Nonresident Scholar Amr Adly, who is based in Cairo, has closely followed economic developments in Egypt since the uprising in 2011. In 2016, he wrote a paper titled “Egypt’s Regime Faces an Authoritarian Catch-22,” on how Egypt’s economic crisis and the contradictory demands of reform and the regime’s need to placate public sector employees would prevent President Abdel-Fattah al-Sisi from consolidating his authoritarian rule except through higher levels of repression. Recently, Adly published a paper titled, “Too Big to Fail: Egypt’s Large Enterprises After the 2011 Uprising.” It’s to discuss his latest paper that Adly agreed to be interviewed by Diwan.

Michael Young: You recently published “Too Big to Fail: Egypt’s Large Enterprises After the 2011 Uprising.” What is your main argument?

Amr Adly: The paper argues that relations between the Egyptian state and large private enterprises underwent significant transformations in the aftermath of the 2011 uprising. These transformations will have longstanding, albeit unintended, consequences leading large private enterprises to become more autonomous economically from the state after decades of mixing private wealth with politics. The paper outlines these changes and indicates that they may prove positive in the long-run for bringing about a more market-oriented private business sector. Such changes may lead to the adoption of collective goals leading to reforms that create a more level playing field in the business sector as well as more transparency, instead of the narrow pursuit of particular interests.

MY: One of your main points is that the relations between Egypt’s business class and the Sisi regime are very different than those between the business class and the former Mubarak regime. Why is that, and what are the consequences?

AA: President Abdel-Fattah al-Sisi’s military-backed regime has shown little tolerance for a resumption of the direct political role played by the owners of large private businesses during the last decade of Hosni Mubarak’s rule. The new regime is adamant about not allowing the re-emergence of old crony and patronage ties with influential businessmen. However, this does not mean that there is less cronyism today. The regime is cultivating new networks with more reliable and trustworthy businessmen who are particularly close to the military.

Unlike the Mubarak regime, the current leadership also has no robust informal channels of coordination and communication with large private enterprises. Moreover, to Sisi, being close to the old private business interests is viewed as a political liability. It may arouse suspicions of corruption and collusion that were reasons for the unpopularity of the Mubarak regime, given the way businessmen exerted visible influence over the ruling party, parliament, and cabinet.

Sisi’s attitude will have deep consequences. On the one hand, large businesses will no longer have the ready access to state rent that they did before. This will make them less dependent on the state, forcing them to become more market-oriented. On the other, in the event of future encroachment by the new regime cronies, the old business networks may choose to promote free-market values and transparency in defense of their market shares and positions.

MY: After the 2011 uprising, the attitude of successive Egyptian regimes changed toward large enterprises amid Egypt’s ongoing economic crisis. Why is that, and has the regime’s new attitude been a success or a failure?

AA: As Egypt’s economic situation deteriorated markedly after 2011, successive regimes came to recognize the functional importance of large private enterprises for economic recovery, growth, and for attracting foreign investment. This demonstrates that Egypt’s big businesses are not mere rent-seekers and looters but rather key players that impact the overall wellbeing of the Egyptian economy. These guarantees, however, fell short of encouraging large private enterprises to resume their activity at levels close to the pre-2011 period. There is a saying that capital is cowardly. Political turmoil, deteriorating macroeconomic performance, especially with regards to inflation and foreign exchange rates, and policy uncertainty have all deterred private businesses from investing in the economy.

There has been an attitude by the current regime to try to limit the political role of big businesses while extending all guarantees and incentives for them to resume their economic activities. This may prove to be positive in the long-run by introducing a division between what is economic and what is political, hence providing the chance for a more efficient allocation of resources and less direct political intervention by the state in favor of those who are politically connected.

MY: Is there a political role to play for the owners of large enterprises, as during the time of Mubarak?

AA: Owners of large enterprises will not likely again play a dominant and visible role in economic decisionmaking as during the last decade under Mubarak. Politicized business tycoons such as Naguib Sawiris or Ahmad Ezz are not welcomed back into politics. They are either viewed as competitors by the newly-installed military and bureaucratic elites or as a liability for the political system as a whole for arousing the public’s suspicions of cronyism and corruption.

MY: All signs are that the Egyptian economy is not improving. Where do you see this going and how will it affect the role of large private enterprises in the years ahead?

AA: Yes, the economy is not showing the long-hoped-for signs of recovery, despite painful austerity measures and a rising external debt. Things are bound to get worse in the coming year or two before they get better, if they do at all.

Unfortunately, Egypt’s recovery is tied to the revitalization of tourism, the Suez Canal, the export sector, and foreign investment in the oil industry, all of which earn the country much-needed foreign currency. These factors are dependent on many non-economic realities, such as security and political stability in Egypt and the broader region, together with the general health of the global economy. In this context, large enterprises will suffer but are not likely to be driven out of the market given the large and fairly transnational resources and activities they developed in the last two decades. Indeed, the state’s reliance on large enterprises for economic recovery—thanks to these enterprises’ ability to increase exports and tourism revenues as well as attract foreign investment—is bound to increase.