Foreign investment and the tripartite relationship: government, foreign investors and local investors during Egypt's economic opening

Gillespie, Kate (1983) Foreign investment and the tripartite relationship: government, foreign investors and local investors during Egypt's economic opening. Doctoral thesis, University of London: London Business School.

Abstract

This thesis is about the tripartite relationship among government, foreign investors and local private investors. In particular, the study centers on Egypt during its Economic Opening under President Anwar Sadat, although the implications of the study are more far-reaching. The thesis contends that there are discernable patterns of coalition building and erosion among the three parties concerned with foreign direct investment in developing countries. These three parties-government, foreign investors, and local private investors--tend to enter bipartite coalitions, two parties in coalition with the exclusion of the third, which form and erode as each of the parties strives to increase advantages to itself. Furthermore, these shifting coalitions among the three parties are likely to follow a succession, possibly even a cyclical pattern. Such a pattern may be observed in Egypt in the 1970s. Egypt's Economic Opening began, as have other open-door policies, with a "development coalition" between government and foreign investors in which the Egyptian government offered incentives to potential foreign investors in hope of receiving assistance in national development. The original development coalition was later replaced by a "capitalist coalition" in which the government could be perceived as being more pro-business in general and in which local private investors rose to a position of essentially equal status with foreign investors as far as government incentives to investment were concerned. Subsequently, as Egyptian investors began to feel more secure in their position vis-a-vis their government some began to push for discriminatory measures against foreign investors, and a "nationalist coalition" began to emerge. Even the nationalist coalition proved unstable, however. Local private investors taking advantage of the Economic Opening represented only a thin layer of society, and their behavior generated substantial political controversy within the country. Opposition to this class culminated in government measures designed to return the Economic Opening to its original development-coalition orientation. Thus the coalition cycle could be said to have come full circle.