Gulf Research MeetingSince the Arab Spring began in 2011 and President Hosni Mubarak was ousted from power in Egypt, many of the Gulf Cooperation Council (GCC) states have been eager to re-establish close economic ties with the Egyptian government. Economic relations have oscillated somewhat between Egypt and the GCC states, from the Muslim Brotherhood's (MB) relationship with Qatar as a sponsor and informal ally, back to the longstanding strategic and political alliance chiefly between Cairo and Riyadh after the MB was ousted from power in 2013. Saudi Arabia has since built its largest embassy in Cairo.1 The ruling elite in Riyadh continues to support Egypt's status as a pillar of the Middle East system and President Abdel Fattah El-Sisi's continued marginalization of the MB. The Egyptian government remains highly dependent on GCC investments and aid (particularly from Saudi Arabia, Kuwait, Qatar and the UAE, which have provided the bulk of energy supplies and funding, mainly in the form of cash grants and interest free deposits into the Egyptian Central Bank2 ). President Sisi has been quick to implement major investment programs such as the Suez Canal project and has also started to reduce energy subsidies, but more needs to be done to turn the precarious economic condition around. Therefore, GCC investments up to the medium term will remain vital to funding the national budget and where possible, an array of public-private spending programs. However, these programs will only provide temporary economic relief and many are far below what is needed. For example, Arabtec, an Emirati company, is investing in low cost housing in Egypt but the number of units will not address the high demand, and the selling cost of each unit is still beyond the means of most unemployed youth. There is therefore a great degree of room for a largescale multi-donor framework to address specific challenges in Egypt. A donor conference for Tunisia and Egypt has already been proposed by King Abdullah of Saudi Arabia but a country specific or pan-regional approach (such as a Marshall Plan for the Middle East) remains elusive. Any such program would have to attract massive investment in order to have a meaningful impact. Many challenges remain: the Egyptian government owes billions of dollars to foreign oil and gas companies while it is trying to attract further investment in this industry; the tourism industry (worth $12 billion in 2010 and employing 10 percent of the Egyptian workforce, fell to $5.9 billion in 20133 ) could attract many more travellers from the Gulf but is still adversely affected by perceived and actual insecurity in some areas; and there are questions over how even the slow removal of subsidies can be sustained.
3 DAYS / 10 Workshops
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Egypt and the GCC states have played a critical role in stabilizing the Arab world during
periods of change. However, after Egypt signed the peace accords with Israel in 1979
there was a lack of pragmatism between the two actors. More recently, states such as
Egypt and Syria supported the GCC states politically and militarily during the 1991 Gulf
War. This coincided with a period of economic dynamism in Egypt. Following the USled invasion of Iraq in 2003, Egypt and the GCC states worked once again to
counterbalance Iran, a point which could be reinforced if Iran is further strengthened by a
successful conclusion to the P5+1 nuclear negotiations and US acceptance of a new
balance of power in the Middle East. Egypt continues to be a cultural and political beacon in the Middle East. Its control of the
Suez Canal, the cold peace which exists with Israel, ability to influence the PNA, and the
marginalization of the Muslim Brotherhood are all key points of significance. The
Egyptian military is the largest in the Arab world, and there is already a close defense and
security relationship between Egypt and the GCC states. For example, Egyptian troops
may have been involved in defending Saudi Arabia's northern border from a threat posed
by ISIS in Iraq in July 2014.4
US officials also say that the UAE air force conducted air
operations from Egyptian air bases against Libyan Islamists in August 2014.5
On the
other hand, the GCC has a large Egyptian expatriate workforce and the Haj attracts
hundreds of thousands of Egyptian Muslims to Mecca each year. Other strong civil and
business ties continue to develop across the region.
Egyptian dependence on the GCC states has led to questions about the long term
sustainability of GCC aid and investment into non-productive sectors without significant
economic reforms being enacted. Conditionality on loans, grants, aid and investments
may become increasingly evident if the close relationship is to remain intact. To that end,
the GCC states and IMF may increasingly converge in their assessments of economic
reform in Egypt. Furthermore, as the Egypt-GCC defense relationship evolves during the
Arab Spring, and to counter external threats such as Iran and ISIS, the GCC states are
considering the participation of Morocco, Jordan, and Egypt in a revised sub-regional
defense architecture.
The workshop is intended to contextualize the role of GCC investment in the Egyptian
economy, the strategic rationale for ongoing investments (including the targeted sectors
and the type of financing employed), and what changes have been apparent in response,
such as how Egypt and the GCC states have formed a partnership or axis to address
regional issues. In the absence of turnkey IMF funding (often a precondition for other
multilateral funding), the risk that Egypt might be carrying in developing relations with
traditional partners such as the GCC states rather than building on relations with More
Developed Countries (MDCs), which could provide technology and skills transfers, will
also be explored. For example, Japan is investing in infrastructure development such as
the Cairo Metro Line 4 and the Borg el-Arab Airport, poverty reduction programs (including support for Cairo University Specialized Pediatric Hospital), and agricultural
development and training programs for the Egyptian government.6
