Egypt’s Revolution: Good for Business?

Category: Culture, International Business

3998046903_02c08a5363_zThe international business community is still trying to assess the effects of revolutions in Egypt and Tunisia for investment and growth in the Middle East and North Africa—especially now that similar uprisings are springing up across the Arab world. A brief look at the Arab and foreign media reveals uncertainty and concern over what will happen next. Yet there is also hope that greater democracy will improve the economic outlook both in Egypt and elsewhere in the region.

To be sure, the economy of the Arab world’s largest country is still reeling after weeks of paralysis. Banks have reopened, but Egypt’s stock market remains closed, reportedly infuriating foreign investors, and the tourists who power much of the economy have been slow to return. Exacerbating the immediate crisis, the rash of labor protests and strikes that helped bring down Egypt’s dictatorship has not yet abated. The Egyptian state newspaper Al-Ahram (in Arabic) echoes the new government’s call for the strikes to end, saying they endanger the country’s economic growth.

Even so, the pan-Arab news network Al Arabiya reports that some investors see a bright future for Egypt in the long term now that the Mubarak regime is gone. Democracy, they say, will lead to more transparency, more open markets and more responsiveness on the part of the government. These changes will spur economic growth, resulting in what the head of one capital management firm calls “a great opportunity to invest in Egypt.”

An even bigger question may be what impact Egypt’s transition will have on the rest of the region, as a wave of “revolution fever” continues to ripple from one end of the Arab world to the other, and even shows signs of spilling over into Iran.

True to expectations, populous countries with stagnant economic growth have led the way. The North Africa Journal cites “grievances that range from housing distribution to labor and from food prices to unemployment” as important factors in Algeria’s current unrest. Nonetheless, an op-ed in MEED, a well-respected Middle East business magazine, calls large-scale protests in Bahrain “an early warning” that even the Gulf’s oil-rich monarchies cannot use their wealth to postpone true democratic reforms forever.

The ultimate lesson, writes Harvard University Professor Dani Rodrik in Lebanon’s The Daily Star, is that “economic health does not buy safety for authoritarian regimes”: Egypt and Tunisia have been among the best-performing economies in the developing world, but that did not save their governments from the anger of citizens who saw their leaders as insular and corrupt. If such observers are right, the growth of democracy, not just the quality of economic policies, could make the Arab world a more stable place to do business in the long run.

Photo attribution: sdhaddow