(alter.net) February 4, 2011 Economic decline at the hands of ‘hot’ money has driven Egyptians’ discontent.
The revolution in Egypt is as much a rebellion against the painful deterioration of economic conditions as it is about opposing a dictator, though they are linked. That’s why President Hosni Mubarak’s announcement that he intends to stick around until September was met with an outpouring of rage.
When people are facing a dim future, in a country hijacked by a corrupt regime that destabilized its economy through what the CIA termed, “aggressively pursuing economic reforms to attract foreign investment” (in other words, the privatization and sale of its country’s financial system to international sharks), waiting doesn’t cut it.
Mohamed Bouazizi, the 26-year-old Tunisian who catalyzed this revolution, didn’t set himself on fire in protest of his inability to vote, but because of anguish over his job status in a country with 15.7 percent unemployment. The six other men in Algeria, Egypt and Mauritania who followed suit were also unemployed.
Tunisia’s dismal economic environment was a direct result of its increasingly “liberal” policy toward foreign speculators. Of the five countries covered by the World Bank’s, Investment Across Sectors Indicator, Tunisia had the fewest limits on foreign investment. It had opened all areas of its economy to foreign equity ownership, except the electricity sector.
Egypt adopted a similar come-and-get-it policy, on steroids. From 2004 to 2008, as the world economic crisis was being stoked by the U.S. banking system and its rapacious toxic asset machine, Mubarak’s regime was participating in a different way. Mubarak wasn’t pushing subprime loans onto Egyptians; instead, he was embarking on an economic strategy that entailed selling large pieces of Egypt’s banks to the highest international bidder.
The result was a veritable grab-fest of foreign bank takeovers in the heart of Cairo. The raid began with Greek bank, Piraeus, taking a 70 percent stake in the Egyptian Commercial Bank in 2005, and included the sale of Bank of Alexandria, one of the four largest state-run banks, to the Italian bank, Gruppo Sanpaolo IMI in 2006. For the next two years, “hot” money poured into Egypt, as international banks muscled into Egypt and its financial system, before the intensity leveled off in 2008.
While foreign banks were setting up shop, Egypt also eliminated the red tape that came with foreign property investment, through decree number 583. This transformed the country, already a tourist hotspot, into a magnet for global real estate speculation. (Something that worked out really well for Ireland.) Even one of Goldman Sachs’ funds got in on the game, buying a $70 million chunk of Palm Hills Development SAE, a luxury real estate developer.
Other countries in the region, such as Jordan, where the unemployment rate is 13.4 percent, and the poverty rate 14.2 percent (as in the U.S.), tried to mimic Egypt’s “open” policies, in varying degrees. That’s why eight of the 21 banks operating in Jordan are now foreign-owned, and its insurance market is dominated by U.S.-based, MetLife American Life Insurance Company. But it was Egypt that did it best.
From 2004 to 2009, Egypt attracted $42 billion worth of foreign capital into its borders, as one of the top investment “destinations” in the Middle East and Africa. “Hot” money entry was made easy, with no restrictions on foreign investment or repatriation of profits, and no taxes on dividends, capital gains or corporate bond interest. As a result, volume on the Egyptian stock market swelled more than twelve-fold between 2004 and the first half of 2009.
Egypt and the United Arab Emirates even eliminated minimum capital requirements for investment, meaning that speculators could buy whatever they wanted, with no money down, a practice that didn’t exactly impel them to stick around for long.
By Nomi Prins