When Secretary Kerry met with leaders in Abu Dhabi the evening of February 17, he surely briefed them on the latest US thinking on Syria and Iran. It is also likely that his counterparts from the United Arab Emirates (UAE) briefed him on their activities in Egypt, which they consider their most important foreign policy problem and where they have taken the lead on helping the Egyptians sort out their continuing economic problems. Over the last several months, the UAE assembled an Egypt Task Force led by UAE Minister of State Sultan al-Jaber, the energetic chief of the Masdar alternative energy project. The task force is charged with two responsibilities: doing “due diligence” on the nature and depth of the Egyptian economic crisis, and supporting “quick win” development projects.
Why the Egypt Focus?
The Emiratis continue to be the most vocal and aggressive foes of the Muslim Brotherhood. The Emiratis actively supported the opposition to ousted Egyptian president Mohamed Morsi in the run-up to the coup that installed General Abdel Fattah al-Sisi, whom the Emiratis fully expect will be elected as president. Virtually hours after the coup, they joined Kuwait and Saudi Arabia in providing huge infusions of cash to prop up the Egyptian economy. The leadership in the Emirates views a successful Egypt, defined as a stable, prospering (not necessarily democratic) country as the most important response to the sectarianism in the region, including the Iranian threat in the Gulf and in the Levant. Emirati officials assess that Egypt’s political issues are nearly solved and security issues will be difficult but manageable. However, they worry that a flagging economy that does not provide a lot more hope to a lot more Egyptians could rapidly become a major liability to the expected Sisi regime.
So How Do You Fix It?
To its credit, and somewhat by default, the UAE has taken the lead for the international community in trying to get the Egyptian economy back on track. The aid from the Gulf states was necessary to stabilize Egypt, but the Emiratis (more so than their Saudi and Kuwaiti counterparts) recognize that aid is not the real answer. Sustained high rates of growth will only come when Egypt addresses the distortions in its economy caused by subsidies, mitigates the suffocating bureaucracy, and begins to attract high levels of investment. Nonetheless, in order to provide hope and confidence in the military authorities, the UAE has supported high profile projects to provide housing, healthcare, and education. They are also studying how to improve grain storage and to enhance the rail system. The UAE also assembled a team of experts to evaluate the state of the Egyptian economy and identify policy initiatives to revive growth. The United States and international financial institutions have provided some modest technical expertise for this effort. State Department Counselor Tom Shannon has coordinated for with the Emiratis for the United States. Even before the task force was fully into its work, the Emiratis realized that a major international Marshall plan type effort will be needed to address the underlying economic issues and provide Egypt the needed assistance, guidance, and encouragement.
The Emiratis do not expect Egypt’s interim economic policy officials, however technically competent they may be, to make any genuinely difficult decisions. They believe those will have to await the presidential and parliamentary elections scheduled to be completed in June of this year. While Gulf aid is likely to continue at high levels for at least the next year, the UAE wants to see a more ambitious long-term effort that provides broader support to Egypt and eventually reduces their own perceived obligations.
This Too Will Fail, Unless…
A major international effort to assist Egypt is in the interest of different countries—some of whom support the recent political developments and others that worry about the direction Egypt is heading. But the Emiratis need to address a few key questions before they can expect to make much progress convincing others to support a large new international economic initiative for Egypt:
- Will the Saudis and Kuwaitis cooperate in a program that requires them to bring their influence to bear on Egypt to follow through on real reforms? They have not traditionally used their aid to nudge the macroeconomic policies of aid recipients in productive directions. If they will not do so with Egypt, then their aid will continue to be a crutch that will allow Egypt’s economy to hobble along and not a bridge that leads to productive investment and substantial job creation.
- Will the Emiratis use their influence to prod Egypt into a needed International Monetary Fund (IMF) program? It is unlikely that substantial new international investment will occur in Egypt unless that country has the IMF seal of approval sometime in the next year. While there have been some contacts between the Egyptians and the IMF, the Egyptians remain convinced that Gulf aid can take the place of an IMF program.
- Will the Emiratis be more successful than others in convincing the Egyptians that they need the goodwill of a broad variety of countries, including the United States and Europe? In order to have such a relationship, the military leaders will need to rein in the ministry of interior’s worst impulses to intimidate dissidents, lock up critics, and manipulate local media. These actions alienate broad swathes of public opinion around the world and provide good ammunition for those who contend that Egypt should simply be left to its own devices.
The Leadership Challenge
Emirati officials took on the task of understanding and assisting the Egyptian economy with enthusiasm and the desire to make a difference for the Egyptian people. As they have learned more about the difficult policy issues and the fundamental weaknesses that plague the Egyptian economy, their eagerness to involve others has grown. This is both understandable and necessary, and generating an appetite in the international community for a large-scale effort will be a worthy test of the UAE’s leadership abilities.
Richard LeBaron is a resident senior fellow with the Rafik Hariri Center for the Middle East with a special focus on the Gulf region.