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Markets  |  February 19, 2013 09:30:56

M. Mobius: Egyptian "Arab winter"

It's been almost two years since the North Africa and the Middle East raced "Arab Spring" and its also great hope in change. Changes are often Neudau as quickly as one would wish, very often is a complicated process. This also applies to Egypt today. Country that is still struggling with the problem of shaping their future. Hosni Mubarak's ouster in 2011, the country immediately netransformovalo democracy in Egypt and so still looking for direction on issues. What is this country and its potential, I am still optimistic and continue to seek out investment opportunities here.

On my last expedition to Egypt at the beginning of November, I arrived in Cairo just days after President Mohamed Morsi announced on yourself when writing a new constitution assumed dictatorial power. It was just a weekend and my team and I were introduced to a young trader with art. Young woman who lived with her ??mother in a house without a lift on one of the busy streets of Cairo. We went to look at her private collection.This young woman and her mother were members of a sophisticated west oriented class, for the rich, however, could not be considered, except in the fine arts, which they were hanging on the walls. This young woman confided to us that she had planned to go to Tahrir Square, or "Freedom Square", where almost two years ago took place as the "Day of revolt", and subsequent small demonstration. I asked her about her reasons. She told me that the act considered as a way to show support for the people protesting against the new government restrictions on freedom and undermining hard-won democratic reforms. Also encouraged us to enable us to join her. We agreed and we agreed on the fact that we meet an hour later.

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The street leading to Tahrir Square welcomed us barbed wire (based on all the side streets leading to Tahrir Square) and civil defense units, which we had in the security measures prove identity card or passport. At the very náměstní there was a rather festive atmosphere with street vendors offering fruits, tea and other goods. It was a shock for us, because we expected the turmoil and chaos. The good takému here did not happen, at least during our visit.

Business and Life

The next day we went to work and began with visits to local businesses. At least from our perspective, then Egypt has returned to normal. Pharmaceutical company we visited, worked at full capacity.Automobile assembly plant also experienced a busy, her newly appointed manager met us even with plans for further expansion. Traffic on the road was quite lively, as well as during our previous visit to Cairo. This does not mean that the situation in Egypt was not worse, and that the emergence new conflicts. From my perspective, however, things seemed to be quite orderly.

What I could not help noticing, however, was far smaller crowd of tourists. Our visit to the famous Egyptian Museum just off Tahrir Square from the previous significantly different.While last time the individual exhibits were crowds of onlookers, this time we have seen only a handful of tourists. A lower number of tourists can have on the Egyptian economy, which focused specifically on tourism, a detrimental effect. Tourism is not only a major source of income, also has a strong multiplier effect on low-income groups. The dramatic decline in this sector could have unforeseen consequences.

For me, it follows an important lesson. What we can read in the headlines of the international press, not in all respects directly reflect the state of the local society.

The Arab Spring is still not resolved. Fundamental changes across the entire Middle East and North Africa, which are now put into practice and can be regarded as a kind of "Arab winter". If you look at the history of the revolution, you will find that the common features mainly arises from economic hardship, particularly in combination with high unemployment and inflation.Once the company gets to the point where it no longer has anything to lose, can even the smallest spark to ignite the flame of unrest. In the case of the Arab Spring was in this flame burning the young Tunisian fruit vendor who solved this way the general injustice and lack of opportunity. The region connecting the common language and easy access to the Internet or availability of mobile phones allows young and ambitious company very easily communicate their desires and frustrations. Organizing demonstrations is then (logistically) is much easier than in the past and the Arab Spring is proof of that.

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The birth rate in the Arab world is high and about 60% of the population is under 30 years of age. This is also the reason why some economists estimate that Egypt needs to maintain peace in the society economic growth of 6% a year. Young population and high unemployment rate creates pressure on politicians to whom is given the task of quickly creating new jobs and ensure a low inflation rate. I see it, one of the best ways to achieve economic growth and prosperity is to promote domestic and foreign investment. Stable and business-friendly environment is the way forward, which according to me more and more are coming to realize themselves political leaders. Policy-oriented in that direction I think is the basis for the development of capital markets and the transformation into a market economy.I think it is vital that what happens in Egypt, the most populous country in North Africa. The local development is also very likely to affect developments in Tunisia, Libya, Morocco, Syria, Iraq and other countries in the region.

After our visit to Egypt we went south to countries such as Tanzania, Rwanda and Kenya that developments in Egypt will not affect, and that through their own reform programs still move forward. Yes, these countries are also tested a number of challenges faced and Egypt.High unemployment, a very young population, inflationary pressures, an underdeveloped economy, the need for increased investment and reducing corruption so as to come to a greater extent to pour investments that will facilitate the creation of infrastructure. These countries have experienced rapid economic growth, the pace should keep this year.

As I stated earlier, as investors in emerging markets, we must look at the long term. Changes are Neudau overnight and are sometimes associated with them some of that trip. Regarding the future development of the continent, I then optimistic.

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© Copyright 2012 Franklin Templeton Investments. All rights reserved.
The article was translated and reproduced with kind permission of Franklin Templeton Investments' Mark Mobius blog from

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M. Mobius: Egyptská „Arabská zima“

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