Is business as usual possible in Egypt?

Dr Elizabeth Stephens takes a look at the current condition of the Egyptian economy, and asks whether businesses will be able to operate with any kind of normality.

A series of challenges have been presented to investors since the deposing of Hosni Mubarak, with uncertainty and outbreaks of violence exerting downward pressure on investment flows. Despite the deteriorating economic environment and payment delays that plague the oil and gas sector in particular, many foreign companies have remained committed to their Egyptian operations, anticipating a return to stability.

Events in the past eight weeks - the ousting of President Mohammed Morsi and the military’s clearing of two protests camps in Cairo resulting in the death of hundreds of Egyptians – have fundamentally altered these calculations. The potential for disintegration has become clear.

The inflow of funds from the Gulf states is positive and more funding is likely to be announced in the coming months if there is a fall in violence. Egypt is receiving several billion dollars in financial aid and considerable assistance in kind. Saudi Arabia is paying directly for wheat contracts while the Qataris are supplying gas, creating a more positive picture than the USD 19 billion in foreign exchange reserves implies.

In the short term Egypt’s economy will muddle along but underlying economic problems will worsen over the course of the year due to disinvestment. Saudi Arabia is muting the figure of USD 12 billion in aid for the Egyptian fiscal year of July to June 2014 but even Riyadh with its deep pockets will be reluctant to bankroll another state indefinitely.

Over the medium term we may end up with predictable confrontation; cycles of protests that don’t escalate in the manner of recent weeks but with each protest having the potential to unleash another uprising. This makes it difficult for companies to recommit fully to their Egyptian operations because of the risk this creates in moving staff and their families back to Cairo.

While parallels have been drawn with Algeria in the 1990s, one of the many notable differences is that Algiers could be ignored by oil companies operating in the country in a way that Cairo cannot. Egypt’s economy is dependent on the service sector whereas Algeria was a hydrocarbons-dependent economy. Ultimately, Algeria was able to transcend its difficulties with higher state spending as oil prices rose. There is no such light on the horizon for Egypt.

Oil and gas companies recently renegotiated payment agreements with the government and payments were to be resumed in exchange for the reinstatement of investment programmes. In the current climate companies will be reluctant to ramp up investment and a new agreement will need to be reached with interim oil minister Sherif Ismail. Ismail knows the energy companies well and will be sympathetic to their predicament, although the outlook for either party is not positive at present.

In contrast to Libya and Iraq, foreign investors in Egypt’s oil and gas sectors can’t even argue that commitment in the short term will lead to worthwhile gains and financial upside in the future. There is no reserve replacement potential for the next five years at least and the risk of expropriation will rise as the domestic energy balance becomes more precarious.

Astute investors had their credit and political risk insurance in place ahead of the uprisings. While the insurance market has remained open throughout the course of Egypt’s political transition, with some rate and capacity fluctuations, the recent coup and violence has led the private market to close for new credit and investment risk. Existing cover continues and underwriters will honour their commitments but support for new market entrants is only available from multilateral insurers for very select investments. Some limited insurer appetite remains for political violence cover.

The Egyptian economy is highly dependent upon the service sector. Photograph: Getty Images.

JLT Head of Credit & Political Risk Advisory

Photo: Getty
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In focusing on the famous few, we risk doing a disservice to all victims of child sexual abuse

There is a danger that we make it harder, not easier, for victims to come forward in future. 

Back in the 1970s when relations between journalists and police were somewhat different to today a simple ritual would be carried out around the country at various times throughout the week.

Reporters, eager for information for their regional newspaper, would take a trip to the local station and there would be met by a desk sergeant who would helpfully skim through details in the crime Incident Book.

Among the entries about petty thefts, burglaries and road accidents there would occasionally be a reference to an allegation of incest. And at this point the sergeant and journalist might well screw-up their faces, shake their heads and swiftly move on to the next log. The subject was basically taboo, seen as something ‘a bit mucky,’ not what was wanted in a family newspaper.

And that’s really the way things stayed until 1986 when ChildLine was set up by Dame Esther Rantzen in the wake of a BBC programme about child abuse. For the first time children felt able to speak out about being sexually assaulted by the very adults whose role in life was to protect them.

And for the first time the picture became clear about what incest really meant in many cases. It wasn’t simply a low level crime to be swept under the carpet in case it scratched people’s sensitivities. It frequently involved children being abused by members of their close family, repeatedly, over many years.

Slowly but surely as the years rolled on the NSPCC continued to press the message about the prevalence of child sexual abuse, while encouraging victims to come forward. During this time the corrosive effects of this most insidious crime have been painfully detailed by many of those whose lives have been derailed by it. And of course the details of the hundreds of opportunistic sexual assaults committed by Jimmy Savile have been indelibly branded onto the nation’s consciousness.

It’s been a long road - particularly for those who were raped or otherwise abused as children and are now well into their later years - to bring society around to accepting that this is not to be treated as a dark secret that we really don’t want to expose to daylight. Many of those who called our helpline during the early days of the Savile investigation had never told anyone about the traumatic events of their childhoods despite the fact they had reached retirement age.

So, having buried the taboo, we seem to be in danger of giving it the kiss of life with the way some cases of alleged abuse are now being perceived.

It’s quite right that all claims of sexual assault should be investigated, tested and, where there is a case, pursued through the judicial system. No one is above the law, whether a ‘celebrity’ or a lord.

But we seem to have lost a sense of perspective when it comes to these crimes with vast resources being allocated to a handful of cases while many thousands of reported incidents are virtually on hold.

The police should never have to apologise for investigating crimes and following leads. However, if allegations are false or cannot be substantiated they should say so. This would be a strength not a weakness.

It is, of course, difficult that in many of the high-profile cases of recent times the identities of those under investigation have not been officially released by the police but have come to light through other means. Yet we have to deal with the world as it is not as we wish it would be and once names are common knowledge the results of the investigations centring on them should be made public.

When it emerges that someone in the public eye is being investigated for non-recent child abuse it obviously stirs the interest of the media whose appetite can be insatiable. This puts pressure on the police who don’t want to repeat the mistakes of the past by allowing offenders to slip through their hands.  And so there is a danger, as has been seen in recent cases, that officers lack confidence in declaring there is a lack of evidence or the allegations are not true. 

The disproportionate weight of media attention given to say, Sir Edward Heath, as opposed to the Bradford grooming gang sentenced this week, shows there is a danger the pendulum is swinging too far the other way. This threatens the painstaking work invested in ensuring the public and our institutions recognise child abuse as a very real danger. 

Whilst high profile cases have helped the cause there is now a real risk that the all-encompassing focus on them does both victims of abuse and those advocating on their behalf a fundamental disservice.

As the public watches high -profile cases collapsing amidst a media fanfare genuine convictions made across the country week in week out go virtually unannounced. If this trend continues they may start to believe that child sexual abuse isn’t the prolific problem we know it to be.

So, while detectives peer into the mists of time, searching for long lost clues, we have to face the unpalatable possibility that offences being committed today will in turn only be investigated fully in years or decades' time because there is not the manpower to deal with them right now.

So, now the Goddard Inquiry is in full swing, taking evidence about allegations of child sex crimes involving ‘well known people’ as well as institutional abuse, how do we ensure we don’t fail today’s victims?

If they start to think their stories are going to be diminished by the continuing furore over how some senior public figures have been treated by the police they will stay silent. Therefore we have to continue to encourage them to come forward, to give them the confidence of knowing they will be listened to.

If we don’t we will find ourselves back in those incestuous days where people conspired to say and do nothing to prevent child abuse.

Peter Wanless is Chief Executive of the NSPCC.