The Egyptian Ruling Structure & Shift To Economy.

The regime of Egypt, under President Husni Mubarak, has been among the most stable in the Middle East in the past 26 years. Despite problems such as Islamic militancy with violent overtones since 1992 and more recent US and EU complaints about the lack of democracy, the Mubarak regime has withstood many difficulties. This is due to the cautious, but firm and steady, hand of Mubarak who took over in October 1981 after the assassination of his predecessor Anwar al-Sadat.

Egypt has a presidential system with wide powers vested in Mubarak, who will be 80 years old in May 2008. On Sept. 26, 1999, he was re-elected in a national referendum for a fourth six-year term to the autumn of 2005. On Sept. 7, 2005, he won a fifth term in Egypt's first experiment with contested multi-candidate elections as he got 88.57% on a turn out of a mere 23% of the registered voters. In one of his victory speeches, Mubarak promised that 4.5m new jobs will be created during his term to 2011.

However, the geo-strategic and importance of Egypt under Mubarak to the US has fallen in recent years. This was underlined by US President George W. Bush's first official tour of the Middle East on Jan. 9-16, 2008. After his visits to Israel and Ramallah, Bush travelled to the GCC areas. Egypt's Sinai resort of Sharm el-Shaikh was the last leg of Bush's tour, which he visited for a mere three hours, and that appeared as an after-thought, a sign of Cairo's decline in Washington's estimation. In contrast, the GCC states - the UAE and Saudi Arabia in particular - were the priority.

Bush's tour was an expression of an established fact. GCC states now are the most important partners in America's new Middle East diplomacy and will remain so for the indefinite future. The tour demonstrated that the 9/11 chapter was now largely closed. No less than 15 of the 19 men who perpetrated the atrocity were from Saudi Arabia and two were from the UAE. In the years since then, both states have demonstrated to Washington's satisfaction that it could have no firmer allies in its war against terror, in bringing stability to Iraq, in promoting Middle East peace and in helping to grease the wheels of the world economy.

Bush's GCC tour may not be a turning point in US policy, but it is part of a fresh start for America and the region. Momentum is building behind the State Department's strategy. It is unlikely that the winner of the November 2008 US presidential poll will want, or have the energy, to shift course radically.

Mubarak's political leadership had realised that since the US under Bush's Republican administration invaded Iraq in March 2003. Since then Mubarak has stopped visiting the US every year - sometimes more than once a year - and has concentrated on Egypt's economy and social reforms. In 2004 Mubarak appointed Ahmad Nazif, a reformist, to form a new government and embark on daring socio-economic changes through technocrats who have since shown they can generate results.

Simultaneous reforms in areas like business registration, promoting foreign and domestic investment, tax codes, monetary policy, trade, and privatisation seem to have convinced the business community that Egypt is serious about change. Registering a new company now takes three days in a single office, rather than the two or three months in dozens of offices. Foreign direct investment (FDI) has risen from $2 bn in 2004 to an estimate of $11 bn in 2007, growing from under 2% to over 5% of GDP, with new investments mostly in the non-petroleum sectors. GDP growth has doubled in three years, to 7% annually. Unemployment has dropped from 11.6% to 9%, and inflation is under control.

These gains, however, contrast sharply with the fact that most middle-class Egyptians can barely make ends meet, as reflected in growing labour unrest and large, persistent strikes throughout the country. What Mubarak and his technocratic ministers have failed to realise since 2004 is that the global perspective had changed since 2002, that socio-economic reforms without real political openness had little impact on Egyptian society as prices in all sectors have since risen sharply with a rapid shift of wealth from the OECD to the big emerging economies (such as China, India, the GCC, etc). Firm political control in a society where the middle class is vulnerable to global changes, such as that of Egypt, has proved to be the main obstacle to the reforms of Nazif's government and this will have geo-strategic implications for Mubarak's political leadership (as explained partly in ood1-IraqBinLadenSaudiOilJan21-08).

A report by Freedom House out in the autumn of 2007 said: "the...government supports the evolution of democracy in Egypt in its rhetoric but continues to quash it in practice". In its annual governance performance survey entitled "Countries at the Crossroads", the group wrote that "the Egyptian government has become more authoritarian and repressive over the past two years, despite its language to the contrary. The freedom of political parties and civil society actors has become increasingly restricted, the judiciary is punished for seeking independence, and a long-term state of emergency has been largely institutionalized". The report's detailed analysis was written by two respected and independent authors, Denis J. Sullivan and Kimberly Jones of Northeastern University in Boston.