TSG IntelBrief: Sisi’s Trouble in Paradise
November 13, 2015

Sisi’s Trouble in Paradise

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Bottom Line Up Front: 

• The downing of a Russian passenger jet in the Sinai has serious implications for the long-term stability of the peninsula, and Egypt as a whole

• The tourism industry accounts for 14.8% of Egypt’s GDP, and any shocks to the industry could be disastrous for the Egyptian economy

• The tourism industry also accounts for 11.6% of total employment in Egypt, or almost 3 million jobs

• It remains to be seen how the Sisi regime—which has strongly emphasized security—will work to secure this vital industry, and attract foreigners back to Egypt.

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For decades, Egypt has marketed itself as a prime tourist destination, offering cultural intrigue, historical wonders, and picturesque beaches. In the fickle tourism industry, however, instability is bad for business. The 2011 revolution hit the tourism industry hard, decreasing its total contribution to GDP by 14.2%. Since then, the Egyptian government has been trying to rebuild the country’s image, but the 2013 military takeover and the rise of Islamist militancy have made that an extremely difficult task. Though the Sisi regime has placed significant emphasis on security, acts of terror continue to take place. The downing of the Russian Metrojet—now generally believed to have been brought down by an onboard explosive—is likely to deal a significant blow to the Egyptian brand, and presents a serious dilemma for the Sisi government, particularly in the restive Sinai.

Following the revolution of 2011, Egypt’s unemployment rate jumped from less than 9% to more than 12%, further complicating a delicate sociopolitical environment. At least part of that jump came from the contraction of the tourism industry, which effectively lost $3 billion in 2011 alone. Despite these losses, Egypt’s tourism industry continues to account for 11.6% of employment, which translates to almost 3 million jobs. Further contractions of the industry will undoubtedly raise the country’s unemployment rates even higher.

Since the revolution, the resort city of Sharm el-Sheikh has proved relatively resilient, managing to attract millions of European tourists—mainly Russian and British—each year. However, the downing of the Metrojet airliner has already had devastating effect on the economic lifeblood of this iconic vacation destination. Though Egyptian and Russian authorities continue to cast doubt on the reports of an onboard explosive, speculation in the media has done its damage. Russia and the UK have evacuated their citizens, and many airlines are now refusing to fly in to the Sharm el-Sheikh airport due to security concerns. Large travel companies like Thomas Cook have cancelled all flights to the city, and have not indicated when those flights might resume. An advisor to the Egyptian tourism minister has even been quoted as claiming that the disaster could cost Egypt’s larger tourism industry about 70% of its visitors.

All of this could spell disaster for the 70,000 residents of Sharm el-Sheikh, which is predicted to lose $280 million every month due to lost revenues from tourism. Before the resorts were constructed, the city was a small Bedouin fishing village; Sharm el-Sheikh does not exist if not for tourism. Given the rise of Islamist militancy in the Sinai—and the presence of groups like the so-called Islamic State—the last thing the Sisi government needs is tens of thousands more unemployed Egyptians in the most populous and prosperous city on the peninsula. Further complicating matters, many tourism workers in the city are from other parts of Egypt, and their earnings support families across the country.

Perhaps most importantly, the downing of the passenger jet effectively shattered the carefully crafted image of a ‘secure’ Egypt. Despite the extensive government emphasis on security and counterterrorism, a hostile actor was reportedly able to place a bomb on a plane full of tourists without being detected. This represents a massive lapse in security, and one that does not have a quick fix. In fact, the military is currently running security operations at the Sharm el-Sheikh airport, demonstrating the level of distrust the Sisi regime has for the airport’s security officials. The tragedy also raises serious questions about security elsewhere in the country, especially at sites popular with foreign tourists.

It remains to be seen how the Sisi regime responds to this tragedy. The militarized response to Egypt’s Islamists has so far yielded tens of thousands of political prisoners and an Islamist insurrection in the Sinai. The preoccupation with terrorist infiltration even led to Egyptian security forces mistakenly launching an air assault on a group of Mexican tourists in the western desert. Economic downturn and escalating security concerns will further destabilize Egypt, with radiating effects in the region and beyond.

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For tailored research and analysis, please contact: info@soufangroup.com

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