February 5, 2002

Under the auspices of the Insurance Committee, the American Chamber of Commerce in Egypt hosted a breakfast briefing at the Cairo Marriott Hotel with the Honorable Frank Wisner, former U.S. ambassador to Egypt and current vice chairman, external affairs, of American International Group (AIG). Although the title topic of the briefing was “Insights on American foreign policy after September 11," Ambassador Wisner went into a great range of topics, discussing their implications for Egypt, the United States and the international arena.

Welcomed by Mr. Mohamed Mansour, president of Amcham Egypt, Ambassador Wisner started off his talk with the ramifications felt by the world economy after September 11. Pointing to the overlap between world business and politics existing today, Wisner called the audience’s attention to a year ago when President Bush’s administration was just entering into office. Perhaps one of the administration’s greatest mistakes was its lack of defined foreign policy despite the presence of seasoned officials. After September 11, this lack of definition has completely changed, and now the U.S. administration is trying to balance off between this overlap of business and politics. Although he declared the military campaign in Afghanistan a success, Wisner stated that the war against the Taliban, Al Qaida and international terrorism was not yet over. While a great portion of U.S. foreign policy is dedicated to the complete demise of terrorism, the global economy, nevertheless, remains a priority. Wisner lauded the increased role of a business council established for greater international understanding.

Wisner then focused on the direct effects of September 11 on a specific sector: insurance. As vice chairman of American International Group, the world’s largest insurer, Wisner gave advice to those present on the current situation. With the rising demand for war terrorism insurance and re-insurance, Wisner asserted the scarcity of supply in an industry that has suffered greatly after September 11. Preliminary estimated losses of the attacks ranged anywhere from $30-$80 billion, with current estimates being $50 billion, of which the insurance industry’s share alone is expected to be 40 percent. There is also a greater need for “re-insurance,” causing the largest demand in the industry today. Wisner urged Egyptian businessmen not to acquiesce to “cheap insurance”; even though the emergence of new capital recovery will be a slow process.

The former ambassador then proceeded to outline the Egyptian economy’s case. Recalling the time when he was in Egypt, during the late 1980s and early 1990s, Wisner witnessed the start of the structural adjustment and reform programs in Egypt. Although the benefits of these programs have yet to be fully felt by the Egyptian economy, the former ambassador urged the government and private sector to continue with the liberalization process. Wisner saw the sharper competition in industries like textiles, coupled with the flat growth and rising fiscal deficit as the most complex symptoms facing the Egyptian economy today. In addition, the American economy, although rebounding, is still facing slow growth and substantial over-capacity. Similarly, both Europe and Japan are facing slow growth. Thus, Egypt is facing a dual challenge: one is to cope with the immediate consequences of September 11, and the other is to deal with the larger long-run economic problems.

Although Wisner stated he had no “fix-it solutions," he did make some recommendations as to how the Egyptian economy could heal itself. Rather than seeing problems only within the macroeconomic field, Mr. Wisner saw the larger looming economic issues within the microeconomic context. He emphasized the need to further liberalize the economy, focusing more on freeing up the market, and making sure that micro-industries were competitive in their respective realms. The next phase is to cooperate with international financial institutions, namely the IMF, to facilitate and aid the transition to a micro focus.

Moving on to Egyptian-U.S. relations, the former ambassador made the declaration that mutual Egypt-U.S. interests far outweigh disagreements, regardless of how sharp these disagreements may be. The way ahead must lie in promoting more cooperation in the economic arena. More importantly, the U.S. government continues to guard its strategic relations with its three pillars in the Middle East: Egypt, Saudi Arabia, and Israel, taking us to our next topic: the Palestinian-Israeli peace process. Seeing the next stage of negotiations as particularly crucial to the Middle East’s stability, Wisner emphasized that this time talks must be different, needing the full involvement and commitment of the region. The previous approach was marked by a top-down policy, rather than using a bottom-up approach, accentuating the need to appeal to the public and to actively engage the ordinary layman. This approach is not exclusive to Egypt; instead, it must be applied to every Arab country genuinely interested in the pursuit of real peace, and not just secret diplomacy. Not only is people’s involvement required for peace-making, but also the need to halt the cycle of denigration, which undermines the confidence of all parties involved.

Core to the success of the peace-making process is the re-strengthening of Egyptian-U.S. relations. Defining the economic and political goals of this relationship, and going through the means of achieving them, should be a priority to both countries. Egypt must reinforce direct dialogue with U.S. interests, particularly targeting the U.S. Congress. Reflecting on Egyptian-U.S. relations, Wisner declared Egypt is and has been “a lighthouse of good ideas.” Moreover, there is still a need for liberal values to continue to be heard for the release of these good ideas.

Question and Answer Forum: 

Due to the constraint in time, Wisner could only receive about four questions, most involving U.S. policy in the Middle East, with specific interest on Egypt. The first question revolved around the Palestinian-Israeli peace process and the American bias towards Sharon. Wisner replied that he regretted that the U.S. government relied profusely on Tel Aviv in the terms of the ceasefire; however, he urged the audience to look at it from the other side. Mr. Arafat promises involvement in peace-making, yet he was also involved in the arms deal boat, causing mistrust to all parties of the process. On the question of the future of FDI in Egypt, the former ambassador emphasized that it was a matter of providing a suitable environment. Egypt must offer a friendly atmosphere for investors, dealing with official authorities, and eliminating an inefficient bureaucratic process constraining investors. China receives about $40 billion/year in foreign capital. Wisner saw that the Middle East could follow suit by removing numerous entanglements that keep capital out. This takes us to our next question: When will Egypt and the United States have a Free Trade Agreement and why has it not happened yet? Wisner confirmed that he was indeed in favor of an Egypt-U.S. FTA, but that it will, however, take time. He asserted the need for Egyptian and U.S. businessmen to do a cost/benefit analysis of a potential FTA. On the other hand, he also pointed to the economic obstacles standing in the way of an FTA: the closed nature of financial services, the lack of development in the financial industry and the presence of too many protected industries, among other reasons. Nevertheless, Wisner was clear on making the point that the lack of an FTA was not for political reasons. On the question of whether the vice chairman of AIG considered Business Councils as useful entities, Wisner said he absolutely found them so. Pointing to the many productive activities of business councils, he singled out AmCham Egypt in particular for the range and scope of its activities. Lobbying for good ideas and causes is imperative to the establishment of an efficient and constructive business environment.

Ambassador Frank G. Wisner Bio

Frank G. Wisner is vice chairman, external affairs, of American International Group, the leading U.S.-based international insurance organization. Prior to joining AIG, he was the U.S. ambassador to India from July 1994 through July 1997. He retired from the U.S. government with the rank of career ambassador, the highest grade in the foreign service.

Wisner joined the State Department as a foreign service officer in 1961 and served in a variety of overseas and Washington-based positions during his 36-year career. Among his other positions, Wisner served successively as U.S. ambassador to Zambia, Egypt and the Philippines. Before being named U.S. ambassador to India, his most recent assignment was as undersecretary of defense for policy. Prior to that, he was undersecretary of state for international security affairs.

Wisner is a graduate of Princeton University. He is married and has four children.

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