Election no early relief for Egypt investors
Egypt's elections reveal a polarised nation that poses long-term risks for foreign investors.
May 29, 2012 12:31 by Reuters
Egypt’s elections reveal a polarised nation that poses long-term risks for foreign investors. The liberal candidates have been ousted in the first round, so voters will have to choose next month between the Muslim Brotherhood’s candidate Mohamed Mursi and Hosni Mubarak’s last Prime Minister, Ahmed Shafiq.
The gulf between the candidates does not bode well for Egypt’s short term political and economic stability. The final choice will be one between two very different Egypts.
Shafiq promises a return to the past. The overhaul of state airline Egypt Air during his time as civil aviation minister gives some credibility to his pledges to reform subsidies and reduce the budget deficit to 6 percent of GDP. Shafiq has also pledged to honour the peace treaty with Israel. A vote for Shafiq would be a vote against rising Islamism and serve as a check to the Brotherhood, which controls the biggest bloc in parliament.
The worry is that Shafiq will turn out to be nothing more than a military pawn. He has been tainted by corruption allegations, and has publicly regretted the anti-Mubarak revolution. His platform promises stability, but his victory could set Egypt on a path to months of street protests as it battles to win back tourism and boost depleted foreign reserves.
The Brotherhood’s Mursi looks better equipped to engineer a quick turnaround of the economy. Enacting vital economic reform will require consensus between parliament and the president in a country still struggling to write the constitution that would define their powers. The Brotherhood’s platform for boosting growth and cutting unemployment balances free-market principles and populism. Under Mursi, Egypt might even become a centre for the booming Islamic finance industry, alongside conventional banking.
The challenge for the Brotherhood in the three weeks until the final vote is to compromise enough to win support of liberals and Christians suspicious about the longer-term Islamic objectives of the movement. Shafiq has already said he would be prepared to appoint an Islamist vice-president.
Investors must come to terms with the fact that Egypt’s elections didn’t end the uncertainty of the post-revolutionary period of transition. The clash between the old regime and political Islam is a warning that, even after a new president is elected, Egypt could spent years torn between ideological extremes.
Egypt’s election committee said on May 27 that it was considering complaints about the first round of polls that are expected to send the Muslim Brotherhood and Hosni Mubarak’s last prime minister into the final round to contest the country’s presidency.
Mohamed Mursi, the Brotherhood’s second choice candidate after the disqualification of an earlier nominee, won 25 percent of the vote according to preliminary aggregated results compiled by Egypt’s Ahram Online. Ahmed Shafiq took almost 24 percent of the vote.
Fitch Ratings said on May 28 that the political differences between the two candidates could exacerbate social unrest and prolong political stalemate. However, it noted that even though tensions are likely to rise before the next election, in the longer term both candidates favour policies that could stabilise the sovereign’s credit profile.
Nasserite candidate Hamdeen Sabahy won almost 22 percent of the vote, followed by moderate independent Islamist Abdel Moneim Abul Fotouh with 18 percent, and liberal former Arab League chief Amr Moussa with 11 percent.
Candidates emerged in the same order in other independent efforts to tally results. The final result is expected on Monday or Tuesday at the latest. The turnout was 44 percent, according to Ahram.
The electoral committee is investigating complaints about the voting filed by four candidates – Shafiq, Sabahy, Abul Fotouh and Moussa.
Opinion polls from the majority of Egyptian outlets prior to the first round cast Abul Fotouh, Moussa and Mursi as the main frontrunners.
A final run-off vote is expected to be held on June 16/17.
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(Editing by Pierre Briançon and David Evans)