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A Crisis of Confidence

2:28 PM, Apr 17, 2012 • By DAVID SCHENKER
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Since then, the Muslim Brotherhood has issued a detailed economic program that could easily pass for European-style capitalism—including trade protectionism—and FJP parliamentarians have visited the Egyptian bourse. More recently, earlier this month, Malik founded the Egyptian Business Development Association, an NGO dedicated to attracting foreign investment and encouraging local entrepreneurs. While these sentiments may be reassuring, it’s unclear if they’ll be sufficient, particularly when senior leaders of the organization, like erstwhile presidential candidate Khairat al-Shater, suggest that there will be “social constraints” on the private sector in the “Islamic system.”

It’s possible that the Muslim Brotherhood will delay, for pragmatic purposes, the implementation of sharia legislation until the economy rebounds. It’s also conceivable that investors will ignore oppressive social legislation and invest if the regulatory environment is sound. After all, Egypt offers investors a large, young workforce, as well as a growing consumer class that, last year, enticed Procter & Gamble to build a $1.5 billion diaper factory just outside of Cairo.

Still, continued uncertainty and insecurity may keep investors away. While there is little the Muslim Brotherhood and the FJP can do about the insecurity, Islamist missteps could exacerbate economic difficulties. Should the Islamists move too fast in pursuing their theocratic agenda; bait the military into a confrontation; provoke the ire of the remaining secular and/or Christian minority; or sour the west with intolerance at home, Egypt will remain in a state of revolution, allowing neither a return to political normalcy nor economic stability.

The Muslim Brotherhood has a lot to prove in Egypt. But Washington also has a lot invested in the success of the Islamists. Indeed, on March 3, State Department spokeswoman Victoria Nuland said the United States was “committed to ensuring Egypt’s economic and financial stability.” No doubt, the prospect of Egypt as a failed state is unappealing. Yet it’s not exactly clear what the administration’s commitment entails—or whether the obligation will endure implementation of illiberal and repressive legislation in Cairo. Washington is not likely to bail Egypt out indefinitely.

While neither American—nor IMF—funding will determine the trajectory of Egypt, this week’s IMF meetings do present an opportunity to encourage Egypt toward a more pragmatic path. The mandate of the IMF is not governance, but economic growth and alleviating poverty. Nonetheless, Washington and its European allies should emphasize to Egypt—and the Islamists who will soon govern—the inverse relationship between radicalism and foreign direct investment. At the same time, Egypt should be encouraged to commit to economic reform, and to lay out a clear vision of where the economy is headed.

With a supermajority in parliament it will be tempting for the Muslim Brotherhood and its Salafist fellow travelers to prioritize the legislating of a hard-line Islamist domestic social agenda. But progress on this front will have a cost—both at home and abroad. Should Egypt’s Islamists not behave responsibly, prospects for stability and economic recovery will remain remote.

David Schenker is Aufzien fellow and director of the Program on Arab Politics at the Washington Institute for Near East Policy. 

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