Egypt’s new politicians need to develop and articulate clear blueprints for the country’s economic policy, as a persistent failure to address the economic aspects of popular demands could ultimately lead to a second, angrier and hungrier revolution.

Military figures need to be aware that future economic development will depend not only on security, but on transparency and accountability.

In ‘Bread, Dignity and Social Justice': The Political Economy of Egypt’s Transition, a new paper published by Chatham House, Jane Kinninmont argues that Egypt’s ability to build confidence among local and foreign investors will depend on the progress of a clearly defined political transition. Uncertainty over the intentions of the military council could weigh on investor confidence and potentially generate domestic tensions that might further weaken the economy and lead to unrest.

Predictably, the uncertainty created by the ongoing political transition has deterred investment and depressed growth. Yet Egypt has significant economic resources. With a population of 85 million, Egypt has a relatively diversified economy in comparison with other Arab countries and constitutes a market that international investors in the Middle East or Africa will not ignore. In addition, women’s employment is relatively high for the Arab world.

In the last seven years of the Mubarak regime, the government had notable successes in attracting fresh inflows in foreign investment. However, the country has continued to struggle with extensive poverty, chronic unemployment and economic inequality.

State services are in such poor shape that it is clear to all political parties that education and healthcare need more investment. The country’s infrastructure, housing and social services range from being in a state of strain to one of near-collapse.

There is also hearsay and rumour in the economic debate, and a severe shortage of reliable and timely economic data. There are wildly different estimates of how much of the economy is owned by the military, ranging from 10% to a less plausible 40%.

The military is highly suspicious of foreign debt as a possible threat to sovereignty, and is likely to have been the main source of objections to the proposed International Monetary Fund loan in 2011. Above all, the military seeks ‘stability’, meaning both that it will see protests and strikes as economically and politically disruptive, and that it will wish to avoid reforms that might challenge its existing privileges – such as any attempt to scrutinize its budgets.

While political unrest has increased Egypt’s already substantial economic challenges, and has alarmed some investors, the current period of political change presents an opportunity to build a stronger, more inclusive and politically legitimate economy in the medium to long term.

Notes to Editors

Read ‘Bread, Dignity and Social Justice': The Political Economy of Egypt’s Transition

Jane Kinninmont is Senior Research Fellow, Middle East and North Africa Programme, Chatham House