Egypt Must Stop Penalizing the Poor
A future President Sisi urgently needs to reform Egypt's economy. But he has to make sure it's not just the rich who benefit.
After three years of political upheaval, thousands of deaths, and an ongoing economic crisis, the people of Egypt are widely expected to vote former Field Marshal Abdel Fattah al-Sisi into power when the presidential election takes place on May 26 and 27. Sisi is seen as a strongman who will make the bold decisions needed to bring stability to the country. But any newfound order may prove short-lived if he fails to address the full range of injustices that inspired the revolution in the first place.
Much of the criticism of Egypt’s human rights record — before, and particularly during, the transition — has focused on its violent political repression. Less widely noted, though, has been the long-standing official disregard for socioeconomic rights, fueling widespread poverty and deteriorating living standards across the country. According to the most recent official statistics, over a quarter of the population lives in poverty, a third of young people are unemployed, and three out of five children are malnourished. These problems — driven by corruption, unemployment, and failing public services — are the same ones that inspired Hosni Mubarak’s ouster three years ago.
Egypt has seen four administrations come and go since 2011, none of which have made any serious effort to tackle the legacy of the past. Sharing an apparent indifference for the socioeconomic rights of ordinary people, the leaders of both the Muslim Brotherhood and the Egyptian armed forces prioritized harsh austerity measures in an effort to respond to an economic crisis precipitated by the country’s continuing instability. Although Sisi has yet to present his economic vision, his rhetoric so far indicates support for more of the same.
In a speech in March he called on Egyptians to "tighten their belts" in order to help their country. Egyptians are unlikely to see improvements in their living conditions anytime soon: A "generation or two" will have to suffer, he predicts. Investment Minister Mounir Fakhry Abdel Nour, meanwhile, believes that Sisi will be able to use his popularity "to take the difficult and often painful decisions to reform the Egyptian economy and face its fiscal problems." (In the photo above, a vendor on Tahrir Square sells shirts depicting Sisi.)
Egypt is indeed facing a severe economic crisis, and politicians have been eager to assert that budget deficits must be reduced as a matter of urgency. There is more than one way to do this, however, and there can be little excuse for forcing the costs of the crisis onto those least able to afford it. Yet this is precisely the approach that successive administrations have taken to date: penalizing poor households while privileging a politically connected economic elite. Such tactics threaten to run afoul of Egypt’s constitutional and international human rights commitments. Needless to say, they also fail the Egyptian people, who have risked their lives to express their aspirations for a country where everyone has the chance of a decent life.
Egypt will be called upon to justify these "tough choices" and their impact on the rights of ordinary people when it appears before the U.N. Human Rights Council’s Universal Periodic Review (UPR) later this year. Working together with a broad coalition, the Center for Economic and Social Rights and the Egyptian Center for Economic and Social Rights have submitted a detailed report to the UPR endorsed by some 130 organizations. The report provides extensive evidence that the unjust distribution of resources has perpetuated, and even exacerbated, the desperate state of socioeconomic rights in Egypt over the past three years.
The post-Mubarak Supreme Council of the Armed Forces (SCAF), the Muslim Brotherhood-backed government of Mohamed Morsi, and the current military-backed interim administration have proposed, and in some cases enacted, reforms that primarily focus on reducing state expenditure. Already underfunded public services, such as health and education, are being squeezed even harder, and subsidies on essential commodities are being cut without any plans to safeguard the rights of the groups most affected or to consider more equitable alternatives.
Though there have been some efforts to increase public revenue, these have prioritized increasing indirect taxation, for example by removing sales tax exemptions on several commodities. The interim administration also plans to replace the country’s sales tax (a 10 percent tax that applies to 17 types of goods and services) with a 10 to 12 percent value-added tax on all goods and services, with few exemptions. Taxes of this kind disproportionately burden the poor. By contrast, direct taxes, such as those imposed on income, corporate activities, and personal wealth, account for relatively little of Egypt’s tax base, while capital gains are virtually untaxed.
Meanwhile, the military’s role in the economy appears to be growing. The administration is increasingly awarding the military lucrative state contracts to carry out large-scale public infrastructure projects such as building roads, housing, and hospitals. Yet its budget is secret, meaning its industries remain unaudited and untaxed.
Successive administrations have similarly failed to take meaningful steps toward combating tax evasion and the illicit economy — steps that would go a long way to tackling the budget deficit. According to research by Global Financial Integrity, Egypt lost over $57 billion to illicit financial flows (money illegally earned or transferred through crime, corruption, or tax evasion) between 2000 and 2009. Equating to an average of $6 billion per year, this enormous level of unlawful and untaxed financial activity has no doubt continued in the post-Mubarak era.
Yet there has been no real effort to claw back any of it. In fact, in 2012, the SCAF quietly released amendments to the country’s investment laws authorizing the General Authority for Free Zones and Investment to settle cases of fraud, theft, and corruption outside courts, effectively nullifying criminal procedures against investors. More recently, in April this year, Egypt’s interim administration passed Law 32/2014, which prevents third parties from challenging deals and contracts between the state and investors in court. Taken together, these measures mean that impunity, rather than accountability, is the norm in corruption cases.
Those who are committed to social justice and a better future for all Egyptians have continued to campaign for more democratic decision-making, along with improved transparency and accountability. Policymaking remains secretive, however, and the state does not gather and make available reliable data, despite the crucial importance of such transparency to creating a meaningful democracy. Relevant policy documents, including the 2014-2015 budget proposal, are not publicly available.
More worrying still is the fact the demands of activists and workers have increasingly been met with a crackdown on dissent. In April, the interim administration proposed draft amendments to the penal code that, if enacted, would criminalize any "intimidation" that could "harm national unity," prevent the application of the country’s constitution or laws, or "damage the economy." Labor strikes or peaceful protests could easily fall within these definitions. Egypt thus finds itself caught in a spiral of popular dissatisfaction, social unrest, and repression.
Against this background, many ordinary Egyptians voting for Sisi are voting for the promise of calm and predictability. For others, he represents a return to Nasserism, which many Egyptians recall as the golden age of national independence, economic prosperity, and social justice. After three years of unrelenting upheaval, the desire for calm is understandable. But the fact that such perceptions have spread among the general population belies the general’s support for a policy program that will only deepen inequality and deprivation. Sisi represents a powerful military elite that has so far made zero concessions to relax its grip on the economy. He could capitalize on his apparent popularity and demand that Egypt’s elite contributes its fair share, but his rhetoric thus far suggests such a course of action is unlikely.
The Arab Spring brought with it a new political consciousness — and the country’s hunger for social justice is yet to be satisfied. If the new president wants to deliver on the promise of stability, he must set the country on a genuinely transformative economic trajectory with human rights at its core. If he does not, the embers of the revolution will not take long to rekindle.