Risk analysis report pessimistic about business in Egypt

Maplecroft predicts army may intervene, fears disruption of Suez Canal and Sumed pipeline to raise int'l shipping, oil prices.

By
February 8, 2011 15:58
2 minute read.
Egyptian protesters shout anti-Mubarak slogans

Egyptian Masses 311. (photo credit: Associated Press)

Risk analysis and mapping firm Maplecroft released an in-depth report on Egypt at the end of last week.

The report predicts that the political crisis will be prolonged by Egyptian President Hosni Mubarak's "reluctance to stand down immediately," and that "the military may be forced to abandon [its] neutral position." In addition, the military is likely to take a position according to Washington's demands, due to its dependency on US aid. However, a unilateral military intervention can not guarantee a democratic Egypt, which may lead to further demonstrations.

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Maplecroft also predicts that Egypt is "unlikely to witness a rapid return to stability if President Mubarak does resign," and therefore, "Western governments and investors will remain nervous."

The report says that the Muslim Brotherhood may have a prominent role in post-Mubarak Egypt, and that its "economic policies [may] cater more to social welfare, but are less friendly to foreign investment from the West and business in general."

In addition, the report posits that the potential for violence makes Egypt a risky place for companies, with criminals exploiting the unrest. There may also be an increased risk of terrorism, which had previously been "offset over the years by the Mubarak regime's strong security apparatus and system of surveillance in mosques."

Business and economic risks

In the business and economics section of the report, Maplecroft posits that a financial crisis is likely in Egypt, because the country's currency has weakened, as has confidence in the government's ability to bolster its banking sector. Investors have transferred hundreds of millions of US dollars out of the country since January 25, the report says, and the Central Bank will be forced to spend in order to keep the Egyptian pound stable, which could cause investors to panic. Weakened currency would also lead to inflation. In addition, political and economic instability will stunt growth, which can already be seen in the tourism sector.

Click here for full Jpost coverage of unrest in Egypt

Maplecroft referred to fears that shipping through the Suez Canal, which accounts for 10 percent of world trade, will be disrupted, which would not only strain the Egyptian budget, but also raise commodity prices. The Egyptian army has stepped up security near the canal, and South Korea's Hanjin Shipping re-routed some containers to avoid Egypt. However, human resources needed to handle ships has diminished due to the demonstrations, and the ports in Alexandria, Damietta and Port Said are manned by a "skeleton workforce."

Another concern is that the 220-mile Sumed oil pipeline will be "sabotaged by protesters or terrorists," even though the government doubled the amount of guards along the pipeline. A disruption of oil flow in the pipeline could raise oil prices; a barrel of oil rose over $100 in the US on January 31 due to concerns over Egypt.


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