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Wed, Nov 21, 2001 - Page 19 News List

Egypt suffers economic fallout after terrorist attacks on the US


There are fewer tourists visiting Egypt these days. Oil export revenues are down, and so is the stock market. Egyptians have been warned hard times lie ahead.

The most populous Arab nation and one of Washington's closest allies in the Middle East, Egypt is reeling from the effects of the economic fallout of the Sept. 11 attacks in the US, with tourism and other key sectors badly hit and tens of thousands expected to join the hordes of jobless.

Renewed, long-term economic hardship could be a recipe for social and political unrest in this nation of 66.5 million people where at least 20 percent of the population lives in poverty, and most others struggle to make ends meet while yearning for more freedoms and civil rights.

Job losses or significant cuts in government spending also could exacerbate feelings at a time when many in Egypt are seething with anger over what they see as a war on Islam by a "Christian West" and a flurry of intensely publicized corruption cases involving former Cabinet ministers, provincial governors and ex-lawmakers.

With wide and growing popular support for Muslim fundamentalists who say they would run a fairer and more responsive government and a history of recent political violence, Egypt's stability has long been seen both as tenuous and as a cornerstone of security in the entire region. A militant Muslim insurgency in the 1990s cost about 1,200 lives and was put down by heavy-handed police methods.

President Hosni Mubarak has made the economy his priority over the past decade, but with limited success. After the attacks, he urged Egyptians not to go abroad and to buy locally manufactured goods. He also told Cabinet ministers to reduce waste and cut costs.

"We must rearrange our priorities in the short term and redefine some of our economic policies so we can efficiently and effectively deal with these emergency conditions," Mubarak said.

An overhaul of policies, however, might be a case of too little, too late -- at least in the short term.

Tourism, thought to account for 10 percent to 15 percent of gross domestic product at about US$4.3 billion last year with 5.5 million arrivals, has been badly hit, with the number of arrivals down by anywhere between 40 percent and 50 percent since the attacks.

Oil export revenues, which brought the treasury US$2 billion last year, are also down due to the decline in world prices.

The Egyptian pound has come under renewed pressure, allowing a resurrection of a black market in US currency that's taking it away from official banking channels.

"The government should order a small devaluation or pump more dollars to defend the currency. Either move would offer a welcome reprieve," said Taher Gargour, a Middle East analyst with HSBC in London.

Battered investor confidence as a result of the attacks also compounded the woes of the stock market. Daily volume, according to market analysts, has hovered around an average of US$7.05 million a day since Sept. 11 compared to about US$11.76 million in August.

Market capitalization is now about US$23.5 billion, compared to US$29.41 billion 10 months ago.

The effects of the September attacks hit Egypt just when a package of economic reforms adopted last summer -- including a much-heralded currency devaluation and a host of investor-friendly legislation and privatizations -- began to lure back foreign funds and sparking a revival, albeit short-lived, in the stock market.

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