March 12, Cairo, Egypt.
This was a full day discussing the economy, five hours of meetings at the University of Cairo followed by dialogue with former "legislative fellows" from Egypt who spent one week in Washington, D.C. last November.
A subtle breeze blew over the Nile River as we boarded our van for an early meeting with the CEO of the American Chamber of Commerce in Egypt. This commute flowed effortlessly on a crisp and sunny morning. The smog was not hugging the streets as usual and the acrid blend of fumes and smoke was absent. The air pollution was clearly on hold for a few hours thanks to a slight breeze. Like a dawn run in the Boise Foothills we were rewarded for early rising. And there was not the jolt of noise pollution caused by incessant honking of horns by cars, scooters and buses seamlessly connected like a chain in lava flow motion. One wonders whether "honking proficiency" is a test question at the Cairo DMV. The horn section of the Cairo urban orchestra adds to the cacophony of 18 million neighbors living cheek-by-jowl.
I was eager to meet with Am-Cham CEO Hisham A. Fahmy this morning. We had met before on earlier visits but never at a time when the stakes were so high. I wondered how candid he could or would be. He didn't hold back in his briefing and he confirmed that the economy is on life support with few good options.
A dissident last night stated in an offhand and matter-of-fact way that the looming economic crisis would be characterized more as an energy crisis. This morning's meeting at the Am-Cham clarified that portrayal.
The greatest government subsidy in Egypt is for gasoline and diesel. Other subsidies exist for foodstuffs, however, the largest drain on the treasury is the energy subsidy. As the government monetary reserves slip further into negative territory, the energy subsidy will likely be cut. With summer just around the corner and energy costs expected to rise, this could be the one-two knockout punch to the economy.
With the dramatic disparity in income, those below the middle class will be socked the worst. Of course, that will have political and economic consequences. Trimming the energy subsidies poses a great problem for the Muslim Brotherhood leadership.
While this energy crisis began long before the revolution the MB now owns it.
The U.S. economic assistance triggered by subsidy cutbacks would be chump change to the huge government debt incurred hourly by Egypt. Many countries will come to the table with direct financial assistance, loan forgiveness and debt re-structuring if IMF conditions are met. However, the total amount is still dwarfed by the overall debt. I felt again like I was watching a train wreck in slow motion.
The math of the economic crisis is simple. The Egyptian budget is basically divided into four equal parts: 25 percent subsidies, 25 percent interest on debt, 25 percent salaries and 25 percent education. While somewhat simplistic, this budget pie chart illustrates why the approaching train whistles grow louder.
One wonders how the Egyptian economy chugs along at this point. The answer is the gray, underground and informal economy. Thirty percent to 50 percent of the economy is essentially off the books. This means no revenues are derived from a massive exchange of money and services on a cash basis. The large enterprises have been targets for taxes, but the small enterprises operate below the radar screen. There is a huge merchant class in Egypt and life goes on for the masses.
The lack of clarity for Egypt's future was punctuated because the Am-Cham has not assembled its talking points and message for upcoming annual "door knock" with Congress in Washington, D.C. in April. In prior years these message points would have already been and ready for shipment. As of today there wasn't even a draft. The economy is so shaky U.S. based companies and other industrial forces in Egypt can't predict the country's economic future one month down the road.
We spent five hours at the University of Cairo in multiple meetings with faculty and staff. We were hosted by the Professor Hala H. Elsaid, Dean of Faculty of Economics and Political Science. We connected because of our mutual backgrounds in banking policy, and she was rightfully proud of her ascension to dean on the vote of her peers. The logistics were arranged by a recent legislative fellow, Dr. Ahmed Abd Rabou, who is a professor at the university. He spent one month in D.C. under the Legislative Fellows Program and smoothly moderated all sessions.
The discussion with his faculty colleagues was very animated as we discussed the future of the U.S.-Egyptian relationship. We concluded that relationships among friends are often more difficult to sustain than between enemies. Like a good marriage it takes work. Hard work.
One professor criticized President Barack Obama for not living up to his rhetoric in his noted Cairo speech that occurred in a nearby building. I remember that speech vividly and was proud of Obama for talking about the "elephant in the room." He addressed historical and sensitive topics oftentimes avoided. This hyper-sensitivity and critical view of the U.S. is rampant. Each time we encountered it we calmly re-stated our "people to people" mission and our nondiplomat status. We pushed back criticisms by pointing out that Obama's speech and subsequent actions have all been intended to highlight the long-standing friendship with Egypt. The U.S. has focused on process knowing that reforms and democracy evolve by the citizens inside the country.
The faculty meeting was a warm-up to a gathering in a spacious lecture hall attracting more than 200 students. This was definitely not as tough as facing an open meeting in Grangeville to discuss more wilderness. ( I have had both character-building opportunities. ) The questions were direct, respectful and packed a punch. They were intended to send a message. We received and we delivered. I pointed out that Scott Klug was not happy with the outcome of the 2012 election and I was unhappy with the outcome of the 2000 election. We are all moving on and staying engaged.
Paul Ryan (our traveling colleague, not the Republican vice presidential candidate) is a star player in this delegation and can forcefully point out that after more than 200 years we are constantly vigilant to perfect the U.S. election laws. The historical context for the criticism we encountered is two years of their nascent democracy. For the foreseeable future, the U.S. is a likely rhetorical target. The Iraq war was mentioned twice in the questions and answers so there is a hangover from that invasion. We were asked how we would define "democracy" for Egypt. That's an easy question: Egypt must define its own democracy.
Paul encouraged the students to vote. I encouraged them to be candidates.
Last night we meet with a young woman, Dr. Nermeen Ibrahim Bedair, who was very happy to conduct her business as a dermatologist until the police cracked down and cracked heads in Tahrir Square. Nermeen now has 30,000 followers on Twitter. She tweets daily as an unintended activist. We also met with Alfred Raouf who is an young engineer and carries a bullet in his calf from Tahrir Square. He works tirelessly with his political party to develop an agenda and future course of action. He and his party must decide whether to boycott the next election or choose to place demands in front of the Muslim Brotherhood for changes to the constitution. They may do both.
We dined last evening with seven activists and I told them I saw seven candidates at the Cafe Riche table. Most demurred but three expressed interest in carrying their passion forward by putting their names on the ballot. I related the story of Rep. Carolyn McCarthy, D-NY, who as a nurse was elected to the U.S. House of Representatives after her husband was murdered in cold blood on a New York subway. She has an agenda and pursues it to this day in the political arena.
Cafe Riche had great lemonade with crushed mint but the cigarette smoke was thicker than the Camel smokers booth at the Frankfurt Airport. The place is a throwback to colonial days and would be a great set for a movie.
TUESDAY OBSERVATIONS: 'AH HA' MOMENT(S)
There is no political infrastructure in Egypt in the wake of the revolution to govern or serve effectively in the opposition. The opposition has a thin bench to offer as alternative choices. It's understandable that the business of politics in Egypt is still in its infancy. While we grow weary in the U.S. with the consultancy class, constant campaigns, talking heads, biased/unbiased media, pollsters, commentators, pundits, fundraisers, bloggers, tweeters, organizers and political wizards, we need to remind ourselves that these competencies lubricate our functioning democracy. While the role of the opposition is to oppose, those opposed in Egypt are new to the game and largely unseasoned and untested. I sense hesitation and outright fear to directly engage in a political exchange through multiple media. Those governing are riding in their first rodeo. They're incapable of "going big" and haven't figured out how to play small ball and get their sea legs. Amidst this landscape of political infancy is a looming economic crisis.
Before Recep Tayyip Erdogan was prime minister of Turkey he was mayor of Istanbul. He knew how to deliver services and pick up the garbage in the street. Garbage pick-up would be a good place to start for any political party in Cairo. That area needs a little attention.
There is no effective dialogue taking place among political parties or officials of the opposition. At the moment it amounts to talking past each other as both sides concoct their conspiracy theories. The Muslim Brotherhood has articulated theories of Obama putting them in power and the opposition spins tales how Obama put the Muslim Brotherhood in power. Maybe they can agree on that for openers, even if it's a fantasy.
We leave early for Alexandria by van. The trip will take approximately three hours. Alexandria was once the center of the whole Mediterranean and was largely Coptic Christian. It's growing into a Muslim Brotherhood stronghold. And history marches on. More tomorrow from Alexandria.
Former U.S. Rep. Larry LaRocco of Idaho is in Egypt this week as part of a professional fellows program, sponsored by the U.S. State Department and Legacy International, which aims to strengthen the legislative and policymaking processes in Egypt and other countries. LaRocco has agreed to submit commentaries outlining his views on life and politics of this Middle Eastern country.