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Al-Ahram Weekly 30 Sep. - 6 Oct. 1999 Issue No. 449 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 30 Sep. - 6 Oct. 1999 Issue No. 449
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Focus Features Profile Travel Living Sports People Time Out Chronicles Cartoons Letters Uncompromising on services deregulation
By Niveen WahishNext year new negotiations on the General Agreement on Trade in Services (GATS) are scheduled to begin. To acquaint Egyptian businesses with this agreement, a conference entitled "GATS 2000: Issues, Coordination and Private Sector Input for Trade in Services Policies" was held last week in Cairo. It was sponsored by the Egyptian Centre for Economic Studies (ECES) and the Commercial Law Development Programme of the US Department of Commerce. Niveen Wahish attended.
The GATS was initiated during the Uruguay round of trade talks to allow services freer access among the GATS' member countries similar to that enjoyed by commodities under the General Agreement on Tariffs and Trade (GATT). However, the agreement reached in Uruguay was "not quite complete and largely untested", according to a paper prepared by the ECES. That is why when the agreement was signed, it was understood that there would be further rounds of negotiations to continue opening up world trade in services.
Key issues in trade in services are: how cross-border exchange of services can take place, the ability of foreign institutions to establish a commercial presence through, for example, a branch, agency or wholly-owned subsidiary and the ability of foreign individuals to temporarily reside in a country in order to provide a service, according to the GATS. The agreement covers 12 broad sectors, which are business, communications, construction/engineering, distribution, education, environment, finance, health, tourism/travel/recreation, cultural/sport, transport and others. Egypt has committed itself to working within the GATS framework in four of these sectors -- construction, finance/banking, tourism and transport.
Experts at the conference agreed unanimously that the country should also commit itself to working within the GATS framework in the communications sector. This would provide the foundation for a state-of-the-art national information infrastructure needed to boost Egypt's trade via the Internet, according to Sherif Delawar, board member of the Alexandria Businessmen's Association.
Many believe that developed countries are promoting the liberalisation of trade in services to open up new markets for their service institutions. However, this is not the only reason. Former US services negotiator in Geneva Richard Self, speaking at a press briefing on the conference sidelines said, "Developing countries have more to gain [from this agreement] than they might think." He pointed out that opening up trade in services generates greater efficiency and makes the economy more competitive. "Better services improve the overall economic performance," he said, explaining that a good services infrastructure is essential for the manufacturing sector. Moreover, according to Self, foreign suppliers of services bring in capital, expertise and job opportunities.
However, not everyone in Egypt is convinced by this argument, especially since the Egyptian services sector has long been a monopoly made up of various government institutions and agencies whose members believe that if service institutions from abroad are allowed into the country, they will swallow up local companies.
On the other hand, the Egyptian manufacturing sector is a strong supporter of opening up the services sector. This sector fully supports the liberalisation of services, such as transport, distribution, and others, because the current services function in a way that hampers the competitiveness of manufactured products in international markets, Delawar said.
Sahar Tohamy, senior economist at ECES, emphasised this point in a paper presented at the conference which said that "inefficient monopolies in ports and airports have long undermined Egyptian competitiveness in international markets. The government monopoly has led to import and export costs for using Egyptian ports that are among the highest in the world," she added.
Fortunately, the maritime sector is included in the four broad sectors Egypt is committed to liberalising. However, the commitments made by a country are not an indication of its commitment in each specific sector and do not necessarily indicate the extent of liberalisation that will occur in a given sector, Tohamy explained.
In her paper, Tohamy highlights the importance of the services sector to Egypt. She said that regardless of the level of a country's development or income, services represent a large share in any economy, and the share of services in overall economic activity grows with development. Egypt's services sector accounts for a 51 per cent share of GDP. In developed countries this figure is sometimes as high as 80 per cent.
Tohamy also stressed that services make a major contribution to Egypt's balance of payments. Service receipts from tourism and Suez Canal fees represent a large part of Egypt's foreign currency earnings.
With this in mind, Tohamy concluded that "the decision to liberalise services should not be open to compromise, both by virtue of their role in enhancing the competitiveness of other sectors and by virtue of the contribution of services to export-oriented activity."
Delawar holds a similar view. "It is no longer a choice of liberalising the services sector or not," he said. If Egypt wants to become part of the international process of globalisation, then it has to accept the rules of the game, he added. "Making the most of liberalisation depends on the management of the economy," he said.
The government should deregulate trade in services before opening up the domestic market to foreigners, Delawar suggested. He explained that privatising service companies would break up existing monopolies and give local companies time to get accustomed to a market with more than one player. This would prepare them for stronger competition from foreign suppliers. And it would permit the evolution of the Egyptian services market and the creation of a regulatory framework with an effective anti-trust law needed in the new competitive environment.
