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The Challenges To Egyptian Labour

Dr. Gary K. Busch - 7/5/2013

There are hard times coming in Egypt as the revolution degenerates into a long and protracted conflict between the Moslem Brotherhood and their Salafist allies and the secular modern, mainly urban, Egyptian citizens appalled at the mess of the economic situation and the rise of the new Islamic configuration of the country’s Constitution. There is little or no fuel available at any price; food imports have been curtailed for lack of foreign currency; and jobs and factories have been folding at an ever-increasing rate, putting large numbers of workers out of work.

In the words of the candidate of the secularists in the last election, Mohammed El-Baradei “Egypt is on the brink -- not of something better than the old Mubarak dictatorship, but of something even worse.”

According to the reformers, two years after the revolution that toppled a dictator, Egypt is already a failed state. According to the Failed States Index, in the year before the uprising Egypt ranked No. 45. After Hosni Mubarak fell, it declined to 31st. There is a serious erosion of state authority in Egypt; law and order is disintegrating. In 2012, murders were up 130 per cent, robberies 350 per cent and kidnappings 145 per cent. There people being lynched in public, while others take pictures of the scene. Women are abused and harassed in the streets. People are very worried. People who have money are not investing -- neither Egyptians nor foreigners. As a result, Egypt's foreign reserves have been depleted, the budget deficit will be 12 per cent this year, and the pound is being devalued. Roughly a quarter of Egyptian youth wake up in the morning and have no jobs to go to. In every area, the economic fundamentals are not there.

Tourists have vanished, depriving Egypt of a vital source of jobs and hard currency. Unemployment has risen from 9.8 per cent in 2010 to 13 per cent today. Inflation is officially 8.7 per cent, though more like 9.5 per cent, or even higher, for food and basic commodities. Even these figures are misleading, since an estimated 40 per cent of Egypt’s economy is “black” or informal, unregulated by and unreported to the government.

Morsi and the Brotherhood have failed. As of 30 June, 2013, the government is unable to import the wheat that sustains the poor—Egypt imports 10 million tons of wheat per year, the most of any nation—or the diesel that fuels bread ovens and transports 99 per cent of everything that moves in this country of more than 85 million. Morsi’s dilemma is that he cannot politically afford to stop providing the costly subsidies to the poor that distort Egypt’s economy. Poor Egyptians spend 70 per cent of their income on food. But unless he reduces these subsidies and adopts a pro-growth budget, Egypt cannot secure the $4.8 billion International Monetary Fund loan it needs to survive. Egypt spends about 20 per cent of its budget on fuel subsidies alone. In other words, the government would be committing political suicide to do what economists say must be done to sustain it. There is no acceptable solution to this problem.

Perhaps he hardest hit are the trade unions. These unions have been the backbone of secular, modernist forces in Egypt for decades and a major part of the opposition to Mubarak and the military. They have been singled out by Morsi and the Brotherhood for particular attention. The International Labour Organisation (ILO) in June 2013 has blacklisted Egypt citing the government violates the workers’ freedom standards. The ILO’s experts committee on Egypt has received several complaints submitted by the country’s independent trade unions criticising receding organising freedoms. The Islamist-led government has not ratified the Syndicate Freedom Law (SFL despite the fact that the SFL was approved by Egypt’s Cabinet after the January 25 uprisings.

The development of Egyptian unionism has been shaped by its long conflict with the Egyptian military and its governments. Egyptian unions operate almost entirely in the public sector. In Egypt today, one-third of the economy is run by parastatal companies under the direct control of the government and the ministries. Another third belongs to the Army, which owns factories, construction companies, arms manufacturers, banks, stock brokers and the bulk of the tourist industry. These two sectors are symbiotic and have virtual monopolies in their respective sectors. Day to day administration is left to hired managers. The ‘owners’ of these two-thirds of the economy are essentially ‘rentier capitalists’; that is a type of capitalism where their earnings are gained from interest, fees, profits and rents on property they own but do not manage. They are the property-owning social class which benefit from their ownership of these assets but do not contribute to the economy by any direct actions of their own. Marx called them ‘social parasites’.

The remaining third of the Egyptian economy is mostly composed of subsistence farmers as well as small shopkeepers and professionals (doctors, lawyers) and small engineering firms. The rules governing this private sector are very bureaucratic. The private economy has no access to credit, no development capacity, and it creates few professional opportunities. Further, 92 per cent of Egyptians have no legal title for their dwellings, and Egyptian law makes it all but impossible for such people to obtain credit. To open, say, a bakery, a would-be entrepreneur must endure 500 days of administrative procedures, with bureaucratic corruption involved at each step.

Egypt is not a prosperous country despite its growing oil sector. It imports around US $50.3 billion worth of goods every year and exports US $ 25.2 billion a year. It is the largest grain importer in the world and requires massive sums of foreign aid to sustain its citizens. Egypt is one of the U.S.'s largest markets for wheat sales. U.S. agricultural sales to Egypt average $2 billion annually above and beyond the US$ 1.3 billion in U.S. military aid to the country. There are few large, unionised private companies. Most of the industrial companies (spinning and weaving cotton, ports and canal operations, airline, transport of all sorts, steel making, etc.) are owned and operated by the state or the Army. In addition, the wide range of public service workers in schools, hospitals, the civil service, etc., are all state employees. This has meant that wages and working conditions of those employed in the public sector (about 87% of the Egyptian workforce) are negotiated with a governmental entity or department. The collective bargaining partner of the Egyptian unions is the State. For thirty years or more, the State has been the Army. This has had some important effects on the labour movement.

The role of Egyptian labour in such a corporatist state posed many challenges. Since the ascension of Gamal Abdel Nasser as the head of state, the labour movements have been seen by the Army as an instrument of the state with the responsibility for maintaining discipline in the workplace and increasing productivity. Unions were not permitted to exert any real pressure for shorter hours or higher wages in any specific industry as wages and benefits were established on a national, and occasionally regional, level. There was a flow of top labour leaders into the ranks of the ruling party and militancy was not encouraged.

The official trade unions, or similar bodies, were regarded as administrative arms of the state, charged with the primary responsibility of maintaining discipline and furthering productivity. They were not permitted to exert any real pressure for shorter hours or higher wages.

The 1980s and mid-1990s were relatively uneventful for the Egyptian labour movement. Until recently the Egyptian Trade Union Federation (ETUF), the sole ‘national centre’, enjoyed a monopoly position as the representative of labour. The practice was for the head of ETUF to also hold, simultaneously, the position of minister of Manpower and Vocational Training in the government... However, the unions were surrounded by government regulation and could not operate freely. There were 23 national unions, based primarily on separate industries, and all were required to affiliate with ETUF. Strikes were forbidden by law, and collective bargaining was permitted only in the private sector and then only on nonwage issues. Labour disputes were resolved by the courts. There had occasional strikes but to lead one was dangerous because of a law stipulating life terms at hard labour for strikers who threaten the national economy.

As a result of pressures by the labour movement and from outside political organisations there were some major changes grudgingly introduced in 2009 and 2010. Despite the escalating strikes over 2009 and 2010, there were few victories: most of them were either ignored by the government or brutally broken and suppressed. The rare and slim victories were largely due to the sheer tenacity of the protesters. They got the government to raise the minimum wage to 400 Egyptian pounds (about $70) per month, nearly four times what it had been but hardly enough to address the rising inflation costs. They also successfully formed two independent trade unions and an independent trade union federation; an unprecedented break from the suffocating hold the government had exercised over labour activism since 1957[

According to a recent report by the International Development Centre, an Egyptian rights organisation, Egypt is currently witnessing a sharp spike in labour and other social protests, with 1,354 protests recorded in March 2013 alone compared to 864 protests during the previous month. This means an average of 44 protests per day, or 1.8 protests every hour. The report also states that the protests were held by 40 different social categories, with most being staged by politically unaffiliated individuals. The vast majority of protests involved labour rights and rising fuel prices.

Within the past two years major strikes in Egypt involved railway workers, public transport workers, doctors and police officers.

It was the unions who pressed for and led the struggle against Mubarak. Between 2004 and 2008, 1.7 million Egyptian workers had already launched almost 2,000 strikes. As protesters gathered on Tahrir Square, Egyptian workers united to form the Egyptian Federation for Independent Unions, effectively destroying the state-controlled Egyptian Trade Union Federation. Whereas the state-controlled union ordered workers to stay on their jobs, the new Federation led them to strike and to join the protests that ultimately brought about Mubarak’s downfall. Yet within a few short months, the workers’ situation was just as bad as it was before the revolution. or even worse. Since then there have been waves of workers’ protests. This was not only an economic struggle; the chief demand was to get rid of corrupt bosses, and to hold to account those responsible for financial and administrative failures. The unions have listed several key concerns:

Where is the new law on trade unions, the so-called the law on trade union freedoms? Why has it not been issued, despite being under discussion for more than two years?

Why is the machine of repression increasingly used against workers’ protests, to the point that the strike at Portland Cement in Alexandria was broken up by police with dogs.

Why are workers being sacked for exercising their rights to protest and strike, and some workers are even facing prison sentences on a charge of so-called ‘incitement to strike’.

Why are there thousands of workers unemployed because their factories have closed, or their temporary contracts have been ended?

Why has the state kept silent as nearly 4,000 factories have closed, without even questioning their owners or protecting workers’ rights?

What is preventing the enactment of laws to improve workers’ conditions, such as the law of the minimum and maximum wage, the new labour law?

Instead, laws have been enacted against workers’ interests, such as the criminalisation of strikes, or laws which take taxes from the poor and leave the rich and the investors untouched. The finger of blame must be pointed at the current government, and previous governments both before and after the revolution, as they have worked against workers’ interests, and for the interests of a minority of investors, the rich and big business.

While others may look favourably at the possibility of the military intervening in the current dispute between Morsi and his opponents, the unions do not see this as any possible major improvement of their situation both because the military is the owner of vast swathes of the Egyptian economy (and a major employer) as well as an entrenched political player in the system. The military even lent money to Morsi. The Egyptian armed forces loaned the government a billion dollars, demonstrating that they are functioning as a separate state. It is one of the critical flaws in Egypt’s current structure that plagues the tottering economy. No one knows exactly how much of the economy is owned by the military, but it is estimated to be in the range of 30 per cent and encompasses a broad spectrum of economic activity. Key positions in the enterprises go to retired officers, and any government determined to impose economic reforms will have to deal with entrenched military interests. Articles 193 through 197 of the new constitution assure the military of its continued independence from the civilian government. The defence minister is to be chosen by the officers from their ranks. The budget is to be prepared by a National Defence Council outside of parliamentary control. The unions do not look for much assistance from the military.

The unions know that however the current crisis is resolved it will not be on terms amenable to their hopes and aspirations. No matter if Morsi goes and is replaced by the military their position will not be enhanced. The only chance for the working people of Egypt is to adopt secular policy which will bring in the necessary legislation to allow collective bargaining and workplace democracy to thrive. The odds on that are very small indeed.

Mohamed El-Baradei, “You Can’t Eat Sharia” FP July/August 2013

Al-Ahram 7 Jun 2013

Joint statement of the Egyptian Federation of Independent Trade Unions, the Permanent Congress of Workers in Alexandria, the Revolutionary Socialists, Rebel Movement, the Egyptian Centre for Social and Economic Rights 28 June 2013.

Felix Imonti, “Egypt’s Economy Stumbles,” National Interest February 7, 2013

Dr. Gary K. Busch has had a varied career-as an international trades unionist, an academic, a businessman and a political affairs and business consultant for 45 years. Gary Busch has been a Chairman and CEO of International Bulk Trade, Transport Logistics, Transport Africa and the North Pacific Lines. These companies have owned, chartered and operated many marine dry cargo vessels and cargo aircraft worldwide. He set up the transport and logistics systems for the Russian aluminium industry for Trans World Metals and operated transport and port facilities across Russia as well as cargo airlines in Africa. He was a professor and Head of Department at the University of Hawaii and has been a visiting professor at several universities. He was the head of research in international affairs for a major U.S. trade union and Assistant General Secretary of an international union federation. He has been a consultant on international political developments for several major international corporations, think-tanks and private intelligence companies. He has authored six books and fifty-eight specialist studies, and has hosted and executive-produced several extended PBS documentary series... He is currently the chairman of both Transport Logistics and Chunguza Associates. His articles have appeared in the Economist Intelligence Unit, Wall Street Journal, WPROST, Pravda and several other news journals. He is the editor and publisher of the web-based news journal of international relations www.ocnus.net.

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