European Bank for Development Encourages Egypt to Pursue its Pre-Revolution Privatization Schemes

Press Release

7 March 2012

The European Bank for Development and Reconstruction issues a strategy for Egypt that does not include human development as a goal

The Egyptian Initiative for Personal Rights (EIPR) today released an analysis of the European Bank for Development and Reconstruction (EBDR)'s technical assessment of Egypt's development and democratization processes, released February 2012. The EBDR’s assessment is a piece of work that clearly reveals the Bank’s lack of commitment to democracy and development in post-revolutionary Egypt. An in-depth reading of the assessment shows that the Bank hardly commits to either. The assessment also draws out the Bank's strategy for future and potential projects in specific areas.

 "Reports issued by international financial institutions are of extreme importance at this juncture as they seem to be the only actor that has some vision of how economic development is to ensue in the near future, in light of the absence of a lawfully-elected government or president and the lack of any clear socio-economic stance within the parliamentary majority " says Amr Adly, head of the EIPR's Economic and Social Justice Unit. "Moreover, Egypt's urgent need for an economic "shot in the arm" in the form of external loans is likely to strengthen the potential role of the IFIs in the setting of fiscal, monetary and economic policies in Egypt for some years to come," he continued.

In its assessment, the EBDR seems to be oblivious to the socio-economic roots of the 2011 revolution as well as its implications altogether. The EBDR’s conception of reform is equated with mere liberalization and privatization. Therefore, the period preceding the revolution (2004-2008) is seen as one of “comprehensive reform” with “one major success story: external liberalization”. The assessment simply ignores the cronyism and corrupt nature of the privatization process during that period where public assets (state-owned enterprises, public land and even natural resources including fresh water and natural gas) were mainly transferred into the hands of a few cronies who where closely tied to the regime.

Moreover, the  “success story” of external liberalization seems hardly to account for mounting poverty and unemployment that set the scene for the revolution in 2011. As a matter of fact, the period between 2004 and 2010 witnessed the largest number of socio-economic protests in Egypt’s modern history. The protests that took the form of strikes, demonstrations and marches were mobilizing against rampant corruption, the ill-distribution of income and the sheer decline in real wages for the vast majority of Egyptians.

The Bank’s plea for more privatization also touches sectors deemed politically and socially sensitive including fresh water, roads and electricity in addition to labor-intensive industries such as textiles. It is noteworthy that the privatization and ‘commercialization’ of public utilities has proven to be of catastrophic consequences for the poor majority in various Latin American and Asian countries, which renders the whole venture unrealistic as well as unfeasible for any post-revolutionary government. In summation, the Bank’s assessment hardly shows any consideration for the ‘developmental’ outcome of the commercialization and privatization of public utilities.

Like many IFIs, the Bank simply ignores the fact that the January revolution has led to the collapse of authoritativeness, which means that public policies should once again be tackled as political issues determined by the interactions of political actors in the society, not a matter to be decided on by experts from the government and external donors and creditors. In this context, it is no longer possible to operate under the old mindset given the increasing politicization of Egyptian affairs and the rise of various social groups to demand their social and economic rights as the grip of the police state loosens.

The EBDR is in the process of developing a portfolio of projects to finance in Egypt. The EIPR's analysis of the Bank's first paper on Egypt after the revolution recommends that the chosen areas for investment should overlap with the developmental priorities set by a democratically-elected government. Such priorities cannot be identified after the revolution without a broad, democratic and well-institutionalized social dialogue through which various and especially the previously marginalized groups can voice their demands and concerns. Otherwise, the Bank's talk of development will merely be pouring old wine into new bottles.

To read the analysis click here.