Three Scenarios for the Development of the Sisi Regime in Egypt

Scenario 1 – “Successful Development Dictator”

Sisi’s supporters argue that the president needs more time to realize his development visions. Through megaprojects such as the expansion of the Suez Canal as well as the construction of a new capital and a nuclear power plant, Sisi wants to give the country a development boost. The floating of the exchange rate, the cut in energy and com­modity subsidies, and the exploitation of newly discovered natural gas deposits are aimed to improve the precarious financial situation and make Egypt independent of international financial aid. In the long run, experts from international financial insti­tutions sometimes suggest that the country could develop into a prosperous economy under Sisi’s leadership.

However, there are two obstacles to this scenario. Firstly, the megaprojects, announced by Sisi in highly emotional speeches, are by no means evidence of adequate awareness of the current prob­lems. These projects do not solve the coun­try’s core socio-economic problems: neither the dilapidated infrastructure, the inadequate education system, nor the exuberant shadow economy. The funds spent on the expansion of the Suez Canal (more than $8 billion), for example, could have been used more expediently.

On the other hand, the military’s position of power impedes the country’s devel­op­ment. Reforms always stop where the interests of the armed forces are affected. During Sisi’s presidency, the armed forces significantly expanded their activities in the civilian economy – and thus hindered the development of a competitive market econo­my. In addition, military spending is surging. Egypt more than tripled its arms purchases between 2014 and 2018 com­pared to the 2009–2013 period, making it the world’s third-largest arms importer.

The state’s positive reports on the increase in economic growth (in the first quarter of 2018/19 at 5.3 percent) and a falling unemployment rate must be viewed with caution. They are based on dubious pub­lic statistics and are not indicators of a reversing trend. The business and investment climate remains poor (in the 2019 “Doing Business” index of the World Bank, it ranked 120th of 190 countries). Foreign direct investment is still well-below the level of the economic boom years between 2006 and 2008. Above all, government debt is rising unstoppably: Between March 2013 and the end of 2018, foreign debt rose by 142 percent, to $93.1 billion. Potential additional government revenues, such as from the expansion of natural gas production, are likely to be consumed by the high level of debt service alone (currently more than 40 percent of government spending). Egypt’s alleged economic upswing has thus been bought at a high price.

Scenario 2 – “Mubarak 2.0”

If President Sisi does not prevail in deliv­ering the envisioned development successes to Egypt, this would not necessarily mean the end of his presidency. Former President Mubarak (1981–2011) was also unable to improve the socio-economic situation in the country. Nevertheless, he was able to remain in power for 30 years. This was mainly due to massive external support from Western states and successful elite management.

President Sisi can also count on extensive foreign support. Saudi Arabia, the United Arab Emirates, and Kuwait provided finan­cial and commodity aid amounting to more than $12 billion immediately after the mili­tary coup in 2013. The Europeans were ex­tremely willing to support the regime, par­ti­cularly in view of the increase in irregular migration flows in 2015/16. They supported Egypt’s efforts to obtain a $12 billion loan from the International Monetary Fund (IMF) with additional financial assistance, with­out demanding an improvement in human rights or governance. It is questionable, how­ever, whether the Gulf States and Euro­peans can, and will, continue to meet the rising financial needs, which will remain substantial, especially after the IMF pro­gram expires at the end of 2019. Scenario 2 could therefore become extremely costly for donors. For example, with $7.1 billion, Ger­many was already the largest creditor be­hind international organizations ($28.4 bil­lion) and the Gulf monarchies ($23.1 bil­lion) in mid-2018.

President Sisi’s elite management differs markedly from that of Mubarak. He has not shown any effort, for example, to form a loyal ruling party as a foundation for his pow­er, along the lines of the National Demo­cratic Party ruling under Mubarak. Rather, Sisi has – so far successfully – built on his close relations with the security apparatus and an extremely authoritarian style of military leadership. In view of the spread of poverty and a lack of social jus­tice, he is likely to use much more force in this scenario in the future to secure his own power.

Scenario 3 – “Sisi Fails”

A lack of development progress and increas­ing repression could very quickly lead to the end of the regime. Further cuts in spending are likely to be met with mass protests, espe­cially by members of the middle class, who have already suffered considerably from the government’s austerity measures in recent years. Another conceivable trigger could be an acute crisis in the provision of basic services, such as water, or due to the crumbling transport infrastructure. Success­ful protests in other countries in the region, such as Algeria and Sudan, could further intensify the dynamics of protest. An exces­sive use of force by the police might con­tain individual demonstrations for the time being but could also have an escalating effect.

Resistance from parts of the elite, and even the security apparatus, is also a con­ceivable threat to the Sisi regime. The mili­tary, the Interior Ministry, and the secret services are all profiteers of the president’s current policies. However, Sisi has also made enemies by depriving top officials of privileges – for example, requiring presi­dential approval for trips abroad – and above all by constantly rotating personnel. The imprisonment of former state officials with their own political ambitions – in­cluding the former chief of staff Sami Anan and the former head of the Central Auditing Organization Hisham Genena – is likely to cause additional bitterness among segments of the elite.

As abstract as this scenario may seem from today’s perspective, developments in 2011 have shown that protest dynamics and elite conflicts can hardly be predicted.

Conclusion

Although the scenario of a development dictatorship appears less plausible, the occurrence of one of the other two sce­narios is much more likely. Both are asso­ciated with high risks and costs, for Ger­many and the European Union (EU). The central prerequisite for the “Mubarak 2.0” scenario would be permanent, substantial financial assistance, which would primarily be to the detriment of European national budgets, as well as the acceptance of a fur­ther deterioration in the human rights situa­tion. In this way, socio-economic decline could, at best, be slowed. Migration pres­sure and radicalization tendencies among young Egyptians are likely to increase.

The scenario of regime collapse offers an opportunity for political reform. However, the current militarization of the regime and the associated disabling of all independent civil society stand in the way of these re­forms, as does the dramatic deterioration in the living conditions of a large segment of the population. Unlike 2011, the collapse could therefore be much more eruptive and less peaceful. A possible consequence could be the collapse of state structures in the most populous country in the European neighborhood.

Against this backdrop, Germany and the EU should press more than before for the pro­tection of an independent civil society as well as for measures to be taken for sus­tainable and inclusive economic development in Egypt. This not only includes point­ing out to the Sisi regime the incompatibil­ity of the planned constitutional reform with the “good governance” principles applicable to development cooperation. Equally im­por­tant is clear criticism – for example at the UN Human Rights Council – of the continuing infringements on human and civil rights. Above all, in the foreseeable renegotiations on further budgetary assis­tance, conditions should be imposed that, unlike in the past, are not aimed solely at austerity, but also at improving the human and civil rights situation as well as good governance. When it comes to project aid, much more attention should be paid to the implementation of the “do no harm” prin­ciple to prevent aid from being used for the further expansion of repressive power struc­tures. Finally, the German government should expand con­tacts with representatives of the exiled Egyp­tian opposition, in­cluding Islamist actors. Thereby, it could support mediation processes between dif­fer­ent social groups in the event of regime collapse.