State Coercion, Debt, and Economic Recovery: Unpacking the Sisi Regime

People walking on Muizz street, Cairo (2017). Image by aaelrahman89 via Shutterstock. People walking on Muizz street, Cairo (2017). Image by aaelrahman89 via Shutterstock.

State Coercion, Debt, and Economic Recovery: Unpacking the Sisi Regime

By : Abdel-Fattah Barayez عبد الفتاح برايز

The developments that Egypt witnessed in September revealed an odd mix of intense repression and state violence on the one hand and tangible regime fragility on the other. The contractor/actor-turned-revolutionary Mohamed Ali appeared in a series of YouTube videos disclosing what he alleged to be cases of corrupt dealings that involved top military officials in the Abdel Fattah al-Sisi regime. The videos received high viewership and fed the political debate among Egyptians touching upon the economic role of the military, corruption, and mismanagement of public funds. It did not take long until Sisi commented on these allegations, ironically, confirming many of them through admitting the building of presidential palaces that he considered somehow a public good. A week later, rare anti-regime demonstrations broke out in a number of cities, including Cairo. The regime reacted harshly arresting hundreds, if not thousands, of protesters (and apparently passers-by as well). The crackdown intensified and extended to scores of activists, opposition party members, and university professors. A week later, despite calls for more demonstrations by Mohamed Ali, almost no one showed up. The storm had passed and the regime emerged, seemingly, unscathed, or did it?

I argue that the events of September 2019 were quite revealing of the regime’s inability to institutionalize its authority despite being in power for six years, and despite all earlier attempts at normalizing its rule by issuing a constitution and then amending it, forming a parliament and holding two--albeit highly controlled--presidential elections. Intense repression and state violence in the aftermath of the 2013 takeover did not serve as necessary conditions for the establishment of a new authoritarian regime following a period of revolutionary upheaval and disorder. Six years later, the regime is not institutionalized and life is not normalized under its rule. Intense and rampant repression is a necessary condition for regime routine operation. Repression and state violence were no founding conditions, they developed into daily conditions for governing as Joshua Stacher remarked in a piece published in 2015. As a matter of fact, not only has repression increased in intensity, but its scope has also broadened over time. What started first as measures against political opposition organizations and networks (mainly the Muslim Brotherhood and its allies), soon extended into civil society groups, independent and private media, and the public sphere generally, rather than just the political sphere.

Repression came in handy afterward with the imposition of austerity measures, especially with the adoption of the IMF-sponsored program in November 2016. Rounds of fuel and food subsidy cuts, raising the prices of public services, and imposing consumption taxes were all made possible by employing the highly-efficient repressive machine against larger social constituencies that have hardly been political, let alone oppositional to the regime. This implied that repression was not only being applied in many policy fields ranging from politics to economics and even foreign policy (e.g., the ceding of the two Red Sea Islands to Saudi Arabia back in 2015). It also meant the subjection of newer and broader social groups to high-intensity state repression. With the advent of economic restructuring, the urban poor and the impoverished middle classes fell into the loop of state violence in order to break their resistance and to police any potential collective action. This appeared the first time with the raising of Cairo metro prices in May 2018, which triggered some protest and was met with a police build-up in a number of key metro stations. This employment of repression was political in character as it had to do with passing unpopular austerity measures. It should not be confused with the social repression that the state has usually been engaged with in Egypt, against the marginalized urban and rural groups as part of reinforcing social hierarchy and public order. Conversely, political repression targets explicitly contested state action (or inaction), which is an element largely absent in social repression. Put simply, state violence has increasingly become the new norm of state-society relations under the current regime.

The continuous centrality of repression and violence to the regime reflects its shallow institutionalization. The latter term, as defined in mainstream political science literature, denotes a process of the setting of formal and informal rules for the exercise of power within the state bodies as well as between state and societal groups. Institutionalization was thought to lead to normalization and routinization of the practice of power, turning political power to authority, which functions more smoothly and with less resort to force. It is as Niccolo Machiavelli held many centuries ago in The Prince that initial acts of violence, usurpation, murder and other acts of force lay the foundations for authoritative action. In chapter 8 titled “Concerning those who have obtained a Principality by Wickedness,” Machiavelli wrote:

Hence it is to be remarked that, in seizing a state, the usurper ought to examine closely into all those injuries which it is necessary for him to inflict, and to do them all at one stroke so as not to have to repeat them daily; and thus by not unsettling men he will be able to reassure them, and win them to himself by benefits. He who does otherwise, either from timidity or evil advice, is always compelled to keep the knife in his hand; neither can he rely on his subjects, nor can they attach themselves to him, owing to their continued and repeated wrongs.

The mean challenge has traditionally been with turning force into more “legitimate” forms of authority that would render the use of force as the exception rather than the rule in the subsequent exercise of power. The regime in Egypt, it appears, has not reached this point. It is also unlikely to reach it anytime soon given the political-economic dynamics at work. The recent crisis revealed this quite clearly. No intermediate actors or networks or mechanisms seemed to be at work to channel messages or material resources to sizable social constituencies. The parliament was absent from the scene throughout the crisis. The key to regime survival was the continued tight coalescence between the state coercive bodies in charge of exercising violence, usually in flagrant violation of any semblance of the rule of law or of legal procedure. Interestingly, when things seemed quite shaky one week after the Friday demonstrations, Sisi appeared with a few supporters saying that there was nothing to worry about and that if needs be, he would call upon Egyptians to take to the streets to grant him another tafweed (delegation). Sisi was referring to the first tafweed in July 2013, immediately after the takeover, when millions of Egyptians demonstrated in his support against “potential terrorism” from the supporters of the Brotherhood. For Sisi to invoke such an extra-institutional and–constitutional tool six years later as the ultimate source of authority in times of heightened threat, is quite telling of the failure to institutionalize the regime in at least two ways:

First, this call comes in spite of the fact that Sisi has been elected twice and had the constitution amended through a “popular” referendum and an overwhelming majority in the parliament to be able to extend his rule beyond two terms. The other related observation is that calling for mass demonstrations sounds anachronistic and can mount even to a reversal to the considerable and consistent efforts put by the current coalition of state coercive bodies in order to empty the public space and sphere and to de-politicize the population rather than to mobilize it in its favor. The regime has no ideology, not even a coherent discourse about public authority or national security. It has created a vacuum and has been jealously guarding it with intense repression going after literally any other voice, from independent media commentators and politicians (many of whom have been supportive of the regime but could not be reduced to mouthpieces of it) all the way to Facebook users with more than five thousand followers.

No Political Opening is Likely

The rising centrality of repression to the functioning, and not just survival of the regime in times of heightened threat, precludes serious chances of partial political opening.

The rising centrality of repression to the functioning, and not just survival of the regime in times of heightened threat, precludes serious chances of partial political opening. To start with, political liberalization, no matter how partial or cosmetic, requires a level of institutionalization of authoritarianism that is simply missing in the current situation in Egypt. The ruling authority does not have the institutional channels for the representation of societal interests in general. It has consciously made the decision not to resurrect a state-party, which has functioned since the times of Gamal Abdel-Nasser as a link between the bureaucracy and various societal groups allowing the rise of patronage and clientelistic relations as well as the creation of intermediaries between the political leadership and society. Already the last decade under Mubarak’s rule showed increasing trouble in attracting these intermediaries and in keeping them in check. The National Democratic Party had undergone significant disintegration years before the 2011 revolution. It remains hard, or even harder, for the current regime to find the people to fill ranks of another state party while keeping them in line and harmonizing their interests.

Another challenge is finding enough resources for the sustaining of patronage networks in the event of creating such intermediaries. The available resources, definitely scarcer than under Mubarak’s last decade, have been rather put in the service of tightening the ruling coalition, within and between key coercive state bodies. This often meant a bigger bite for these state bodies and those affiliated with them formally and informally, from a smaller cake (due to austerity, currency depreciation, and chronic fiscal crises), which became itself an additional element of contestation as revealed by the recent Mohamed Ali-triggered crisis.

The previous restraint is institutional having to do with choices made at previous critical junctures that made this regime increasingly look similar in dynamics to Latin America’s (often short-lived) bureaucratic authoritarianism regimes of the 1960s and 1970s. There is also another functional restraint that corresponds to the multiple uses of repression that makes it very hard now to adapt politically and economically with smaller doses or more restrained practice of repression. A case in point is Egypt’s reinsertion into the global economy through heavy foreign borrowing since 2016. Egypt started this path with the IMF deal of November 2016, which offered the former a twelve-billion-dollar loan as part of a broader finance package of twenty-one billion dollars over three years. The Egyptian regime was to bring about macroeconomic stabilization by introducing unpopular measures including slashing subsidies, freezing public-sector wages, devaluing the Egyptian pound, raising consumption taxes and privatizing public utilities. These IMF-conditioned measures were crucial for raising debt on the global financial markets. The IMF upheld Egypt’s “policy reforms,” which translated into relatively better credit-rating by Moody’s, S&P and others in a way that reduced the borrowing cost for badly-needed dollars. These agencies sent the right signals to private equity investors, willing to take the calculated risk of investing in Egypt’s growing external debt through buying government bonds and bills, both denominated in dollars as well as occasionally in Egyptian pounds. The bedrock of this full cycle has been the continued ability of the regime to pass and uphold unpopular austerity measures, which could only be done through the reemployment of repression in economic policy-areas against broader social constituencies as explained earlier. This formula did not work in other less authoritarian MENA countries such as Jordan and Morocco, not to mention Tunisia.

Egypt’s debt-dependent economic recovery means that not only has repression been instrumental for regime security stabilization (but not institutionalization) but also it was a condition for redefining Egypt’s position in the global economy. Foreign debt has been growing at very high rates in the past three years. Better macroeconomic indicators attracted more debt than foreign direct investment, which has never caught up with the pre-2008 levels. It is not exaggerated to maintain that unlike the last decade under Mubarak and his neoliberal economic team, Egypt is being reinserted through debt rather than foreign investment. It is an exact and full reversal of the earlier period (2004-2009). Foreign debt has been stagnant under Mubarak with a declining ratio to GDP whereas net FDI inflows soared to unparalleled levels in Egypt’s contemporary economic history. It has been the opposite since 2016. Repression is so crucial for keeping the cost of borrowing low and for securing the very access to foreign borrowing for that matter. This is a functionalist restraint on any political opening, even if partial or cosmetic. Moreover, it reinforces the institutionalization-deficit that the regime has suffered from since its attempted establishment in mid-2013.

In conclusion, state violence and repression in Egypt proved not to be the founding conditions for a new authoritarian regime. They have become conditions for regime operation. The scope, scale, and functions of repression have only increased in the past six years. This co-evolved with the inability of the regime to institutionalize its power, neither within the broad state bureaucracy or with regard to the conducting of state-society relations. The choices that were made in 2013 and 2014 in response to challenges and opportunities have made subsequently repression more central not just for the internal cohesion of the regime by binding together a tight and small alliance of coercive bodies, but also for the reinsertion of Egypt’s economy into global financial markets through debt. This, in turn, created institutional and functionalist restraints to any partial political opening that could enable the regime to deal with rising socio-political tension or by accommodating more pluralism.

[Click here to read this article in Arabic]

Repression or Development? Morocco after the Hirak

The wave of social unrest that shook Morocco between 2016 and 2018 marked a major turning point in the country’s political and economic landscape. Spontaneous protest movements (soon termed Hirak, in Arabic) located in the semi-peripheral towns of al-Hoceima and Jerada highlighted deteriorating socio-economic conditions for a large section of the population due to the absence of jobs, investment, and infrastructure, among other things. The authorities met these demonstrations with a mixed approach, offering dialogue and investment projects while resorting to harsh repression measures to bring back stability. Meanwhile, protests in solidarity with al-Hoceima and Jerada took place across the rest of the country, threatening to escalate these demonstrations into a nation-wide phenomenon. Eventually, and with great difficulty, the authorities succeeded in containing these protests, which have gradually been absorbed and are now over, at least temporarily.

The unprecedented nature of these demonstrations rang a loud alarm bell for Morocco’s decision-makers. Unlike the 2011 Arab Spring-inspired unrest, which the urban middle classes largely dominated, the 2016-18 demonstrations took place in rural and semi-urban settings, marking a watershed in Morocco’s recent history. As famously described by Remy Leveau, since independence the rural population has been the most important constituency for the monarchy. Rural Moroccans have defended this institution from the revolutionary threats and demands for political and economic change coming from the country’s urban middle and working classes. Nevertheless, over the past years, the decline of rural notables (which have traditionally been the key connectors between the monarchy and the population in the countryside), the emergence of a new and better-educated generation, and an increasingly vocal rural and semi-urban population have started to affect this relationship. Indeed, rural communities have become vocal, expressing a rejection of the status quo and putting forward demands for better infrastructure, investment, and jobs.

The existential threat these new protests have posed is a potential game-changer in the country’s political economy.

The existential threat these new protests have posed is a potential game-changer in the country’s political economy. Aware of the impending risks, the Makhzen has so far resorted to a combination of approaches. First, the authorities have taken a firm security response (as highlighted by the case of the leader of the Hoceima protests, Nasser Zefzafi, who is still in jail), which has sparked criticism both domestically and abroad, with human rights activists denouncing this policy as a return to Hassan II’s “years of lead.” Secondly, the authorities have somewhat loosened their previously rigid fiscal stance to provide some respite to a population that has gone through a gradual reduction in public spending since 2012. This was evident in the April 2019 decision to increase public sector employees’ salaries (as well as the minimum wage), thus undoing the previous governments’ efforts to reduce the impact of the wage bill in the government budget. This wage hike was reminiscent of the fiscal loosening that took place in the immediate aftermath of the 2011 protest movement.

Finally, the monarchy has been the main sponsor of a series of structural economic measures that aim to correct some of the imbalances in Morocco’s economic model–namely, lagging productivity and an unfair land distribution in the agricultural sector, low levels of human capital affecting negatively employment and a lack of competition in domestic sectors stifling innovation and growth. Under pressure from the protests, the monarchy is cautiously trying to remove some of these obstacles that weigh negatively on economic development. Nevertheless, at this stage it is difficult to answer the questions of how far the Makhzen is willing to push changes and how genuine these efforts are, as the adoption of some and implementation of other measures is still in its early stages due to various factors, including political and societal resistance to changes and a slow and inefficient bureaucracy. Moreover, there is no sign that the monarchy is ready to scale down its direct involvement in the private sector through its al-Mada holding owned by the king, thus leaving unaddressed one of the biggest obstacles to competition and innovation in the country’s economy.

The Monarchy Takes the Lead


While most accounts of the Moroccan Hirak have focused on the authorities’ security-minded response to instability, in the months that have followed the protest movements in Jerada and al-Hoceima, the monarchy has also presented a series of initiatives that aim to provide a political and economic answer to the demands for jobs, investment and social justice that emerged from the demonstrations. The growing frustration of the country’s rural population has been long in the making, but its explosion between 2016 and 2018 was a major source of concern for the monarchy, whose support has historically been found in these constituencies.

Indeed, since the beginning of this new phase, King Mohammed VI has intensified his interventions and speeches, in what has probably been an attempt to push the government to take action and provide answers to these key constituencies. The most evident example of this approach was the October 2017 “royal earthquake” as the local media outlets called it, when the king fired four ministers (Mohamed Hassad, Mohamed Nabil Benabdellah, al-Houcine Louardi, and Larbi Bencheikh) and other officials following the Audit Court’s report that pointed out a series of administrative mistakes and errors at the root of the unrest in al-Hoceima. This intervention was presented as a way for the monarchy to hold government officials accountable for their actions and was followed by a similar decision in August 2018, when the king fired Economy Minister Mohamed Boussaid. Through these spectacular dismissals, the monarchy has tried to distance itself from these allegedly ineffective officials, while sending a message that it remains in control of the situation.

In addition, the monarchy has taken a more proactive role in the legislative field. In late 2018, the monarchy imposed a bill to reintroduce the military conscription, bypassing any consultation with the government, political parties, or civil society. This initiative will be analyzed in more detail later, but it initially aimed to provide an answer to the large number of young unemployed Moroccans implicated in the protests. Most importantly, the monarchy has also kickstarted a larger debate on the need to update the country’s “development model.” The king has reiterated in several speeches the need to revise the current economic model, which has failed to produce jobs and wealth for everyone. Far from marking the beginning of a lively debate, the main goal of this invitation has been to lay the groundwork for a series of difficult economic decisions that have been gradually unveiled over the past months.

Agriculture, Human Capital, and Competition


Short of presenting a coherent vision for Morocco, the authorities have been working below the radar, putting forward a series of proposals that have attracted attention mainly in the specialized press. It is unclear whether this has been done on purpose to soften the predictable opposition of vested interests or, more likely, if this low-profile approach is the result of a frantic search for plausible answers to Morocco’s socio-economic malaise and to minimize scrutiny by civil society groups and foreign observers. Nevertheless, an analysis of the main initiatives deployed by the authorities highlights three main axes in the monarchy’s economic response: agriculture, human capital, and competition.

These three priorities are not new, as domestic observers and international financial institutions have been discussing some of these problems for a long time. In particular, Morocco’s low levels of human capital and insufficient competition in domestic markets have been identified as key obstacles to the country’s long-term economic development. What is new is the monarchy’s apparent willingness to tackle these issues, after years of inaction. If this effort to reform the economy is genuine, the authorities are likely to run into considerable opposition by the powerful businessmen that have traditionally benefited from a web of protection, monopolies, and fiscal advantages in exchange for their support for the monarchy.

The emphasis on agriculture is hardly surprising, due to the rural nature of the 2016-18 protests. In a country that has never had a land reform and where around forty percent of the workforce is employed in this sector, agriculture continues to play a key role in political and economic debates. The latest “Green Plan,” which was adopted in 2008, focused mainly on a minority of large enterprises and on boosting exports and competitiveness, paying little attention to the majority of small farmers. While the top-line results of this program were overall positive, with exports doubling over ten years thanks to considerable productivity gains, small farmers did not benefit from this improvement. In particular, a large part of agricultural workers continues to rely on “collective lands” with no formal property rights, posing all sorts of obstacles to farmers in terms of access to credit, investment, etc.

The new plan recently announced by Agriculture Minister Aziz Akhanouch (a close confidant of the king’s) aims to create a “rural middle class” by privatizing (“melkization”) these collective lands and facilitating access to credit for this new class of small landowners. Around one million hectares of land are available for this process, with young farmers identified by the authorities among the key beneficiaries of this plan. The plan is to start by privatizing some of the collective lands that are already irrigated (which amount to just sixteen percent of total cultivated land) and later to extend this process to the rest of the country. By creating a rural middle class with better access to credit and the ability to invest in increasing productivity, the aim is to create a direct relationship between the Makhzen and this new social class, and thus, ease some of the tensions that have been at the root of the recent protests, while leaving the current property structure and unbalanced distribution of infrastructural facilities unchanged.

The authorities have also placed significant emphasis on the problem of human capital. This is a well-known problem that has been highlighted by most international institutions (such as the World Bank), as Morocco continues to fare among the worst countries in the Middle East and North Africa in terms of educational outcomes. Low human capital levels weigh negatively on economic performance and contribute to youth unemployment, as young Moroccans are ill-equipped to grab opportunities in the job market. In turn, this frustration is seen as one of the main drivers of the recent wave of social unrest and a spike in migration from the country.

The authorities have therefore taken two initiatives to tackle these issues, but both bills have sparked controversy inside and outside parliament. The first initiative has been the re-introduction of military conscription–an ill-defined project that has been imposed in a top-down manner on Morocco’s political class and population. Among its many stated goals, this law aims to provide an opportunity for young Moroccans (particularly for those who have dropped out of school) to acquire a set of transferable skills that should contribute to raising human capital levels. It is unclear whether this project will manage to achieve this objective, as the budget for and details of the implementation remain opaque.

More promising is the new education bill and the goal of broadening access to pre-school facilities to all four and five-year-olds by 2028. These measures aim to overhaul Morocco’s educational system, in particular by placing more emphasis on learning foreign languages and improving access to pre-school education, which have been identified as key weaknesses in the current system. While the idea of pre-school education is uncontroversial, the issue of languages in school has become a major stumbling block on the way to the adoption of this bill. The plan to de-emphasize the role of Arabic in favor of the French language as the key teaching vehicle has divided the political class, with the Islamist Party of Justice and Development (PJD) blocking the approval of the bill for months. In the absence of a compromise on this issue, the law remains stuck in parliament, as the political and social cleavage between French-speaking and Arabic-speaking Moroccans is again at the center of the public debate. Indeed, the controversy around which teaching language should be used in Moroccan schools goes back to the early post-independence era and Hassan II’s “Arabization” policy.

Finally, the authorities have recently injected some momentum into the discussion on competition. The existence of monopolies and cartels between the main economic actors in almost all domestic markets has hampered productivity growth and depressed innovation and job creation. While this issue has always been a taboo that the local media have only been able to tackle in very cautious terms, the mid-2018 boycott campaign organized on social media against some of the country’s biggest companies has been impossible to ignore. By targeting fuel distributor Afriquia (owned by Akhanouch himself), dairy firm Centrale Danone, and bottled water company Sidi Ali, online activists have shed light on the incestuous ties between political power and some of the biggest enterprises in the country.

Therefore, it is not a coincidence that in late November, the king finally appointed the new president of the Competition Authority, Driss Guerraoui. Despite the adoption of the competition law back in 2014, this body had been inactive for the previous four years, most likely due to pressure from Morocco’s largest businesses. Symbolically, one of Guerraoui’s first acts was to tackle the issue of competition in the fuel distribution sector (which had been targeted by online campaigners) in early 2019. In addition, in late 2018, the king appointed the head of the National Commission for Integrity and Anti-Corruption, seven years after the institution was officially set up. These appointments fill two important gaps, but their effectiveness remains in question. At this stage, it is still unclear if these two bodies will be sufficiently empowered to carry out their mission, and thus, tackle some of Morocco’s most powerful businesses. Most importantly, it is highly unlikely that either institution will be allowed to take action against the king-owned companies, which often enjoy monopolistic or dominant positions in domestic sectors, such as agri-food and retail distribution.

Likewise, the government is preparing a new investment code, which is meant to redistribute fiscal incentives away from the country’s least productive sectors (such as real estate, which has been the object of considerable speculation over the years) to encourage business activity in more labor-intensive and export-oriented industries, such as manufacturing and information technology. Moreover, the new code will streamline fiscal incentives and subsidies, thus easing access to start-ups and small and medium-sized enterprises. This measure should contribute to creating a more attractive environment for companies operating in innovative sectors and to reducing the advantages enjoyed by companies operating in less productive and risky sectors.

Just a Bluff?


The monarchy has played a central role in the promotion of all these initiatives. In some cases (military conscription, competition) this role has been obvious, in other cases (agriculture, education, investment code) the king has preferred to take a lower profile and avoid any direct implication while pressuring the government to accelerate the adoption of economic reforms. Regardless of the direct or indirect involvement of the Makhzen, in all these cases the approach has been almost the same: a top-down imposition of measures that had been discussed for years but had never seen the light due to their politically sensitive nature.

Nevertheless, the key question remains how serious this effort is and if this is part of a strategy to overcome those obstacles that have so far undermined Morocco’s economic performance or if it is just a bluff, a maneuver to deflect responsibility. The devil is in the implementation: for example, the Competition Authority could have a significant impact on the country’s economy, but will it have the resources and the political backing to break up cartels and monopolies in the domestic economy (not to mention the companies owned by the king himself)? The alignment between formal and informal institutions (such as the patron-client relations going all the way up to the monarchy) will be decisive. The threat posed by social unrest in rural Morocco is a potentially existential menace that the monarchy cannot underestimate. How it decides to respond will be the key for its own future and for the long-term economic development of the country.