Egyptians marked the one-year anniversary of the protests that toppled Hosni Mubarak this week as the country’s first democratically elected parliament in more than sixty years had its opening session. Despite these accomplishments, Egypt’s road to democracy has many hurdles ahead, including presidential elections, the writing of a new constitution, and economic reform.

In a Q&A, Yezid Sayigh says Egypt needs to negotiate numerous important issues that will shape the country’s future, especially the relationship between the civilian authorities and the armed forces.

While the Supreme Council of the Armed Forces wants to transfer power to a civilian government, it balks at giving up its exclusive control over budget and economic activities and submitting to full civilian oversight and control. The process may prove contentious. And imposing conditionality on U.S. foreign military assistance is not likely to be effective in helping the transition.

What does the outcome of the parliamentary elections mean for Egypt’s democratic prospects?

On the one hand, it’s helpful that there are a few particularly strong parties because this means that you don’t have a fragmented, quarreling parliament that’s composed of highly unstable coalitions—where political parties are constantly tempted to break up, break away, and form new coalitions. Since Egypt is moving into a period where it has to negotiate some very important issues that will shape the nature of its future—especially the relationship between the civilian authorities and the armed forces—having a strong parliament, with a number of strong parties, means that the their ability to negotiate both with the armed forces and with each other in order to formulate what they see as the necessary relationship, as well as social and economic policy, is going to be aided in this transitional phase.

The flip side of that is if there is one particularly strong party, in this case the Muslim Brotherhood’s Freedom and Justice Party, there is always the risk that if it feels like it can do anything it wants then it may become somewhat autocratic and ram through legislation or policies that disadvantage other groups. The critical question really is whether there are strong opposition forces outside or inside parliament that learn the democratic lessons of fighting for themselves or fighting for certain rights.

Democracy is not just about acquiring a majority and earning the right to take office, it’s actually just as much about the people who have lost the elections learning to operate within the system and to continue challenging the majority. Democracy arises out of that contestation and out of both sides learning how to tolerate and respect their limits and the rights of others.

Does the Supreme Council want to transfer power? What role is the military likely to play going forward?

The Supreme Council of the Armed Forces wants to hand power over to civilians. That is very definite. It has had a really hard time governing Egypt over the last eleven months—taking decisions on key issues to deal with the economy, social relations, demonstrations, and what to do with the police force. The Supreme Council found it extremely difficult to both maintain a correct balance and to take decisions on these matters, especially since funding is short and the economy has suffered. They don’t have answers for these things so in a way they are going to be very relieved to hand responsibility for them back to civilian authorities that can then take all the blame.

However, the Supreme Council of the Armed Forces also wishes to secure its own particular interests and privileges in the future. In terms of foreign policy, the armed forces are keen to preserve the peace with Israel and that is partly linked to wanting to preserve U.S. foreign military assistance, which runs to $1.3 billion a year. The Supreme Council is unwilling to risk that, so it doesn’t want to hand power over to civilians who then have the power to tear up the peace treaty with Israel or to go to war, for instance.

Nor does it want civilians to scrutinize or have full oversight over the defense budget because at the moment it is under exclusive military control. No one knows what the money is spent on or how it’s spent. The military runs a number of economic enterprises and businesses that it doesn’t account for, and it has other types of discretionary funds and income streams, all of which it wants to keep nontransparent to civilians.

The armed forces are trying to work out a deal in which they will continue to enjoy these particular exclusions from civilian oversight in the future whether by writing it into the constitution or maybe by having a role in nominating the next president or in somehow ending up with a president that is amenable to their pressure and preferences.

How significant are the upcoming presidential elections?

The presidential elections are important because if the Egyptian armed forces are to retain ultimate veto power over issues of war and peace and foreign policy, and if they are to maintain their exclusive control over their budgets and funding streams, then either those powers has to be written into the constitution or they need a president who is sympathetic to them—if not under their control—and will use his presidential power to ensure that no other civilians get involved in military affairs. That was pretty much the situation under the previous president Hosni Mubarak.

How the military is to ensure that in the future the president will always be somewhat sympathetic and always in its control is a very big challenge. It is not obvious the military leaders can do it this time; how they are going to do it in the future is not really evident.

Can the international community push the military to democratize Egypt?

The international community faces a dilemma because most of the time the way in which the United States exercises influence in these situations—besides private discussions and encouragement—is to offer or threaten to withdraw financial assistance. This is an extremely crude and blunt instrument that more often backfires than serves its purpose. It would not work if the United States or other Western countries were to try and assist the democratic transition by offering further economic assistance—either for the armed forces or for the economy—conditional on certain behavior.

Although the Supreme Council of the Armed Forces is absolutely adamant about protecting its special relationship with the U.S. military and U.S. military assistance, if the assistance is presented with threats of funding cuts if certain conditions aren’t met, the Egyptian armed forces will reject the assistance realizing that they would then gain on the domestic front for having stood up to a sort of blackmail.

The real challenge for the outside players—the United States, EU, and others—is to instead set as the ultimate goal—a genuine democratic transition—the armed forces’ complete acceptance of civilian oversight, which means scrutiny of the defense budget and any other economic or financial activities or streams they have, and obeying the orders of the duly constituted government.

Getting to that point is going to be a very difficult, protracted process, but if the outside players make it very clear to the armed forces that this is what is expected, then this may also encourage the Egyptian political parties to stand firm and to say to the armed forces, as the Muslim Brotherhood has been saying repeatedly, “it is unacceptable and unconceivable that there should not be proper civilian oversight and parliamentary scrutiny of the defense budget in the future. This has to happen. There can’t be permanent immunity of the armed forces from whatever they do inside the country. We may offer immunity for past behavior and past problems and mistakes, but not for future ones.”

The parties will stand firm if they also feel an important player like the United States or the EU also supports this position because the Egyptian armed forces would then understand that this is the real U.S. position, even though in the last year this hasn’t been Washington’s stance. The armed forces have been encouraged to think that they can exercise increasingly more influence and leverage over the civilian politicians. They essentially think that they can say to civilians, “Okay, we are going to hand over power, but you are going to have to pay a price for it.” But if they are made to feel like that is a useless game, they may back down more easily and at less cost.

How will the constitution be written?

The constitutional declaration that was issued by the Supreme Council of the Armed Forces at the end of March 2011 followed only one week or so after a referendum had already approved a revised constitution. It was a rather strange exercise. The armed forces laid out how the new constitution was to be drafted, which was specifically to set up a drafting committee of 100 people who would be selected and appointed by the new incoming parliament. The problem is that last fall, it became obvious that the Muslim Brotherhood and maybe other parties such as the Al-Nour Party—the Salafi Islamist party—were likely to do very well in the elections. The armed forces then started to retreat under pressure from some of the secular, liberal parties and from non-liberal parties (secular parties that basically don’t want regime change and don’t want anything to change; they hope that the military will stay in power to ensure that they too will always benefit from the future system).

These different sources of pressure came in and the armed forces tried to issue a new document governing the new constitutional process in which parliament would only select twenty of the 100 members of the drafting committee and that no single party could appoint more than five people to represent it among those twenty. So even if, say, the Muslim Brotherhood controlled 50 percent of parliament—which should give it ten out of twenty seats in the constitutional committee—it would only be entitled to five. The other 80 representatives in the constitutional drafting committee would represent a wide range of government and non-government sectors—lawyers, engineers, university teachers, workers’ unions, farmers’ unions, and so on—and these were to be nominated by various unions or their governing bodies. A lot of these bodies and unions—the council or assembly of universities for instance—were people who had mostly been appointed by the previous regime of Hosni Mubarak or were going to be reappointed by the new Supreme Council of the Armed Forces, so this became a very blatant attempt by the Supreme Council to stack the constitutional committee with their nominees. In other words, they are going to make sure that no matter what happened in the elections for the Senate, the Shura Council, it would have next to no bearing on the drafting of the constitution, which was a fundamentally nondemocratic process.

It’s fine for the armed forces to say that they have to make sure that the new constitution doesn’t go the other way entirely just because it happens to be a parliamentary majority these days or Islamist or socialist or whatever it might be. That is fair enough. But their attempt was quite blatant and triggered the November protests that finally forced the Supreme Council to backtrack and take that document off the table. It may come back on the table however.

What can be done to improve the economic situation in Egypt?

In terms of the democratic transition specifically, what’s important is to shift the power away from people who possess political power by virtue of holding public office or by virtue of sitting in senior positions in the state bureaucracy, where they have a lot of control and influence over economic decisionmaking—who gets what contracts, who gets the biggest contracts, who gets special access to credit or capital, for instance. As long as that was the state in Mubarak’s Egypt, this meant his cronies, very big businessmen, people close to the president, and close to the leading circle of the National Democratic Party—which was partly headed by Mubarak’s son Gamal—got the biggest contracts and they got privileged access.

Then as now, the Egyptian state accounted for lots of expenditure and spending on infrastructure and construction and controlled many of the dealerships and big brands in commerce and trade, so it could give contracts and access to privileged cronies. As long as that happened, small and medium businessmen in Egypt weren’t going to invest or expand, there wasn’t any predictability. They couldn’t be sure that their rights and contracts would be respected. If they got big enough, then some senior bureaucrat would muscle in and say, “Well, if you are going to get an even bigger share of this market, you are going to start expanding. We want our share too. You’ve got to let us in on this.” As long as that’s the case, the small and medium business class in Egypt will never grow.

In a country like Egypt, as in much of the developing world, it’s the small and medium business class that accounts for the largest single number of individual businesses and of employees and owners. Big business tends to be much more concentrated and so the rise of a very huge business class that is committed to free market economics, to private sector enterprise, to genuine competition, and to genuine openness and transparent rules of the game as it were, is going to be blocked.

So, it’s fundamentally important in the case of Egypt’s democratic transition for this relationship to shift. Then it will maybe end up where Turkey ended up—the growing middle class grew so much that it could finally challenge the rule of the military. It backed the sort of political party that was interested in challenging the military, rolling back military power and pushing it out of political life.