Nov 12, 2016 7:12 PM

With shock reform, Egypt throws out rules it long lived by

The Associated Press

CAIRO (AP) — From as early as the 1950s, Egypt's rulers have had an unspoken social contract with Egyptians: Forfeit genuine democracy and freedoms and, in return, you get to live on the cheap with heavy state subsidies keeping down prices of basic items and services — bread, sugar, rice, fuel, water and electricity.

Now Abdel-Fattah el-Sissi, the latest in Egypt's string of military officers-turned-presidents, has had to do the unthinkable to rescue the tanking economy of the Arab world's most populous nation.

The currency has been floated freely for the first time and subsidies are being substantially cut. Prices have jolted upward as the Egyptian pound plunged in value and, overnight, fuel and gasoline became more expensive. The measures, carried out hours apart on Nov. 2. have caused panic among a population where poverty, unemployment and inflation are already high.

At the same time, his government is keeping the iron grip it has held the past two years, curtailing freedoms, giving security forces a free rein, jailing thousands and managing a media machine that demonizes dissidents.

The question is how long el-Sissi can keep a lid on discontent while, it is hoped, reforms bring economic growth that will ease the pain. Already, some voices are calling for political reforms as well.

On Friday, Egypt received its reward for the painful shock therapy measures when the International Monetary Fund approved a $12 billion bailout package, including an immediate first installment of $2.75 billion. The hope is that the bailout plus reforms will salvage state finances and signal to international investors to start putting money back into the country.

The same day gave a sign of the firm security hand. Calls for protests against the economic measures fizzled, with almost no one turning out in the streets. For days ahead of time, police had warned of harsh measures against anyone heeding the calls, which officials blamed on the banned Muslim Brotherhood.

But analysts warn that a popular backlash can still come.

"People are angry and frustrated over the rise in prices, but there is no leadership to organize protests. People cannot just take to the streets," said Khaled Dawoud, spokesman for the Democratic Alliance, an umbrella of six small left-center parties.

"But you cannot rule out something happening out of the blue given the widespread anger."

About 40 percent of Egypt's 92 million people live under or hover just above the poverty line — making them vulnerable to even small price hikes. Even before the measures, prices were going up on staples, electricity, and water. Now the Egyptian pound, which traded at 8.8 to the dollar before the flotation, is at around 17 to the dollar.

On everyone's mind are bread riots that erupted in 1977 and forced then-President Anwar Sadat to back off his attempt to cut subsidies.

El-Sissi and his government have promised programs to cushion the impact, including shifting from general subsidies to cash help directed at the poor and greater steps to ensure only the needy receive subsidized goods.

"What is required now ... is to liberate the political environment in parallel with the freeing of the economy from its shackles," political scientist Ahmed Abd Rabbou said in a column this week in the independent Al-Shorouq daily.

There is little sign of that happening.

During the 2011 uprising that toppled autocrat Hosni Mubarak, the millions who took to the streets chanted for a new social contract: Bread, human dignity and social justice.

Instead, the country was mired in crisis, first under nearly 17 months of direct military rule and later with an elected Islamist president, Mohammed Morsi of the Muslim Brotherhood, at the helm for a year.

El-Sissi led the military's ouster of Morsi in 2013 and was elected president a year later, promising stability and an improved economy. He launched a series of mega projects that brought the state and military more into the economy but whose benefits were questioned by economists, including an $8.5 billion extension of the Suez Canal and plans to turn 1.5 million desert acres to farmland.

His security agencies, meanwhile, jailed thousands, mostly Islamists, but also secular and leftist activists who fueled the 2011 uprising. A wide sector of the public backed the moves, convinced that stability was the priority.

"Under el-Sissi, Egypt entered a new contract: The contract of submission," said Negad Borai, a rights lawyer who was put under criminal investigation after he proposed legislation against torture.

"The validity of this contract and its continuity will hinge on the extent to which the state is willing to go to crush dissent."

In the weeks leading up to the currency flotation and fuel price hikes, pro-government TV show hosts persistently berated Egyptians, saying they don't work hard enough, depend too much on handouts or consume too much food or fuel. They also talked up fears of the Brotherhood stirring up unrest, warning Egypt could fall into chaos like Syria or Iraq if a firm hand is not kept.

In his speeches, el-Sissi echoed that with repeated calls, wrapped in nationalist language, for Egyptians to work harder and consume less.

Prominent analyst Abdullah el-Sennawi warned that Egyptians are being asked to sacrifice when the state is not.

"There are conditions for everything. In this instance, they include ending political oppression, releasing detained young people, a more just distribution of burdens, introducing strict and tangible austerity in state institutions and fighting graft with actions, not just words," he wrote in a column on Wednesday.

Michael W. Hanna, an Egypt expert with New York's Century Foundation, says the measures were way overdue but could have been taken earlier under better terms and more secure circumstances. Now the government must show it can shepherd the changes through.

"It's an open question whether this will transition to something more sustainable and the government is disciplined enough to see through a reform process."

Some economists have said the government not only has to push forward with the reforms but also lift the hand of the government and military from the economy to let in investment.

In an article published this week, Ziad Bahaa el-Din, a former deputy prime minister, prescribed a remedy that includes reviewing el-Sissi's mega-projects, regulating state intervention in the economy and improving the business climate. He also called for political reform, "without which economic performance will not improve."

But the state is deeply wary of easing its security grip.

Ibrahim Eissa, a critic of el-Sissi, wrote this week in the daily al-Maqal that popular anger is high, and authorities know that the lack of backlash so far is only "an artificial calm."

"It's like a layer of ice that covers a lake of anger, concern, alarm and rejection for the policies of the current regime."

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