What are the economic consequences of police repression in Egypt?
The repression of demonstrations in favour of Morsi in Cairo that has caused hundreds of deaths and thousands of injuries not only has unleashed a wave of unrest in the country, but may have an economic reaction of unpredictable consequences.
Government buildings, police stations, churches and even the legendary library of Alexandria became targets of numerous attacks since Wednesday. The country’s authorities called such an attitude of “terrorist” and announced that they would shoot at anyone who assaults a building. For its part, the National Coalition’s defense of the legitimacy, which comprises several Islamic groups like the Muslim Brotherhood, proclaimed Friday “a day of Wrath” and called for protest marches? The reaction of financial institutions public and private companies, domestic and foreign, to this situation of extreme tension did not wait.
The stock market and the banks of Egypt announced on August 15 a temporary shutdown of at least three days. It is the first time these institutions workday closed since January 2011, when the country was shaken by the first revolution that led to the resignation of President Hosni Mubarak.
The British-Dutch giant Royal Dutch Shell announced the temporary closure of its offices in Egypt until at least next Monday, and limited business travel of their employees to the country. Egypt produces at least 728,000 barrels of oil and 60,900 billion cubic meters of natural gas: a large part of this production is due to the foreign oil companies operating in its territory. The income from oil and mainly gas varies between 7% and 4% of GDP.
The automotive giant General Motors temporarily closed its assembly plant in the vicinity of Cairo and his office, without specifying how long the closure will last. The Electrolux Group appliances Swedish producer, suspended the operation of its factories located around Cairo, where about 7,000 employees, and reported that the situation will revisit Saturday to decide whether or not to extend the closing. The Turkish producer Yildiz Holding cookie with about a thousand employees in Egypt, suspended production for an indefinite period.
The Textile Association of Istanbul warned that it has significantly reduced the number of orders receiving Turkish textile manufactures operating in Egypt and who are considering closing. It should be recalled that the production and export of textiles is one of the main sources of income for the State and employment for the local population, which suffers an arrest of between 11.8% and 13.1% according to the official figure, while experts insist the real figure is much higher.
The tourism giants Thomas Cook Group plc and the German Department of TUI Travel plc announced that tourists who bought trips to Egypt are entitled to book another destination without additional charges. Russian tourist companies have totally suspended the sale of travel to Egypt. The Russian Federal Tourism Agency has banned Russian companies sell trips to Egypt: Russian operators estimate that the ban will cost about $ 130 million.
It should be noted that the tourism industry employs 12% of the Egyptians and constitute 11% of the GDP of the country.
President Barack Obama condemned the violence by the Egyptian Government and cancelled the exercises joint military, a traditional bi-annual event, scheduled for next month. American media ensures, in addition, has significantly increased the number of U.S. lawmakers, both Republicans and Democrats, calling for revoke its annual aid to Egypt (about 1,300 million dollars) and even influence the International Monetary Fund to cut the access to loans to Cairo.
At the same time, it should be noted that most analysts agree that such a scenario is highly unlikely. Israel, the strategic ally of the U.S.. in the region, it already addressed the Obama Government with the request not to disrupt the financing of Egypt, which is a fundamental point of the 1979 Israeli-Egyptian peace treaty. Both for security reasons and for geopolitical reasons, U.S. cannot jeopardize relations with Egypt, its key ally in the Middle East and chief mediator between ultraconservative and secular forces in the region, says columnist Joyce Karam Al Arabiya.
While, the UN Security Council is expected to rule Friday on the situation in Egypt. There are analysts who predict not only a resolution condemning violence against the civilian population but also one that it imposes financial sanctions against the country.
- Erick Gálvez