New Political Science, Volume 28, Number 1, March 2006

Globalization, Structural Adjustment, and Pressure to Conform: Contesting Labor Law Reform in Egypt
Agnieszka Paczynska George Mason University
Abstract This article examines the decade-long contentious encounter between the Egyptian regime and Egyptian organized labor over changes in the labor law. I examine why an authoritarian regime which was often willing to deploy violence against its opponents encountered such difculties in pushing through one of the central components of Egypts structural adjustment program. I argue that Egyptian organized labor was able to inuence the process of economic restructuring in general and reform of the labor code in particular because in the decades prior to the initiation of reforms in the 1990s, unions were able to acquire important resources. These resources included legal prerogatives, a degree of nancial autonomy from the state as well as experience gained from previous contentious encounters with the state. These resources in turn allowed them to shape policy debates once the structural adjustment program commenced.

In the 1980s much of the developing world found itself grappling with a growing economic crisis and crippling foreign debt. With few resources available domestically to address these crises, countries were forced to turn to the international community for assistance. This assistance, however, was forthcoming only if countries were willing to implement far-reaching structural reforms. The newly dominant neoliberal analysis identied the state and state involvement in the economy as the primary culprit behind the dismal economic performance in the developing world. Structural adjustment reforms therefore entailed curtailing this state role and allowing the unencumbered functioning of market forces.1 These economic changes meant that the relationship between the state and society had to be fundamentally renegotiated. The state would no longer provide employment or consumer goods subsidies and market forces would now determine the allocation of resources in the economy. While everyone was affected by such profound restructuring of the economy, the costs and benets of reform were not distributed evenly across all social groups. While some beneted from these changes, others quickly found themselves struggling to cope with the changing economic environment. In other words, social contracts that had for decades governed the relationship between state and society became increasingly strained. Among those

1 Research for this article was made possible by funding from the Social Science Research Council and the American Council of Learned Societies. I would like to thank Marsha Pripstein Posusney, Robert Vitalis, Terrence Lyons, participants in the DC-Area Workshop on Contentious Politics as well as two anonymous reviewers for their helpful comments on earlier versions of this article.

ISSN 0739-3148 print/ISSN 1469-9931 on-line/06/010045-20 q 2006 Caucus for a New Political Science DOI: 10.1080/07393140500518208

46 Agnieszka Paczynska most immediately affected by cuts in consumer subsidies and proposals to privatize the public sector were workers in the formal urban sector. In other words, the benets that organized labor in many developing countries had enjoyed in decades past, including access to secure employment and pension and health benets often unavailable to other groups within developing societies came under attack.2 At the same time as governments were implementing structural adjustment programs, changes associated with globalization appeared to further undermine the power of organized labor. In particular, as national-level policies became more capital-friendly, the political clout of trade unions seemed to be weakening and workers have been caught in a relentless race to the bottom of lower wages, lower social spending, and less worker-friendly market regulations. The changes in the global economy and the structural adjustment programs have indeed often had a deleterious impact on workers job security and standards of living. These real and profound losses in workers economic status, however, should not be equated with their inability to affect the processes of change. Organized labor, although often weakened, has not remained silent and in many instances has mounted spirited resistance to these changes. In some instances this resistance has been translated into inuence on policies. In other instances, organized labors attempts to shape economic restructuring programs have been largely ineffective. What explains this variation in labors ability to make its voice heard? In this article I argue that in order to account for the differing ability of organized labor to inuence economic restructuring policies, we need to look to the institutional resources that unions can draw upon as reform programs are commenced. Of particular importance are legal prerogatives and nancial autonomy as well as the experience of past confrontations with the state. These resources will vary depending on the relationship that evolved between state and organized labor in the decades preceding reform initiation.3 Labor organizations which acquired these resources before reforms are commenced have a greater ability to ensure that their voices become part of the debate about the shape of the reforms themselves. Their ability to draw on the legal prerogatives, nancial resources and historical experience means that the political costs of silencing labor organizations are much higher than in cases where labor organizations do not have such resources. In this article I examine how historically acquired resources affect the ability of organized labor to shape economic restructuring policies by analyzing the contentious encounter between the Egyptian regime and Egyptian organized labor over the changes in the labor code. Across cases, changes in labor market regulations often generate some of the most intense confrontations between governments and organized labor. Although many analysts see labor code reforms as primarily a technical matter, as Cook points out, for organized labor, the conict over labor reform is often a struggle over rights and the power to defend them.4 Consequently, organized labor is often willing to use its political
2 See for example, The World Bank, Unlocking the Employment Potential in the Middle East and North Africa: Toward a New Social Contract (Washington, DC: The World Bank, 2004). 3 In other words, institutions once established are difcult to change. See, for example, Geoffrey Garrett and Peter Lange, Internationalization, Institutions, and Political Change, International Organization 49:4 (1995), pp. 627 655. 4 Maria Lorena Cook, Labor Reform and Dual Transitions in Brazil and the Southern Cone, Latin American Politics and Society 44:1 (2002), p. 1.

Contesting Labor Law Reform in Egypt 47 capital to resist changes in the labor code.5 In the early 1990s, as Egypt embarked on a new round of structural adjustment, the reform of labor market regulations became central to policy debates. Many observers of the Egyptian political scene anticipated that the changes would be quickly adopted. After all, the Egyptian regime was facing increasing pressure from the International Financial Institutions to nally engage in serious reforms and was increasingly scrapping the political liberalization experiment undertaken in the 1980s. With the conict between the regime and Islamist groups intensifying, the regime resorted to increasingly repressive tactics and reintroduced numerous political restrictions.6 Thus, neither the political nor the economic developments boded well for workers ability to resist regimes plans to liberalize labor market regulations. However, it was only in 2003, a full decade after it was rst proposed, that the new Unied Labor Law was nally adopted by the parliament. Egyptian organized labor was able to inuence the process of economic reforms thanks to the resources it had acquired in the decades prior to the initiation of structural adjustment policies in the 1990s. Most important, the Egyptian Trade Union Confederation (ETUC) succeeded in extracting a number of signicant legal concessions from the state that enabled it to play a direct role in policy-making. Additionally, over time, the ETUC acquired more nancial independence from the state. In other words, corporatist labor institutions, established by the postrevolutionary Egyptian regime with the goal of politically controlling unions, over time became more autonomous from the state and provided organized labor with the institutional tools to challenge the state. Indeed, as Bayat points out, observers often mistake the repressive labor environment and the close relationship between Confederation leadership and the regime for the inability of organized labor to inuence policy.7 However, as Posusney has demonstrated, labor has been able to pursue economic demands and wring concessions from the state in various issueareas important to the labor organization.8 Alongside legal prerogatives and signicant nancial autonomy, Egyptian organized labor could draw upon the years of experience in confronting the state. During the 1990s, as the Egyptian government was implementing the structural adjustment program, enterprise-level unions and rank and le members militancy grew. As in previous decades, labor took to the streets in protest when its economic interests were threatened. The high concentration of industrial workers in Cairo and its immediate vicinity has meant that labor protests over wages and job security could easily transform themselves into collective action with political overtones. The Egyptian regime, concerned about maintaining political stability and mindful of past explosions of workers anger, has proven to
Raul Madrid, Labouring Against Neoliberalism: Unions and Patterns of Reform in Latin America, Journal of Latin American Studies 35 (2003), pp. 53 88. 6 During the 1990s Islamist activism in Egypt intensied. Consequently, there were a number of violent confrontations between the Egyptian regime and Islamists. As these clashes became more bloody the regime resorted to increasingly repressive tactics in its ght with Islamist groups. For further discussion of this subject, see, for example, Eberhard Kienle, The Grand Delusion: Democracy and Economic Reform in Egypt (London: I. B. Tauris Publishers, 2001). 7 Asef Bayat, Activism and Social Development in the Middle East, International Journal of Middle East Studies 32 (2002), p. 6. 8 Marsha Pripstein Posusney, Labor and the State in Egypt (New York: Columbia University Press, 1997), p. 10.
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48 Agnieszka Paczynska be very reluctant to suppress labor protests without meeting workers demands. At the same time, the ETUC leadership, although not accountable to the rank and le, nonetheless could not simply ignore the demands of its members. The growing hostility towards privatization among public sector workers and opposition parties put pressure on the Confederation not to cave in to regime demands.9

Globalization, Structural Adjustment and Labor Although global economic integration is hardly a novel phenomenon, many analysts argue that the recent explosive growth in the volume of trade, investment and capital movements has began to reshape how states, societies, and economies interact with each other. Recent analyses of structural adjustment and economic globalization have been exploring how these processes have affected organized labor. In the view of some analysts, organized labor is no longer the powerful social, economic and political force it once was and is unlikely to again reclaim its position. According to the pessimists, a nearly perfect storm has permanently weakened unions. On the one hand, structural adjustment policies have targeted the bastions of union strength, the public enterprise sector and have shifted winning political coalitions toward the business sector and away from labor. On the other, changes associated with globalization appear to have further undermined the power of organized labor. Others, however, are less pessimistic both about how organized labor has fared in the changed economic environment and what its future is likely to be. Two distinct albeit interrelated changes associated with globalization have had, in this view, a profoundly negative impact on organized labor. First, the emergence of truly global multinational corporations, the segmentation of production and the just-in-time production process have combined to create an increasingly integrated global economy, thus heightening competition between workers in different locales. Corporations can now use the threat of moving production elsewhere, thereby undermining labors bargaining power.10 Workers across cases have been caught in a relentless race to the bottom of lower wages, lower social spending, and less worker-friendly market regulations.11 Among the most telling signs of labor weakening in this view are the dwindling union membership rolls, the decline in the number of labor disputes and strikes, the move away from manufacturing and the growth of the service sector, and the shrinking of enterprise size.12 Second, many analysts contend that globalization processes have been weakening state sovereignty thus reducing the scope of economic decision-making available to national governments. This has led to the convergence of macroeconomic policies which favor business over labor interests.
Bayat, Social Activism, p. 6. Jay Mazur, Labors New Internationalism, Foreign Affairs (January/February 2000). 11 See, for example, Alan Tonelson. Race to the Bottom (Boulder: Westview Press, 2000). 12 See, for example, Michael Shalev, The Resurgence of Labor Quiescence, in Marino Regini (ed.), The Future of Labour Movements (London: Sage, 1992); Aristide Zoldberg, Response: Working-Class Dissolution, International Labour and Working Class History 47 (1995); Manuel Castells. The Information Age, Vol. 2: The Power of Identity (Oxford: Blackwell Publishers, 1997); James A. Piazza, Globalizing Quiescence: Globalization, Union Density and Strikes in 15 Industrial Countries Economic and Industrial Democracy 26:2 (2005).
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Contesting Labor Law Reform in Egypt 49 The pressure towards policy convergence is especially acute in developing countries that have been straddled with foreign debt which further reduced state decision-making autonomy.13 However, not all studies of how organized labor has responded to and been affected by the processes of globalization and marketization have been so pessimistic. A number of analyses suggest that social groups, including organized labor, have reacted to these changes in more complex ways. These studies maintain that domestic-level institutions structure and the political struggles at the local level continue to inuence the shape of macroeconomic, regulatory, tax and other policies.14 Various institutional factors emerge from these studies as playing a particularly signicant role in shaping labors response to economic restructuring. Murillo, for instance, argues that the ability of labor organizations to affect policy reform varies both across countries and across sectors within countries, depending on incentives created by partisan loyalties, partisan competition and union competition.15 Levitsky and Way note that the strength of the government party, level of union competition, organizational overlap and autonomy of union leaders from party-controlled resources and the rank and le accounts for government labor cooperation.16 Burgess sees the explanation for the variation in union inuence on policy in the ability of afliated party leaders to punish disloyal unionists and the degree to which there is a strategic contradiction between loyalty to the party and loyalty to workers among union leaders.17 In a similar vein, Bellin argues that key to understanding labor response is its dependence, both political and nancial, on the state as well as the degree of organized labors aristocratic position within broader society.18 Alexander, on the other hand, points to workplace institutions as the crucial explanatory variable of effective labor mobilization when confronted by privatization.19 In this article, I build upon the insights of these recent studies that note the complex and often very visible role that organized labor plays during periods of economic restructuring and change. In particular, I argue that to gain a more nuanced understanding of the patterns of labor inuence, we need to explore the resources that labor groups can draw upon as structural adjustment
13 Evelyne Huber, Dietrich Rueschemeyer, and John D. Stephens, The Paradoxes of Contemporary Democracy: Formal, Participatory, and Social Dimensions, in Lisa Anderson (ed.), Transitions to Democracy (New York: Columbia University Press, 1999), p. 195. 14 Christopher Candland and Rudra Sil (eds), The Politics of Labor in a Global Age: Continuity and Change in Late-Industrializing and Post-Socialist Economies (New York: Oxford University Press, 2001). 15 Maria Victoria Murillo, From Populism to Neoliberalism: Labor Unions and Market Reforms in Latin America, World Politics 52:1 (2000), p. 137; Murillo, Labor Unions, Partisan Coalitions, and Market Reforms. 16 Stephen Levitsky and Lucan Way, Between a Shock and a Hard Place: The Dynamics of Labor-Backed Adjustment in Poland and Argentina, Comparative Politics 30:2 (1998), pp. 171 192. 17 Katrina Burgess, Parties and Unions in the New Global Economy (Pittsburgh: University of Pittsburgh Press, 2004). 18 Eva Bellin, Stalled Democracy: Capital, Labor, and the Paradox of State-Sponsored Development (Ithaca: Cornell University Press, 2002). 19 Christopher Alexander, The Architecture of Militancy: Workers and the State in Algeria, 19701990, Comparative Politics 34:3 (2002).

50 Agnieszka Paczynska programs are commenced. These resources, and in particular legal prerogatives, nancial autonomy and experience gained from previous contentious encounters with the state will shape the ability of organized labor to affect policy change. These resources will vary depending on the interaction between states and labor organizations in the period prior to the initiation of reforms. Organized labor acquires these important resources as a consequence of contentious encounters with the state. In cases where the state has constructed corporatist institutions to maintain political control over labor, these contentious encounters frequently revolve around issues of control over decision-making within the labor organizations themselves as well as at the national level. The legal changes often involve guarantees that labor will have a voice in policy changes that are likely to affect their rank and le members. They can also involve ceding responsibility for decision-making in particular issue areas to organized labor. Thus, the price the regime may have to pay in order to maintain labors political support during periods of crisis is often a long-term reduction in the regimes ability to control labor organizations. By gradually expanding the autonomous space that corporatist labor institutions enjoy, labors political loyalty to the regime becomes that much more difcult to enforce. This in turn increases the likelihood that during the next moment of crisis the unions will be that much more willing and able to demand and extract further concessions. These legal prerogatives are often accompanied by the acquisition of other resources. When these legal prerogatives are acquired through a bargaining process with an often reluctant state, labor organizations also gain a more intangible resource of experience. Thus labor organizations that had successfully extracted concessions from the state are more condent in their ability to challenge the state in the future and know how to do so. They had confronted the state previously and had witnessed the state back down. Consequently, what once may have been perceived as a regime with large reservoirs of repressive tactics and a willingness to use them comes to be seen more as an opponent that can be brought to the negotiating table. By the same token, during subsequent encounters the regime is aware that the once submissive labor organization has gained additional experiential resources it can draw upon and knows how politically threatening labor unrest can be.20 Finally, the acquisition of legal prerogatives by labor organizations is also often accompanied by the expansion of scal autonomy from the state, through, for instance, greater control over the collection and expenditure of union dues and through the control of various prot-generating ventures, such as vacation resorts, housing, or, as was the case in Egypt, a bank. With greater nancial autonomy the ability of organized labor to effectively confront the state grows since unions are now less concerned that in retaliation for insubordination the ruling party will be able to cut off all of its nancing. Furthermore, once acquired, these resources prove difcult to rescind and highly resilient even in the face of profound and farreaching socio-political and economic transformation.
20 For example, the specter of the January 1977 riots that erupted in Egypt following President Sadats removal of consumer subsidies continues to haunt Egyptian policymakers. Author interview with World Bank ofcial, Cairo, September 1998.

Contesting Labor Law Reform in Egypt 51 Labor and the Egyptian State During the rst years following the overthrow of the monarchy in July 1952, the military ofcers did not initiate any radical changes in economic policies. By 1960, however, Egypt was increasingly moving away from relying on the private sector as the engine of economic development. Instead, the regime placed greater emphasis on central planning and relying on the public sector. By 1964, following a mass nationalization program, the private sector was essentially wiped out. With the change in economic policies President Nasser also re-evaluated his relationship with organized labor. Although initially he was wary of creating a trade union federation, by the late 1950s he came to see workers as a base of support for his regime and this new perception was reected in policy initiatives. A series of legislative changes resulted in improved standards of living for the working class and greater job security.21 In 1962, in order to institutionalize its political support base, the regime created the Arab Socialist Union (ASU) as an alliance of working forces. Workers and peasants formed the core of the organization and were guaranteed 50% of positions within the party and the parliament. The regime also created a special ofce within the party with the sole aim of devising strategies to bring unions under ASUs control.22 Along with the establishment of a political party, the regime moved to consolidate its control over organized labor. The regime began to consolidate the highly fragmented labor movement into a hierarchical organization. As a result, the number of trade union federations declined from sixty-ve to twenty-seven and each was granted monopoly status.23 As in many other developing countries, by the mid-1960s the Egyptian regime had created corporatist labor organizations. Their primary function, unlike other types of trade unions, was not the representation and promotion of workers interests but rather the political mobilization and control of labor and support of state policies. In exchange for this political subordination to the regime and loss of autonomy and independence labor received access to various material benets that ensured its privileged position within the domestic economy. However, as Stepan points out, maintaining a corporatist system can be difcult.24 Indeed, it did not take long for the conditionality of labors support for Nassers regime to become clear. When the economic situation began to deteriorate and the regime sought to withdraw some of the material concessions it had made to organized labor and in particular higher wages and benets, labors reaction was immediate. Beginning in the late 1960s, labor protests became a recurring feature of Egyptian political life. Economic crises and the growth of workers activism also set in motion a long-term deterioration in the corporatist controls that the Nasser regime had established.
21 Assaf Bayat, Populism, Liberalization, and Popular Participation: Industrial Democracy in Egypt, Economic and Industrial Democracy 14 (1993). 22 John Waterbury, The Egypt of Nasser and Sadat: The Political Economy of Two Regimes (Princeton: Princeton University Press, 1983), pp. 321323; Joel Gordon, Nassers Blessed Movement: Egypts Free Ofcers and the July Revolution (New York: Oxford University Press, 1992), pp. 39 59. 23 Robert Bianchi, The Corporatization of the Egyptian Labor Movement, The Middle East Journal 40:3 (1986), p. 432. 24 Alfred Stepan, The State and Society: Peru in Comparative Perspective (Princeton: Princeton University Press, 1978), pp. 301 316.

52 Agnieszka Paczynska The recurring crises inevitably trigger labor mobilization and protests. The location of organized labor within the public sector and in urban areas meant that the regime saw these actions as politically destabilizing. Thus in order to maintain organized labor within its support coalition the regime tended to be responsive to labor demands. In other words, these moments of crisis provided windows of opportunity for ETUC to more effectively press for concessions from the state. Furthermore, while the regime initially could offer substantive concessions in the form of wage increases or expansion of social benets in order to quell labor protests, over time the recurring economic crises began depleting regimes resources, forcing it to turn to other forms of payment for labors political support. Financially strapped, the regime had few alternatives but to offer organized labor procedural concessions. Although these were less costly in the short run, in the long term these procedural concessions resulted in the ETUC acquiring legal prerogatives that during the subsequent clashes between state and labor increasingly tilted the balance of power toward organized labor and away from the state. A few particularly deep crises provided the ETUC with windows of opportunity to reshape its relationship with the state. The most signicant of these came in the latter half of the 1970s when Nassers successor, President Anwar alSadat, sought to reorient Egypts economic policies. By the mid-1970s, the Egyptian economy was in a profound crisis. Sadat, convinced that the development policies that Egypt had been pursuing were unsuccessful, sought to reorient economic policies toward a greater reliance on private investment both domestic and foreign. This change in development strategies, made public by Sadat in the 1974 October Paper, came to be known as intah or open door policy. At the same time, Sadat also initiated political reforms transforming the ASU into three political platforms. The disbanding of the ASU and the changes in economic policies proved to be a watershed in state labor relations. Initially, the ETUC was supportive of Sadats plan to liberalize the economy and did not oppose his plans to encourage foreign investment. However, Sadats plans to also begin restructuring of the public sector generated heated debate within the ETUC. Although ETUC chairman Salah Gharib did not voice objections to these proposals, other union leaders began to publicly criticize the program.25 At the same time, although the ETUC opposed the dismantling of the ASU, it saw in this reform an opportunity to reassert its independence from the regime. In November 1976, the ETUC announced that it would not align itself with any of the newly established political platforms.26 In fact, many in the trade union movement began advocating the creation of an independent workers party.27 The growing assertiveness of the unions was also evident in the inroads that the new opposition parties, and especially the left-wing Tagammu, made in local union elections. These moves by the ETUC were a direct challenge to the corporatist controls established during Nassers tenure. Although Sadat was interested in shifting his political alliances towards the business sector, nonetheless he also wanted to retain
25 Muhammad Khalid, Al-haraka al-niquabiya bayn al-madi wa al-mustaqbal (Cairo: Institute of Cooperative House for Printing and Publishing, 1975), pp. 88 91. 26 Mustafa Kamel al-Sayyid, Mujtamaa siyasiya, p. 83. 27 Huwaida Adli, Al-ummal wa alsiyasa: ad-dawar al-siyasiy li-l-haraka al-umaliya misr min 1952 1981 (Cairo: Ahali Books, no. 45, 1993), p. 169.

Contesting Labor Law Reform in Egypt 53 organized labor within his support coalition. In order to maintain that support, during the second half of the 1970s Sadat extended a number of concessions to ETUC. The rst of these concessions came just prior to the 1976 elections. Fearful that the ETUC would make good on its pledge not to back any of the newly created political platforms, Sadat promised to place unionists in leadership positions of the ruling party, soon named the National Democratic Party (NDP), in exchange for their abandoning the idea of an independent workers party.28 Over time, the ruling party and the ETUC leadership developed a close relationship. Senior unionists have traditionally belonged to the NDP and the regime has continuously sought to isolate ETUC leaders from the rank and le and bind them closely to the ruling party. At the same time, in order to put an end to industrial unrest and convince the ETUC to support his policies, he extended additional substantive and procedural concessions. In addition to higher wages and consumer goods subsidies, the revised trade union law gave the ETUC the right to participate in all government discussions concerning any policy changes that would have an economic or social impact on workers, to have input into designing such policies, and to assist in their implementation.29 In a move that also proved to have far-reaching consequences, Sadat encouraged union leadership to look beyond the public sector and expand its business activities. As Bianchi points out, the ETUC was granted powers to expand the existing system of cooperatives and to use a combination of public funds and compulsory worker contributions in establishing its own economic enterprises.30 During this period, the Confederation established its own bank, university, and vacation resorts and became one of the wealthiest interest groups in Egypt.31 Sadats goal in promoting these union activities was to soften its criticism of economic restructuring. But the long-term effect was the growth of ETUCs nancial independence. As Sadat and ETUC were renegotiating their relationship, large scale protests shook Egypt. Historically, whenever economic conditions deteriorated, workers have tended to organize protests, strikes and demonstrations, most often without ETUC approval or support.32 The riots that erupted in January 1977, however, were unprecedented in scope. They erupted in response to Sadats surprise announcement that subsidies on many basic consumer goods would be cut. The riots spread from Alexandria to Cairo and then to other urban areas. Clashes between the demonstrators and security forces left an estimated 800 dead. The specter of these events continues to haunt Egyptian policy-makers.33

Pripstein, Labor and the State, pp. 109 111. Huwaida Adli, Al-ummal wa al-siyasa, p. 172. 30 Robert Bianchi, Unruly Corporatism: Associational Life in Twentieth Century Egypt (New York: Oxford University Press, 1989) p. 49. 31 Author Interview with USAID labor consultant, Cairo, 1998. 32 See for example, Mahmoud Hussein, Class Conict in Egypt, 1945 1970 (New York: Monthly Review Press, 1973); al-Sayyid, Al-mujtama wa al-siyasa; Joel Beinin, Will the Real Egyptian Working Class Please Stand Up, in Zachary Lockman (ed.), Workers and Working Classes in the Middle East: Struggles, Histories, and Historiographies (Albany: University of New York Press, 1994); Hassan Badawi, Al-taharukat al-jamaiya li-l-ummal, 1988 1991, in M. Abbas et al. (eds), Al-haraka al-ummaliya marakat al-tuhawwul (Cairo: Arab Research Center, 1994); Posusney, Labor and the State. 33 Author interview with World Bank ofcial, Cairo, September 1998.
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54 Agnieszka Paczynska At the same time, the ETUCs response to the January events made clear for the rst time that the Confederation was willing to publicly oppose government policies. Although the ETUC did not approve of the protesters tactics, it also strongly condemned the price increases pushed through by the government. The events of that January also underscored that the ETUC took seriously the concessions the Sadat regime granted the previous year in exchange for the political backing of organized labor for his economic liberalization experiment, or intah.34 These concessions proved crucial in the 1990s, when Sadats successor, President Mubarak embarked on an ambitious program of restructuring the Egyptian economy. The legal prerogatives, the increased nancial autonomy and the historical experience in confronting the state provided Egyptian organized labor with important tools to challenge economic restructuring. The corporatist institutions established by President Nasser in the 1960s were no longer effective in ensuring that the regimes policy preferences would not be challenged by labor. Structural Adjustment Program Like many other developing countries by the latter part of the 1980s Egypt faced a deepening economic crisis. Following the 1990 1991 Gulf Crisis, the Paris Club, IMF and the World Bank came to an understanding with Egypt that 50% of its foreign debt would be forgiven if Egypt agreed to fundamentally restructure its economy. The Economic Reform and Structural Adjustment Program signed by Egypt, the International Monetary Fund and the World Bank in June 1991 entailed not just measures aimed at stabilizing the macroeconomic situation but also more far-reaching structural reforms. The rst phase of the program focused on stabilization measures, including the unication of the exchange rate, liberalization of the banking system and the nancial sector, bringing the budget decit under control and lowering ination.35 The second phase of reforms was to tackle more fundamental structural issues. The most important component of this second phase was the privatization program. Its aim was to sell off 314 public sector companies, preferably to anchor investors who could provide the capital, know-how and connections to global production and distribution networks. Although the issue of public sector reform was on the governments agenda from the mid-1970s, until 1991 the various proposals oated by the government met with a quick demise because of the staunch opposition from the labor movement. Organized labor opposed privatization for a number of reasons. In the rst place, the socio-economic policies initiated by Nasser provided workers with numerous benets. They guaranteed employment security, access to health, pension and retirement benets previously unavailable, which substantially raised workers standards of living as compared to pre-revolutionary days. Furthermore, unions were mainly based among public sector employees. All these factors combined to create hostility within organized labor towards proposals aimed at privatizing the
Muhammad Khalid, Al-haraka al-niqabiya bayn al-madi wa al-mustaqbal (Cairo: Institute of Cooperative House for Printing and Publishing, 1975), pp. 88 91. 35 For a discussion of other aspects of the economic reform program, see for example Mona Qasim, Islah al-iqtisadiy Misr: dur al-bunuk khaskhasa wa aham al-taqarib al-dawla (Qahira: Maktabat al-Usra, 1998); and various issues of Awraq al-Iqtisadiya published by Markaz al-Buhuth wa al-Dirasat al-Iqtisadiya wa Maliya.
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Contesting Labor Law Reform in Egypt 55 public sector. Throughout the 1970s and 1980s the ETUC rejected any proposals that included provisions for the sale of state rms.36 The Confederations resistance was all the more potent due to the regimes fear of social unrest and instability, a fear that the ETUC skillfully exploited. Although by the late 1980s the ETUC conceded that reform of state rms would need to be seriously addressed, the Confederation remained steadfast in its opposition to outright privatization, arguing that the economy would be better served by foreign capital setting up new ventures rather than trying to take over public rms.37 Given previous union opposition to privatization proposals and the history of labor unrest during the 1990s the government attempted to make the prospect of divestiture more appealing to the working class. Among other measures, it instructed the National Investment Bank to begin working on a plan that would allow workers to purchase shares in companies being privatized thus giving them a stake in success of the program. Simultaneously, with the assistance of United States Agency for International Development, the government embarked on designing a program of employee buy-outs based on the American ESOPs (Employee Stock Ownership Programs). It also initiated a media relations campaign, with government ofcials promoting the benets of privatization and sending signals to the ETUC that this time privatization would indeed become a central feature of the reform program. Yet, despite the regimes overtures to public sector workers, the process of implementing privatization program has been a contentious one from the start and the pace of sales was extremely slow, continuously falling behind the announced schedule. Not only did unions and workers see privatization of the public sector as directly threatening their job security and standards of living but the deterioration of the economic situation further added to their anxieties. Studies of changing levels of poverty suggest that Egyptians had good reasons to be concerned about the employment situation. Unemployment remained high and the GNP growth during the 1990s did little to resolve the problem of job creation. On an annual basis 500,000 people were entering the workforce, making employment expansion an urgent task. The purchasing power of Egyptians declined in the course of the decade, and the number of people living below the poverty line rose steadily. Furthermore, while the majority of poor households were in the countryside, the rise in relative poverty has been primarily an urban phenomenon, hitting hard the unionized industrial workforce.38 During the decades preceding the implementation of economic reforms the public sector provided employment to 35% of the non-agricultural workforce and was particularly attractive to women and those entering the labor force for the rst time. During the 1990s, when public sector downsizing began, the private formal sector did not expand sufciently to absorb the growing labor force.39 Although
36 For a discussion of privatization attempts during this period, see Posusney, Labor and the State; al-Sayyid, Al-mujtama wa al-siyasa. 37 Al-Ahram al-Iqtisadiy, August 21, 1989. 38 Nader Fergany, Impact of the Proposed Labor Law on Labor Market Flexibility and Social Conditions in Egypt: A Preliminary Assessment, unpublished manuscript, Cairo, 1998. 39 Jackline Wahba, Labour Mobility in Egypt: Are the 90s Any Different from the 80s?, Egypt Labor Market Project (Cairo: Economic Research Forum for the Arab Countries, Iran, and Turkey, 2000).

56 Agnieszka Paczynska government employment outside state-owned enterprises continued to expand during the 1990s,40 a major change in the structure of employment during the decade has been the growth of the informal sector. By the end of the 1990s half of employees worked with no contract or social security coverage.41 During the same period, incomes eroded, with real wages declining in almost all sectors of the economy. Consequently, by 1994 the average wage was only two-thirds of that in 1985/1986.42 Additional external shocks, including the economic fallout of September 11th and the global recession further weakened the already struggling Egyptian economy. By the early 2000s, half of the population was living below the poverty line and income disparities grew.43 Labor, the Structural Adjustment Program and Reform of the Labor Code While the ETUC is hardly a paragon of union democracy and rank and le workers voice well-founded criticism and deep disappointment at how the ofcial union is representing them, nonetheless during the 1990s, as in previous decades, the ETUC has proven that it was willing to oppose regime policies. The Egyptian regime for its part, despite possessing an impressive security apparatus at its disposal, was reluctant to push through economic restructuring policies over union objections. The regime was especially concerned that too rapid an implementation of structural reforms may affect the countrys political stability.44 The regime did attempt to bring ETUC under tighter state control in 1995 by pushing through administration of trade unions. The amendment to the trade union law extended the term in ofce of top union ofcials to ve years and allowed these ofcials to hold on to their positions even after retirement. Other changes placed additional restrictions on moving up in the ranks of union hierarchy, thus making it more difcult for opposition activists to hold higher ofces within the Confederation. However, these changes did not have the desired effect. Although ETUC president Sayyid Rashid publicly expressed support for the privatization program, the opposition of the rank and le to the restructuring plans and the heated media discussions about economic reforms, meant that the ETUC continued to confront the regime over the design and implementation of the economic reform program. Egyptian labor employed a variety of strategies in resisting economic restructuring policies. The ETUC was actively engaged in direct discussions with the regime concerning changes in the organization of the public sector, making use of legal provisions that guarantee it a voice in government decisions that affect its rank and le members, provisions which it had secured during the 1970s. Government attempts to restructure state-owned enterprises also encountered factory-level labor opposition. Although these protests tended to be expressions
Ragui Assaad, The Transformation of the Egyptian labor Market: 1988 1998, Egypt Labor Market Project (Cairo: Economic Research Forum for the Arab Countries, Iran, and Turkey, 2000). 41 Jackline Wahba and May Moktar, Informalisation of Labor in Egypt, January 2000, available online at: , http://www.iceg.org/NE/projects/labor/informalisation.pdf . . 42 Samir Radwan, Employment and Unemployment in Egypt: conventional Problems, Unconventional Remedies, Working Paper no. 70 (Cairo: The Egyptian Center for Economic Studies, August 2002). 43 Business Monthly (February 2002). 44 Author interviews with Public Enterprise Ofce and World Bank ofcials, Cairo, 1998.
40

Contesting Labor Law Reform in Egypt 57 of particularistic grievances at individual enterprises rather than coordinated challenges to government decision-making, nonetheless as their frequency grew they made the implementation of economic restructuring policies politically difcult.45 Labor activism in Egypt thus proceeded along two distinct, albeit interrelated, paths. The ETUC engaged the regime directly in negotiations over policy changes. Lower levels of the trade union movement, on the other hand, engaged in direct protest actions over issues related to job security, wage payments and benets. Although these collective expressions of workers anger were generally mounted without ETUC support, and often directly against ETUC directives, they nonetheless bolstered the Confederations negotiating position since its leadership could play on the regimes fear of widespread social unrest.46 The rst confrontation between the ETUC and the government erupted during the parliamentary debate in the summer of 1991 over the adoption of Law 203, which was to provide the legal framework for privatization. The draft of the law was greeted with hostility by the unionists both within the Confederation and the Peoples Assembly. The ETUC, arguing that the law threatened workers interests, refused to endorse it. The government, on the other hand, did not want to adopt the law without the Confederations blessing. Discussions were held between union representatives and government ofcials, with the various ministers trying to convince labor leaders that the law was a necessary component of the reform program.47 Before the Peoples Assembly voted on the law, a nal meeting was held between the ETUC leadership and government representatives, during which the government agreed to a number of signicant concessions. Most important among them were guarantees against mass layoffs of workers, additional protections of health and pension insurance coverage, retention of the prot-sharing scheme for workers as well as guarantee that, as the laws passed in the 1970s required, only the adoption of a new labor code could override these provisions.48 The unionists also received assurances that they would be consulted on any future decisions that could affect the situation within the public sector and that adequate compensation be provided to any worker who was harmed by public sector restructuring.49 In fact, the negotiations over the early retirement scheme, which was to address the problem of excess workers in the public sector, proved to be quite contentious and the ETUC succeeded in assuring higher monetary compensation and ensuring that the participation in the program would be strictly voluntary.50 The next confrontation between the regime and the unions erupted over attempts to change the labor law. At the time when structural adjustment policies were initiated, the laws regulating the labor market were seen by private business as excessively favoring employees and severely constraining their ability to
45 Protest actions and wildcat strikes increased during the 1990s. The trend continued during the following decade. 46 Author interview with USAID consultant, Cairo, 1998. 47 Al-Ahram al-Iqtisadiy, July 29, 1990. 48 Al-Ahali, November 13, 1991, November 27, 1991. 49 Rose al-Youssef, April 15, 1991. 50 Al-Ahram, October 23, 1997. It is important to note that although the program was voluntary, over time there were numerous reports that workers were being forced to take the early retirement package in some companies.

58 Agnieszka Paczynska effectively manage their companies. The labor code in force when the structural adjustment program began was adopted in 1976 and amended several times, most recently in 1981. The law stipulated that workers, once hired, could only be red under certain, very restrictive, conditions, specically if the worker had been nally sentenced for crime or misdemeanor involving dishonesty and immorality. At the same time, strikes were, according to the law, illegal and participation in a strike is a crime punishable by imprisonment.51 The government was concerned that the lack of exibility of labor regulations was discouraging foreign investors from entering the Egyptian market. Without generating the interest of both domestic and foreign investors, however, the progress of the privatization program was in serious jeopardy. Furthermore, changing laws governing labor relations was crucial if other components of the structural adjustment package were to succeed. In particular, the changes in the trade regime and consequently the growing openness of the Egyptian economy to international ows of goods and services meant that the Egyptian business environment had to be improved if the country had any hope of becoming internationally competitive. Or, as the Ministry of Economy noted, the government has increasingly sought to encourage domestic investment and foreign capital and technology transfers.52 In order to attract these investors, the labor law needed to be rewritten. Large domestic investors saw the existing regulations as severely constraining their ability to effectively run their companies. Surveys conducted by the World Bank in 1992 and 1994 among company managers revealed that the business community saw the existing labor regulations as among the most signicant constraints on the development of the private sector.53 Another survey found that according to managers, the larger the rm, the more constraining was the labor law in terms of pursuit of business activities.54 As Fathi Nemattah, National Democratic Party (NDP) MP pointed out, businessmen need to be condent in the investment atmosphere to commit funds. The current law makes many of them reluctant, which hurts the economy. The [new] law simply adds a measure of balance to the employer employee relationship.55 In other words, the labor legislation, proponents of changes argued, placed too many restrictions on employers freedom of action, discouraged private, and especially foreign, investors thereby stiing economic growth. Critics of the labor code, however, were careful to frame the need for restructuring labor market regulations in terms of benets that would also accrue to the average worker as a result of such changes. In particular, they pointed out that the difculty of dismissing workers had resulted in a number of problems
51 While the old labor law prohibited strikes, this did not prevent workers from staging them. Although the government often responded to these actions by sending in security forces to quell the protests, generally only individual strike leaders faced arrest. Furthermore, during 1990s when the regimes response to the Islamist opposition became increasingly brutal, harassment of labor activists appeared to decline. 52 The Ministry of Economy, Final Report: Private Sector Contribution to Egypts Productivity and Growth, Development Economic Policy Reform Analysis Project, March 2000, pp. 45 48. 53 IBTCI, Quarterly Review for the Period October 1, 1997 to December 31, 1997, p. 109. 54 Ahmed Galal, Which Institutions Constrain Economic Growth the Most in Egypt, Working Paper no. 001 (Cairo: The Egyptian Center for Economic Studies, 1996), pp. 12 13. 55 Interview with Nematallah, Cairo Times, January 13 19, 2000.

Contesting Labor Law Reform in Egypt 59 in the labor market. Most notably it had led to the unwillingness of the private sector to hire. Rather than taking on additional employees, the private sector had preferred to invest in capital-intensive production. Unions and workers, however, opposed changing the labor code and were particularly concerned about proposals that would undermine job security provisions. The lack of an adequate safety net for the unemployed as well as workers experiences with private sector employers added to these anxieties. For example, one of the favorite methods within the private sector of getting around the labor law had been to hire workers only on temporary three month contracts, dismissing them before the three month period elapsed and therefore before the worker automatically became a permanent employee. Alternatively, workers were forced to sign an undated letter of resignation at the same time as the employment contract was signed. This provided the employers with the exibility to dismiss workers at will by simply placing a date on the already signed letter of resignation. Another common practice was to move the worker to another plant belonging to the same company, often located hundreds of kilometers away. Given the severe housing shortage in Egypt, moving ones family to a new location was not a viable alternative in most cases, thus often forcing workers to resign.56 Furthermore, the lack of employment security within the private sector meant that employees were actively discouraged from voicing dissatisfaction with working conditions or wages since the threat of dismissal is very real and frequently carried out. Such abuses, in addition to much less attractive benets and pensions packages in the private sector, made unionized public sector workers unenthusiastic about the prospect of leaving their current jobs which, while not well paid, had always been secure and ensured a pension as well as access to health and other benets.57 The labor community was well aware of the reasons behind governments attempts to restructure the labor code. As Kamal Abbas, director of the Center for Trade Unions and Workers Services noted:
The government believes that if workers rights are restricted, it will help attract foreign investors. If any giant foreign company wants to build a factory overseas, it will nd Turkey, Indonesia, and Egypt offering different things, and it will take the country that offers the best deals in order to invest. The worker, the human being here, has been transformed into a tool of competitive advantage in attracting investment.58

Thus, although the government was eager to see labor market regulations reforms, and large segments of the Egyptian labor force may well have beneted from such changes, the attempt to change the labor law came up against organized labors opposition. The law was rst proposed in 1993 and the government anticipated that the legislation would pass quickly through the Peoples Assembly. But it took a full decade for the parliament to actually vote on the new code. During that time,
Ragui Assaad, Do Workers Pay for Social Protection? An Analysis of Wage Differentials in the Egyptian Private Sector, Working Paper 9610 (Cairo: Economic Research Forum on Arab Countries, Iran and Turkey, 1995). 57 American Chamber of Commerce in Egypt, The Egyptian Labor Force (Cairo: American Chamber of Commerce in Egypt, July 1996), pp. 2 6. 58 Business Monthly, June 2002, author interview with Kamal Abbas, Helwan, 1998.
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60 Agnieszka Paczynska union ofcials, the business community, and the government, with representatives from the International Labor Organization participating as observers, sought to hammer out the details of changes in the labor code.59 Although the new law also anticipated changes in the collective bargaining process and procedures for management labor dispute resolution, the two issues that generated the most controversy have been the right to strike and the issue of worker dismissal. While the positions taken by business and labor groups were far apart from the beginning, as unemployment climbed and living conditions became more precarious, union representatives became more vocal in their demands that any changes in the labor law must restrict business prerogatives to dismiss employees without cause and guarantee the right to strike.60 The right to strike became an especially contentious issue during the negotiations. The ETUC leadership wanted to ensure that the right to strike would be guaranteed in the new legislation although it was keen on maintaining control over whether and when a strike could be called. The Confederation was under pressure not to cave in on this demand given that the campaign to secure the right to strike became associated with the demand of many opposition union activists for the right to form union organizations that would be independent of the ETUC. Labor activists pointed out that the High Constitutional Court twice ruled that workers had the constitutional right to form independent unions.61 Signicantly, these calls were emanating not just from the enterprise-level union activists who were personally involved in work stoppages but also from presidents of various federations. Especially vocal were the leaders of the Mining Federation and the Chemical Workers Federation.62 The business community for its part rejected the idea of a guaranteed right to strike, and the government was willing to entertain it only if it was highly restricted.63 Moreover, as the negotiations progressed, it became clear that other disagreements divided the three groups. The ETUC argued that the proposed law favored the employer at the expense of workers, objecting in particular to the removal of provisions in the existing labor law that protected workers from arbitrary dismissals and to the lack of minimum wage provisions in the new law. The business community, on the other hand, argued that the law did not go far enough in creating a level playing eld between employers and employees, and that too many vestiges of Nasserism remained, hindering the establishment of a exible labor market.64 The deep differences between the three sides meant that the draft law could not be put to a vote in the parliament. The government, concerned about the potential backlash from the working class, announced that the new law would include provisions guaranteeing
Abd al-Khaliq Farouq, Al-niqabat wa at tataur al-dusturiy Misr, 1923 1995 (Cairo: Center for Human Rights and Legal Aid, 1997), p. 59. 60 Al-Shab, December 4, 1992. 61 Al-Shab, December 4, 1992, Al-Ahrar, June 18, 1995. The Court also noted that the international treaties Egypt had signed obligated it to allow workers the right to strike. 62 Al-Ahrar, September 18, 1996 63 It is important to note that although ETUC wanted to see the right to strike guaranteed, it also wanted to control when strikes would be called. ETUC was thus opposed to giving factory-level unions more autonomy. 64 Kamel al-Manu (ed.), Tahlil nataij al-intihabat al-ummaliya (Cairo: Friedrich Ebert Stiftung and Jamaat al-Qahira, Kulia al-Iqtisad wa al-Ulum Siyasiya, 1997), pp. 23 24.
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Contesting Labor Law Reform in Egypt 61 protection of workers rights in their relationship with employers, maintain their rights to a share of company prots, and pledged to increase wage levels.65 In the eyes of business groups, however, these proposals appeared to tilt the negotiations too far in labors favor. Consequently, business refused to entertain them, arguing that as far as they were concerned the government had pledged that the new labor law would ensure the ability of owners to dismiss workers and set wage levels. The business community also continued to resist granting the right to strike. By this point, in fact, the negotiations revealed how deeply divided the business community itself was. Although large businesses were keenly interested in pushing through changes in the labor code, many in the business community saw little reason to support any changes in the existing labor legislation if the right to strike was to be included in the new provisions. Many small and medium-size businesses in particular had little difculty in circumventing the existing labor law, and therefore saw only marginal benets in codifying exibility in hiring and dismissal policies if such exibility was to be accomplished at the price of creating a potentially more militant labor force.66 With negotiations deadlocked by late 1996, the government again sought to jumpstart the talks by introducing modications to the draft labor law. This only made matters worse. The government proposal included provisions for mandatory compensation for workers in case of dismissal aimed at bringing labor back to the negotiating table. However, because the proposal was presented without prior consultation with either business or ETUC, the proposal did little to overcome differences between the two sides.67 The unionists continued to point out that the institutional framework necessary to manage the increase in unemployment anticipated fallowing the enactment of the law simply did not exist. As Abdel Hamid al-Sheikh, head of the Tagammu Party labor committee noted, we have a crisis in Egypt . . . unemployment compensation is very difcult to secure. Theoretically, workers have six weeks of compensation, but getting it is so fraught with red tape that in effect it is nonexistent. Currently, there are LE17 billion in the states unemployment compensation coffers, because its not going to lay off workers.68 By late October 1998, the negotiations over the labor law were still at an impasse. While the government was assuring business and labor groups that the new law did not seek to undermine anyones rights but rather sought to bring the existing legislation in line with the changing economic conditions, the two groups disagreed. Business continued to complain that the proposed changes were insufcient and maintained too many employee protections while adding few new rights for the business sector. Labor took the opposite view, arguing that the law threatened basic rights of the workers by giving business the right to dismiss them and close down factories.69 The government for its part seemed increasingly
Al-Taqrir al-Istratijiy, 1996, p. 285. Al-Ahram Weekly, January 6 12, 2000. 67 Al-Ahrar, January 25, 1997. 68 Interview with al-Sheikh in Cairo Times, January 13 19, 2000. He argued that unless an unemployment insurance plan was in place, the new law would only contribute to the already difcult economic situation of the workers. He further pointed out that there is unemployment everywhere. Thats normal. But when you look at European countries they all have unemployment insurance so even if you do not have a job at the moment you can still survive. This, however, is not the case in Egypt. Author interview with Abdel Hamid al-Sheikh, September 23, 1998, Cairo. 69 Al-Ahali, October 21, 1998.
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62 Agnieszka Paczynska frustrated by the deadlock, placing the blame primarily on the union delegation to the negotiations. As one legal advisor in the Ministry of Public Enterprise commented, the Confederation is creating obstacles. It is the negotiations that are going on with the Confederation that are delaying the presentation of the law to the parliament for debate and approval.70 The stalemate continued through 2000. In January of that year once again there were expectations that the law, in its 17th version, would be passed by the parliament. But this did not happen.71 The stalemate in negotiations came at a time when opposition to privatization grew both among industrial workers and the public in general, becoming a hotbutton issue during parliamentary and union elections. The threats to job security that public sector restructuring and labor law reform posed contributed to the growth in labor activism at the enterprise level. In the 1991 trade union elections candidates of the opposition Tagammu and Socialist Labor parties made substantial inroads. At the same time, labor activists dissatised with the ETUC, renewed efforts to organize workers in opposition to public sector reform. In November 1993, these activists formed the National Committee to Combat Privatization and groups such as the Center for Trade Union Services became active in disseminating information to workers about government reform proposals. Within a few years, the number of protests was on the rise. A long standoff between workers and management at the textile plant in Kafr al-Dawwar in November 1994 proved to be a harbinger of clashes later in the decade. The fear and opposition that public sector restructuring generated among workers translated into an increase in protest actions and work stoppages and growing calls that the right to strike was absolutely essential, given the changing economic conditions.72 The summer of 1998 witnessed an unprecedented wave of labor protests, and by the winter of 1998 1999 it was evident that Egypt was experiencing the largest wave of labor unrest since the 1952 revolution.73 The Land Center for Human Rights estimated that in 1998 alone there were approximately 80 labor protests and this trend continued in 1999 and during the next few years. In 2004 the number of protests reached 267.74 Even more troubling
70 Author interview with a legal advisor in the Public Enterprise Ofce, September 28, 1998, Cairo. 71 The revised version of the law included a number of provisions that were generating much opposition. Among them was the extension of the daily working hours from seven to eight in industrial enterprises without any concomitant pay increases; a reduction in the number of non-holiday vacation days to seven a year; a reduction from three to two months of allowed maternity leave; an increase in the percentage that could be withheld from a workers paycheck for payment of loans from 25% to 50%, and the termination of employer-provided health insurance. 72 A survey of 6,000 public sector workers, conducted by Al-Arabi newspaper in 1996, suggested that government attempts to push forward with privatization were likely to encounter strong labor opposition at the enterprise level. The survey found that 91.2% of the workers were opposed to privatization. Among the 8.8% who supported the program, 80.6% were against the sale of public sector companies to foreigners and only 35.5% were willing to accept the sale of their own enterprise, cited in Business Today, August 1996. For a discussion of protest actions, see August 1996. Al-Shab, December 22, 1992; Al-Ahali, July 1, 1994; Al-Wafd, May 2, 1995; Al-Arabi, August 15, 1996; author interviews with labor activists, Cairo 1998. 73 Middle East International, March 29, 1999. 74 Land Center for Human Rights, Ahwal al-umal Misr am 1998 (Cairo: Land Center for Human Rights, 1998 and Land Center for Human Rights annual report 2004), cited in Business Monthly, May 2005.

Contesting Labor Law Reform in Egypt 63 for the government, the protests were spreading beyond the industrial areas. The governments program of earmarking 10% of shares in privatized companies for sale at a discount to workers did little to assuage labor concerns.75 Along with wildcat protest actions, and in direct response to the government campaign to restructuring labor market regulations, a coalition of ve opposition parties and three workers rights groups formed a National Committee in Defense of Workers Rights. The group argued that the draft law needed more input from labor groups before being presented again to the parliament for a vote.76 The government for its part decided that given this increasingly vocal labor opposition to the legislation and with the negotiations with the ETUC and business groups at a stalemate that it would wait till after the November 2000 parliamentary elections to consider any further changes.77 The legislation was nally submitted to the Peoples Assembly in 2002 but as the spring session came to a close, it was once again clear that no vote would be taken on the new labor law. The Unied Labor Law was nally adopted in 2003. In the end, neither business nor labor received all the concessions they had sought.78 Workers were granted the right to strike but under only very restrictive conditions and wildcat strikes continued to be illegal. Employers were granted exibility in dismissing workers for economic reasons but could do so only after negotiations with the trade unions.79 Although organized labor did not win all the concessions it sought, its opposition to the originally proposed changes and its ability to engage the government in negotiations substantially delayed the implementation and the content of this crucial piece of legislation.

Conclusion The expansion of the global economy has placed new pressures on national governments to restructure their economic policies. In the case of Egypt, a persistent economic crisis led in the 1990s to a renewed commitment to the implementation of a structural adjustment program aimed at moving way from the state-led development model to one based on market mechanisms. In order to make the economy more competitive internationally, the Egyptian government also sought to attract more foreign investors who could provide the capital, technical know-how as well as the prospect of integrating Egyptian manufacturing into global production and distribution networks. Given this new set of pressures, the Egyptian government sought to reform labor market regulations in order to make them more exible and more compatible with the market economy model. Nonetheless, the regime encountered difculty in pushing through these
75 Al-Ahram, March 27, 1995. For a discussion of labor protests during this period, also see Nicola Pratt, Maintaining the Moral Economy: Egyptian State Labor Relations in an Era of Economic Liberalization, Arab Studies Journal 8:2/9:1 (Fall 2000/Spring 2001), pp. 111 129. 76 Among the groups goals was to campaign against all the parliamentarians who supported the legislation during the November 2000 elections. The threat was never carried out since the government did not present draft legislation for a vote. 77 Statement of a World Bank representative to the author, September 2000, Washington, DC. 78 Business Today, July 2003. 79 US Department of State, February 25, 2004.

64 Agnieszka Paczynska restructuring measures, and the contentious negotiations with business and labor groups over the new labor code lasted almost a decade. The inability or unwillingness of the Egyptian regime to push through the new labor law over union objections was surprising given the increasingly authoritarian nature of the Mubarak regime. As I have argued in this article, in order to understand why organized labor was able to object to the government economic project, we need to consider the resources available to organized labor as reforms are commenced. Those resources in turn were shaped by the dynamics of the state labor relationship that developed during the decades preceding reforms. While the post-revolutionary Egyptian regime constructed corporatist labor institutions with the dual goal of politically mobilizing and controlling the labor movement, over time, the regime was forced to grant concessions to the working class and, more important, to the ETUC. Furthermore, as the economy faltered and the resources that the state could exchange for political support dwindled, these concessions increasingly shifted from primarily substantive, like wage increases, to procedural ones, eventually giving the ETUC a voice in all government decisions affecting rank and le members. Additionally, over time the ETUC acquired greater nancial autonomy from the state. These legal prerogatives, and in particular those secured during the 1970s, and the greater nancial independence from the state, meant that organized labor had access to resources that gave it greater ability to shape policies and increased the political costs for the regime of ignoring union views. Additionally, the long history of confrontations between workers and the state made clear to labor that despite the repressive action that they often elicited, staging strikes was an effective tool in extracting concessions from the state. Consequently, when the regime embarked on implementing an ambitious structural adjustment program, it was forced to contend with a labor organization that was well placed to engage in policy debates. The negotiations over changing the labor code were especially difcult and organized labors opposition to the reforms the government proposed resulted in delaying the adoption of the new code and modifying the codes content. The contentious negotiations over the changes to the labor code in Egypt underscores the diversity of responses of organized labor to the challenges presented by neoliberal globalization and structural adjustment. The very real economic losses that organized labor has sustained in many developing countries, does not mean that workers have not resisted and challenged these policies. Indeed, in some cases, organized labors resistance to policy changes has signicantly shaped both the pace and the types of policies that were implemented. As this article has argued, what profoundly affects organized labors ability to make its voice heard are the resources that it brings to the negotiating table as economic restructuring begins. These resources in turn are shaped by previous encounters between organized labor and the state.