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Islamists Egypt’s Economy Saviors

Published: 21/12/2011 01:32:26 PM GMT
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CAIRO - Widely regarded as Egypt's future rulers, Islamsits's popularity is reassuring investors and businessmen who are growing more optimist in the b (more)

CAIRO - Widely regarded as Egypt's future rulers, Islamsits's popularity is reassuring investors and businessmen who are growing more optimist in the belief that help for Egypt's ailing economy is near, Wall Street Journal reported on Tuesday, December 20.

"The Muslim Brotherhood has the most organizational experience and I've read what their business program entails—I'm hopeful," Ali Habib said of the largest Islamic political group in Egypt.

With his family selling trinkets to tourists in Cairo's historic Khan el Khalili district over the past 53 years, the revolution scared off many foreign investors, cutting Habib's sales in half.

Not only Habib's small business.  

The lack of capital inflows since Egypt's January revolution has forced Egypt's central bank to deplete about 40% of its foreign-currency reserves to prop up the Egyptian pound. The country faces the possibility of an imminent economic crisis.

"If the new government fails to take action, a disorderly devaluation of the pound looks inevitable," London-based Capital Economics Ltd. wrote in a note this month.

"The immediate impact could be an increase in inflation, interest rates and the fiscal deficit. Combined with an uncertain global environment, Egypt's near-term economic conditions could deteriorate rapidly."

However, the Islamist parties' huge win in current parliamentary elections was seen by many businessmen as boosting Egypt's ailing economy.

"The Islamists have been neutralized and marginalized up until now,” Habib said.

“Why not give them a chance? If it doesn't work, we'll vote them out."

The election's first stage on November 28 saw Islamist parties crush their liberal rivals, mirroring a pattern established in Tunisia and Morocco following a string of popular uprisings across the region.

Final results from the first round have revealed the Democratic Alliance lead by the Muslim Brotherhood's Freedom & Justice Party (FJP) secured 40 percent of the seats

The Salafist Al-Nour party came in second place with 24.4 percent.   

On Monday, the second round of elections reflected close rates with FJP winning 39 percent of the votes the lists.

The Salafist Al-Nour party also confirmed that it had gained over 30 percent in the lists for the second round.

Egypt's Mandate

Winning electoral mandate, which the general lacked and led to reluctance to make resolute decisions, Egyptians said Islamist parties' will help them make policy decisions that will bring direction to the economy.

"An element of certainty has been brought forward as opposed to uncertainty," said Mustafa Abdel Wadood, chief executive of Abraaj Capital, a major investor in Egypt.

"You will have a Parliament in place, you will have a president in place, and I think that's the most important step for stopping that free fall."

Seeking a way out, both FJP and Al-Nour parties suggested a “gradual” increase in the role of Islamic banking.

Under Mubarak's 30-year rule, the country sought to enforce a more secular financial system.

According to a 2009 report by consulting firm McKinsey, Islamic banking only accounts for 3 to 4 percent of Egypt's $193 billion banking industry. That compares with 46 percent in the United Arab Emirates.

Widely practiced in the Arab Gulf, in South Asia and in Muslim-majority Southeast Asian nations, Islamic bears a strong resemblance to conventional banking and is unlikely to affect investor confidence, said Magda Kandil, the director of the liberal Egyptian Center for Economic Studies.

Economic analysts, businessmen and foreign investors agree that the market-oriented mindset that the Islamists have expounded in policy papers and public statements will return Egypt to the rapid growth.

Islamic banking, which began almost three decades ago, has made substantial growth and attracted the attention of investors and bankers across the world.

With estimated 300 Islamic banks and financial institutions worldwide, the industry expands by 15-20 percent a year and entered recently new markets from Australia to South Africa.

However, some analysts were still skeptical about Islamist's economic theories, complaining that Islamist economic policies say little about what will drive economic growth.

"The only solution to rescue the economy is by using the talents and resources of Egypt's population," Ahmed al-Naggar, an economic analyst at the government-funded Al Ahram Center for Political and Strategic Studies, said.

"These are very general ideas. Nothing new or revolutionary."

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