July 12 (Bloomberg) -- Egypt’s first elected civilian president arrived in Saudi Arabia to strengthen ties with the region’s biggest economy as negotiations to form a government in Cairo continue.
Mohamed Mursi, on his first foreign trip since winning the presidency last month, met Saudi officials and members of the royal family in Jeddah before performing the lesser pilgrimage, or Umrah, in Mecca today. His visit follows an invitation from King Abdullah, who had been allied with Egypt’s deposed leader, Hosni Mubarak.
“His economic agenda will be firmly focused on capital flows -- both direct Saudi investment and official aid,” said Said Hirsh, an economist at Capital Economics in London. “Saudi Arabia will have no problem helping Egypt with more funds. Of course, it has to first deliver on its earlier pledges, some $4 billion. But I am sure it will be ready to provide more funding if it feels confident that Egyptian politics will remain firmly aligned to those in the gulf.”
Mursi has struggled to assert his authority over Egypt’s former ruling generals and confronted the judiciary. A constitutional court overturned his order to reinstate parliament, a ruling he accepted yesterday. He inherits an economy battered by 17 months of unrest that followed the uprising against Mubarak.
Egypt, which used up more than a half of its international reserves in that period, is seeking to reach a $3.2 billion loan agreement with the International Monetary Fund.
Mursi is expected to name his first prime minister “within hours” of arriving back in Cairo, the state-run Al-Gomhuria newspaper reported. State-run Nile TV said he should finish the visit today. State media have tipped Mahmoud Abul-Eyoun, a former central bank governor, as the likeliest candidate.
The Freedom and Justice Party, the Muslim Brotherhood’s political arm, wants 35 percent of the posts in the new government, according to Al-Gomhuria, which named Essam el-Erian and Mohammed el-Beltagy, among the party’s leaders, as possible Cabinet members.
Mursi, 60, who comes from the Brotherhood’s ranks, was elected president with a slender majority. He has decreed that another parliamentary vote will be held within 60 days of the approval of a new constitution in a referendum. The charter has yet to be drafted.
Remittances from Egyptians working in Saudi Arabia, the world’s top oil producer, accounted for 13 percent of the $7.8 billion that entered Egypt in the fiscal year through June 2009, according to last available breakdown of data on the Central Bank of Egypt’s website. That’s the fourth-largest contribution behind expatriates sending money home from the U.S., Kuwait and the United Arab Emirates.
Mursi’s visit “is important from Egypt’s economic perspective, given that is heavily reliant on tourism, remittances and capital flows from the Gulf,” said Hirsh. “From a Saudi perspective, Egypt is perhaps the most important geopolitically of all the Arab countries. So making sure that it remains on the side of the Gulf states is crucial given troubles with Iran.”
Tensions have long existed between the Muslim Brotherhood and the Saudi monarchy, which follows the austere Wahhabi interpretation of Islam. While Egypt and Saudi Arabia enjoyed close relations under Mubarak, the government in Riyadh withdrew its ambassador from Cairo in April after a diplomatic spat over the detention of a rights activist, Ahmed el-Gizawy, in the kingdom.
Saudi officials agreed to increase investment in Egypt and provide more job opportunities for Egyptians, MENA reported today, citing Yasser Ali, a spokesman for Mursi. Saudi Arabia, which pledged to provide Egypt with almost $4 billion in aid last year, deposited $1 billion at the central bank in Cairo in May.
Egypt’s benchmark EGX 30 stock index rose for a third day, gaining 0.7 percent at 12:56 p.m. in Cairo.
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