Social Insurance Reforms in Egypt: Needed, Belated, Flopped

Abstract

Social policies are an extremely sensitive policy field even for authoritarian regimes. Reforms in this field produce always winners and losers. They are thus potentially dangerous for all political regimes that legitimise their rule by their performance, e.g. in improving the social and economic well-being of citizens, as most MENA governments did during recent decades.

And reforms in social insurance legislation are particularly critical because they affect, almost by definition, first of all the urban middle classes. These are normally the main beneficiaries of social insurance and hence at risk to suffer from any reform. At the same time, however, urban middle classes have also traditionally been the main clienteles and allies of political regimes in MENA within society – not least because they tend to be better able than other population groups to understand the impact of policy changes, form opposition and organise resistance.

Social insurance reforms can thus undermine the stability of political regimes unless these are able to (i) convince relevant social groups – above all urban middle classes – of the fact that reforms are necessary and better for everybody than the status quo – at least on the long term, (ii) compensate at least the most influential social groups – again typically the urban middle classes – for any loss they incur through the reforms (a method that some MENA governments use to contain opposition against energy subsidy reforms), or (iii) repress civil society to prevent resistance.

The article argues that Egypt’s government under President Mubarak had to abandon both its social pension and health insurance reform plans, because it failed to convince the urban middle classes of the necessity of reforms, because it did not try to repress the urban middle classes and because it could not afford to compensate it for possible losses. In addition, the government was undecided about the main goals and elements of a reform and, hence, much too reticent and defensive in the communication of its plans so that it lost control over the public debate at a very early stage.

Under President Sisi, in contrast, the Egyptian government made clear from the beginning that it was determined to reform at least social health insurance. It was able to convince parts of the population of the necessity of reforms. It did not give any time or space for controversial discussions on its reform plans. And it argued right from the start that any opponent was jeopardising not only progress in social policies but also the unity and stability of the nation.

Keywords: social protection, social policy reform, social insurance, health insurance, pension insurance, reform, Egypt

JEL Classification: H55, I13, I18