Administration of Egypt:

History
The pharaoh was usually depicted wearing symbols of royalty and power.
The pharaoh was the absolute monarch of the country and, at least in theory, wielded
complete control of the land and its resources. The king was the supreme military
commander and head of the government, who relied on a bureaucracy of officials to
manage his affairs. In charge of the administration was his second in command, the
vizier, who acted as the king's representative and coordinated land surveys, the treasury,
building projects, the legal system, and the archives. At a regional level, the country was
divided into as many as 42 administrative regions called nomes each governed by a
nomarch, who was accountable to the vizier for his jurisdiction. The temples formed the
backbone of the economy. Not only were they houses of worship, but were also
responsible for collecting and storing the nation's wealth in a system of granaries and
treasuries administered by overseers, who redistributed grain and goods.
Much of the economy was centrally organized and strictly controlled. Although the
ancient Egyptians did not use coinage until the Late period, they did use a type of
money-barter system, with standard sacks of grain and the deben, a weight of
roughly 91 grams (3 oz) of copper or silver, forming a common denominator.
Workers were paid in grain; a simple laborer might earn 5 sacks (200 kg or 400 lb)
of grain per month, while a foreman might earn 7 sacks (250 kg or 550 lb). Prices
were fixed across the country and recorded in lists to facilitate trading; for example a
shirt cost five copper Deben, while a cow cost 140 deben. Grain could be traded for
other goods, according to the fixed price list. During the fifth century BC coined
money was introduced into Egypt from abroad. At first the coins were used as
standardized pieces of precious metal rather than true money, but in the following
centuries international traders came to rely on coinage
Modern civil service of Egypt is administratively divided into governorates, regions,
districts, and villages.

Governorates
Egypt is divided for administrative purposes into 27 governorates. Egyptian
governorates are the top tier of the country's five-tier jurisdiction hierarchy. A
governorate is administered by a governor, who is appointed by the President of Egypt
and serves at the president's discretion. Most governorates have a population density of
more than one thousand per km, while the three largest have a population density of less
than two per km. Each governorate contains at least one city.

Governorates are either fully "urban" or else an admixture of "urban" and "rural". The
official distinction between "urban" and "rural" is reflected in the lower tiers. Fully urban
governorates have no regions (markaz), as the markaz is, natively, a conglomeration of
villages. Moreover, governorates may comprise just one city, as in the case of Cairo
Governorate or Alexandria Governorate. Hence, these one-city governorates are only
divided into districts (urban neighborhoods). Cairo Governorate consists of 41 districts;
Alexandria Governorate consists of 7.
Two new governorates were created in April 2008: Helwan and 6th of October. In April
2011, however, the 6th of October and Helwan governorates were again incorporated into
the Giza and Cairo Governorates, respectively. Luxor was created in December 2009, to
be the 29th governorate of Egypt, but with the abolition of the 6th of October and Helwan
governorates, the number of governorates has decreased to 27.

Regions
The region or markaz consists of a capital city, other cities if they exist, and villages.
Today, there are 167 markazes. The Prime Minister of Egypt appoints the chiefs of
markazes.

District
The district is the smallest local unit in urban communities. However, districts differ from
one governorate to another in terms of size, population and political and economic
circumstances. In addition to this, districts used to be further divided into sub-district
neighborhoods called sheyakha, which were considered of a better size for efficient
delivery of certain services, vaccination campaigns.

Village
The village is the smallest local unit in rural communities. However, villages differ from
each other in terms of the legal status. The chiefs of villages are appointed by the
respective governors.

Culture of Egyptian Administration

The growth of government activities in the Egypt after independence was accompanied
by an increase in the size and importance of bureaucracy. With full control over the
public purse the Egypt became responsible for charting social and economic development
policies and for the bureaucracy empowered to implement them. The challenge of Egypt
bureaucracies to transform their societies rapidly from traditional to modern entities has
contributed to their size and vested them with an intense concentration of powers. In turn,
their size and their acquired powers have increased the opportunity for corruption,
unethical conduct and the misuse of public office for personal profit.

Moreover, within the context of this new administrative culture, attempts at reforming the
bureaucracy in the Egypt have not been successful.

THE DECEIVING ADMINISTRATIVE CULTURE OF

FORMAL CONTROL MECHANISMS
The poor performance of bureaucracy in the Egypt and the inability of Egypt
governments to reform bureaucracy seem puzzling. A cursory examination of Egypt
bureaucracy would point to the presence in the Arab World of a special administrative
culture which is reflected in the significant number of formal control mechanisms
designed to insure accountability and integrity. The first formal control mechanism is
internal and governed by the pyramidal structure of the bureaucracy whereby each
administrative layer is accountable to the next higher one. Moreover, the behavior of
public servants, their rights, responsibilities and positions are regulated by laws enacted
by either a legislative branch and promulgated by presidential decrees.
The second kind of control mechanism is external and comprises political, administrative,
juridical and non-official watch-dogs which presumably strive to make sure that the
bureaucracy is accountable, efficient and productive. Finally, open hearings, interest
groups, and organized citizens participation and pressure attempt to keep public servants
accountable and prevent them from using their public office for personal gain.

THE REAL ADMINISTRATIVE CULTURE IN

THE EGYPT
The concern of Egypt governments since World War II to develop and modernize their
countries has led them to adopt, at times wholesale Western management philosophy and
administrative structures. This exercise proved unsuccessful because Western innovations
were implanted in an environment which continues to be influenced by a pervasive and
powerful traditional administrative culture which draws its strength from two main
sources: one, administrative and structural; the other, social and behavioral.
The administrative and structural source:
Six traditional cultural streams nurture this source.
They are: over centralization, outmoded systems, administrative expansion, overstaffing,
rigidity and complexity of rules, and salary structure

Over-centralization
Over-centralization of administrative structure and overconcentration of authority
characterize bureaucracies in the Egypt First, authoritarian superiors and top managers
are usually accompanied by passive subordinates. Second, the large span of control and
lengthy lines of command easily cause loses control and distortion of orders. Third,
subordinates rely to excess on their superiors and send them minor administrative
problems for resolution; as a consequence, senior public servants become occupied by
administrative minutiae instead of spending their time on more important matters,
resulting in, fourth, underemployment of subordinates and underutilization of their
talents. Fifth, influence peddling and corruption tend to thrive. Finally, citizens waste
time and money by having to travel often to the capital to crowded offices in order to
finalize their transactions.
Centralization in government organizations became the preferred Egyptian solution for
any problem of coordination. The rapid structural changes that took place in Egypt
between 1952 and 1970 gave rise to a complex and over-centralized organizational
structure, which was cumbersome and unwieldy (Ayubi 1980:234-235). Moreover, all the
major steps taken by the Egyptian central government to improve local governments
failed to decentralize the system and to delegate more authority to local government
officials. Even in public enterprises, there is a general tendency towards centralization
(Abdo-Khalil 1983:67). Egyptian officials are always trying to concentrate more power in
their own hands. In an editorial in 1982, the Egyptian Gazette stated that "with such
material and moral accoutrements adorning the post of manager, it is only natural that
officials should be vying with one another to attain this post through all means available,
not excluding hypocrisy, bribery, backbiting, double-dealing and deception.
" Palmer, Yassin and Leila (1985:323-337) provided an empirical assessment of the
excessive centralization in the Egyptian bureaucracy. Their conclusions supported Ayubi's
(1980) thesis that centralization of authority in the Egyptian bureaucracy was a problem
of major proportions. They also concluded that the sources of centralization in the
Egyptian bureaucracy were rooted both in the pragmatic realities of bureaucratic life and
in the broader dimension of Egyptian culture. Similar illustrations exist in the rest of the
Arab World

Outmoded Systems
Despite the substantial amounts of money Egypt spends on modernizing their
bureaucracies, most of them still have dated administrative structures, outmoded systems
and procedures and old technical and physical facilities; all of these foster an
administrative culture characterized by an unsystematic flow of information, poor
coordination, lack of comprehensive planning, difficulty of control and supervision, redtape and inefficiency.

Expansion
The emergence of the Egypt in the post World War II era as the chief employer and
provider caused a rapid, unexpected and unplanned expansion of the bureaucracy, which
hampered the development of a strong sense of accountability among public servants.
This situation made proper control, coordination, and supervision extremely difficult to
achieve; it also caused overstaffing and underemployment, lack of clearly defined lines of
responsibility, and in some cases lack of qualified personnel.

Overstaffing
Overlapping and lack of qualified personnel in key government areas do not promote a
culture of accountability Egypt public servants. In the promotion policy contributed
significantly to overstaffing. Promotions were made annually between ranks regardless of
whether there were vacancies for those promoted (Nakib 1972: 105). Overstaffing of the
Egyptian bureaucracy reaches extreme dimensions at most levels, and estimates of excess
workforce are about 15% of all employees (AI-Ahram AI-Iqtisadi 1979). Overstaffing
results from the steady pressure on the government to provide employment and from the
bargaining attitude of top officials, who exaggerate their personnel needs in order to
increase prestige and opportunity for promotion. According to Ayubi (1980:247) sectoral
and geographic overstaffing contributes to bureaucratic inflation, idleness, cynicism and
disguised unemployment in the Egyptian bureaucracy and thus creates a hostile cultural
environment for accountability among public servants

Rigidity and Complexity of Rules

Public Servants subject to rigid and complex rules seldom do not take initiatives, nor can
they be accountable for their actions and behavior. In Egypt bureaucracies, rigidity stems
from over-centralization of authority and a legalistic approach to administrative decision
making and procedures, which do not allow much room for innovation. In fact, rigidity
leads to a tendency among Arab public servants to avoid responsibility, especially when
they are faced with new problems which are not foreseen and regulated by law.
Moreover, laws and regulations which govern administrative behavior are often rigid and
confusing.

The Socio-cultural and Behavioral Source

Traditional customs, attitudes and behavior that are deeply imbedded in Egypt public servants include
nepotism and favoritism, patron-client relationships, corruption, avoidance of responsibility, and lack of
adequate training.

Nepotism and Favoritism

The family continues to rival the state as the focal point of loyalty and security in Egypt countries. In fact,
accountability to one's family often takes precedence over accountability to the state and thus leads to a
culture and practice of nepotism. Moreover, loyalty to the family is paralleled by a strong devotion to one's
village and friends, thus leading to a culture of favoritism. Neither is conducive to a culture of
accountability in Egypt public servants. Family, friendship, geographical ties are strong in Egypt and
loyalty to them is the hallmark of the Egyptian bureaucracy (Nakib 1972: 101). Thus, despite the
professionalization of the Egyptian civil service, it is not only permissible "socially" but mandatory for a
zaim (political leader) to appoint family members and friends to prestigious posts in the Egyptian
bureaucracy. As a consequence, the qualified child of an sordinary Egyptian citizen experiences difficulty
in finding a post in the

Corruption
Because it means the use of public office for personal gain, corruption is a serious
cultural flaw in Egyptian societies and their bureaucracies. Corruption has many causes:
weak commitment to the national interest and the common good; changing economic
status of public servants, which makes their salary insufficient to satisfy their rising
expectations and love of ostentation; the confusing network of government institutions
and regulations; and an oversupply of graduates seeking a limited number of available
positions, thus opening the door for bribes. All these factors have given Egyptian public
servants a golden opportunity to cultivate the art of bribery and corruption by
systematically using their public offices to promote and protect their private interests.

Laxity and Avoidance of Responsibilities

Laxity and avoidance of responsibility constitute two additional and serious flaws in the
administrative culture of Egyptian bureaucracies. In Egypt, show little interest in their
jobs, go home early and take maximum advantage of loose regulations affecting leave
with pay. The Egyptian bureaucracy, a small minority of public servants who are
committed to their jobs, the attitude of the majority toward hard work is very lax.
According to Ayubi (1982:289), Egyptian public servants arrive late to their offices and
by noon many of them are getting ready to go home. Moreover, a significant number may
not go to work at all. Ayubi (1980:293) adds that only 15 per cent of all Egyptian
employees arrive at their offices punctually, and most of these are in the security and
order departments. The cost of lost working hours is estimated at 4 million Egyptian
pounds every month. When at work, Egyptian public servants seemed to do everything
other than attend to their jobs. On average, the Egyptian public servant works an
estimated 20 minutes to 2 hours every working day (Ayubi 1980:293). Obviously, there is
no culture of integrity, probity, and accountability, and no one seems to care much.

Present Situation of Civil Service:

Since the 1990s, the need for streamlined procedures to facilitate business, trade and
investment has grown to crisis proportions in Egypt. But the political will to deliver
administrative reform was always lacking, not least because it would involve lay-offs and
wage reductions; in other words, direct threats to the livelihoods of some seven million
state employees and consequently the regimes popularity. But with the government wage
bill estimated to reach USD30 billion next years, Egypt has finally taken action. In
keeping with a strategy focused on cutting government spending, the Civil Service Law
was passed in March and began to be enacted in July.come and gone. But while stoically
maintaining a baseline status quo, the hypertrophied bureaucracy has been running the
country into the ground.
Over the last three years state salaries have increased by an annual rate of 16 percent and
currently consume a full quarter of the yearly budget. In comparison to other developing
countries, administrative bodies are overstaffed by roughly a factor of four. Each civil
servant serves 13 citizens in Egypt, as compared to 54 in Indonesia or 38 in Morocco.
The state has historically assumed an outsized burden of employment as a means of both
social welfare and self-preservation. During Mubarak-era presidential referendums, the
bulk of the yes voters were state employees and their families.
The new law calls for basic efficiency-improving managerial practices such as open
announcements of available positions, qualification guidelines and regular evaluations.
Rather than outright lay-offs, the law will encourage early retirement. If an employees
performance is assessed as poor for two years, a new position for which he/she is better
qualified will be assigned. If performance does not improve in the third year, wages will
be halved. If that doesnt work, the assessment committee will propose terminating
employment without the loss of pension.
The law will also restructure salaries, which currently differ even among employees
holding similar positions, and adjust the system of bonuses, currently awarded annually
regardless of performance and considered by employees a due portion of their modest
pay. Once the system is in place the government wage bill will increase by an estimated
five percent, a considerable improvement on the 16 percent annual increase recorded for
the last three years, saving nearly USD3 billion in FY2016.
Although the law is necessary and not unreasonable, the state made little attempt to
explain its rationale or reach common ground with the concerned parties. In the absence
of a sitting parliament (Egypts was dissolved three years ago; the new one is to be
elected in the coming two months) there was no political debate or public discussion; the
law was simply drafted and approved by the cabinet and wage restructuring began in
July.

In August, a group of 2000 Tax Authority employees assembled to oppose the law,
fearing for their jobs and salaries. High officials hastened to reassure them, including
Prime Minister Ibrahim Mahlab who said the law will benefit "the people, the state, the
good of society, and discover [sic] youth and [their talents]." The demonstration by state
employees was in direct defiance of the Protest Law passed in 2013 under which many
activists have been imprisoned. The protest was also condemned by the state-controlled
trade union federation (ETUF). No one, however, was arrested. President El-Sisi called
on demonstrators to accept the law and make a sacrifice for their country.
Another larger protest was held on September 12 by Tadamon (solidarity) a grouping of
independent unions representing a wide range of state employees, from doctors to railway
workers. Aside from being passed without parliamentary review, the Civil Service law
drew criticism for the fact that it excludes some state bodies without clarifying which
ones or why. Some ministers reassured their employees that they were among the
exempted, implying that they were better off than those the law covered.
Nor were provisions made for the establishment of the human resource committees who
would be responsible for evaluating, hiring, firing and regularly assessing millions of
employees. Such an undertaking promises to generate another mountain of paperwork
and, state employees fear, more procedures that are vulnerable to favoritism and
corruption.
Egypts government is certainly justified in undertaking these urgent and long overdue
reforms. But such sweeping measures called for by the Civil Service Law should have
been accompanied by a serious effort to explain the project to the public and gain its
support. Especially now, as people labor under the strain of reduced subsidies on fuel
and electricity, in addition to widespread water and fuel shortages and high inflation, the
call for further sacrifices threatens to diminish the governments fund of public trust,
arguably its most precious resource.

Judiciary of Egypt
The judicial system in Egypt is an independent branch of the government which includes
both secular and religious courts. The Egyptian judicial system is based on European
and primarily French legal concepts and methods.
The legal code is derived largely from the Napoleonic Code. Marriage and personal
status are primarily based on the religious law of the individual concerned. Thus, there
are three forms of family law in Egypt:
1. Islamic,
2. Christian,
3. Secular (based on the French family laws).

The judicial branch plays an important role in the political process in Egypt, as the branch
is given the responsibility to monitor and run the country's parliamentary and presidential
elections.

History
Egypt was among the first world countries after France to establish a judicial institution.
The beginning was in 1875 with the enactment of the modern codification under which
the Mixed Court were established. The Egyptian judicial institution that existed in the
mid 19th century was characterized by the following:

Courts at that time were not entirely national, but rather there were courts for
foreigners known as "consular courts".
The judicial authority at that time was not the only authority entrusted with giving
rulings on disputes, but rather there was another system that had enabled members
of the executive authority to issue rulings in certain cases.
Abandonment of the unified judicial system that had existed since the Ottoman
rule of Egypt.

During the Ottoman era, the judiciary power was undertaken by one person known as the
Chief Justice, who was assisted by four deputies representing the four schools of Islamic
jurisprudence; Hanafi, Shafie, Maleki and Hambali. During Mohamed Ali's reign of
Egypt and his endeavor to build a modern Egyptian state, two significant developments
took place in Egypt, leading to the existence of various bodies of civil judiciary in the
country.

Criminal code
Egypt based its criminal codes and court operations primarily on British, Italian, and
Napoleonic models. Criminal court procedures had been substantially modified by the
heritage of Islamic legal and social patterns and the legacy of numerous kinds of courts
that formerly existed. The divergent sources and philosophical origins of these laws and
the inapplicability of many borrowed Western legal concepts occasioned difficulties in
administering Egyptian law.
The criminal code listed three main categories of crime
1. Contraventions (minor offenses),
2. Misdemeanors (offenses punishable by imprisonment or fines),
3. Felonies (offenses punishable by penal servitude or death). Lower courts handled
the majority of the cases that reached adjudication and levied fines in about nine
out of ten cases. At their discretion, courts could suspend fines or imprisonment
(when a sentence did not exceed one year).

Capital crimes that carried a possible death sentence included murder, manslaughter
occurring in the commission of a felony, arson or the use of explosives that caused death,
rape, treason, and endangerment of state security. Few convictions for capital crimes,
however, resulted in execution. Egypt's laws require that a detained person be brought
before a magistrate and formally charged within forty-eight hours or released. An accused
is entitled to post bail and had the right to be defended by legal counsel.
The Emergency Law of 1958 outlined special judicial procedures for some cases. The
law enabled authorities to circumvent the increasingly independent regular court system
in cases where people were charged with endangering state security. The law applied
primarily to Islamic radicals but also covered leftists suspected of political violence, drug
smugglers, and illegal currency dealers. It also allowed detention of striking workers,
pro-Palestinian student demonstrators, and relatives of fugitives. The Emergency Law of
1958 authorized the judicial system to detain people without charging them or
guaranteeing them due process while an investigation was under way. After thirty days, a
detainee could petition the State Security Court to review the case. If the court ordered
the detainee's release, the minister of interior had fifteen days to object. If the minister
overruled the court's decision, the detainee could petition another State Security Court for
release after thirty more days. If the second court supported the detainee's petition, it
released the detainee. The minister of interior could, however, simply re-arrest the
detainee. The government commonly engaged in this practice in cases involving Islamic
extremists.

Civil code
The Egyptian Civil Code is the prime source of civil law, and has been the source of law
and inspiration for numerous other Middle Eastern jurisdictions, including predictatorship Libya and Iraq as well as Qatar.

Courts
Court of Cassation (Mahkamt al-Naqd or The Supreme Constitutional Court)
The Court of Cassation, the only one in its category, was established in 1931 and based in
Cairo. The Court of Cassation, the exclusive body atop the judicial hierarchy in Egypt,
was designated with the purpose of creating a central tool to provide exclusive and
uniform interpretation and application of law. The jurisdiction of Court of Cassation
basically includes consideration of challenges brought to it by either adversary or by the
public prosecution. It also includes examining lawsuits related to judges' actions. In such
a case, the court undertakes its role as a court of merit, rather than a court of law.
It also has the power to give rulings on requests of reparations for all violated verdicts.
The court issues annual collections on approved judicial principles under the title
Rulings and Principles of The Court of Cassation.

Court of Appeal
Courts of Appeal, some which are called Higher Courts of Appeal, have the competence
to consider rulings by the courts of first instance falling under its jurisdiction should these
rulings be liable for appeal. According to the Egyptian judiciary law, there are seven
courts of appeal in Egypt; in Cairo, Alexandria, Tanta, Mansoura, Ismailia, Beni Swaif
and Assuit.

Court of First Instance

These courts of first instance have the competence to consider lawsuits filed before them
as may fall under their jurisdictions. Their rulings are liable to appeal.

Courts of Limited Jurisdiction

These courts have the competence to issue rulings on lawsuits of limited importance,
falling under their geographical and term jurisdictions.
These rulings are liable to appeal.

Family Court
The Family Court (FC) was established in 2004, motivated by the need to differentiate
between family litigations and other disputes. It is intended to provide a specialized
judiciary tool that would take cognizance of such cases in an atmosphere totally different
from
that
of
other
lawsuits.
This aims to secure psychological peace for the children who may be involved, especially
in
such
cases
of
tutelage,
divorce,
alimony,
custody,
etc.
The ultimate objective of this court is to hammer out an amicable settlement for family
problems through specialized guidance bureaus.

Public Prosecution
The public prosecution acts as public attorney before criminal courts with the right to file
criminal actions. It was given the right by the Egyptian legislation to initiate action even
if plaintiff has relinquished his right to do so.

Administrative Judiciary
This judiciary has the jurisdiction to decide on administrative disputes to which any
administrative body is involved. Egypt has adopted a dual system of judiciary. the
ordinary and administrative judiciary.

The Private Sector in Post-revolution Egypt

Business sector, is accusing some of its major players of being responsible for the
reprehensible conditions of the Mubarak years, including unfair monopolies, large
income disparities, increasing poverty, and expanded budget deficits. This situation is
compounded by the widespread negative perception of the corporate private sector that
persists throughout Egyptian society. Some political parties, civil society organizations,
and media outlets have helped promote this negative image, accusing the private sector of
being unwilling to assume a proactive role during the transition period. In several cases,
the media have contributed to the negative image by equating the private sector with
corruption. It has also been difficult to distinguish between individual actors within the
private sector and determine the impact of the process of privatization more generally.
For its part, the prerevolutionary business elite has failed to articulate a new role for itself
in the transition period and beyond. Nor has it managed to agree on a unified set of
demands to facilitate its interactions with other stakeholders. This silence reflects its
hesitancy to act while the political situation remains in a state of flux.
The established private sector must contend with a number of new Islamist leaning
business groups and associations that have emerged since the ouster of Mubarak. Most of
these new groups tend to be quite politicized, using slogans of social justice and openly
supporting the program of the Muslim Brotherhood and President Mohamed Morsi. It is
not yet clear how relations between the old business elite and these new, more explicitly
Islamic organizations will evolve.
In addition to these Islamist organizations, several new secular parties have emerged
since the revolution. Each of these partiesIslamist and non-Islamist alikeemploys
slightly different rhetoric when it comes to economic issues. Some of them have close
ties to business leaders, and most of them have adopted an agenda that advocates a
market economy and promotes social justice. But the rather general policy statements that
many have promulgated fail to specify what is really meant by either market economy
or social justice. They lack clear positions on key issues such as taxation, minimum
wage, and privatization.
Perhaps more importantly, these political parties have failed to forge effective alliances
with social forces, such as labor unions, which have emerged as one of the most
influential players in the political arena. The number of strikes organized by labor
movements has increased over the past two years, with demands for better working
conditions and higher wages. The average annual number of protests following the
revolution has doubled compared to the period between 2007 and 2010, during which the
average number of protests did not exceed 700. The private sector must find a way to
navigate this emerging post-revolutionary landscape. Its productive operation within
Egypts new economic framework will be crucial to helping pull the country out of its
increasingly dire economic situation.

Economic Performance after the Revolution

In the two years since the revolution, Egypts economic performance has been weak. The
economy has slowed since the revolt. The IMF had predicted that the Egyptian economy
would grow by 3 percent in 2013, but it has now downgraded to 2 percent. Recorded
growth for 2012 was 2.2 percent that is, very close to the 2011 population growth
estimate. The balance of payments has deteriorated, mainly because capital outflows,
such as the purchase of necessary food imports and the repayment of foreign debt
installments and services, have persisted while capital inflows have dried up due to the
high risk associated with business investment and a significant drop in tourism. The result
has been a plunge in foreign currency reserves from $24.1 billion in September 2011 to
about $15.04 billion in September 2012, which is equivalent to about 2.6 months of
imports.
The fiscal deficit has now reached more than 10 percent of Egypts gross domestic
product (GDP). Stalled economic activity accounts for some of the rise, as does the
governments increase in public spending in response to rising demands from the street.
Outlays include a pay raise for public sector workers and increased subsidies to cover the
increasing price of food imports. To finance this spending, the government has resorted to
short-term borrowing from the domestic market at high interest rates. Such loans
accounted for 16 percent of the treasurys bills in September 2012.
This pressure on the credit market has pushed interest rates to new heights, limiting the
private sectors access to financing and crowding out its investments. An estimated 65
percent of commercial bank deposits has been extended as loans to the public sector.6
Such an outcome implies an adverse selection problem because this money, instead of
being invested smartly, is being used mainly to fuel consumption and imports. During the
last week of 2012, the Egyptian pound reached its lowest level relative to the U.S. dollar
since the ousting of Hosni Mubarak, and the Central Bank of Egypt enacted new
monetary foreign exchange regulations in an attempt to curb currency speculation and
limit inflation. At around the same time, the credit agency Standard & Poors downgraded
the Egyptian economys rating from a B to a B, citing the civil unrest that weakened
Egypts institutional framework, and the increasingly polarized political discourse that
could diminish the effectiveness of policy-making. The agency had downgraded
Egypts rating earlier in 2012 from B+ to B, arguing that Egypts external position had
deteriorated and was likely to weaken further, absent stabilization in the domestic
political situation alongside external financial support.

The Private Sector in Post-revolution Egypt

None of the four successive administrations over the last two years has attempted to deal
with the long-term economic challenges underlying these developments. Rather, each has
responded to the immediate pressure of the street.

Structure of the Private Sector

A marginal force during the days of Nasserist state socialism, the private sector grew
under Presidents Anwar Sadat and Hosni Mubarak to become Egypts primary engine of
economic growth. In 2011, the private sector represented 63 percent of GDP and
employed 70 percent of the Egyptian labor force. The private sector in Egypt is a mix of
micro-, small-to-medium, and large enterprises. Microenterprises, employing one to four
employees, comprise nearly 91 percent of all Egyptian enterprises. Small and medium
enterprises, employing five to 100 people, comprise 8 percent, and large corporations
constitute less than 1 percent of total Egyptian enterprises.13 In terms of employment
rates, microenterprises employ 58 percent of the labor force, small and medium
enterprises employ 25 percent, and large corporations account for 17 percent.
Microenterprises are scattered and have little potential for expansion due to structural
weaknesses, such as poor managerial skills and few financial resources. Most
microenterprises are informal, so it is difficult for them to benefit, even from the
government-sponsored programs that aim to enhance their capacities. These businesses
require specific programs that target their key weaknesses. Moreover, they face tough
competition, and their profit margins are generally very narrow. The workers in these
businesses suffer from poor working conditions and, despite their large numbers, are not
organized.
As a result, they have little political representation and cannot bargain for better wages or
benefits. Small and medium enterprises, which operate in the manufacturing and services
sectors, face numerous obstacles, including limited access to financing, poor labor skills,
inconsistent standards, and weak links to large firms. They lack effective representation
in the existing private sector institutional framework, which is dominated by large firms.
The poor business climate, the obstacles associated with adhering to social security
requirements, and limited access to financing have forced many medium enterprises into
the informal sector. Large corporations normally dominate the scene as a result of their
effective organizational structures and access to financial resources. They also have
disproportionate access to decision makers and may be skewing policy in their direction.
Large corporations include enterprises that operate in the services, manufacturing, and
agricultural sectors

Organizations Representing the Private Sector

A wide range of organizations and institutions have represented the private sector in
Egypt both before and after the revolution. Some of them have been highly visible and
influential in shaping the business environment, while others have had limited influence
on the policymaking process. Many are directly or indirectly linked to the Egyptian
government, and a number of the prerevolutionary associations played a part in the
rampant corruption that marked the Mubarak era. The newer associations pursue the
interests of certain businesses that were marginalized prior to the revolution, but they
have adopted many of the policies and practices of their predecessors and are not
promoting a new economic vision.

Business Institutions That Predate the

Revolution
Among the most visible and influential organizations formed before the revolution is the
Federation of Egyptian Industries, which comprises sixteen chambers of industry that
seek to support Egypts manufacturing sectors. It serves as a formal lobby for the
interests of its members. Another prominent institution is the Federation of Egyptian
Chambers of Commerce. This organization, the member chambers of which represent
various governorates, aims to serve the interests of the Egyptian business community in
general. These federations are semi-official bodies. The government appoints their chairs
and contributes to their financing. Since the revolution, a number of business leaders
have been demanding amendments to the laws regulating these bodies in order to
guarantee full independence and free elections for their leadership. Export commodity
councils constitute another group of semi-official bodies.
They are financed by their members but overseen by secretariats linked to the Ministry of
Trade and Industry. There are fifteen export commodity councils that serve the interests
of exporters in specific fields and lobby against bureaucratic overregulation and red tape.
There are also specific chambers of commerce and associations linked to countries of
particular interest to manufacturers and traders (such as the American Chamber of
Commerce and the Canadian Chamber of Commerce).
There are also bodies, such as the Association of Egyptian Businessmen, the Egyptian
Junior Business Association, and the Alexandria Business Association, that do not enjoy
such high levels of government support. These organizations are not related to the
government and were effective advocates of the corporate private sector during the
Mubarak era. They have historically been relatively narrow and sector specific in their
focus. They do not possess an overarching policy or vision of economic development and
have limited resources, which have been expended mainly on internal logistics and
operations. In most cases, the little lobbying these institutions have undertaken has been
limited to securing specific protection and favorable treatment from complacent
government officials rather than focused on developing and promoting a wider growthoriented economic program that would benefit both them and the national economy.
A self-interested co-mingling among these business associations and political elites
which became particularly flagrant during the last ten years of Mubaraks regime
contributed to the negative image of the private sector held by many Egyptians. During
that era, business leaders manipulated parliament and the government to shelter their
interests and maintain monopolies over certain markets, including the steel and cement
industries. These clear conflicts of interest went unpunished as there was no law or code
of ethics to govern the relationship. The Mubarak regime was driven by the need to
solicit support from private sector leaders for the succession of the former presidents
son, Gamal Mubarak.

A quid pro quo arrangement was in place whereby prominent businessmen offered
political support for Gamal in exchange for certain privileges that served their business
interests. Examples include allocations of land, freezing of anti-trust laws, and dubious
privatization deals. Such instances of corruption have stuck in the minds of many
Egyptians

Business Associations and Public Policy

In the past, both public and private sector elites were satisfied with this arrangement. This
weakened the sort of demand for serious reform from powerful constituencies that could
have produced a more competitive environment and encouraged new entrants to the
market, not to mention expanded the economy more sustainably so as to alleviate the
sense of injustice that helped spark the January 2011 revolution. But now a healthier
relationship, taking account of 2011 events, needs to be predicated on transparency, wider
inclusion, and a focus on promoting socioeconomic policies that encourage growth while
creating jobs and boosting social justice. For example, a number of debates have been
going on in Egypt for several years concerning the minimum wage, taxation policy, and
the curtailment of subsidies.
Private sector associations have not seriously engaged these issues, rarely addressing
them or outlining policy alternatives. The same has been true for questions of how to
support the informal economy or increase linkages between small-to-medium enterprises
and large corporations. In terms of representation, micro- and small enterprises have been
essentially invisible in the existing structure. They may have been members of
associations either by law (in the case of the Federation of Egyptian Industries and the
Federation of Egyptian Chambers of Commerce) or voluntarily (in the case of the
business councils and investors associations that are spread across the country at the
governorate level). However, the influence of these enterprises has been minimal in the
main business associations, and their concerns have not been communicated effectively
in the public sphere or the policymaking process. Moreover, the de facto informal
economy, which makes up almost 30 percent of the Egyptian economy, has had no
official acknowledgement or representation.
Currently, there are attempts to amend laws and regulations governing representative
institutions in the private sector to limit government intervention. These laws would
allow elections to be held for the boards and chairmen of industrial and trade federations,
which would be a step in the right direction.

Bridging the Confidence Gap Between

Government and Business
The current government has been trying to reassure the corporate private sector of its
economic reliability by taking steps to restart economic growth and reduce policy

uncertainty. For example, it has continued to try to move forward with the IMF on the
crucial loan agreement, so far without success, and has moved to facilitate private-public
partnerships. However, poor transparency on important issuessuch as the removal of
subsidies and IMF loan conditions as well as the lack of a well-defined economic vision
and clear policy regarding those businesses that profited unfairly from the Mubarak
systemthreatens to undermine the positive message the government is trying to convey.
One has to keep in mind that the Brotherhood movement is trying to avoid articulating a
clear pro-market and pro-business position. It fears that doing so might antagonize its
electoral base, which is composed mainly of poor and middle-class groups, mostly in
rural areas, that have negative perceptions of the private sector

Coordination with the Private Sector

The Egyptian president has been trying to reach out to the corporate business community
Indeed, President Morsi has formed a committee to liaise between his office and
representatives of the corporate private sector. The committee includes investors from
traditional private sector institutions and members of the Egyptian Business Development
Association. According to Hassan Malek, the committees spokesperson, it is intended to
develop policy ideas that would jump-start the economy and to plan for the future by
undertaking strategic studies for long-term economic development.
Part of Morsis plan is to encourage the Egyptian private sector to look abroad. During
his recent visit to China and Turkey, Morsi was accompanied by a group of corporate
businesspeople interested in establishing and exploring business opportunities in these
countries. This development was viewed positively by the business community and
negatively by some opposition groups and small and medium enterprises that accused the
president of favoring the big business community over other stakeholders. These
complaints were exacerbated by the lack of transparency concerning how the
businesspeople who accompanied the president were selected. Some corporate
businesspeople have expressed dissatisfaction with the views on the economy that Morsi
presented during these visits. They argue that the president sugarcoated the business
environment in Egypt, glossing over the red tape, corruption, and opacity that still exist,
not to mention the ongoing unpredictability and insecurity. As a result, they argue that the
he is nave to expect foreign direct investment to improve, regardless of his goodwill tour.
Before appealing to the outside world, these businesspeople would like to see the
government working to improve the business environment in Egypt and creating
conditions that would incentivize the Egyptian private sector to inject money into the
Egyptian economy.

Promoting Private-Public Partnerships

Postrevolution governments have been trying to explore new schemes through which
they can involve the private sector in providing public goods, such as infrastructure.
These projects are based on a private-public partnerships law that was approved during
the Mubarak era in 2010. The current government, headed by Qandil, has proposed that
the private sector invest in infrastructure for utilities, such as electricity and water. For

example, the government has encouraged private investment in power generation to

compensate for a deficit that has resulted in regular electricity cuts during peak periods.
Private plants participating in this project could sell electricity directly to consumers
using the national grid for a reasonable fee. Egypt has also amended the laws governing
private-public partnerships to allow disputes to be resolved through arbitration rather than
the Egyptian court system. This reduced some current negative incentives for investors by
amending the arbitration laws to guarantee shared executive powers and create more
efficient arbitral proceedings. These amendments also closed a few loopholes that have
materialized over the years and encouraged more transparency in the appraisal of the
arbitrators fees. They also reassured investors that nationalization of key industriesa
measure that enjoys support from several political partiesis not an option the
government would pursue. The private-public partnerships law was meant to replace
another system of private-public partnerships in which the private sector established and
operated some infrastructure projects that, after an agreed-upon period of time, were
transferred to the government. This system, known as BOT (Build, Operate, and
Transfer) or BOOT (Build, Own, Operate, and Transfer), was widely adopted in Egyptian
infrastructure projects during the 1990s. Interviews with business leaders have revealed
that the private sector needs clear legal terms on which to base a transparent process to
conduct some of the needed private-public partnership projects.