Friday, February 4, 2011

The immediate economic impact of the Egyptian protests

The events of Cairo, Egypt have captivated the world. Thousands of demonstrators have clashed with government forces, demanding the immediate resignation of President Hosni Mubarak. Tanks have rumbled through the streets. Tear gas has rained down. And blood has flowed.

While most of the focus has been on the effects this will have on politics in Egypt and throughout the Middle East, the events in Tahrir Square have repercussions beyond the presidential palaces of the region. Most business-related stories that have emerged from Egypt relate to the shut down of cell phones and Twitter. But there is so much more to consider.

Imagine what it would be like to work in a city where tensions are high and the streets simmer as people wonder if and when the pot will begin to boil over. Try selling your bread and butter in the marketplace that is witnessing the face-off between flag-waiving protesters and gun-toting soldiers.

Events are happening so fast that it is difficult to get an accurate read on what is occurring or their effects. Perhaps that is why, beyond the politics of the matter and the blockage of social media, we have read very little about the effects the demonstrations have had on business. Nevertheless, international business people need to understand how events like the Egyptian protests can affect them even if they are not physically present.

On Sunday, January 30, Yahoo! News ran an Associated Press article that reported that the events in Egypt caused stocks being traded in other Middle Eastern markets to lose value. For example, when the market opened in Dubai, nervous investors caused regional business to lose 4 percent of their value. These losses affected firms in industries as diverse as real estate to airlines to port operators. A day later MSNBC attributed losses in the Japanese, Korean and Australian markets to the events in Egypt.

Beyond the loss in market value and the violence in the streets, international firms with operations in Egypt are also wondering what the “rules of the game” will be in a post-Mubarak Egypt. What new regulations will be put in place? What new, if any, freedoms will they have? How soon will rule of law be re-established if lost? In other words, how difficult will it be for me to sell my bread and butter once all the flag waving is done and the guns are put away? These are all questions that are or should be on the minds international business people in the Middle East.

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