In Translation: A modest proposal to fix Egypt's economy
Economist, former government minister and rare voice of reason Ziad Bahaa Eddin presents a list of sensible suggestions for what Egypt should do, undo, and not do to right its sinking economic ship. Pity that they will almost certainly fall on deaf ears. This installment of our In Translation series is brought to you as always by the professional translation team at Industry Arabic.
El Shorouk newspaper, October 20 1015
One cannot describe the current economic situation as only a minor bump, one that we can deal with using the same tools and methods the state has grown accustomed to using over the past years, and which exacerbated the crisis in the first place. I am not referring here to the disturbances in the exchange market that recently grabbed the media’s attention: they are a symptom of an underlying sickness, the expression of deeper problems in the management of the economy. The principle of these problems are weak levels of investment, exports and employment and the rise in both internal and external public debt. The most important of these problems, though, is the government’s lack of clarity in its economic policy and the direction it intends to pursue. For citizens, the steady price increases, especially in food, the continuing decline in public services and the scarcity of employment opportunities are the real indicators of the Egyptian economy’s performance. For them, these issues are more important than figures for growth, reserves and the public debt.
We can, of course, blame the slowdown in world trade, global conspiracies, or the regional situation. None of these, though, are sufficient to explain the rapid worsening of the economic situation over the past few months. We can also demand that minister after minister step down or cabinet after cabinet be replaced every time there seems to be a slowdown or a failure or every time the media calls for an immediate change. However, the gravity of the current situation requires us to stop and reassess our position and to build a minimum of consensus around certain important priorities instead of searching for a scapegoat or trying to satisfy the media’s thirst for a new victim. Here is what I propose:
Over the short-term, the government must make decisions on various issues that remain unclear and that cause persistent anxiety within the investment community. Most importantly, the government must explain what taxes and fees it intends to impose in the short and medium term, the future of energy pricing, what the forthcoming agreement with the World Bank contains and, last but not least, what measures it plans to adopt to deal with the exchange rate. Even if some of these are hard choices with a high social cost, lack of clarity is, in all cases, is more damaging than decisiveness. Lack of clarity leads one to imagine the worst possibilities and paralyzes investment and production. Furthermore, it is necessary for there to be complete agreement on a shared position among members of the government. Contradictory statements made by officials causes the government to lose credibility. As for the exchange rate, no statements or forecasts should be made, except by the Central Bank, as it is an issue that is negatively effected by any rumor or poorly thought-out statement.
In the short-term, as well, there is a great need to review many recent faulty decisions and to courageously acknowledge their shortcomings rather than stubbornly persisting in them. It is no longer up for debate that the Investment Law issued at the Sharm el-Sheikh conference was a big mistake. It further complicated the investment environment, opened up space for corruption and manipulation of land allocation and promised investors things that it could not guarantee. There is agreement among experts in law, economy and business that this law set us back ten years. So why do we not repeal it? The same applies to the policy of promoting global investment without giving sufficient, let alone similar, weight to small and medium-sized national ventures, older industrial zones and local investors’ associations that represent tens of thousands of small producers.
In the long-term, it will be useful to reexamine the utility of large national projects in light of the continuing lack of clarity and of contradictory statements made by officials about their cost, economic impact, funding and mechanisms of implementation. No one hates the idea of a new capital for Egypt, nor of adding millions of acres to the available agricultural land. Yet, due to the scarcity of resources, urgent needs in all areas of social expenditure and the need to upgrade existing public utilities, we must reconsider our priorities. There must also be dialogue within the community about the utility of such projects: which should be implemented now and which should be delayed or even set aside entirely.
Likewise, we must return to the issue of social justice, which has been neglected recently despite remaining, over the past four years, the Egyptian people’s clear, repeated demand. Though it represented for a time the core concern of the entire state, social justice has become again an overlooked issue, only pursued by the Ministries of Social Solidarity and Supply through the tools available to them. These tools -- pensions and social security through the Ministry of Social Solidarity, and ration cards and food subsidies through the Ministry of Supply -- are not enough to achieve the prosperity that people seek. We must transition from a concept of “social solidarity,” achieved by means of granting additional pensions and subsidized food supplies, to a concept of “comprehensive social protection” that gives all citizens proper education, the chance to become qualified for the labor market, healthcare and the opportunity to compete and advance. After this comes the role of social security: to protect the weak and those who cannot compete in the work market. Successive governments have made substantial efforts in this area, but a political decision needs to be taken to reinvigorate interest in completing this process, begun many years ago.
Finally, both in the short and long-term, there is a need to broaden the circle of discussion surrounding decision makers both in the Presidential Palace and the Cabinet. I speak here not only of the need to ask for assistance from Egyptian experts both inside and outside the country who could make valuable additions. More importantly than that, there must be an institutional dialogue. Economic policy should not be set solely by the group of people that surround the president, no matter how competent they are. Instead, it should be set through dialogue between the government, the Federation of Egyptian Industries, the Federation of Egyptian Chambers of Commerce, investors’ associations, professional associations, workers’ unions, political parties and civil society organizations. Each of these bodies represents a force in society and an interest that we must listen to and involve in the decision-making process so that they do not become spectators waiting to see what surprises the government throws their way. A sound economic policy should be designed with their support and participation and should represent a balance between their various interests.