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Kick-starting Egypt’s economy

Fady Labib

16 Dec 2015 2:27 pm

 

 

 

 

 

 

Egypt has seen a number of conferences this year on the economy and what the country needs to do if it is serious about attaining prosperity. The first quarter saw the international gathering at Sharm al-Sheikh on which Watani International reported extensively in its 15 & 22 March 2015 issues; the last quarter saw two other substantial conferences take place. The second annual Akhbar al-Youm Economic Conference which has rapidly gained the respect of economists and policy makers recommended that Egypt should focus on supporting logistics and information technology services and industries, export-oriented industries, and the optimal exploitation of natural resources. Legislation should be enacted to speed their growth, and adequate financing should be made available through the banking sector which has at its disposal some trillion Egyptian Pounds in ready funds, as well as through bonds and stocks and non-conventional financing tools.

The other conference was held in the western coastal town of Marsa Matrouh and focused on the projects most needed by the region. Matrouh Governor, Alaa’ Abu-Zeid, signed with interested investors 16 memoranda of understanding on projects in the fields of tourism, agriculture, and industry, as well as the establishment of a new port at Gargoub. Included are projects for a theme park, a world-class museum, and three sanitary drainage plants in Siwa oasis.

A number of the contracts signed during the economic conferences are already in the process of execution, but others have yet to start.

 

 

 

Egypt ranks 116th out of 140 countries in the 2015 – 2016 Global Competitiveness Report. Economists see this as only a slight improvement from last year when Egypt ranked 119th out of 144.

The Global Competitiveness Report (GCR) is a yearly publication by the World Economic Forum (WEF) studying factors that affect the productivity of a country, which in turn determines the level of prosperity of its people. Competitiveness is measured by assessing a number of indicators, called the 12 pillars of competitiveness, grouped into three main groups: basic requirements, efficiency enhancers, and innovation and sophistication factors. The Global Competitiveness Index (GCI) uses a scale of one to seven to assess the overall performance of a country in the 12 pillars of competitiveness; Egypt scored 3.7 in the current report as compared to 3.6 in 2014 – 2015. 

With the UAE ranking 17th in the GCR, Kuwait ranking 34th, Jordan ranking 64th, Tunisia ranking 92nd and Lebanon ranking 101st, Egypt’s overall rank is considered poor not only globally but also on the regional level.

 

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First time improvement

The GCR trends show an enhancement in basic requirements in Egypt resulting from an improvement in the pillars of institutions and infrastructure; however, no tangible advance is noted with respect to the pillars of macroeconomic environment and health and primary education. The report highlights an improvement in the efficiency enhancements pillar attributed to the increase in domestic market size, as well as significant increase in GDP and in the efficiency of the banking system. Minor improvement is noted in the efficiency of both goods and labour markets whereas the innovation and sophistication factors show neither improvement nor decline.

The improvement in the pillar of institutions is attributed to the consolidation of judicial independence, property rights and the efficiency of legal framework in settling disputes. The improvement in the infrastructure pillar reflects a better quality of port infrastructure and electricity supply. The increase in the goods market efficiency results from the effectiveness of anti-monopoly policy and a reduction in the number of procedures required to start a business, both considered important factors which have a positive impact on attracting foreign direct investments.

Omneia Helmy, Acting Executive Director and Director of Research at the Egyptian Center for Economic Studies (ECES), says that the 2015-2016 GCI indicates a slight but steady improvement in the Egyptian economy for the first time since 2010-2011. Egypt has ranked poorly in several sub-pillars such as budget deficit, quality of primary and higher education, on-the-job-training, the availability of training centers, business costs of terrorism, efficacy of corporate boards, and female participation in the labour force.

 

Falling short

In her research about Egypt’s ranking in the GCR, Dr Helmy asked members of the business community in Egypt what measures they believed the Egyptian government should take to improve the country’s competitiveness. The businessmen cited policy stability as their first demand; they also asked the government to increase the efficiency of the State administrative apparatus, facilitate business financing, establish foreign currency regulations that would reduce inflation, draft more flexible work bylaws, and encourage creativity.

Nihal al-Megharbel, First Assistant to the Minister of Planning, Monitoring and Administrative Reform, sees that despite the slight increase in Egypt’s ranking in the GCR, the results of the report are still very far from Egypt’s aspirations. “Egypt’s sustainable development strategy, which is supported by President Sisi, aims to move Egypt to the top 30 countries by 2030,” she says. “To achieve this goal, programmes were set targeting a 7 per cent growth rate and a decrease in budget deficit, as well as initiatives to promote creativity and scientific research and achieve development in several fields.” As for infrastructure and institutions, Dr Megharbel thinks these pillars are bound to score better in the future, especially since EGP29 billion is allocated to infrastructure in the 2015/2016 plan which is expected to have a positive effect on prospective investments. “We need to put more effort into the health and education sectors,” Dr Megharbel says. “Eventhough considerable funds are allocated for them in the State Budget, most of these funds are spent on salaries. The strategy for 2030 is being set with the joint efforts of the private sector and civil society.”

 

Catching up

“Competitiveness is very important for Egypt’s economic development,” says ECES Vice-Chairman Mohamed Taymour. “With a 90-million strong population that imports about 65 per cent of its needs, the main focus in the current period is to catch up with the global economy.” To achieve this, Dr Taymour believes that Egypt must improve its monetary and financial policies and turn them into a growth incentive. It is also imperative to restore Egypt’s position as a major tourist destination after the decline in tourism income following the 2011 Arab Spring uprising from USD 13 billion to USD 7 billion. “New economic and monetary policies must be adopted to eliminate impediments to foreign investment,” he says. “It is interesting to note that the value of the Egyptian Pound has recorded a 15 per cent increase against most foreign currencies except for the US Dollar, against which the value of the Egyptian Pound continues to decline.”

Abla Abdel-Latif, Professor of Economics and Head of the President’s Economic Development Council, thinks Egypt’s ranking in the GCR is not what really matters at this stage; however, the current vision must focus on new ways to achieve economic development that would raise Egypt among the world’s top 30 economies.

“Our ailing economy is suffering from chronic problems, and the current political situation was not taken into account in the GCR; however, we are trying to improve Egypt’s economic performance and adopt a sound developmental model that takes into account the social factors that impact the economy,” Dr Abdel-Latif says. “The GCR is simply an economic index which focuses on a number of factors, but in order to reach a better and more comprehensive picture of the economy, other factors—including industry and trade—which are more favourable to the Egyptian economy must be taken into account.”

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Assessing performance

Seif Allah Fahmy, Chairman of the Egyptian National Competitiveness Council (ENCC), says that the GCI and other similar indexes can be used by the State as a work assessment tool. The report facts can, for instance, be used by the Minister of Education to assess performance and set future plans that would increase Egypt’s future rank in education. It is important, Mr Fahmy says, to focus on improving education because it has a direct impact on all other development aspects. “Unfortunately,” he says, “the indexes of education keep getting lower year after year. The competitiveness index must be taken seriously because it usually goes hand in hand with the growth index. Without assessing Egypt’s competitiveness and finding ways to improve the different pillars, Egypt will never advance.”

Hossam Badrawi, former Head of the Education Committee at the People’s Assembly and honorary chairman of the ENCC, says higher education and training are among the pillars of global competitiveness. “Adopting the conventional methods of education has brought us to where we are today,” Dr Badrawi says. “Therefore, we must think out of the box to come up with creative solutions for the problems of education. Egypt has a cumulative experience in this particular field which gives us an edge and prevents us from re-building the whole system from scratch. A long-term education plan must be set to be implemented by successive governments.”

As for ways to improve the GCI, Dr Badrawi says there is a plan to issue a local competitiveness report for Egyptian governorates and use each one as a smaller model of the country’s economy. Indexes must be set for the different economic sectors of agriculture, industry, trade and services. The combined index should reflect Egypt’s GCI.

 

Watani International

16 December 2015

 

  


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