Author's note: An earlier version of this paper was presented at the annual meeting of the Middle East Studies Association of North America, Washington D.C., 23–26 November 1991. Valuable comments on an earlier draft were provided by Soha El Agouz, Galal Amin, Martha Diase, Heba Han-doussa, Magnus Hellgren, Clement Henry, Hosam El Tawil, and Mourad Wahba. The usual disclaimer applies.

¹ The major legislative changes were Law 43 (1974), Law 32 (1977), and Law 159 (1981). See, for example, Hill, Enid, “Egypt's New Capitalism after Fifteen Years of al-Infitah” (Paper delivered at the meeting of the Middle East Studies Association, Toronto, 11 1989Google Scholar).

² The growing role of the private sector in the economy is indicated by changes in its share of gross fixed investment. In the 1960s and early 1970s, this share was less than 10 percent; for the period 1977–81/82 it was 19 percent and for 1982–83–86/87, 26 percent. See Handoussa, Heba, “Egypt's In-vestment Strategy, Policies, and Performance since the Infitah,” in Investment Policies in the Arab Countries, ed. El-Naggar, Said (Washington, D.C., 1990), 156–57, 171–72.Google Scholar

³ Estimates of the number of Egyptians working abroad vary widely, from government estimates at 1.4 million to figures as high as 4 million. See the Economist Intelligence Unit, Egypt: A Country Profile 1990–91 (1990), 17Google Scholar.

⁴ In early 1990, petroleum prices were at 35 percent of the international level. The price of electric-ty was 22 percent of the economically efficient price, the long-run marginal cost. See Richards, Alan, “The Political Economy of Dilatory Reform” (Cairo, 11 1990, Mimeographed), 8Google Scholar.

⁵ Presentation by Handoussa, Heba at a Middle East Times seminar on Egypt's trade with Eastern Europe, 27 09 1991Google Scholar.

⁶ For data on government budget deficits, see the Economist Intelligence Unit, Egypt: A Country Profile, 43. There was, however, no full-blown resistance to IMF policies. On the contrary, with or without an agreement, the government periodically devalued the Egyptian pound, and tried to reduce subsidies. See Abdel-Khalek, Gouda, Country Study: Egypt, Stabilization and Adjustment Policies and Programmes, Country Study No. 9Google Scholar (World Institute for Development Economics Research: Helsinki, 1988), 28; and Vandewalle, Dirk, “Egypt and Its Western Creditors,” Middle East Review 20 (Spring 1988): 27Google Scholar.

⁷ In 1977, loans provided by the World Bank, Western countries, and Arab Gulf states after the January iots made it possible for Egypt to bypass IMF recommendations. During the period 1980–84, a ombination of increased foreign aid (in the aftermath of Camp David) and high revenues from oil and worker remittances made it possible for Egypt to avoid the IMF. See Abdel-Khalek, , Country Study, 28;Google Scholar andewalle, “Egypt and Its Western Creditors,” 27.

⁸ IMF agreements were signed in 1976, 1978, and 1987. The famous food riots of January 1977 dissuaded he Egyptian government from carrying out the subsidy cuts and from implementing additional measures in the 1976 agreement. In 1978 and 1987, the IMF did not disburse the second tranche when it concluded that Egypt's budget deficit was too high. See Waterbury, John, The Egypt of Nasser and Sadat: The Political Economy of Two Regimes (Princeton, N.J., 1983), 410–11;CrossRefGoogle Scholar and Seddon, David, “The Politics of Adjustment: Egypt and the IMF, 1987–1990,” Review of African Political Economy 47 (1990): 95–96CrossRefGoogle Scholar.

⁹ See Richards, , “Political Economy of Dilatory Reform,” 16; and Robert Springborg, “Egypt: Successes and Uncertainties,” American-Arab Affairs 33 (Summer 1990): 84Google Scholar.

¹⁰ Middle East Times, 15–2110 1991Google Scholar; Middle East Economic Digest (hereafter MEED), 15 March and 17 05 1991Google Scholar; and United States Embassy, –Foreign Economic Trends and Their Implications for the United States: Report for the Arab Republic of Egypt” (Cairo, 04 1991), 8Google Scholar.

¹¹ MEED, 18 January and 24 05 1991Google Scholar; United States Embassy, “Foreign Economic Trends,” 7.

¹² Al-Ḥayāt, 22 01 1992, 10Google Scholar.

¹³ The budget was based on a realistic foreign-exchange rate, E £3.24 per U.S. dollar, only 3 percent above the commercial rate at that point in time. See MEED, 10 05 1991Google Scholar. In the past, the use of overvalued exchange rates for government transactions had hidden the actual cost of selling imported goods at subsidized prices.

¹⁴ MEED, 10 May and 28 06 1991Google Scholar.

¹⁵ MEED, 17 05 1991Google Scholar; United States Embassy, “Foreign Economic Trends,” 7.

¹⁶ United States Embassy, “Foreign Economic Trends,” 10; and MEED, 7 06 and 21 06 1991Google Scholar.

¹⁷ al-Khāliq, Jūda ʿAbd, “al-Taḥrir al-Iqtiṣādi: Mafhūm Khaṭiʾ wa-Istrātājiyya Qāṣira,” al-Yasār 24 (02 1992): 17; MEED, 14 06 1991Google Scholar.

¹⁸ Sherif, Khaled F., “Egypt's Local Government Privatization Follies,” Middle East Times (13–19 08 1990), 11Google Scholar.; MEED, 8 02 1991; and United States Embassy, “Foreign Economic Trends,” 12Google Scholar.

¹⁹ Close to fifty state-owned companies active in the following areas will be unaffected by the law: military production, oil, banks, iron and steel, aluminum, and the Suez Canal. See MEED, 28 06 1991Google Scholar. Regarding equal treatment between private and public firms, it may be noted that the special public sector discounts on energy prices and interest rates lately have been reduced. See MEED, 17 06 1991; and al-Ahram Weekly, 12 09 1991Google Scholar.

²⁰ MEED, 28 06 and 23 08 1991Google Scholar.

²¹ Richards has found that one Egyptian negotiating tactic is to “promise a lot and deliver little.” See his “Political Economy of Dilatory Reform,” 16.

²² As an example, on the basis of the experience of Eastern Europe in this area, Kornai concludes that “[it] is futile to expect that the state unit will behave as if it were privately owned and will spontaneously act as if it were a market-oriented agent. It is time to let go of this vain hope once and for all … [In Eastern Europe], direct bureaucratic regulation was replaced by indirect bureaucratic regulation. State Authorities found a hundred means to meddle in the life of firms.”. See Kornai, János, The Road to a Free Economy: Shifting from a Socialist System. The Example of Hungary (New York, 1989), 58–59Google Scholar.

²³ MEED, 12 04, 17 05, and 7 06 1991Google Scholar.

²⁴ The calculation leading to this figure is based on information presented by Handoussa (Handoussa, Middle East Times seminar). Public authorities (e.g., utilities) and the military sector were excluded from the total on the basis of which the 30 percent figure was computed.

²⁵ See, for example, MEED, 13 09 1991 and al-Ahram Weekly, 10 10 1991Google Scholar.

²⁶ The articles are Sadowski, Yahya, “The Sphinx's New Riddle: Why Does Egypt Delay Economic Reform?” American-Arab Affairs 22 (Fall 1987): 28–40Google Scholar; Vandewalle, “Egypt and Its Western Creditors”; Richards, “Political Economy of Dilatory Reform”; and Sullivan, Denis, “The Political Economy of Reform in Egypt,” International Journal of Middle East Studies 22 (08 1990): 317–34CrossRefGoogle Scholar.

²⁷ Richards, , “Political Economy of Dilatory Reform,” 16–19Google Scholar; Sadowski, “Sphinx's New Riddle,” 40; and Sullivan, “Political Economy,” 318–19, 328–31.

²⁸ For data on foreign-exchange earnings, see Carr, David “structural Reform of the Egyptian Economy for Overcoming Major Economic Weaknesses” (USAID/Cairo, 05 1987)Google Scholar; United States Embassy, “Egyptian Economic Trends” (Cairo, 03 1989)Google Scholar.

²⁹ The GDP data are from al-Ahram Weekly, 12 12 1991Google Scholar. The data on incomes and labor market conditions are based on Heba Handoussa, “Crisis and Challenge: Prospects for the 1990s,” in Employment and Structural Adjustment: Egypt in the 1990s, ed. Handoussa, Heba and Potter, Gillian (Cairo, 1991), 5–6Google Scholar; Richards, “Political Economy of Dilatory Reform,” 10–11; and Assaad, Ragui, “Structure of Egypt's Construction Labor Market and Its Development since the Mid-1970s,” in Handoussa and Potter, Egypt in the 1990s, 140Google Scholar. The dangers of relying on migration abroad as a solution to domestic labor market problems were vividly illustrated during the Gulf crisis when some 400,000–700,000 Egyptians, most of whom were workers, returned in a few months' time. See MEED, 5 07 1991, and al-Ḥayāt, 17 12 1991Google Scholar.

³⁰ World Bank, World Debt Tables 1990–1991: External Debt of Developing Countries, vol. 2 (Washington D.C., 1991), 102Google Scholar.

³¹ The Economist, 6 04 1991; and MEED, 31 05 1991Google Scholar.

³² Al-Ahram Weekly, 26 10 1991, 5Google Scholar; Springborg, Robert, “Egypt: Successes and Uncertainties,” American-Arab Affairs 33 (Summer 1990), 94Google Scholar. Recently, former prime minister ʿAbd al-ʿAziz Hijazi predicted that the revolutions of Eastern Europe would lead to the reallocation of a large part of current Western aid to the Third World. See al-Ahram Weekly, 5 09 1991Google Scholar.

³³ See Sherif, Khaled F., “More Donor Aid Nothing to Brag About,” Middle East Times, 3 12 1990Google Scholar.

³⁴ The expected real GDP growth rates for 1991 and 1992 are 1 percent and 2 percent, respectively. These rates, not very different from those of the late 1980s, reflect recent contractionary policies and an increase in foreign-exchange earnings. See the Economist Intelligence Unit, Egypt: A Country Report 3 (1991): 4Google Scholar.

³⁵ MEED, 3 05 1991Google Scholar.

³⁶ Thus, after the debt cuts from the United States and the Gulf states, the foreign debt had fallen to $35 billion. See MEED, 15 02 1991Google Scholar. Assuming that the Paris Club cuts are implemented in full, Egypt's foreign debt in mid-1991 was around $25 billion.

³⁷ MEED, 26 04 1991Google Scholar.

³⁸ Waterbury, John, “The Political Management of Economic Adjustment and Reform,” in Economic djustment in Algeria, Egypt, Jordan, Morocco, Pakistan, Tunisia, and Turkey, ed. Roe, Alan, Roy, Jayanta, and Sengupta, Jayshree, EDI Policy Seminar Report, no. 15 (World Bank, 1989), 63Google Scholar.

³⁹ Al-Ahram Weekly, 2 05 1991Google Scholar.

⁴⁰ Wahba, Mourad M., “On the Implementation of Economic Policy in Egypt,” Business Monthly, Journal of the American Chamber of Commerce in Egypt 5 (07 1989), 5Google Scholar. Yusif has properly noted that this raises a number of important questions for research: which social groups are most strongly affected by the current economic reforms? What are their capacities to hinder or influence the reforms? See Yūsif, Aḥmad, “Mīzān al-Qiwā al-Siyāsiyya” (The Balance of Political Forces) in al-lṣlāḥ al-Iqtiṣādi fī Miṣr wa-al-Taṭawwurāt al-Duwaliyya (Economic Reform in Egypt and International Developments), ed. al-Raḥmān, Ibrāhīm Ḥilmi ʿAbd, Kitāb al-Ahrām al-lqtiṣādī, suppl., 43 (09 1991): 76–77Google Scholar. The ultimate danger to the present order would arise if economic grievances were successfully utilized by an ideologically based organization able to mobilize the great mass of the population, such as the movement behind the Iranian revolution (cf. Waterbury, “Political Management,” 58).

⁴¹ Waterbury, John, “The ‘Soft State’ and the Open Door: Egypt's Experience with Economic Liberalization 1974–1984,” Comparative Politics 18 (10 1985): 69CrossRefGoogle Scholar.

⁴² Wahba, “On the Implementation of Economic Policy in Egypt.” One might add that the argument is further weakened when the effect itself is not all that visible. This discussion is, of course, not an advocacy of policies that hurt poor people. The challenge for Egypt is rather to find workable policies that, inter alia, eliminate poverty.

⁴³ The newly inaugurated $500 million “Social Fund,” supported by the government and foreign donors, may be a modest beginning toward this end. See al-Ḥayāt, 13 10 1991Google Scholar.

⁴⁴ Yūsif, “Mizān al-Qiwā al-Siyāsiyya,” 77; and Springborg, Robert, Mubarak's Egypt: The Fragmentation of the Political Order (Boulder, Colo., 1989), 36Google Scholar. The term “apathy” is used when describing the Egyptian public by Springborg, Mubarak's Egypt, 295; Brumberg, Daniel, “Democratic Bargains and the Politics of Economic Stabilization: The Case of Egypt in Comparative Perspective” (Paper delivered at the meeting of the Middle East Studies Association, Toronto, 11 1989), 21Google Scholar; and Abdalla, Ahmed, “Structure of Political Participation in Egypt” (Paper delivered at the meeting of the Middle East Studies Association, Washington D.C., 11 1991), 9Google Scholar.

⁴⁵ This is most clearly manifested by the emergency laws, extended for another three years in May 1991. When commenting on the last extension, Interior Minister Mūsa linked it directly to the economy, saying that they were needed “to secure our internal front, and this is vital for economic reform” (MEED, 7 06 1991)Google Scholar. Ayoubi notes that government preparations in this area were upgraded after the 1977 riots; Ayoubi, Nazih N. M., “Implementation Capability and Political Feasibility of the Open Door Policy in Egypt,” in Rich and Poor States in the Middle East: Egypt and the New Arab Order, ed. Kerr, Malcolm H. and Yassin, El Sayed (Boulder Colo., 1982), 82Google Scholar.

⁴⁶ Egypt's modern history has witnessed three domestic mass protest movements (excluding the nationalist movement of 1919) with Islamic undertones. All of them fell short of overthrowing the government. See Marsot, Afaf Lutfi al-Sayyid, Protest Movements and Religious Undercurrents in Egypt: Past and Present, Occasional Papers Series, Center for Contemporary Arab Studies (Georgetown University, Washington D.C., 1984), 2Google Scholar.

⁴⁷ According to Samīr Ṭūbar, a leading National Democratic party spokesman on economic issues, major cuts in food subsidies will be postponed to the last stage of the program agreed upon with the IMF (interview on the BBC Arabic Service, 5 February 1992). Thus, it seems that the international actors largely have accepted the arguments of the Egyptian government in this area. According to Sadowski, this was the case already in the mid-1980s. See Sadowski, , “Sphinx's New Riddle,” 35Google Scholar.

⁴⁸ In the early 1980s, Waterbury argued that there was no dominant class in Egypt that had turned the state into its creature with regard to long-run policies. See Waterbury, , The Egypt of Nasser and Sadat, 12–17, 432Google Scholar. This view is not uncontested; see, for example, Springborg, Robert, “Agrarian Bourgeoisie, Semiproletarians, And The Egyptian State: Lessons For Liberalization,” International Journal Of Middle East Studies 22 (08 1990): 467Google Scholar.

⁴⁹ The same conclusion applies to the reduction of controls on imports and investments. The same group has gained from moves to close the gap between the interest rates charged from private and public sector firms. See al-Ahram Weekly, 12 09 1991Google Scholar.

⁵⁰ See Commander, Simon, The State and Agricultural Development in Egypt since 1973 (London, 1987), 133Google Scholar.

⁵¹ Grindle, Merilee S. and Thomas, John W., Public Choices and Policy Change: The Political Economy of Reform in Developing Countries (Baltimore, 1991), 5, 7, 164–65Google Scholar. Similarly, Fitzgerald, (quoted by Waterbury, The Egypt of Nasser and Sadat, 14)Google Scholar has argued that state autonomy in the Third World is accentuated during periods of political and economic crisis. See Fitzgerald, E. V. K., The Political Economy of Peru, 1956–1978 (Cambridge, 1979), 4–5Google Scholar.

⁵² Awad argues that some government decisions may be explained by the influence of private business groups. See Awad, Ibrahim, “Socio-Political Aspects of Economic Reform: A Study of Domestic Actors' Attitudes towards Adjustment Policies in Egypt,” in Handoussa and Potter, Egypt in the 1990s, 292Google Scholar. In the autumn of 1991, government resistance to IMF pressures to impose higher taxes on its private sector was attributed to the political leverage wielded by business groups. See al-Ḥayāt, 15 11 1991Google Scholar.

⁵³ Key examples of elements in the economic policies that Egypt's private sector are opposed to include the structure of import tariffs, the sales tax, credit ceilings, and “high” interest rates. See al-Ḥayāt, 11 11 1991 and al-ʿ Ālam al-Yawm, 5 12 1991Google Scholar.

⁵⁴ Qandīl, Amāni, “Taḥawwulāt al-Siyāsa al-Iqtiṣādiyya wa-ʿAmaliyyat Tamṯhil al-Maṣāliḥ bayna Jamāʿāt Rijāl al-Aʿmāl wa-al-ʿUmmāl” (Changes in Economic Policy and the Process of Interest Representations among the Organizations for Businessmen and Workers), al-Yasār 20 (October 1991)Google Scholar; Bianchi, Robert, “The Corporatization of the Egyptian Labor Movement,” Middle East Journal 40 (1986): 438Google Scholar.

⁵⁵ Sisters in the Wood: A Survey of the IMF and the World Bank, Supplement to The Economist, 12–18 10 1991, 4Google Scholar.

⁵⁶ MEED, 6 12 1991; The Middle East, 07 1989Google Scholar.

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⁵⁸ For Iran's current economic policies, see MEED, 15 11 1991Google Scholar.

⁵⁹ Springborg, , Mubarak's Egypt, 40Google Scholar.

⁶⁰ Springborg argues that, since most participants view the visits and stays in the United States as extended holidays, they don't have any policy implications. See Springborg, , Mubarak's Egypt, 283Google Scholar. This seems erroneous since the issue is not one of skill acquisition but one of ideological attitude. Could it not be the case that people are even more easily influenced under relatively relaxed conditions?

⁶¹ This was in apparent contrast with the situation in 1987 when the United States, in a sudden turnaround, forced the IMF to accept a policy package the United States itself had considered inadequate a few months earlier. Sadowski, “Sphinx's New Riddle,” 37.

⁶² United States Embassy, “Foreign Economic Trends,” 10; MEED, 1 February, 22 February, and 7 06 1991Google Scholar.

⁶³ MEED, 25 January, 26 April, and 5 07 1991Google Scholar; al-Ḥayāt, 24 11 1991Google Scholar.

⁶⁴ MEED, 7 June and 14 06 1991Google Scholar.

⁶⁵ In July 1991, “Egypt's Consultative Group” (with Western and Arab governments, the IMF and the World Bank as members) met for the first time since 1981 to coordinate their activities. It has also been reported that the activities of the $10 billion Gulf Fund—the primary vehicle for Gulf state support to friendly governments—will be partly oriented by the IMF and the World Bank, and focused on direct support to the private sector in countries liberalizing their economies. See MEED, 3 May and 19 07 1991Google Scholar; Baker, Raymond, “Imagining Egypt in the New International Order: Foreign Policy, Politics, and the Prospects of Civil Society” (Paper delivered at the meeting of the Middle East Studies Association in Washington D.C., 11 1991), 20Google Scholar; and al-Ḥayāt, 5 02 1992, 9Google Scholar.

⁶⁶ See Hill, “Egypt's New Capitalism,” for an analysis that has Egypt's transformation toward capitalism as its fundamental premise.

⁶⁷ See, for example, al-ʿ Ālam al-Yawm, 30 January 1992 and al-Ḥayāt, 22 01 1992Google Scholar.

⁶⁸ Al-Ḥayat, 6 10 1991Google Scholar.

⁶⁹ Kornai, , Road to a Free Economy, 53–54, 93Google Scholar; Shehata, Ibrahim, “Healthy Conditions for a Successful Private Sector,” al-Ahram Weekly, 24 10 1991Google Scholar.

⁷⁰ In this context it is noteworthy that the World Bank as a general future policy for the Third World intends to put greater emphasis on encouraging privatization. See MEED, 10 05 1991Google Scholar.

⁷¹ Financial Times, 24 06 1991Google Scholar.

⁷² al-Ḥayāt, 29 08 1991Google Scholar; Sherif, Khaled F., “Privatization: When, Where, and How Now?” Middle East Times, 8–1410 1991, 8–9Google Scholar.

⁷³ Saʿid al-Najjār, “Qānūn al-Qiṭaʿ al-ʿĀmm fī al-Mīzān” (The Public Sector Law in the Balance), al-Ahrām al-Iqtiṣadi, 30 09 1991, 14Google Scholar; Richards, “Political Economy of Dilatory Reform,” 12–13. From this angle, it is troublesome that the Egyptian government, in order to please the IMF, seems to be trying to run ahead of schedule in the macro area in order to compensate for slow progress in public sector reform and privatization. See MEED, 20 09 1991; al-Ḥayāt, 6 October and 19 October 1991Google Scholar.

⁷⁴ See, for example, Komai, , Road to a Free Economy, 59Google Scholar.