How can we grow the Egyptian economy NOW?

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source international trade organization ministry of finance Egypt
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By: Amira Elhamy

In a very informative session, titled “How can we grow the Egyptian economy now”, the American University in Cairo, hosted Dr. Noha Bakr, Adjunct Faculty, Department of Political Science, AUC, and Mr. Aly Wali, Senior Director of Logic Management Consultant to address the key potentials of developing the Egyptian Economy. The session was held May 11th on AUC new campus. Dr. Noha Bakr, started the seminar by providing an overview of the main national problems facing Egypt. She stated that the security problem is actually one of the most serious problems hindering direct foreign investments as well as the tourism industry in Egypt. She highlighted that we are faced with relatively high unemployment rates in Egypt, a high inflation rate and a budget deficit of LE 300 billion. “However, we cannot say that there is no hope; in fact there is hope and there’s a multitude of opportunities within these challenges, especially that Egypt is endowed with a strong political will, and managed various reforms, most importantly the lift of subsidies, accompanied by a safety net for unprivileged citizens; for example “Takafol” and “Karama” tailored programs for unprivileged citizens” said Bakr.

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Dr. Noha Bakr, clarified that we do need to move fast with our development process; we further need to fix our long and short term goals, and accomplish quick wins to satisfy the average citizen. She moved to point out that several financial resources have been allocated to infrastructure projects, which in due time will have a solid impact on the country’s economic development and stability. Bakr, pinpointed that developing all sectors of the economy is vital; A developed economy is the outcome of developing the various sectors, not only a few of them.

She also referred to one of the most successful economic experiences in Egypt, which is sorting out the electricity crises; Bakr explained that this experience was successful as it included all success elements, such as; having a fixed strategy, good planning, and crises management techniques. Furthermore, Mohamed Shaker, minister of electricity, managed the crises in a decentralized manner. She said that administrative powers when it came to the electricity issue were equally disseminated, which is one of the most crucial keys required for any political or economic success, namely decentralization of powers. Shaker, was also able to allocate the necessary funds; furthermore the crisis was prioritized and there was a strong political determination that aimed to manage the crisis. Bakr, also added that Ministry of Social Solidarity, is another obvious example for a successful ministry that is operating in a decentralized manner.

The AUC adjunct professor, stressed the importance of education and research in order to empower and upgrade human capabilities, as they are the basic requirement when it comes to building a nation. “Egypt will be built by it’s own human capabilities, hence, education is important to change people’s lives and make them embrace all efforts required to build their nation.” As Wali started his part of the session, he initiated the discussion by tackling the main challenges ahead of Egypt. These can be summarized as follows; major budget deficit, high inflation rate, dollar shortage, unemployment and bureaucracy. He notes that the Egyptian government, loses LE 326 Billion/ annually; due to the current major economic challenges; which the government can actually address either by increasing government revenues, or decreasing government expenses. “In fact, Egypt’s government revenues are meager in comparison with other countries. In 2015 Egypt’s government revenues, were $31 billion”, said Wali, adding that Egypt has a relatively big trade deficit; in 2015-2016, Egypt’s exports reached $ 25 billion dollar, whereas its imports reached $77 billion dollar, which indicates a deficit of $52 billion dollar. Furthermore, Egypt’s exports are very low in comparison with other competing countries; in 2015, Egypt’s exports reached $25 billion dollar, in comparison with Turkey; which exports scored $144 billion, Malaysia, $200 billion, Thailand, $214 billion , and Korea $ 527 billion.

So how can we manage the current situation? In order to reduce the shortage in supply as well as the dollar shortage, several key solutions can be suggested, however, every solution has its impact over the economy and some solutions cannot be adopted in Egypt’s case. In other words, reducing imports, can be a suggested solution, however this is very difficult, because the successful way to reduce imports is by reducing the value of the currency to make imported goods more expensive; however, this could culminate in a drop in the standard of living. Remittances from Egyptians abroad, can help, however it’s impact is quite slow. Tourism can be another suggested solution. However, the best solution that could have a major impact on the Egyptian economy is boosting exports; the Egyptian economy can grow more than $25 billion; in fact increasing our exports is the best solution to fix the trade budget deficit. Aly Wali proceeded to add that decision makers in Egypt, constantly get distorted messages, such as; we must start first with upgrading the education system as Malaysians did, or let us focus on our services to increase Egypt’s GDP; however growing industrial exports is an essential step to make substantial moves to drive the Egyptian economy to recovery. According to IMF Egypt’s GDP, in 2015 was $ 331 billion and actually it is expected to drop to $220 billion in 2017 as a result of the devaluation decision.

Manufacturing is regarded as a significant sector, we badly need to focus on developing it’s parameters in order to increase the GDP, and in turn industrial exports. Wali further said that investment is another key issue that poses as a must in order for us to manage to fix the trade deficit. To grow our government revenues, we need to attract investments that are export focused”. Furthermore, we need to work on increasing investment opportunities; every increase of government revenues by $1/year requires $5 investments. The seminar attendees ranged from university students to multinational companies representatives, UN officials, as well as journalists, who were all keen to join in the discussion.

 

 

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