Draft Constitution: Army Autonomy & Greater Secularism

BMI View : Egypt's draft constitution is another tentative step towards a return to an elected government and underlines our view that the worst of the political crisis in the country has passed. The proposed constitution, if passed, will increase the secular nature of government and enshrine the independence of the army.

Egypt's draft constitution is another tentative step towards a return to an elected government and underlines our view that the worst of the political crisis in the country has passed. The date of the referendum on the constitution has yet to be confirmed but is likely to be at the end of January, with parliamentary and presidential elections following in Q214. Whilst, there is a significant likelihood for protests at the time of each vote, we believe that on the whole these votes will mark steady progress back towards a popularly elected regime and a reduction in political risks. The order of parliamentary and presidential elections has not been decided and there is a chance that presidential elections will be held first. This is a relatively significant change and answers concerns that the new parliament is likely to be highly fragmented and thus the election of a president first would ensure greater political stability.

The draft constitution marks a significant break from the previous version under the Muslim Brotherhood, particularly regarding the role of Islam and the army. The draft allows military trials for civilians and avoids scrutiny of the arm's spending by listing its budget as a single entry in the national accounts. In addition, over the next eight years, a council of top commanders will have to approve the defence minister. A final key development is putting the army in a position where they are almost outside of politics, with the government decreeing that Egyptian soldiers will not be required to swear loyalty directly to the president of the country.

Potential For Gains
MENA - BMI Political Risk Ratings

BMI View : Egypt's draft constitution is another tentative step towards a return to an elected government and underlines our view that the worst of the political crisis in the country has passed. The proposed constitution, if passed, will increase the secular nature of government and enshrine the independence of the army.

Egypt's draft constitution is another tentative step towards a return to an elected government and underlines our view that the worst of the political crisis in the country has passed. The date of the referendum on the constitution has yet to be confirmed but is likely to be at the end of January, with parliamentary and presidential elections following in Q214. Whilst, there is a significant likelihood for protests at the time of each vote, we believe that on the whole these votes will mark steady progress back towards a popularly elected regime and a reduction in political risks. The order of parliamentary and presidential elections has not been decided and there is a chance that presidential elections will be held first. This is a relatively significant change and answers concerns that the new parliament is likely to be highly fragmented and thus the election of a president first would ensure greater political stability.

Potential For Gains
MENA - BMI Political Risk Ratings

The draft constitution marks a significant break from the previous version under the Muslim Brotherhood, particularly regarding the role of Islam and the army. The draft allows military trials for civilians and avoids scrutiny of the arm's spending by listing its budget as a single entry in the national accounts. In addition, over the next eight years, a council of top commanders will have to approve the defence minister. A final key development is putting the army in a position where they are almost outside of politics, with the government decreeing that Egyptian soldiers will not be required to swear loyalty directly to the president of the country.

The constitution will also enshrine a more secular version of government than experienced under the Muslim Brotherhood, and appears to hark back to the regime under President Hosni Mubarak. The 50-member committee tasked with amending the suspended 2012 constitution is overwhelmingly secular and liberalist with only two outwardly Islamist political members. By way of contrast, in December 2012, when the Muslim Brotherhood was in power, the 100-member committee charged with re-writing the constitution consisted of 60 people affiliated with Islamist groups. This has been reflected in the newconstitution which removes the role for clerics to decide if new legislation confirms with the principles of Islamic law, restoring that right solely to the constitutional court.

Increasing Likelihood For Sisi To Run, And Win

As we have highlighted previously, we see an increasing likelihood that Egyptian defence minister General Abdel Fattah el-Sisi will run for president in next years' elections (See: Momentum Builds For el-Sisi To Run As President November 22). It appears extremely likely that el-Sisi would win any vote if he were to run. The defence minister appears to have substantial popular support, as well as the backing of key institutions such as the army and opposition candidates. In addition, there is a lack of an alternative. Indeed, Mohammed Elbaradei, the former head of the International Atomic Energy Agency, could be a contender; however he has fared poorly in previous elections and does not appear to have widespread popular support.

Modest Improvements To Continue
Egypt - Short-Term Political Risk Components (Out of 100)

Even if el-Sisi does not run as a presidential candidate, we expect little reduction in his, and the army's power in government. In this scenario, we would expect a candidate from outside the army to win the election, but become a figurehead, as much of significant executive power remains with the army. We expect the opposition Muslim Brotherhood to face either a de facto or de jure ban on its activities, or perhaps refuse to take part. Indeed, for as long as the army remains the key political players, it is highly unlikely that the Muslim Brotherhood will return to power.

The likelihood that the Muslim Brotherhood's Freedom and Justice Party (FJP) will play any role in forthcoming elections is minimal. It is likely that the interim government will place a ban on 'religious parties' or a more explicit ban on just the Muslim Brotherhood. Even if this is not the case, the party themselves may decide not to take part in elections, arguing that they were ousted unconstitutionally with three years of their mandate still to run.

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Sector: Country Risk
Geography: Egypt
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