In 2011, both Tunisia and Egypt were rocked by popular protests against economic and political repression that ended in the ouster of their authoritarian governments. Three years later, how much progress have these states made in reforming their economies? And what has happened to the entrepreneurs whose grievances helped fuel these revolutions?
Reforming the Entrepreneurship Ecosystem in Post-Revolutionary Egypt and Tunisia, a report from CIPE and Stanford University’s Center for Democracy, Development, and the Rule of Law (CDDRL), attempts to answer these key questions. With this report, CIPE staff and IACE will engage policymakers and stakeholders in roundtable discussions to formulate policy recommendations in the coming weeks.
Working with CIPE Cairo staff and CIPE partner L’Institut Arabe des Chefs d’Entreprises (IACE) in Tunisia, lead researcher Amr Adly conducted an extensive study of existing literature and over 100 detailed interviews with entrepreneurs in each country to shed light on the obstacles and opportunities that comprise the entrepreneurial ecosystems in these post-revolutionary states.
The survey results paint a small yet detailed portrait of what life is like for the Egyptians and Tunisians trying to make ends meet in countries with increasing unemployment rates, among other worries. Dysfunctional and inaccessible regulatory structures, crony networks solidified by corrupt past regimes, and a lack of access to information for the private sector and policymakers are only a few of the areas for which Adly’s research provides nuance.
Who are the entrepreneurs that can withstand such an unstable environment? The majority of respondents in both countries affirmed that they do not trust formal contract enforcement, managed to start their business largely through self-financing due to a lack of access to loans, and endure high transaction costs as a result of inadequate institutions. They are men and women, younger and older, more or less educated, formally registered or informally operating, risking bankruptcy and/or jail time for a failed venture, running joint or solo endeavors—and they are all citizens for whom their government is not working.
As part of the American Enterprise Institute’s Philanthropic Freedom Project, AEI President Arthur Brooks recently interviewed Microsoft co-founder and philanthropist Bill Gates about the intersection between the exceptional entrepreneurial success of Microsoft and the extensive charitable contributions of the Bill and Melinda Gates Foundation.
When asked about how a free market supports philanthropy, Gates explained that effective governments have the capacity to implement social services and deliver necessary support to citizens, but lack the resources to improve upon goods and delivery mechanisms. Taking on the expensive risk of such innovation therefore falls to the private sector, which has a financial incentive to invest in what would otherwise become a market failure.
However, sometimes needed goods are not lucrative for private enterprise to invest in, either. Gates offered the example of anti-malarial medicine research, which proves to be an undesirable field for pharmaceutical companies to invest in due to the inability of most people in malaria-affected countries to afford these medicines at the costs required to support such an expensive research effort. This is the space in a free market where philanthropic efforts, such as those of the Bill and Melinda Gates Foundation, step in to provide research and development assistance that will hopefully produce a cheaper and more effective product.
“Here’s why you have my undying support and friendship: you are doing what I take for granted all the time and forget sometimes. You are carving out the space for people to breathe and express themselves in a way that I think is incredibly admirable…”
— American Satirist Jon Stewart to Egyptian Satirist Bassem Youssef, April 24, 2013
Egypt has once again captured the world stage these past few weeks as millions of revolutionaries charged Cairo to demand President Morsi’s ouster and were supported by military intervention. As we continue to watch the events in Egypt unfold, many are resting their hopes on this revolution as a grand solution to the disappointments that lingered after January 25, 2011. In fact, in these past two years Egypt has focused primarily on fresh leadership to revive hope—a new father figure for Egypt who could keep the passions for democracy and unity burning after the streets cleared and the face paint washed away.
As Egyptians again search for a new authority, they must also address the deeper cooperative issues hindering democracy and prioritize stronger institutions to determine and stabilize the transition they seek. With strong civic and private sectors, the future of Egypt will no longer be determined by one Egyptian, but by all Egyptians.
Anna Nadgrodkiewicz and Marko Tomicic present the Implementation Gap handbook.
This past week, CIPE’s Cairo field office worked with partners Federation of Economic Development Associations (FEDA) and United Group to facilitate a conference on “Combating Corruption between the State and the Society.” The event was intended to summarize the lessons learned and experience gained by CIPE and its partners since 2008 under CIPE Egypt’s U.S. Agency for International Development- funded Combating Corruption and Promoting Transparency program, and to lay the groundwork for the newly-funded, two-year next phase of the initiative.
Of particular interest to the approximately 120 Egyptians present were two panelists who telecasted in from our Washington, DC office to share their perceptions of the “implementation gap” in Egyptian governance.
Marko Tomicic, a manager at the innovative transparency, governance, and corruption research organization Global Integrity, encouraged the audience to shy away from the conventional reliance on ranking indexes to understand the relative successes and failures of a country, and in particular, their own country.