How normalization with "Israel" assassinated Egypt's economy
Economic prosperity? Anything but. After 40+ years, "peace" negotiations with "Israel" turned Egypt into a sluggish, aid-dependent rent economy.
There is no war without Egypt, and no peace without Syria – words Henry Kissinger, Nixon’s Secretary of State, uttered in the depiction of the strategic importance of Egypt to US interest in West Asia. Its manpower, resources, geographical position on the map are alone enough to make or break any project in the region.
Egypt, in the critical years between the 1960s and the 1970s, moved from being the first industrial power in the Arab world, enjoying self-sufficiency and economic independence, to a country whose entire decision-making mechanism depends on receiving "humanitarian" aid from Washington.
How did this drastic jump, which put Egypt on a catheter mount, come to happen?
Just one month after the 1973 October war – or, what’s known by the Israelis as the “Yom Kippur War," there was a radical realignment process which brought Egypt and the US together. This was a process that initially started in 1971, the year when Anwar Sadat, Egypt's president, invited the first US Secretary of State to visit Cairo since 1953. In the war of 1973, Egypt lost Sinai, and Sadat wanted to reclaim "self-respect": a dream unattainable after Abdel Nasser's death, unfound in what was coming for Egypt.
When it came to reclaiming Palestinian land back to the Palestinians – and Sinai back to Egypt – to Sadat, the only way to negotiate with the Israelis was through the United States, in a political settlement, if you may. He thought that turning to Washington would help him solve problems unsolvable by military means, whether it was on the annexation of Sinai, or an economic crisis.
The so-called political settlement came at the expense of the Egyptian economy, human rights and security for years to come.
The Egyptian economy enjoyed minimal imports (in 1961, with Abdel Nasser’s economic reforms, food imports to Egypt were only at 7%), redistribution of land and resources that isolated and diminished the power of traditional Egyptian landowners, the nationalization of the Suez Canal, protective policies against international inflation, and restrictions on foreign investment. Nasserism won its pioneer a substantial fan base and popularity after the 1952 Revolution.
However, his successor, a shameless lackey for the US, was determined to reverse all that revolution had done for the Egyptian people: Sadat, between 1971 and 1973, launched talks with Henry Kissinger. Sadat’s economic policies donned an ‘Open Door’ policy, which opened Egyptian markets to foreign investors and corporations without restrictions.
However, what he really got was a society lamb to the slaughter of foreign and private interest, dependent on food aid, and subject to US-Israeli policies.
Sadat wanted to be sure that Washington would come to Egypt’s rescue, so he required real, tangible evidence from the US that they will support Cairo. If such evidence was available, Sadat was willing to make Egypt undergo the necessary economic changes for US’ aid and the so-called ‘comprehensive peace plans.’
The evidence was provided: a basic tenant for Egypt to ride the American aid bandwagon was the normalization of relations with "Israel", which consolidated in 1978. The free trade agreements, the astronomical numbers of foreign aid, and other agreements isolated Egypt from its neighbors, Arab and non-Arab. However, not only were both Sadat and the US eager to drive Egypt away from Soviet influence in the Cold War, but “Israel” also sought to plant itself on Arab soil, seeking Arab acceptance, which Sadat was so willing to do.
The US seduced the Egyptian elite, by offering billions in aid, into signing on the Camp David Accords.
Let’s talk about the costs.
An Israeli official once called US aid “narcotic” – not too surprising considering that Washington is “Israel’s” godfather in West Asia, taking unconditional billions in aid and weapons to push common interests.
Between the years 1946 and 2011, the United States gave Egypt a total of $71.7 billion in bilateral foreign aid.
With Sadat’s economic liberalization, US’ conditions for aid were to integrate Egyptian and Israeli economies and boost foreign investments which would supposedly strengthen the economy. The public sector accounted for 75% of all Egypt’s outputs. However, Sadat’s laissez-faire policies only diminished them, placing them at the mercy of private companies and trade deals, such as the Qualified Industrial Zones.
The investments which Sadat was hoping for were not meant for productivity but were rather oriented towards banking and tourism. However, the banking sector, under what was called Infitah (Open Door policy), was not doing what it was supposed to do. With only 6 banks existing in 1974, Sadat allowed the influx of seventy-five banks – several of those were American, which abused the vulnerability of the situation in Egypt. The foreign banks, not to much surprise, laundered Egyptian money to the West rather than benefiting the people.
With a deteriorating economy where the cost of production of basic goods such as rice, wheat, sugar, flour, oil, and gas was skyrocketing, many locals had left to oil-producing countries to make a living.
In Egypt, this meant one thing: bend to US interest or starve.
By 1981, Egypt was importing 60% of its food into the country: much of that was provided by Washington, in addition to Arab oil-producing countries. After normalization in 1978, Arab investors withdrew their investments; to Sadat’s convenience, the US was able to compromise.
Where has this led Egypt? Egypt today has a workforce participation rate of approximately 48%. Governmental spending exceeds the total revenue. Egypt is hideously indebted to the International Monetary Fund, its debt representing 92% of its Gross Domestic Product.
Sadat attempted to convince the population that normalization with “Israel” would bring economic well-being and prosperity to the average Egyptian, though what it really did, with Washington’s shuttle diplomacy, is sell it to capitalists, and create a bread crisis in 1977, which was initiated by IMF and World Bank pressures to remove subsidies on bread.
Furthermore, along with the millions of dollars in US aid, a large project was initiated by the Nixon administration on March 1, 1975, to reconstruct the cities along the Suez Canal after three wars – the cost of which was to maintain peace with the Israeli neighbor. Disarmament was on the agenda, meaning that Egypt, on par with the accords, was prohibited from any military confrontation with “Israel”; however, even the Egyptians, given US-Israeli threats against them, knew that "Tel Aviv" would not be complying with the Sinai Disengagement Agreement.
As for economic growth, from the 1980s till recently, Egypt’s gross domestic product per capita has barely doubled, when emerging economies such as South Korea were able to multiply their GDP by ten times (the two countries’ economies, during the 1950s, had similar developmental conditions). Poverty rates in Egypt today hover around 30%, sustaining a high unemployment rate, last 10.4% in 2020.
As if turning to "Israel" once was not enough, wait till you see the "second Camp David Accords."
Despite the population’s adamant rejection of Sadat’s policies and the normalization, a greedy leader,a successor, looked for the preservation of the system at the expense of the nation’s interest. Another case taken into account is the US’ Qualified Industrial Zone (QIZ) economic proposal, which ultimately meant to expand economic cooperation between “Israel” and “Egypt.”
QIZ deal, signed in 2004 by Hosni Mubarak, was deemed by many as a “second Camp David,” and it was the most important economic deal between the two in 20 years, according to a US representative who attended the signing event.
Just a few months after that was sealed, Egypt and “Israel” signed another deal where Egypt would provide ‘Israel” with $2.5 billion worth of gas at a low price at a time when the country’s economy was running into the ground.
Those agreements came just a few days after Israel shot and killed 3 Egyptian soldiers at the border.
“One would have anticipated that with the ongoing carnage in Iraq, constant US threats against Iran and Syria, and Israel’s recent killing of three Egyptian border police, Egypt would have taken a tougher stance. But the exact opposite happened,” wrote K. Kamel, in Egypt and Israel: From Cold Peace to Warm Embrace.
The trade agreement stipulated that the US would allow the exporting of Egyptian products free of duty and customs to the US, given that at least 11.7% of the total exports are manufactured in “Israel.”
Mubarak, though rejecting the agreement in 1994 through 2004, promoted the agreement on purely economic terms: Egypt's textile-export agreement with the US would soon lose effect, China and India will replace Cairo in the market, and there is no choice other than to accept the QIZ agreement.
Officials in the Egyptian government told their people that the agreement will create a million jobs and that foreign direct investment will reach $5 billion in the next 5 years - both unrealistic and exaggerations.
Gamal Mubarak, Hosni’s son, defended the agreement, saying it serves the Palestinian cause.
However, facts on the ground proved otherwise. Many things were wrong with this deal, which was falsely marketed and heavily oriented towards “Israel.”
The first issue is that the deal breached World Trade Organization's free trade conditions since the agreement gives “Israel” the power to enjoy a monopoly over Egyptian manufacturers.
Secondly, and even worse: to ensure the 11.7% quota, Israeli companies marginalized small and medium-sized businesses that supply larger textile factories with parts, as they forced them out of their jobs. The deal was heavily biased towards “Israel,” Egypt was not allowed to export its goods to the US duty-free without exporting Israeli goods, despite countries like China, India and Turkey engaging in it freely so.
There was no real guarantee that the products will be exported to the US, prompting analysts to say that the agreement sort of resembles a Trojan horse, allowing Israel to flock into Arab markets, hence the “second Camp David.”
As some countries resist pressures to normalize relations with the psychopath 'state' (you can read Farah Haj Hassan's article on Asian nations that said 'No' to normalization), others have not read much history on the first example of normalization in West Asia, and still deem normalization as an end to conflict, a yes to economic boom and a gateway to acceptance in both the region and the international community.
To look West, after all their history in the West Asian region alone, should not deceive anyone anymore. Other than the fact that normalization is a human rights issue against fellow Arabs (not even just Palestinians! The US used Egyptian waters and airspace to bomb Iraq and Afghanistan in 2003), it's suicide for any country looking to flourish with sovereignty.