traditional structures and established their own, more autonomous instruments of exercising pressure. For , the American-Egyptian Presidential Council, the American Chamber of Commerce and the Egyptian Centre for Economic Studies, which is funded by USAID, amount to a political entity whose decisions affect both economy and politics. "These are pockets of influence which defend the interests of those businessmen and act as local agents for the global system," he said.
and others do not consider this "class" of businessmen to be part of the ruling system, but to be seeking to join it. Abdel-Nour, on the other hand, believes that it is rather the government which seeks to co-opt businessmen. "I don't believe that they are agents of the regime or that they want to be part of the regime. They might want this, but only as far as their business interests can be served," Abdel-Nour said. For him, the relationship is a utilitarian one. "The government seeks to co-opt businessmen to be able to indirectly control their money and their ability to influence the workers. It is more for political and security reasons," Abdel-Nour said.
Some economists agree that the rise to power of a segment of the private sector is largely due to the changing role of the state over the past decade. "The state wants to take its hands off economic development projects, but in the meantime, the government wants to make businessmen committed to replace it," professor of economy at the National Institute of Planning told the Weekly.
Available data validate El-Eisawi's argument: in the fiscal year 1993-94, the value of new private investment exceeded that of new public investment. It grew from between 30 and 40 per cent in the 1980s to more than 50 per cent in 1989 and to more than 60 per cent after 1994. According to the National Planning Institute's 1995 Human Development Report, the public sector share of economic activities amounted to 37 per cent in the period 1978-85 and only some 30 per cent in the period 1986-91.
In his study of interest groups in Egypt, political scientist Robert Bianchi argued that "the emergence of more autonomous private capitalists may provide the ruling elite with an important new coalition partner whose support can be particularly welcome since the traditional populist slogans of the 1952 Revolution lose what little remains of their credibility." This is supported by the fact that the NDP has paved the way for its partners in the business world to play a greater role in both legislative and bureaucratic spheres.
Others believe that it would be totally wrong to conclude that the ruling party has merged with the new class of entrepreneurs. Some observers note that businessmen are not "partners" or "agents" of the ruling elite, but have instead managed to fashion a more reciprocal power relationship with the government and particularly the economy ministers.
Eberhard Kienle, in his book Democracy and Economic Reform in Egypt, cites an example of this relationship, referring to an incident which demonstrates that the liberties attributed to this group of businessmen are given rather than taken by them. In a 1998 meeting with a group of prominent businessmen, President Hosni Mubarak did not hesitate to criticise "their lack of civic duty and social responsibility," indicating that social mobility could work both ways. Kienle concludes that the representation of interests depended largely on the willingness of the regime to listen.
supports this view, referring to what he described as a "discreet conflict of interest between the traditional Egyptian state and the new class of businessmen. [...] It is not true that the state gives them a free hand, because there are issues of national security with a social dimension and the state is rather keen on the stability of the system more than anything else," he explained.
One incident which shows that the relationship is not a one-way street came last February when the press reported "a simmering confrontation" between Prime Minister Atef Ebeid and several investors, who closed down five factories -- and laid off more than 700 workers -- in protest against the PM's statements. He accused businessmen of using such closures as a way to pressure the government into intervening: namely, allowing banks to grant the businessmen credit facilities despite the financial irregularities they are involved in. Ebeid accused them of "blackmailing the government."
Earlier in the same month, it was revealed that businessmen associations had submitted a confidential memo to Ebeid, Economy Minister Youssef Boutros Ghali and Central Bank chief Ismail Hassan, urging them "to give immediate instructions to halt any court procedures against businessmen." Such incidents, in the view of businessmen, are proof that the system is in many ways still unable to represent them and defend their interests. thinks that the role they are seeking to establish goes beyond their personal interests. "Some of them seek to control the banking sector, others want to publish newspapers and a third segment seeks to be part of the political life at all costs." This shows, he says, that they are not just there to defend their interests but rather to use the power of money to achieve a political and social status of sorts.
Economic observers are keen to draw a line between this emerging class of entrepreneurs in Egypt and that which emerged in Western societies. The Egypt 2020 project, which maps out different scenarios for the future of Egypt in light of current circumstances, offers a descriptive analysis of Egypt's new burgeoning class. The scenario titled "new capitalism" says that Egypt's neo-capitalists prefer to work in risk-free projects with guaranteed profits -- real estate, trade, manufacturing by assembling -- rather than investing in manufacturing industries. A second feature is that they rely heavily on bank loans -- in fact, most of them accumulated wealth due to a bank loan spree during the 1980s -- and a large part of their profit is put in foreign banks.
"This emerging capitalism has all the manifestations of crony capitalism and corruption, as it is based on a cobweb of nepotism relations and preferential treatment," the Egypt 2020 report says. An illustration of crony capitalism is mentioned in a study carried out by economist Salwa El-Antari who blamed the failures facing the banking sector on the growing political influence of businessmen. She explained that many of the banks allocated credit to most of these businessmen on personal or political rather than economic grounds. She also refers to the increase of loans allocated to the private sector. In March 2000, the report says, 343 clients obtained 42 per cent of the overall credit facilities allocated to the private sector. Of these, a mere 28 clients obtained almost 13 per cent of all the credits granted to the private sector, whereas the share of only eight clients reached LE12.4 billion (almost $4 billion).
The growing public role of businessmen, according to many political observers, comes at the expense of other segments of Egyptian society who, in the words of El-Eisawi, have been completely marginalised. "Social groups such as consumers and workers and other civil society groupings which should take part in the process of governance are rarely there on the political scene," El-Eisawi said. The government, he added, has nationalised the syndicates, so that those who claim to be speaking in the name of workers do not truly represent their interests.
"Their voice can only be heard in strikes and sit-ins but not during important decision-making." This, according to El-Eisawi, could result in a state of social tension due to the discrepancy in distribution of wealth and incomes and the unequal representation of interests. "There is a growing sense that a certain class gets preferential treatment at the expense of the rest of the society," he explained. In a way, his argument is supported by growing fears among several MPs and representatives of various political trends that the businessmen elected to parliament are there only to promote their own interests. "They sought to enter the house in order to gain the advantages that come with being an MP and this means more power and being closer to the members of the executive in a way that serves their interests in the best way possible," lawyer Shawqi El-Sayed of the Shura Council said.
Such fears raise doubts about the politically liberalising role of the entrepreneurs. Indeed, their efforts at political liberalisation are hardly impressive. According to one prominent businessman, political liberalisation has never been on their agenda. "Their stand on political liberalisation is no different from [their stand] on economic liberalisation. They do not seek to have full-fledged economic liberalisation, which entails opening up the local markets for foreign trade because this, in a way, threatens their own business interests and puts an end to their monopoly over the local market," Abdel-Nour said.
Explaining why the economic liberalisation programme did not lead to political liberalisation, Abdel-Nour said that the businessmen-politicians only toe the government line -- on both domestic and international issues -- and cannot be seen to challenge it by asking for an expansion of democracy. and El-Eisawi agree that those businessmen have no interest in defending the democratisation process. The political issue has not been a pressing one for one reason: "It will work against their own interests because democracy means more transparency and growing opposition to the kind of capitalism they represent," El-Eisawi added.
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