Courcy’s Intelligence Brief

*** Further blow to Egypt’s tourism sector as economy languishes.  One indisputable victim of the Egyptian revolution has been its tourism industry.  At its peak, the tourism industry brought 15m visitors a year to Egypt.  This is now down to about 3m.  The latest blow has been the announcement by the Muslim Brotherhood-dominated government that licenses to sell alcohol in Cairo, Alexandria, and other large cities will not be renewed as they fall due.  For the moment, tourist centres such as Sharm al-Sheikh will not be directly affected, but the whole tourism industry is suffering not just from falling visitors but also from lack of confidence.  No one is investing in the industry because of the uncertainties.

The ruling Muslim Brotherhood seems to believe that it can weather the economic storm, mostly with the help of subventions from Qatar, one of the main backers of the post-Arab Spring rise of the Muslim Brotherhood.  But moves that further damage the tourism sector are far from helpful, and talks with the IMF to conclude a $4.8bn loan agreement remain frozen.  An agreement with the IMF could lead to a further $12bn in funding from the World Bank, the European Union, the US, and the Gulf.

The problem with the IMF talks is that any agreement will require the government to implement cuts in subsidies and other austerity measures, but the government cannot contemplate these ahead of new elections due in April or May.  Nevertheless, it does accept the eventual need for them, according to national security adviser Essam Haddad.  Haddad says: “It is very well known by the IMF that nobody would do such an action just before the elections.  However, our message is very clear.  These reforms are essential for the economic recovery.  There is no other choice.”

In the meantime, Iran senses an opportunity in Egypt’s economic distress.  In its 20 February edition, the hard-line Keyhan daily argued that Egypt will be “passing through a transitional phase that will last for at least 2 to 3 years”.  During this phase, the paper says, Egypt will not be able “to make definite decisions regarding its relations with Iran”.   However, the hardline paper adds, “Egypt needs help in trade and economy and at the same time has an important market.  The US, Europe and Saudi Arabia are not helping.  Iran can penetrate this market in a subtle way.  If we manage to link the economies of the two countries, it would be possible to gradually take steps in the political arena as well."

*** Al-Qaeda “training recruits in Tunisia”.  Algerian sources say that Al-Qaeda in the Lands of the Islamic Maghreb (AQLIM) is training as many as 5,000 recruits in southern Tunisia.