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Al-Ahram Weekly 27 May - 2 June 1999 Issue No. 431 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 27 May - 2 June 1999 Issue No. 431
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Profile Living Features Travel Sports People Time Out Chronicles Cartoons Letters The job creation challenge
by Mona El-FiqiEgypt's economic reform programme, implemented since 1991, ranks as the fourth most successful of its kind worldwide, according to a World Bank study released this month.
But longer-term challenges must also be dealt with -- namely the creation of productive job opportunities for a rapidly growing labour force and raising the current level of income.
Egypt has to find productive employment for around 550,000 workers every year. However, from 1990 to 1995 the Egyptian economy produced only 370,000 jobs a year. Per capita income is currently $1,200 annually.
The creation of job opportunities necessitates an increase in GDP growth rates, which can be accomplished by increasing the current level of investment, increasing domestic savings and improving competitiveness in the productive sectors, said the report prepared by Sahar Nasr, an expert with the World Bank.
At present, the economy's investment level accounts for less than 20 per cent of GDP. In order to raise the current annual growth rate of 5.7 per cent to the targeted 7 to 8 per cent, investment must account for approximately 28 per cent of GDP.
Domestic savings must also be raised from about 15 per cent of GDP at present to approximately 25 per cent, said the study. Otherwise, a large a part of investment will have to be financed from abroad, and this could make the Egyptian economy vulnerable to changing investment patterns in the outside world, the report warned. Egypt can achieve higher rates of savings through privatisation, reforming pension schemes, and increasing exports, according to the report.
Privatisation proceeds raised from the sale of public sector companies can help reduce the government's budget deficit. Privatisation is also instrumental in attracting foreign investment, introducing new technologies and establishing higher quality standards.
The report diagnosed Egypt's exports as being "too concentrated" and not sufficiently diversified to gain access to potential regional markets. The export sector's growth rates have been "slow". In the years 1986 to 1997, exports increased by a mere four per cent. The ratio of exports to GDP is much lower than that of the fast-growing economies, and, in fact, has steadily been decreasing.
Egypt's low export competitiveness is reflected in its declining share of world exports. Its share of global exports fell from 0.3 of one per cent in 1985 to 0.1 of one per cent in 1997.
If Egypt had retained its 1985 export share, its exports would have been $16 billion in 1997, instead of $5 billion.
Growth in real exports has fluctuated sharply as well. In the 12-year period from 1986 to 1998, real export growth was negative in five of those years, and negligible in three of them, the study said.
It concluded that social development must proceed in tandem with economic development. In order to use investments efficiently, there must be a well-trained labour force. Here, education and training play a vital role. Health care for workers must also be given priority because well-trained workers who are, nevertheless, frequently absent on sick-leave cannot enhance productivity.
