Egypt's new president to face daunting challenges (page 1 of 3)

This week's confirmation that Egypt's first freely contested presidential election would conclude with a run-off between the representative of the Muslim Brotherhood, and the country's former prime minister, came as little surprise, even amid demands by defeated candidates for a recount due to alleged electoral violations. The two top candidates, who each received more than five million votes, will go to the polls again in June.

However, the capture of Egypt's top political office brings with it responsibilities which will weigh heavily on the victorious candidate. The country's economy has been listing badly since the last weeks of the Mubarak regime, and overseas investors and contractors, not to mention everyday Egyptians, will be anxious to see the new man and his administration address long-term concerns, as well as salve short-term wounds.

"The dominant challenge is political stability first and foremost, from a constitutional perspective as well as from a government, regulatory and administrative perspective," Aaron Bielenberg, a Dubai-based partner at US law firm Latham & Watkins, tells AMEInfo.com.

Contract transition concerns among foreign investors

There are particular concerns among foreign investors and contractors that projects awarded under the old Mubarak regime may be renegotiated, put out to tender again, or scrapped altogether. From basic infrastructure such as road and rail improvements, to more specialised projects including the much-needed development of the country's hydrocarbon sector, Egypt is in urgent need of foreign expertise - and cash - to upgrade and replace its creaking facilities. The question is whether foreign firms, particularly those which had ties with the Mubarak regime, will be allowed to conduct their business unhindered.

"There's a process now of contract counterparties finding out whether the contracts they had in place are going to be supported and upheld, and whether or not they are going to have to rebid," says Bielenberg. "There are also legal issues related to transition, where if you had a very significant contract with the former government, whether or not that contract's going to be honoured. Companies aren't really sure about the status of their contracts, and that makes it very difficult for investors to provide finance."

The availability of finance will be dictated largely by the confidence of foreign investors in the Egyptian legal system. Some 15 months after the anarchy of revolution led to to the uncertainty of military rule, would-be investors are looking for signs that Egypt is back open for business, and can be trusted to conduct said business in an open and fair manner. According to Bielenberg, the extent to which the rule of law is able to function in Egypt will boil down to the basics: "can you enforce judgements, are the courts functioning, are the courts economically supported, and are they independent from the new elected governments?

"Egypt has a pretty well-established legal regime and the court system is relatively independent," he continues. "You have confidence in Egypt because there's a well-established body of law, the courts are generally functional and there are a lot of local lawyers who are familiar with international investment. It's a functioning legal regime, but the tension is over whether that independence will be able to sustain itself."

Presidential candidates hold key to investor confidence

Much will depend on the outcome of the forthcoming presidential run-off, which is expected to install Muslim Brotherhood candidate Mohammed Mursi, as the successor to Mubarak.