A SUMMARY of a report issued by the Egyptian Centre for Economic Studies (ECES) said that although Egypt has achieved economic stability and reduced its inflation rate, thus catching up with other fast-growing economies, it still suffers from problems which can hinder growth, such as low per capita income, excessive government expenditure, low domestic savings and high illiteracy rates.
Government expenditure remains at a high of 30 per cent of GDP, said the report, compared with 20 per cent in other expanding economies. Domestic savings remain a meagre 18 per cent of GDP, substantially short of the 30 per cent needed to attain a stable growth rate.
The report said that in order to reduce government expenditure, the public sector should stop investing in projects which "are more efficiently carried out by the private sector". It predicted that the scheduled privatisation of one third of government-owned assets will eventually lead to an increase in savings by an estimated two per cent of GDP (since the public will be investing in the stock market as a result of companies being offered for sale).
Studying different factors which hinder growth and productivity, the report cited the poor level of education as a major impediment. Despite the allocation of approximately six per cent of total GDP to the educational system, Egypt's illiteracy rates remain high, said the report, because not enough attention is given to primary as compared to secondary and university education.
The report also mentioned the protection of copyright laws as a prerequisite for attaining rapid growth, saying that clear-cut rules must be enforced in these matters, along with the fair and speedy resolution of disputes.
What the report termed as "the bias against exports" must be removed as well, and the services sector -- which includes telecommunications, energy, transport, ports and banks -- must be liberalised, since the inefficiency of these services has caused exporters to bear additional costs of 15 per cent of the value of exports.
The report also said that Egypt can attain a stable growth rate and higher per capita income through coordination of efforts by the government, private sector and international funding institutions.
A single voice
THE MINISTERIAL privatisation committee has recently forbidden officials in holding and affiliate companies to make any comment on performance-related issues in an attempt to avoid potentially damaging effects such comments may have on share prices. Instead, information will be made available through an official and by the publication of quarterly financial statements.
This recent decision seems to fly in the face of repeated recommendations that there be greater transparency in the Egyptian capital market. Experts believe that investors need to be fully informed about the company they have put their money in; otherwise the market is prone to crashes caused by sudden bouts of panic-selling by nervous shareholders.
