While the world was debating the overthrow of Egyptian President Mohammed Morsi, Turkey’s well-known economist Suleyman Yasar was the first to declare that the Egyptian coup was all about the economy. Yasar explained his views to the daily Taraf. He said the same IMF trap was laid for Turkey’s AKP years ago. The AKP’s experience helped it to avert a coup. Morsi lost because of his inexperience. Yasar had an interesting, biting view on elites, bureaucracy, the IMF and the Western world.
Taraf: How does the significant wealth of the army in the Egyptian economy affect the political process?
Yasar: The day Morsi took over as president on July 1, 2012, stock market prices rose by 6.7%. Now, on July 4 and in the aftermath of the military coup in which Morsi was toppled, the stock market prices went up by 7%. This goes to show that in the one-year tenure of Morsi, the bureaucracy and the army had blocked Morsi’s economic reforms. The market goes up when he takes over, and goes up when he leaves. As to why he was blocked, it is not easy to overcome the collusion of the elites with the military. Let’s see what Morsi proposed to change this order.
Taraf: What did Morsi propose?
Yasar: Morsi, contrary to Muslim Brotherhood’s traditional policy of charitable assistance, was going to try liberalizing the private sector. This was to reduce the share of the state in the economy,which would also help in abolishing the bureaucratic tutelage.
The Egyptian economy’s real problem is the blunting of entrepreneurship by the elites. There are people who have been waiting for 10 years to get state approval to open a bakery. If you were not close to the Mubarak regime, you couldn’t get a permit. That is why so many people had to live on state or Muslim Brotherhood handouts. The only objective was to prevent anyone other than the elites from becoming rich. Egyptian economic life is just like our military tutelage times, when all privileges were for the capital, Istanbul.
Taraf: How do they prevent people from acquiring wealth?
Yasar: I will give you an example. The well-known Peruvian economist Hernando De Soto and his team discovered that 92% of real estate properties in Egypt had no deeds; they were not registered. If these properties were required to be registered and have deeds, the country would have $400 billion worth of new assets on record. But this wasn’t allowed. Elites and the army of the Mubarak regime did not allow utilization of these assets by the economy, because they were using them.
According to De Soto, the private sector in Egypt legally employs 6.8 million people, the state employs 5.9 million, and the unregistered informal sector employs another 9.6 million. The largest employer is therefore the underground economy. It is very difficult to set up a business if you are not an elite. You need on average 500 days to get a bureaucratic permit to open a bakery. There are people who have been waiting for ten years for the processing of their papers because they have to get the approval of 56 separate state agencies. Since there are legal obstacles to opening a business, your wealth can’t increase that much even if you work very hard and save a bit. The bureaucratic setup doesn’t allow an average Egyptian to develop economically. People rebelled in this environment, a revolution took place and former President Hosni Mubarak was deposed. He was replaced by the first-ever elected president, Morsi. But the elites and civilian-military bureaucracy clamped down on him and prevented him from taking economic steps. Peoples' expectations were not met. The [economic] growth rate declined to 2%. Youth unemployment went up to 82%. The coup environment burgeoned because these questions could not be solved and economic expectations could not be met.
Taraf: You said one of the reasons for the coup is the economy. Why couldn’t Morsi improve the economy?
Yasar: For Morsi to put the economy in order, he had to overcome the hegemony of the elites and the bureaucracy. He adopted Turkey and Malaysia as models. When the AKP came to power in 2002, the same trap Morsi fell into was laid for the AKP. You may recall that in the charge sheet of the Ergenekon [coup planning] case, there is a recording of [columnist] Ilhan Selcuk advocating an economic crisis and making the country ungovernable. But the AKP did not fall for it and declared it would fully implement the agreement with the IMF. It eased the tax fears of the elites and reassured them. To do that, the government even annulled the tax inquiries known was ”where did you get it?” But Morsi couldn’t conclude negotiations with the IMF in one year. Or somebody did not allow him to conclude them.
Taraf: Why did Morsi need the IMF?
Yasar: In Egypt, the budget deficit is 10.4% and public debt load is 85.2%. To sustain their public finances, they had to get IMF credits and show global investors that they are working with the IMF. Otherwise nobody will come near you. Immediately after Morsi took over, credit rating agencies lowered Egypt’s country grade. This was actually a trap by the elites because Morsi wanted to turn the economy that was dominated by the elite and civilian-military bureaucracy to the benefit of middle classes and the poor. He wasn’t given time and the bureaucracy did everything possible to make him fail.
Taraf: Why didn’t or couldn’t the Egyptian administration conclude an agreement with the IMF?
Yasar: Gerry Rice, who heads the communications department of the IMF, in a news conference on June 20 said: “We are working on a standby agreement with Egyptian officials. We want them to quickly prepare national economic programs. We will provide support for growth, employment and stability. There is an enormous budget deficit. Budgetary subsidies for oil and gas have to be cut to close this deficit. This is a decision that has to taken by the political authority. If they decide quickly, the agreement will be concluded right away.”
Meanwhile, the bureaucracy was stalling and slowing down to prevent such a decision. For a political decision to be made, the bureaucracy has to prepare a national economic plan. Morsi couldn’t do that by himself. In short, Morsi was shackled by elites and the bureaucracy. As such, the ground was prepared for a coup and the coup makers were mobilized saying Morsi couldn’t cope with it.
Taraf: Prime Minister Recep Tayyip Erdogan said there are similarities between Egypt and Turkey. What are those similarities and differences?
Yasar: The basic similarity was the existence of the tutelage of elites and the military in both countries. The AKP eventually wiped out this tutelage regime. It didn’t allow the bureaucracy to stall because they knew from the experience of the [Islamist] Welfare Party before them, when Prime Minister Necmettin Erbakan faced significant obstructions. AKP leaders, aware of the situation, immediately sent out positive messages to global investors and declared immediate full implementation of the agreement with the IMF. It launched privatization. But Morsi had no such experience. He could not cope with bureaucratic obstructions and stalling. Obviously he didn’t have a team of technicians as the AKP did. The trap that was set for AKP in Turkey worked in Egypt.
Taraf: Will the AKP government’s tough statements against the military regime in Egypt affect the Turkish investors in Egypt and Turkish-Egyptian economic relations as a whole?
Yasar: Investments by Turks, estimated to be around $6 billion, are generally in free zones. These zones are regulated by internationally accepted rules. That is why they won’t have many problems. I think the first task of the new regime will be to reach an agreement with the IMF. They did not prepare a national economic plan to demonstrate how political Islam failed in governance. Now they will themselves make an agreement with the IMF to reassure investors. It won’t be wise for them to take a position against Turkish investors. Don’t forget Turkey is extending $1.2 billion in assistance to Egypt.
Taraf: We see that after the coup, Western investors in particular are looking more favorably to the Egyptian economy. How do you assess this?
Yasar: The West won’t call the overthrow of Morsi a coup. What concept of democracy is that, we have to ask them. The West is a part of the economic trap laid for Morsi.
Taraf: Can the government that replaced Morsi improve the economy with the support of the West? In this context, how do you see Egypt’s future?
Yasar: I must point out that unless the IMF helps, economies with such unsustainable public finances cannot attract global investors. Egypt needs foreign investment. For the West, Egypt is an economically important country. It is transit country. One million barrels of oil travel through the Suez Canal daily. Furthermore, every day 1.1 million barrels of oil are shipped through pipelines. This is 2% of the word’s oil production. Some of Europe’s oil needs are met via Egypt. That is why unless available energy resources and shipment methods are changed, the West can’t give up Egypt.
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