At the World Economic Forum in Davos, we interviewed an Arab billionaire investor about the state of geopolitics.
We asked him about ISIS, Syria, Mubarak, Obama, Israel, China, Oil, Africa, and the Arab Spring.
The investor agreed to answer our questions on the record, but only if we redacted his name and only refer to him as an “Arab” investor and billionaire.
Through a spokesperson, this investor said that if we were to publish the honest answers he wanted to provide us along with his name, it would “haunt him.”
“This is simply a reflection of the times in which we live.”
The interview lasted 30 minutes.
Here is a brief summary of the Arab investor’s views, which we do not necessarily share but do find fascinating:
- Democracy doesn’t always work. It didn’t work in Egypt after the Arab Spring because Islamists were going to use it to gain power and pull up the ladder behind them.
- What Obama misunderstood about the Arab Spring was that the movement was made up of illiterates who were susceptible to more organised Islamist “lunatics.”
- If the current President of Egypt fails, significant terrorist attacks will be an every-decade occurrence in the US.
- Israel doesn’t want peace because Russian immigrants have taken over its political system and moved it rightward.
- There are 70,000 to 80,000 ISIS fighters. Their rise to power is the result of a Faustian bargain made by Syrian president Assad — similar to one that Egypt’s Sadat made in 1971, and that ultimately cost him his life.
- Indeed, violent extremists across the region have come to power because secular political leaders allied with them in hopes of gaining and maintaining power.
- Now that it has a middle class built on commodities, Africa’s economy has turned a corner. In 40 years, it will be a major force in the global economy.
- China only seems to be providing cheap capital to Africa. In fact, it is over-charging third world nations.
Business Insider: It’s been four years since the start of the Arab Spring. In Egypt, it seems like the revolution has been undone. Before, there was military rule. Then came the Spring and a democratically-elected, Islamist president. Then he was thrown out. And now there is military rule again. What is the state of Egypt’s economy now?
Anonymous Arab Investor: Things are improving in Egypt in the past six months. Starting January 2011 and until six months ago, things were very challenging, so the risk perception and the risks were quite high. Today, my view is that the actual risks have come down. That is the perception from the inside.
From the outside, the perception is obviously still one of elevated risk. That is reinforced by a geopolitical picture in some parts of the Middle East/North Africa region that is unsettling.
I find it ironic that a year ago the conventional wisdom was [that the ouster of Egypt’s democratically elected president, Mohammed Morsi] was a coup. The conventional wisdom today is that it was the best coup ever. [The new president,] El-Sisi, is a guy who’s a moderate. He can rein in the hard interpretation of Islam.
What took place here was a fight for the soul of Egypt. [Was it going to be] a society with respect for all sorts of minority rights? Or [was it going to be] a theocratic state ruled by a Wahhabi-style interpretation of Islam? [Was it going to be] a country that fights for the separation of church and state, or not?
Business Insider: Was the Arab Spring itself a good thing or a bad thing?
Anonymous Arab Investor: The reasons for the revolts were correct: The growing income inequality, the growing unemployment. The problem was, whenever you unleash one of those springs, you can’t control the final outcome. The people who [unleashed the Arab Spring] were youth who were not organised. They didn’t have a political mandate on the ground.
So, the Muslim Brotherhood, which was never on the forefront of the Arab Spring, [was able to] they jump on it because they were the only semi-organised force on the ground. They exploited the situation to their benefit. It got us to where we were one year ago.
Business Insider: Which was not a good place?
Anonymous Arab Investor: Which was a terrible place.
Business Insider: And now it’s gotten better?
Anonymous Arab Investor: It’s getting better by the day. I wouldn’t advocate returning to the situation before 25 January 2011 [the beginning of the Arab Spring] because there were [legitimate] grievances [with then president Mubarak.] But now we have at least we have charted the course. We agree on a private-sector-led economy with a lot of social programs.
Business Insider: Mubarak, the military-backed president prior to the Arab Spring, has recently been cleared of certain charges. Is that a good thing, bad thing, or irrelevant?
Anonymous Arab Investor: Irrelevant. I mean, if you are accusing him of political negligence, of neglecting education, healthcare, of responsibility for the growing slums that have been built around Cairo, he’s certainly guilty of that. Is he guilty of embezzling a house, a villa? Be serious. To me, that’s not important.
I judge him by how poorly he behaved on key agendas: The relationship between Muslims and Coptics, the lack of healthcare, and unemployment, the slums, the income inequality. Those are areas where he failed to lead. So it’s a political trial as far as I’m concerned and not one that involves criminal activity, unless one can prove he gave orders to shoot on demonstrators, which nobody has been able to prove.
Business Insider: In the United States some people say — maybe half the people say — that president Obama did a very bad job managing the Arab Spring and what happened over there. What’s your view?
Anonymous Arab Investor: As a result of many factors, the United States has not always been either consistent [about] or understanding of the realities in various countries.
I think [Obama] misunderstood the fact that the [population’s] illiteracy on the one hand and money on the other made it possible to rig the democratic process.
Plus there was a misguided belief that immediate, total democracy works universally, one version of it, throughout the world. I think that’s an open debate. I think democracy needs prerequisites and it is a process.
[Former president Morsi and his party] exploited religion to their benefit. Those guys were not ready to govern.
Theoretically you could have changed them after 5 years but that assumes that you will have new elections after 5 years.
Also the assumption that [the Islamists] will moderate after they are integrated into the political process has proven wrong.
History is filled with examples of people who use democracy as a ladder. You know, we go to the top floor through democracy and then we go up and we take the ladder with us. Democracy is the ladder.
Business Insider: How and why did ISIS come out of Syria?
Anonymous Arab Investor: You have a brand of extremist religions — extreme interpretation of Islam, which have their original roots in Saudi Arabia. That was the source of this interpretation, especially in the Wahabi interpretation. So, ’70s started and even a little bit earlier.
And, you know, it took roots because of a variety of social factors. It migrated to Egypt as a result of an unholy alliance between President Sadat and the Islamists who killed him. So, in 1971 President Sadat made a deal — that famous deal where he met the leaders of the Muslim Brotherhood in a place called Gianaclis, and they agreed that he would open the door to get them out of prison in return for them attacking the Nasserites and the leftists, who were the strong party at that point in time. They succeeded, but he paid the ultimate price, which is his own life. Because at the end of the day he was killed by them.
And if you look at his four or five latest — the last speeches of his life, he said “I made a mistake. I should never have done this.” Then he ultimately, a number of weeks later, he paid with his life. Anytime you tamper with religion you will pay. Look at Al Qaeda and it’s the same story.
So we’re living with that and throughout the region, starting with al Qaeda, followed by ISIS. Now ISIS has 70,000/80,000 fighters in Syria and Iraq.
Any time you attempt to use religion to advance a political agenda, you get burned. Al-Qaeda and ISIS are both the result of failed attempts to use religion — whether it was the Russians in Afghanistan or the Assad regime in Syria — to advance a political agenda. I say ‘failed’ because although the prime objective was achieved, the unintended consequences were far, far more dangerous and enduring.
Business Insider: How great is the threat from extremists and what is the appropriate response?
Anonymous Arab Investor: Look at the map. Tunisia, Libya, Sinai, Syria, Iraq, Hamas, Yemen [are all struggling with Islamic extremists]. If Egypt had also been in that category you would have had a brand of repressive Islamic interpretation [across the region]. Everyone has a stake in Sisi’s success — even the U.S. If he fails, significant terrorist attacks in the United States will be an every-decade occurrence.
Business Insider: Can we have a pluralistic Middle East that involves Islam?
Anonymous Arab Investor: That involves Islam? Yes. That involves ‘Islamists’? No. The difference is between people who are devout versus those who have decided to take matters into their own hands — ‘religious activists,’ if you wish. It depends which interpretation. [The Egyptian] president is a very devout Muslim, but he espouses an interpretation of Islam which is the right interpretation. Read his January 2015 ‘religious revolution’ speech. It’s a very important speech. He said we need a religious revolution. We need to weed out the wrong interpretation of Islam — [the one where people] want to kill 5.8 billion people to the exclusion of 1.2 billion or 1.4 billion Muslims.
People need to make the very important distinction between Islam and a brand of interpretation of Islam which is extreme.
You know, you have the same [extremism] in the US. I sometimes look at several people in the US and think, “My God, they’re as bad as ours.” The [difference] is [US extremists] don’t, by and large, advocate violence.
If you want some extremists, go to the Bible Belt and I’m sure you’ll find a big share of them there. The [difference] is they have never espoused taking action into their own hands and killing other people. You’ll find the occasional lunatic. Our lunatics outnumber yours. They are not 100-150, they are 200,000-300,000.
Business Insider: What are your views on Israel?
Anonymous Arab Investor: The problem is Israeli politics. As a result of a number of years of rightward movement and of emigration from Russia, the country has moved totally to the right in a political sense. The proportion of people who had deeper intellects and deeper understanding of historical development of the region aren’t there.
Today, the middle has shifted to the right, tremendously. You look at the region and you read some of the comments that are being made by Israeli politicians and you could never read something like that 20, 25 years back.
Obviously, everybody within the Arab region understands that Israel is there to stay, that you need a two state solution.
One part of the problem is on the Israeli side there is nobody in the political arena to espouse that. They think that time is on their side. They procrastinate.
Europe has correctly read that. Sweden has recognised a Palestinian state for a variety of reasons.
The U.S. will take longer to realise that Israel now doesn’t want peace. They want all the land, they want to be a Jewish state, and they want to be a democracy. Those three are incompatible. Something has to give.
Business Insider: Let’s talk about oil. How has the sudden drop changed things and what does it mean? And is it permanent?
Anonymous Arab Investor: Is it permanent? I believe that lower oil prices will destroy supply of marginal fields including heavy oil or shale, and that will bring back a balance sometimes down the line. That’s how markets work at the end of the day. And that is against the backdrop of a slower demand in China and in Europe.
Business Insider: Are you making any kind of bets one way or the other?
Anonymous Arab Investor: No. If I knew [when the price would rise again] I would. Now, within our region, Egypt stands to benefit tremendously from [lower oil prices] because Egypt is a net an importer of oil. So, Egypt benefits today to the tune of $US7 to $US8 billion in reduction in budget deficit and balance of payment as a result of the drop in oil prices, per year. That’s a substantial amount and Egypt benefits.
Obviously, some countries in the region will be adversely impacted, and that may result in lower FDI [foreign direct investment], which may adversely affect Egypt. So, yes, you may find less inflows, but I would take any day a reduction of my budget deficit and balance of payments as opposed to relying on FDI’s coming from somewhere else.
Business Insider: What is China doing in Africa?
Anonymous Arab Investor: China is investing throughout Africa. We see this across the continent. China is providing what seems to be very cheap money to some African countries to build pieces of infrastructure. If you factor in everything including the value of the contracts, etc., this will end up being very expensive money.
Business Insider: Explain.
Anonymous Arab Investor: If [China] builds a piece of infrastructure at double the cost, even if it gives concessionary financing over 50 years, it has taken a profit upfront. So, on the face of it, [China is providing] very long-term financing at concessionary rates, but if the value of the contract is double what it should be, then it becomes very expensive.
Business Insider: What will Africa look like in 10 years? What’s happening there?
Anonymous Arab Investor:It’s very positive.
Africa, historically, was a land where people got commodities. That was the first view of Africa until 10 years ago. Let’s get timber, let’s get copper, let’s get oil and take it out. So that was the first phase. When commodity prices started to rise, Africa benefited tremendously. Some places which were ready, like Angola, like South Africa, like Nigeria, benefited tremendously from the commodity cycle that was there until recently.
[Now,] for the first time there is a middle class that is growing and because of that Africa became a market in and of itself, as opposed to a place where we can get commodities out. I think demographics and the growing middle class in Africa will have a profound impact on Africa for the first 10 years, and on the world for the following 40.
Think of Africa as where China was 30 years back. It was a blip in the global economy. But as a result of successive years of 10-plus per cent of growth, you have a country that has grown to be the second largest economy on a global scale.
So, in 10-years’ time, things are going to improve tremendously in Africa on a local scale, and on the quality of life scale. Beyond 10 years, this will have a marked impact on the global economy and it will provide one of the beacons growth within the global landscape.
Beyond the growing middle class, the second thing that is happening in Africa is that you have much better governments and governance.
You have a younger generation of leaders who have, to a large extent, Western educations and if they have not been, they have been exposed to it because the telecommunication revolution is making it such that everybody knows everything.
After a growing middle class and better governance, the next thing Africa has is a number of very well-educated Africans that are willing to come back and invest and work in their own countries. That is extremely important because that increases the capacity of those economies and increasing capacity is extremely important.
Business Insider: What does Egypt look like in 10 years?
Anonymous Arab Investor: I’m bullish on Egypt for a variety of factors. For the first time you have a government that is willing to pay the price. So the political will is there. You also have respect for minority rights. Women and Christians are a strong element of the Sisi coalition.
Business Insider: Pay what price?
Anonymous Arab Investor: The price of reforms. You know, look at you in the US. Is anything getting done between the Republican and the Democrats? They can’t even agree on anything. I follow US politics quite closely. And it seems that the bickering and infighting is — nobody wants to pay the price of [losing] re-election. In our case, you have a president and a government that has stood up [and is] doing what’s right and is ready to pay the price.
So you have a government that is super clean, with no corruption. Everybody recognises that, which is extremely important. You have a guy who is willing to put in the time and effort to tackle the tough problems.
Obviously, there is a learning process. The problems are real and they are deep, an anybody who thinks that those problems can be tackled in one year or two years is dreaming. But you go through reforms, you move along the path and good things will happen. You can’t ask for anybody to do anything better.
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