VZCZCXYZ0000
RR RUEHWEB

DE RUEHEG #2148/01 1921011
ZNR UUUUU ZZH
R 111011Z JUL 07
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 6091
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC 0290

UNCLAS CAIRO 002148 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ELA, NEA/RA 
USAID FOR ANE/MEA MCCLOUD AND DUNN 
USTR FOR SAUMS 
TREASURY FOR NUGENT AND HIRSON 
COMMERCE FOR 4520/ITA/ANESA/OBERG 
 
E.O. 12958:  N/A 
TAGS: ECON PREL PGOV EAID ETRD EG
SUBJECT: MB PLATFORM CALLS FOR "MIXED" PUBLIC-PRIVATE ECONOMY 
 
REF: CAIRO 2147 
 
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Summary 
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¶1.  (SBU) In preparation for the Shura Council elections, the Muslim 
Brotherhood (MB) issued a platform that included an extensive 
economic component.  The document, our first in-depth look at the 
MB's economic views, criticizes capitalism and free markets in 
general, particularly the GOE's economic reforms, including 
privatization and what they consider to be the resulting corruption. 
 The MB cites poverty as Egypt's main socio-economic problem, and 
believes it can be solved through comprehensive development.  The 
state would play a large role, driving investment, growth, and 
poverty eradication.  Many of the policy suggestions are similar to 
current GOE policies, but the MB emphasizes the role of the state in 
protecting citizens from market-driven approaches.  The government 
would ensure social justice through Islamic law and values, 
including redistribution of wealth through charity (Zakat).  The 
platform does not include many concrete suggestions for 
accomplishing its objectives, but does indicate that its authors 
have thought seriously about the problems facing the economy. 
 
---------------------------- 
Criticism of Free Markets... 
---------------------------- 
 
¶2.  (U) The recently issued MB elections platform is highly critical 
of the government's free market reforms, blaming them for 
exacerbating poverty and income disparity.  The criticism begins 
with the "Open Door" policy of the 1970s, noting that this policy 
resulted in a "consumption culture" that "distorted the culture of 
production."  In the 1990s, moves toward "market-economics or the 
so-called Capitalist economy" led Egypt away from industrialization 
to services, an evolution that has "negatively affected Egypt's 
development."  The government's abandonment of its role as economic 
planner in the 1990s led to external "forces," such as the IMF and 
the World Bank, assuming undue influence over Egypt's economy.  The 
current reform program, coupled with heavy reliance on Suez Canal 
revenues, tourism and remittances, make Egypt more vulnerable to 
external shocks and move the country further away from "economic 
independence." 
 
--------------------------- 
...especially Privatization 
--------------------------- 
 
¶3.  (U) The platform's strongest criticism is aimed at the GOE's 
privatization program.  The MB argues that privatization of public 
companies has not created new investment, as only successful 
companies have been sold and the proceeds used to pay early 
retirements and to finance failing companies.  Moreover, the MB 
argues that "the private sector has deteriorated in Egypt," and is 
not capable of managing the privatized companies.  The MB calls on 
the private sector to engage in more "risky" economic activity that 
adds new investment to the economy, rather than buying successful, 
established public companies.  The platform also claims that the 
current administration's handling of privatizations has led to 
increased corruption through non-transparent assessment of value and 
politically-motivated awarding of sales contracts.  While critical 
of the GOE's handling of privatizations, the platform is more 
nuanced towards privatization per se, arguing that the government 
must ensure that privatizations are carried out in a manner that 
maximizes return to the state, adds investment into the economy, and 
precludes corruption. 
 
¶4.  (U) Turning to the social impact of privatization, the platform 
also calls for creation of "special funds" for employees who retire 
before the legal age of retirement, "job creation" for displaced 
workers, "job training" programs for employees with outdated skills, 
and "soft loans" for displaced workers who would like to engage in 
private economic activity.  There is no discussion of how to fund or 
implement these suggestions. 
 
------------------- 
Poverty Eradication 
------------------- 
 
¶5.  (U) The MB platform identifies "poverty and poor living 
standards" as the basis of the "social crisis" in which Egypt finds 
itself.  It calls for "comprehensive, sustainable development," 
based on freedom for the individual and "balance in distributing 
benefits of development."  The MB also argues that poverty is the 
cause of extremism.  The platform notes that "Islam has always 
targeted the eradication of poverty and maintenance of social 
justice through mutual social responsibility to prevent exploitation 
and monopoly.  Sharia allows the ruler to take excess property from 
the rich and give it to the poor and needy to prevent accumulation 
of wealth only in the hands of rich people." 
 
¶6.  (U) The MB's suggestions for eradicating poverty include, inter 
alia: 
 
- Harnessing the Muslim "Zakat" or charity tithing, to create new 
jobs and provide training, rather than traditional "consumer goods 
that only meet short term needs and do not ameliorate poor living 
standards..." 
 
- Organizing a social role for business that balances public and 
private interests; 
 
- Redistributing income to ensure justice and guarantee that every 
individual gains in return for effort; 
 
- Guaranteeing vital services like health, food, education and 
housing in order to improve living standards; 
 
- Activating idle state assets to create jobs without creating new 
expenditures; 
 
- Reviewing the policy of privatization and maintaining successful 
public companies, while investing in labor intensive public 
projects; 
 
- Improving the investment climate and eliminating bureaucratic 
impediments for the private sector; 
 
- Providing soft loans, with easy application procedures; 
 
- Making good use of FDI and stopping the sale of properties, 
especially in the field of mining, to foreign investors, drawing on 
the experience of Southeast Asian countries; 
 
- Avoiding the "manifestations of luxury and excessive 
consumption;" 
 
- Sanctifying the value of work to avoid corruption and bartering; 
 
- Controlling prices of some items through a "special apparatus." 
 
---------------------------- 
Public versus Private Sector 
---------------------------- 
 
¶7.  (U) While the platform envisions more state intervention in the 
private sector than does the NDP's, it does include some reasonable 
"level the playing field" language of the state's role in 
regulation:  the state "should protect against private sector 
monopolies, fund projects and produce goods that the private sector 
will not, and regulate contracts and exchanges."  In regulating the 
private sector, the MB would foster competition, "which can never be 
attained without government control," and encourage economies of 
scale.  The platform maintains that the current government has not 
fulfilled its regulatory role due to "lobbies existing inside and 
outside power." 
 
------------------------------------- 
Development, Development, Development 
------------------------------------- 
 
¶8.  (U) The platform calls for a national development plan, to be 
developed by higher institutions of the state, such as the Shura 
Council, and the specialized national councils.  Drawing on the 
experience of other countries, the plan would focus on proper use of 
natural resources, moving development out of the Nile valley, and 
undertaking specialized programs, such as nuclear energy and space 
exploration.  The national development plan would have the overall 
goal of economic self-reliance for Egypt, and "encourage saving and 
local investment, (and) Arab, Islamic and international investments 
in development."  On this latter point, the platform calls for 
integration with "Arab and Islamic countries, specifically Sudan and 
Libya."  The MB also supports the right of "citizens who live 
abroad" to participate in Egypt's development.  This may be 
recognition of the importance of Egyptians working overseas, who are 
a major source of income from remittances. 
 
¶9.  (U) Women are highlighted as key to development.  The platform 
notes that "she (woman) has full and independent financial 
identity," and the MB would remedy discrimination by "improving 
legal protection for working and rural woman in particular who (are) 
denied labor rights by legislative and administrative bodies." 
Other suggestions include:  eliminating female illiteracy, 
particularly in rural areas; guaranteeing women's security, 
including on transportation and at work; and providing small loans 
for poor women financed by Zakat.  With regard to children, the 
platform does not address the current state of child labor, but 
focuses on "rehabilitating children who entered (the) labor market 
during their early years."  The platform doesn't specify any 
concrete steps to bring about protection of children. 
 
---------------------------- 
Nothing New Under the MB Sun 
---------------------------- 
 
¶10.  (U) Most of the MB's policy prescriptions for development and 
poverty eradication are similar to policies advocated by reformers 
in the GOE, most of who are NDP members.  The difference is in 
emphasis - the MB platform is clearly geared toward the poor and 
disadvantaged, promising them a better living standard guaranteed by 
a social safety net, rather than the NDP's promise of greater 
opportunity for all through private sector-led economic growth and 
job creation.  The MB does, however, reference the positive 
experience of several Southeast Asian countries with FDI, 
demonstrating awareness that an investment regime welcoming of 
foreign investment can benefit the country.  This reference is 
offset, however, by the call for "economic self-reliance."  On 
self-reliance, the platform states "we should be aware that external 
loans and aid is not a magic solution for all problems."  Through 
increased domestic saving and good use of natural, financial and 
human resources, the MB believes Egypt can rely less on foreign 
investment.  The platform also calls for FDI to comply with the 
national development policy, and not "disregard social, economic and 
cultural potentials." 
 
-------------------------------- 
MB Makes Socialism Swing Islamic 
-------------------------------- 
 
¶11.  (U) In calling for a "mixed" economic model, with regulated 
free enterprise balanced by public intervention to bring about 
social justice, the MB platform is essentially a variation on the 
European economic model.  The unique feature is invocation of Islam, 
rather than secular, egalitarian motives, as the catalyst for the 
government's efforts to bring about social justice.  The message 
seems to be that while the secular socialist model of the Nasser era 
failed, Islamic government planning, taking the private sector into 
account, can succeed. 
 
¶12.  (U) Under Islamic law, the MB believes corruption can be 
eliminated in all realms, economic, social and political.  The main 
policy prescription is implementing the rule of law for government 
and business activity.  While the NDP platform is similar in its 
advocacy of transparency, the MB line takes aim at the ruling 
party's lack of transparency.  Islamic law, according to the MB, 
ensures the right of the governed to hold their representatives 
accountable, as "public posts are for service rather than 
superiority, duty not honor."  The platform criticizes application 
of "unwritten" laws, including "patronage, corruption and the 
absence of transparency," and includes some good ideas to combat 
corruption, e.g., the need for a law requiring high ranking 
officials to declare wealth, properties and tax returns, a 
transparency measure undertaken in several developing/emerging 
countries. 
 
¶13.  (U) The platform also strongly criticizes the move to 
"consumptive" industries, and calls for production of "machines and 
technology," and an SME development strategy.  Although the emphasis 
is on old-style heavy industrial development, the platform mentions 
SME several times, implying an awareness of the importance of small 
business to development.  Interestingly, the platform also 
identifies attainment of a "knowledge economy" as one of the main 
development goals.  A knowledge society would allow "rebuilding of 
understanding and values among Egyptian citizens." 
 
---------------------------- 
MB Views on Economic Sectors 
---------------------------- 
 
¶14. (U) Scientific research:  The platform sets the goal of creating 
a meritocracy in scientific research, aiming to make Egypt a leader 
in scientific research.  This would be attained by devising a 
comprehensive, integrated plan for all research institutions.  The 
plan would be integrated with production, and education with labor 
markets, to create research projects that solve problems specific to 
Egyptian society, rather than "importing" solutions that may not 
suit Egypt.  Arabic would also figure prominently in the development 
of educational curricula. 
 
¶15.  (U) Health sector:  The MB's goal is universal health care, 
though the document does not specify how this would be funded.  The 
MB would also develop the pharmaceutical industry, focusing on 
manufacturing medication for "heart diseases, diabetes and cancer." 
The platform states that there should be "domestic substitutes for 
foreign drugs," and continued government control of medication 
prices.  It also calls for linking licensing of medication to the 
manufacturers; establishing labs to test drug efficacy; and 
affordable pricing policies. 
 
¶16.  (U) Environment:  Again, the platform calls for creation of a 
national council, with emphasis on water quality and use of 
resources.  A separate council would be established to protect the 
Nile River.  They propose increased regulations for polluting 
companies and end users to reduce air, water and noise pollution 
levels. Noise pollution would be reduced by regulating use of 
amplifiers in public places (an interesting point, as it is mainly 
mosques that use amplifiers in public places). 
 
¶17.  (U) Urban development, housing and utilities:  The platform is 
highly critical of private sector monopolies on construction, and 
argues that this monopoly focuses the construction sector on luxury, 
rather than middle or low income housing.  The platform focuses on 
the large stock of empty housing, especially in Cairo, which could 
be used to relocate poor people living in cemeteries, mosques and 
overcrowded slums.  The MB claims "85% of the total number of 
families in Egypt and about 25% of the total census, equivalent to 
19 million people, are living in uninhabitable housing and slums." 
To rectify the problems, the platform suggests, inter alia: 
designing "creative," subsidized low income housing that utilizes 
local materials; implementing policies that foster mobility, 
depending on age, needs and other factors; financing through Islamic 
estate financing; and restructure estate taxes to discourage 
building of luxury housing at the expense of middle and low income 
housing. 
 
¶18.  (U) Transportation:  In this sector, the platform calls for an 
inter-modal strategy, i.e., enhanced coordination of road, rail, 
marine, and aviation - linked by leading ITC technologies - to 
maximize transport efficiency.  Although not stated in the document, 
this strategy is currently employed by some of the most agile of the 
developing economies (e.g. UAE, South Africa, etc.) and recognizes 
that the private sector is the only possible source with the 
flexibility and finance to enact an effective transport system. 
While the Ministry of Transport is currently trying to develop rail 
and river freight/cargo, both modes are highly underutilized.  The 
MB platform recognizes that this leads to overuse of the crumbling 
and dangerous road network, a cause of both increased 
costs/inefficiencies as well as traffic-related fatalities.  The 
platform also highlights the GOE's poor record on road safety. 
 
¶19.  (U) Communication and information:  The platform calls for 
greater competition in the mobile market, but without increasing the 
number of players.  The MB are concerned that Egypt does not have 
enough control over its ICT industry, however, and the platform 
suggests adding state-owned enterprises to the current private 
sector companies in the field, to increase national security.  Other 
suggestions include a national program to develop technology 
components from design to implementation, controlled by Egyptians, 
to limit foreign meddling; expanding Egypt's Internet 
infrastructure; and establishing an internal (Egypt-only) Internet 
to complement the external one. 
 
¶20.  (U) Agriculture, Irrigation and Animal Production:  Again, the 
platform calls for a national plan for self-sufficiency in 
agriculture.  It identifies several weaknesses in the sector, 
including improper pricing policies, outdated technology, poor 
irrigation, and lack of agricultural credit.  Self-sufficiency in 
agriculture will improve the overall nutrition of Egyptians. 
Specific suggestions include:  developing agriculture in the Sinai, 
the northern coast, New Valley and other areas; rationalizing 
irrigation; increasing government control of agricultural policy; 
providing long-term credit; controlling production to target market 
needs to avoid fluctuations in prices; fully enacting trade 
agreements to which Egypt is already party; integrating agriculture 
with Sudan; and preserving genetic assets. 
 
¶21. (U) Industry, Energy and Mining:  The platform calls for 
re-industrialization of Egypt, to focus on exports and move away 
from reliance on Suez Canal revenues, oil and gas exports, tourism, 
and remittances.  This policy would include yet another national 
council for industrial policy; setting new industrial standards; 
improving vocational training; and balancing fossil fuel use by 
industry with renewable energy sources like wind, solar, and nuclear 
energy. 
 
¶22.  (U) Tourism and Civil Aviation:  The platform recognizes the 
importance of this sector and calls for the study of other 
competitor countries, noting Egypt's comparative advantage in this 
area.  The platform calls for entertainment tourism to conform to 
Islamic principles, which appears to be a reference to alcohol 
consumption in tourist areas.  To develop the tourism sector, the 
platform calls for another national plan for cultural and coastal 
tourism, establishment of specialized hospitals in tourist areas, 
encouragement of conferences, and development of infrastructure. 
 
------- 
Comment 
------- 
 
¶23.  (SBU) This is the most comprehensive statement to date of the 
MB's views on Egypt's economy.  It seems to be taking an approach 
similar to the GOE, with a focus on economics as the vehicle for 
change.  The platform's focus on corruption and concern over the 
GOE's implementation of the privatization program will continue to 
resonate with disenfranchised poor voters. The platform can not be 
seen as a pro-business platform, even though many of the MB's 
members are wealthy businessmen and capitalists.  The emphasis on 
self-sufficiency, alongside a call for implementation of trade 
agreements, suggests the MB has not thought through the 
contradictions in this policy or the costs to Egypt of turning 
inward economically.  The platform is clearly aimed at convincing 
the dispossessed that an MB government would provide a better life 
through Islamic social justice. 
RICCIARDONE