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Al-Ahram Weekly 21 - 27 October 1999 Issue No. 452 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 21 - 27 October 1999 Issue No. 452
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Features Profile Travel Living Sports People Time Out Chronicles Cartoons Letters Ebeid's economic agenda
By Gamal Essam El-Din
Prime Minister Atef Ebeid announced this week that the newly-appointed government intends to focus on nine key issues among which are: accelerating mega-development project implementation, revitalising the privatisation programme, boosting exports, upgrading public services and administrative reform. A "technological renaissance" project, achieving social justice and improving living conditions in Upper Egypt and rural areas will also be top priorities for the new government.
Following the cabinet's first meeting on Sunday, Ebeid said that his government's economic strategies will be debated by the "Economic Group" headed by Economy Minister Youssef Boutros Ghali. It includes the government's most liberal-minded ministers who will draw up an ambitious programme for increasing exports, bringing stability to the exchange rate and attracting greater foreign direct investment flows into Egypt.
Minister Ghali was given powers to implement new economic policies and speed up the liberalisation of the economy and is expected to be the key formulator of monetary, fiscal and investment policies in the future. His powers now include the foreign trade portfolio and direct supervision over the General Agency For Investment (GAFI).
Prime Minister Ebeid's former adviser, Mokhtar Khattab, now elevated to the post of minister of the public business sector, is expected to take the privatisation programme out of its current doldrums. Khattab announced this week that as many as 48 public industrial companies will be ready for privatisation in the next three months. Some of these companies, such as the Egyptian Company for Telephone Equipment and Assiut Cement Company, will be sold to anchor investors. This week, a World Bank mission arrived in Cairo to announce the funding of a programme to promote public industrial companies among potential international investors.
The privatisation programme, however, will have to surmount a number of obstacles in order to become more attractive to investors. The government needs to introduce financial and administrative reforms of public industrial companies before they are offered for privatisation. An estimate from the Public Business Ministry indicates a dire need for a fund of LE3 billion to persuade as many as 350,000 workers in these companies to accept early retirement. Khattab announced this week that the early retirement programme in the coming period will be confined to workers who are more than 50 years old.
On a more positive note, recent reports show that a big number of international investors are now lining up to buy shares in Telecom Egypt. As well, the long-awaited decision to float 10 per cent of the shares of the Greater Cairo Company for Electric Power is considered a major step towards ending the stagnation afflicting both the privatisation programme and the stock market.
The appointment of Hassan Khedr, former chairman of the Principal Bank for Development and Agricultural Credit (PBDAC) as minister of supply and internal trade was seen as a very significant step in Ebeid's drive to privatise the state-owned consumer products cooperatives.
Khedr, as a first under-secretary at the Ministry of Agriculture, was largely responsible for liberalising the marketing of basic agricultural crops and the phasing out of subsidies provided to farmers.
The most feared repercussion of speedy privatisation, however, has been its potentially negative effect on lower-income groups. Ebeid's critics, specifically those left of centre, attack him for being what they describe as a 'technocrat' who they anticipate will be a tough executor of privatisation. Ahmed Abu Ismail, an MP and former finance minister, told Al-Aram Weekly "Now, a clash is expected [inside parliament] if Ebeid decides to submit a long-awaited draft labour law aimed at regulating the relationship between investors and workers in a market economy," Abu Ismail said. The leftists believe that the draft law will work against the interests of labour and favour businessmen and investors.
The second challenge facing the cabinet's economic group will be boosting Egypt's export sector.
The new government has three options in this respect: to devalue the Egyptian pound to make exports cheaper; to slow down the implementation of several mega-development projects; or to impose stricter curbs on imports.
Closely related to export promotion is tackling the problem of foreign currency shortages. The Central Bank is now faced with the task of raising foreign exchange reserves "from the current $16.8 billion to the former level of $22 billion of three years ago," according to Abu Ismail.
Successfully meeting these challenges will mainly depend on whether Ebeid's government will be able to attract larger amounts of foreign direct investment to Egypt. In 1998/99 El-Ganzouri's government achieved only modest success in attracting direct investments estimated at $711 million, compared to $1.104 billion in 1997/98. "In this respect, I think Ebeid and Ghali will take urgent measures to see a long-awaited unified investment law passed by parliament in its next session. This bill is mainly aimed at providing greater facilities to investors. They tried their best in the past to submit this urgent bill to parliament, but [former prime minister] El-Ganzouri's over-centralised powers obstructed them," said Abu Ismail.
