Although the rise of Egypt’s Muslim Brotherhood is being carefully watched by its neighbours and international investors, Firas Abi Ali, Middle East analyst at Exclusive Analysis tells GTR that there is nothing to panic about yet. Indeed President’s Morsi’s decision in August to force a number of senior army officials into retirement was less of an attack on the military than part of a deal to protect army interests. Rebecca Spong reports.

Exclusive Analysis Briefing

On August 12, 2012, President Mohammad Morsi annulled the supplementary constitutional declaration, issued by the Supreme Council of the Armed Forces (SCAF) on June 17, 2012. This limited the powers of the president and gave the SCAF the right to appoint a new constituent assembly. ~

The president also sent into retirement defence minister and SCAF chairman Mohammad Hussein Tantawi, and army chief of staff Sami Anan. SCAF member and head of military intelligence general Abdul Fattah al-Sisi was sworn in as defence minister. Morsi also appointed Mahmoud Makki into the new post of vice-president. Makki, a judge, was a key champion of the judiciary’s independence from the executive under President Mubarak. Before Makki’s elevation in August, Morsi selected another prominent supporter of judicial independence to take over the justice ministry.

Exclusive Analysis believes that President Morsi would not have taken this action without at least the acquiescence of the military, and that al-Sisi, the youngest member of the SCAF, is seen by his SCAF colleagues as an acceptable successor to the unpopular Tantawi, who can be relied upon to protect the army’s core interests. The government-owned media, which has been dominated by the army, has welcomed Morsi’s action. Source: Exclusive Analysis

Risk implications

These very public assertions of Morsi’s authority indicate that he has reached an accommodation with members of the SCAF, and that the military leadership has been assured that its commercial interests will be protected from political interference. Moreover, the influence of the military and the executive over the judiciary is likely to fall in coming years. This is likely to result in less interference with the judicial process and reduced risks of bribery and corruption, at least in cases that reach higher courts.

GTR: What is your view on the removal of senior Egyptian army officials from their posts in mid August? Is there any cause for concern regarding the increasing power of the Muslim Brotherhood?

Abi Ali: I think this has been misrepresented as President Mohammed Morsi striking out against the army. He has sidelined figures that have been there for too long and seen as having been there too long by junior officers. Junior officers were mostly in support of Morsi’s decision. So I don’t think the army as an entity was being challenged, rather specific people within the army leadership were being challenged.

The power of army has not changed, but the leadership now is more likely to acquiesce to the demands of the Muslim Brotherhood. But I still think the army in Egypt is by far the single most important actor. Secondly, the judiciary in Egypt is still quite formidable, powerful and outside the control of the Brotherhood.

President Morsi recently appointed to the justice ministry Ahmad Mekki, who had championed judicial independence under Mubarak. [In August he appointed Mahmoud Mekki as the new vice-president. He was also known for promoting judicial reform under Mubarak.]

Suggestions that the Muslim Brotherhood is taking control of the state are exaggerations. They are growing powerful, but let’s not forget that they were elected, and whenever an elected president takes office he tends to fire people and appoint his own personnel. Developments in Egypt should be seen in this context and not in the context of the Muslim Brotherhood taking over the state.

GTR: How important is it for the army and the Muslim Brotherhood to come to some form of agreement regarding the share of power in Egypt?

Abi Ali: One of the reasons the IMF is holding back on a loan to the Egyptian government is because it believes there isn’t any political consensus over whether or not they want a loan and over which direction they want to take economic policy. The reaching of an agreement between SCAF and the Muslim Brotherhood means it is more likely that the IMF would proceed with a loan. Secondly, as long as the military’s core interests are respected, the Saudis are quite likely to provide funding to Egypt.

Thirdly, the Qataris are providing support to the Muslim Brotherhood and are quite keen to be seen as patrons of the organisation. So they will be providing financing to Egypt as well. Egypt has multiple sources of financing, and is going to access them once a deal is confirmed.

GTR: How will the planned new constitution address the balance of power in Egypt?

Abi Ali: A key determinant in the future of Egypt is the constitution and what role this gives to an independent judiciary. If the Muslim Brotherhood decides to place all power in the president or a Muslim Brotherhood-dominated parliament, then yes you can start saying they are trying to take over, but only then. To say that now is a stretch. Let’s not forget that a large proportion, if not all, of the Egyptian administration are Mubarak appointees that are still in their jobs. They have no love for the Muslim Brotherhood and they are still there.

There is a lot of exaggeration going on and I don’t think it is warranted. There is a court set to rule in early September as to whether or not the constituent assembly is legal; basically, whether or not the body that is in charge of drafting a constitution is actually allowed to draft it.

There is a possibility they could dissolve the assembly and say that the presidential decree that gave the president the right to appoint a new constituent assembly was not a legal decree. But I think they will find a compromise where the judiciary remains independent and takes over the military justice system, or parts of it. The army would have some form of protection over its budget and economic interests.

Yet, this is not the only constitution the Egyptians are going to write over the next 10 years. This process is going to evolve and it would be surprising if they ended up with this constitution and no amendments to it for the next decade.

GTR: What about investors looking to invest in Egypt? Can they do so with any confidence?

Abi Ali: The Muslim Brotherhood or any future government is not going to be able to do a lot about the civil unrest issues. They can’t give everyone a raise; neither the government nor foreign investors can afford to do this. It is going to take them some time to address the issues of transportation, electricity and water provision. The healthcare and education systems are in a shambles. Civil unrest is going to be an issue for some time to come regardless of anything political.

The thing that I find encouraging is President Morsi’s appointments of people who even under Mubarak had championed an independent judiciary. I do think that the top level of the judiciary are going to be getting more professional and less corruptible in the coming year, but this process is going to take a while. It won’t address the corruption at the lower levels of the civil administration in Egypt.

Egypt is still going to be the cheapest labour and have very good access to markets in the entire Middle East region. This is going to be quite positive. The other important thing is that the main risk related to civil unrest is that the Muslim Brotherhood and the army would fight it out on the streets. This would be the worst case scenario and this has been averted.

If you were willing to invest under Mubarak then there is no reason not to invest under Morsi. There is nothing that has happened that has made things worse, but then under Mubarak, things were extremely bad. Corruption was prevalent at the highest levels of government, with, for instance, construction tycoons becoming ministers of housing and transportation, showing a clear conflict of interest. Egypt is not going to be defaulting on its debt and I think people lending to Egypt will get paid on time and in full. GTR