Kim Badawi

Editorial Assignments: Businessweek : Egypt's Unfinished Revolution

by Vivian Walt

It’s around midnight in Cairo, and the four business partners are huddled around a sidewalk table in the upscale neighborhood of Zamalek, downing cappuccinos, smoking cigarettes, and debating the two issues that dominate their lives: the revolution and their startup. “You have to change the system from the bottom,” says Mohamed Ashour, 28. “The system is rotten from the inside.”

Ashour is one of the founders of Maybe Two, Egypt’s first frozen-yogurt chain, which launched last January, just before the overthrow of former President Hosni Mubarak. Ashour and his partners are about to open two new stores, and their frustration is palpable. Ashour thumps his fist on the table as he details the maze of red tape confronting entrepreneurs in the new Egypt. At one site, he says, workers toil from 2 a.m. until dawn because the managers of the shopping mall in which they are opening have banned them from doing construction work during business hours. At the second location, a local official angled for a bribe to approve the company’s plans. To avoid paying it, the founders installed a large storefront window in the dead of night, without the official’s approval, then covered it with cardboard so he wouldn’t spot it. “This experience is going to either break us or make us,” Ashour says. At that, Yomna Bakry, a petite 28-year-old in ripped jeans who oversees the company’s online marketing, interjects, “And we want to make it.”

Nearly nine months since the Tahrir Square revolution, the mood in Egypt continues to swing between hope and uncertainty. With 87 million people, Egypt is by far the most populous country in the Arab world. It is also Washington’s closest Arab ally, the recipient of billions in U.S. aid and, because of its 33-year peace agreement with Israel, the linchpin of regional stability. Egypt’s political and economic development is therefore crucial to the outcome of the Arab Spring. In the most optimistic scenario, the corrupt and parochial regimes of the past will give way to new Arab Tigers, similar to those that have emerged in Southeast Asia and Latin America in recent decades after dictatorships from Indonesia to Chile collapsed. Yet the Arab revolutions could just as easily produce governments dominated by military generals or radical Islamists who offer their people little improvement over the old despots.

In Egypt, the Supreme Council of the Armed Forces (SCAF), which has run the country since Feb. 11, appears to be carving out a lasting role in power. In September the military reintroduced Mubarak’s hated emergency laws; soon after, soldiers in Cairo conducted a bloody crackdown on Christian demonstrators, killing 24. Those hoping to succeed Mubarak will have to wait a long time, perhaps until 2013, before presidential elections take place. Although legislative elections will be held over the next two months, with a new Parliament convening next March, military officials say they will retain ultimate control. It’s little wonder that 48 percent of Egyptians say they are unhappy with the country and half say it is moving in the wrong direction, according to a September poll by Ipsos.

Pessimism about the revolution has been exacerbated by the state of the country’s economy. Egypt has lost more than $10 billion in foreign reserves, and foreign direct investment, which rose from $300 million in 2004 to $13 billion before the global financial crisis in 2008, has dried up since the revolution. The real gross domestic product growth rate slumped from 5.1 percent last year to 1.6 percent this year. The tourism industry, which accounts for more than 10 percent of revenues and roughly 1 in 10 Egyptian jobs, is down 41 percent since the revolution. Of equal concern to investors is the anticapitalist rhetoric voiced by some newly ascendant political players. The perception that members of the monied class colluded with the old regime has tarnished the image of Egypt’s business community and fueled calls for tighter regulation of the private sector, increased social-welfare spending, and more confiscatory tax policies. “Regionally, there is an enormous push by the youth for better jobs [and] opportunities,” says Egyptian billionaire Naguib Sawiris, who resigned last May as executive chairman of Wind Telecom and Orascom Telecom and founded a liberal, secular political party called Free Egyptians. The trouble, says Sawiris, 57, is that “many young people think that social justice means no free economy, no privatization.”