Egypt's Infitah Policy: Sadat's Open Door Economy

Introduction

Anwar Sadat's Infitah policy was a reversal of Nasser's policies. Nasser had presided over a command economy in which market economics were centralized and controlled by the government, with little to no private sector. Egypt had been influenced by the Soviet Union under Nasser, and its economic policies reflected the characteristics of the Communist state — an immense public sector and an entrenched bureaucracy (Osman, 2010). Sadat wanted to shift away from the Soviet Union and develop a better relationship with the United States. Sadat thus moved away from war with Israel to adopt a spirit of openness with its Middle East neighbor. In this manner, Sadat sought to open the private sector in Egypt, establish ties with the West, and cultivate a more diplomatic demeanor in the region.

However, Infitah did not go very far in establishing a free market with an open economy. By the 1980s, Egypt was vastly dependent on foreign assistance just to sustain itself — a stark reversal from the 1960s, when Egypt imported only 7% of its food from abroad (Weinbaum, 1985). In 1981, the year of Sadat's assassination, Egypt's imports exceeded exports by more than $3 billion. Thus, Infitah was not an economic success.

The Infitah Policy Explained

Infitah of 1973 under Sadat was an Open Door policy meant to breathe fresh life into Egypt. Sadat's political objectives were unattainable through military means, so a socio-economic policy of openness was conceived in order to bring in foreign investment and assistance, particularly from the United States (Weinbaum, 1985). Infitah represented a realigning of Egypt's position in the Middle East — but it came with notable risks. By adopting a friendly stance toward Israel and the West, Egypt estranged itself from other Arab states. Nevertheless, the intention of the policy was to bring about positive change; as Ates (2005) notes, Sadat aimed "not only to transform the economy according to the free-market model, but also to correct the deficiencies of state control and achieve integration with the world economy" (p. 134). The privatization of industry would lead to wealth creation — but the risk was that it would also generate social unrest, as wealth would flow toward the upper class and foreign investors, leaving little for the lower classes.

In the 1970s, Egypt had the potential to be the largest market in the Middle East (McLaughlin, 1978). Its population was increasing, its middle class had grown under Nasser, oil was available for extraction, and the Suez Canal had reopened. With Sadat at the helm, Egypt appeared poised to attract foreign investment and capitalize on these conditions for an economic boom (McLaughlin, 1978). Infitah signified a major economic restructuring that would open the door to outside investment, and it was genuinely believed that it would turn Cairo into the major hub of economic activity in the Middle East (Salacuse, 1975).

Impact on the Egyptian Economy

Under Infitah, 90% of all public projects were financed by foreign money (Weinbaum, 1985). Abdel-Khalek (1981) states that the policy ushered in an era resembling a nineteenth-century type of specialization — "one emphasizing oil, the Suez Canal, and tourism as the leading sectors" (p. 394). The open door policy was an invitation to major foreign players to make use of what Egypt had to offer in terms of resources; in effect, it opened the door to the possibility of corporate neo-colonialism and exploitation.

Investors were not quick to seize the opportunity, however, because of mistrust of Egypt's internal politics, its entrenched bureaucracy and red tape, cultural clashes, and the state's lack of a sustainable overall vision. For instance, conservative Islamic groups in Egypt wanted alcohol banned in tourist centers; but for Western investors and businesses seeking to attract Western tourists, this type of religious intrusion was a severe frustration and undermined the economic ambitions of Infitah (Weinbaum, 1985). Egypt could not reconcile how it would appeal to the West while simultaneously appeasing its own domestic constituents. By seeking investment and foreign funding, Egypt made itself economically vulnerable. By 1977, food riots were occurring, as the once largely self-sufficient nation found itself increasingly at the mercy of other countries for basic food items, having attempted to pivot away from domestic labor toward international industrialization (Weinbaum, 1985). The impact on Egypt's economy was thus crushing, and the social unrest that resulted was evidence of this failure.

Conclusion

Infitah was an attempt by Egypt under Sadat to pivot away from Nasser's social programs and develop greater economic relationships with the West. It was viewed as a way to take advantage of Egypt's growing population, invite foreign investment, and become the major economic hub of the Middle East. It ushered in an era of peace with Israel, which suggested that Egypt could focus more on domestic development and less on military build-up. None of these hopes and ambitions truly came to fruition. Foreign investors were deterred by Egypt's cultural values, which placed restrictions on certain types of business practices, such as selling alcohol to tourists. The large businesses that entered Egypt to develop energy sector projects did little to actually support the country's broader economic growth. The lower and middle classes, which had benefited under Nasser, soon began to riot over the lack of self-sustainability that Sadat's policies ultimately produced. Sadat himself was assassinated in 1981, marking the end of the dismal failure that was Infitah.

References

Abdel-Khalek, G. (1981). Looking outside, or turning northwest? On the meaning and external dimension of Egypt's Infitah 1971–1980. Social Problems, 28(4), 394–409.

Ates, D. (2005). Economic liberalization and changes in fundamentalism: The case of Egypt. Middle East Policy, 12(4), 133–144.

McLaughlin, G. T. (1978). Infitah in Egypt: An appraisal of Egypt's open-door policy for foreign investment. Fordham Law Review, 46(5), 885.

Osman, T. (2010). Egypt on the brink: From Nasser to Mubarak. Yale University Press.

Salacuse, J. W. (1975). Egypt's new law on foreign investment: The framework for economic openness. International Law, 9, 647.

Weinbaum, M. G. (1985). Egypt's Infitah and the politics of US economic assistance. Middle Eastern Studies, 21(2), 206–222.