Politics, Economics and Tourism Development in Egypt: insights into the sectoral transformations of a neo-patrimonial rentier state

Abstract

This article challenges claims that liberalising state-regulated markets in developing countries may induce lasting economic development. An analysis of the rise of tourism in Egypt during the past three decades suggests that the effects of liberalisation and structural adjustment are constrained by the neo-patrimonial character of the Egyptian political system. Since the decline of oil-rent revenues during the 1980s tourism development has been the optimal strategy to compensate for the resulting fiscal losses. Increasing tourism revenues have helped in coping with macroeconomic imbalances and in avoiding more costly adjustment of traditional economic sectors. Additionally they provided the private elite with opportunities to generate large profits. Therefore sectoral transformations resulting from economic liberalisation in neo-patrimonial rentier states should be described as a process which has led to the diversification of external rent revenues, rather than to a general downsizing of the rentier character of the economy.

Notes

The authors would like to express their gratitude to Martin Beck and Juliane Brach for their valuable comments on earlier versions of this paper. Christian Steiner gratefully acknowledges the financial support of the German Research Foundation (dfg) and Thomas Richter would like to thank the Graduate School of Social Sciences (gsss), University of Bremen, for a financial contribution.

1 For the concept of neo-patrimonialism, cf J Bill & R Springborg, Politics in the Middle East, New York: Longman, 2000; and M Kassem, Egyptian Politics: The Dynamics of Authoritarian Rule, Boulder, CO: Lynne Rienner, 2004. For the rentier state, see H Beblawi & G Luciani (eds), The Rentier State, London: Croom Helm, 1987.

2 A George & A Bennett, Case Studies and Theory Development in the Social Sciences, Cambridge: mit Press, 2005, p 75.

3 A Strauss & J Corbin, Basics of Qualitative Research: Grounded Theory Procedures and Techniques, Newbury Park, CA: Sage, 1990.

4 Ministry of Tourism, Arab Republic of Egypt, Tourism in Figures, Cairo, various years; World Bank, World Development Indicators, Washington, DC: World Bank, 2004; Central Bank of Egypt (cbe), Annual Report, Cairo, various years; and imf Archives, Arab Republic of Egypt—Recent Economic Developments, Washington, DC: imf, various years.

5 R Bianchi, ‘Towards a new political economy of global tourism’, in R Sharpley & D Telfer (eds), Tourism and Development—Concepts and Issues, Clevedon: Channel View, 2004, p 271.

6 For an example of the former, see S Britton, ‘Tourism, capital, and place: towards a critical geography of tourism’, Environment and Planning D: Society and Space, 9 (4), 1991, pp 451–478. For the latter, see J Brohman,‘New directions in tourism for Third World development’, Annals of Tourism Research, 23 (1), 1996, pp 48–70.

7 G Wall, ‘Sustainable tourism—unsustainable development’, in S Wahab & J Pigram (eds), Tourism, Development and Growth, London: Routledge, 1997, p 36.

8 Bianchi, ‘Towards a new political economy of global tourism’, p 271.

9 VS Smith & R Eadington (eds), Tourism Alternatives: Potentials and Problems in the Development of Tourism, Philadelphia, PA: University of Pennsylvania Press, 1992.

10 M Clancy, ‘Tourism and development: evidence from Mexico’, Annals of Tourism Research, 26 (1), 1999, p 5.

11 Ibid.

12 M Hall, ‘The institutional setting—tourism and the state’, in D Ioannides & K Debbage (eds), The Economic Geography of the Tourist Industry, London: Routledge, 1998, p 199.

13 Cf H Aziz, ‘Understanding attacks on tourists in Egypt’, Tourism Management, 16 (2), 1995, pp 91–95; WS Wahab, ‘Tourism and terrorism: synthesis of the problem with emphasis on Egypt’, in A Pizam & Y Mansfeld (eds), Tourism, Crime and International Security Issues, Chichester: Wiley, 1996, pp 175–186; and A Al-Hamarneh & C Steiner, ‘“Islamic tourism”? Re-thinking the strategies of tourism development in the Arab world after September 11th’, Comparative Studies of South Asia, Africa and the Middle East, 24 (1), 2004, pp 18–27.

14 W Hazbun, ‘Globalisation, reterritorialisation and the political economy of tourism development in the Middle East’, Geopolitics, 9 (2), 2004, p 319.

15 WS Wahab, ‘Tourism development in Egypt: competitive strategies and implications’, Progress in Tourism and Hospitality Research, 2, 1996, pp 351–364.

16 M Gray, ‘Economic reform, privatization and tourism in Egypt’, Middle Eastern Studies, 34 (2), 1998, pp 91–112; and Gray, ‘The political economy of tourism in North Africa: comparative perspectives’, Thunderbird International Business Review, 42 (4), 2000, pp 393–408.

17 P Pawelka, Der Vordere Orient und die internationale Politik, Stuttgart: W Kohlhammer, 1993; and A Richards & J Waterbury, A Political Economy of the Middle East, Boulder, CO: Westview, 1996.

18 T Karl, The Paradox of Plenty: Oil Booms and Petro-States, Berkeley, CA: University of California Press, 1997.

19 D Waldner, ‘States, markets, and development: what we know—and do not know—about the political economy of the modern Middle East’, paper presented at the esf/scss Exploratory Workshop, ‘Euro-Med and Middle East Political Economy: Assessing the State of the Field’, Florence, 2003, p 2.

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21 A notable exception is K Chaudhry, ‘Economic liberalization and the lineages of the rentier state’, Comparative Politics, 27 (1), pp 1–25.

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25 More precisely, and in contrast to Karl Marx, who associates absolute rent exclusively with owners of private property, it is the external and internal sovereignty of the state which explains the monopoly of governmental institutions over, for instance, the cultural heritage of a country. Seeing it this way, it is the state that has captured its own monopolistic access to this lucrative source of income.

26 Schmid, Das Konzept des Rentier-Staates, p 10.

27 Richter, ‘The political economy of regime maintenance in Egypt’, p 182.

28 P Gray, ‘The contributions of economics to tourism’, Annals of Tourism Research, 9 (1), 1982, pp 109–110.

29 B Balassa, ‘Structural adjustment policies in developing economies’, World Development, 10 (1), 1982, pp 23–38; A Krueger, ‘Government failures in development’, Journal of Economic Perspectives, 4 (3), pp 9–23; World Bank, World Development Report: From Plan to Market, Oxford: Oxford University Press, 1996; and J Williamson, ‘What Washington means by policy reform’, in Williamson (ed), Latin American Adjustment: How Much has Happened?, Washington, DC: Institute for International Economics, 1990, pp 7–20.

30 femise Co-ordinators, Egypt Country Profile: The Road Ahead for Egypt, Cairo: Economic Research Forum for Arab Countries, Iran and Turkey (erf), 2004, pp 1–2.

31 G Abed & H Davoodi, Challenges of Growth and Globalization in the Middle East and North Africa, Washington, DC: imf, 2003; and A Subramanian, The Egyptian Stabilization Experience: An Analytical Retrospective, Washington, DC: imf, 1997, p 61.

32 undp and Arab Fund for Economic and Social Development, Arab Human Development Report 2002: Creating Opportunities for Future Generations, New York: undp/rbas, 2002.

33 C Schmid & P Pawelka, ‘Der moderne Rentier-Staat im Vorderen Orient und seine Strategien der Krisenbewältigung’, in P Pawelke & A Maho (eds), Arabische Golfstaaten in der Krise, Frankfurt: Fischer, 1990, pp 91–117.

34 P Pawelka, Herrschaft und Entwicklung im Nahen Osten: Ägypten, Heidelberg: C Müller, 1985; and D Weiss & U Wurzel, The Economics and Politics of Transition to an Open Market Economy: Egypt, Paris: oecd, 1998.

35 P Rivlin, The Dynamics of Economic Policy Making in Egypt, New York: Praeger, 1985, p 181.

36 B Momani, ‘American politicization of the International Monetary Fund’, Review of International Political Economy, 11 (5), 2004, pp 880–904.

37 Weiss & Wurzel, The Economics and Politics of Transition to an Open Market Economy.

38 Wahab, ‘Tourism development in Egypt’, p 354; and Gray, ‘Economic reform, privatization and tourism in Egypt’, p 98.

39 imf archives, Arab Republic of Egypt—Recent Economic Developments, SM/79/53, Washington, DC: imf, 1979, p 17.

40 Gray, ‘Economic reform, privatization and tourism in Egypt’, p 94.

41 Wahab, ‘Tourism development in Egypt’, p 356.

42 The annual tourism investments had already peaked in 1998/99 at LE5203 billion. After 2000 investment decelerated as a result of problems in the Egyptian banking sector and a temporary oversupply of hotel rooms.

43 C Steiner, ‘Political instability, transnational tourist companies and destination recovery in the Middle East after 9/11’, Tourism Hospitality Planning & Development, 4 (3), 2007, pp 167–188.

44 Clearly, external factors like the global expansion of tourism demand and the redirection of tourist flows within the Mediterranean region (eg because of the war in former Yugoslavia) had a significant influence on this growth too. Nevertheless, without the necessary regulatory changes in Egypt, the tourism industry would not have been able to take advantage of these externally generated opportunities.

45 Steiner, ‘Political instability, transnational tourist companies and destination recovery in the Middle East after 9/11’.

46 Arab Republic of Egypt, Monthly Economic Digest, Cairo: Ministry of Economy and Foreign Trade (meft), 3 (7), 2001, p 13.

47 Central Bank of Egypt, Annual Time Series, Cairo: cbe, 2006.

48 S Tohamy & A Swinscoe, The Economic Impact of Tourism in Egypt, Cairo: eces, 2000, p 17.

49 World Bank, World Development Indicators.

50 Authors’ calculation based on Tohamy & Swinscoe, The Economic Impact of Tourism in Egypt; and imf archives, various years.

51 sifs are social security schemes funded by the reserves and contributions of employees. P Alba, S Al-Shawarby& F Iqbal, Fiscal and Public Debt Sustainability in Egypt, Middle East and North Africa, Working Paper Series 38, Washington, DC: World Bank, 2004, p 8.

52 These were the Banque du Caire, Bank Misr, the National Bank of Egypt and the Bank of Alexandria.

53 G Abdel-Khalek, ‘Domestic public debt in Egypt: magnitude, structure and consequences’, Cairo Papers in Social Science, 23 (1), 2000, pp 6–66.

54 The bulk of treasury bills in the late 1990s, about 80%, was held by the domestic commercial banks. Cf imf archives, Arab Republic of Egypt—Recent Economic Developments, SM/97/290, Washington, DC: imf, 1997, p 54.

55 J Sowers, ‘Allocation and accountability: state–business relations and environmental politics in Egypt’, unpublished doctoral dissertation, Department of Politics, Princeton University, 2003, pp 221–233.

56 Richter, ‘The political economy of regime maintenance in Egypt’.