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Al-Ahram Weekly 4 - 10 November 1999 Issue No. 454 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 4 - 10 November 1999 Issue No. 454
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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 At globalisation's door
By Aziza Sami
The Chinese characters on the cover of the World Bank's annual report for 1999/2000, "Entering the Next Millennium", mean door. They were the inspiration of Shahid Yusuf, a senior economist at the World Bank (WB) who has worked extensively on China, authoring two books on its rural development and dynamics of urban growth.
Yusuf, who led the team which prepared the WB report, was in Cairo last week and spoke to Al-Ahram Weekly on the bank's strategy and his predictions for Egypt's course in a globalising world.
Yusuf, former senior advisor to WB Chief Economist Joseph Stiglitz, also spoke of the new 'philosophy' expounded by both Stiglitz and President of the World Bank James Wolfensohn, known as the Comprehensive Development Framework, (CDF). This strategy for the next millennium draws from the WB's experience over the five decades since its establishment with the Bretton Woods agreement. The philosophy, which is defended by Wolfensohn and Stiglitz against criticism that by "aspiring to do too much it risks achieving too little," has shifted focus from sheer 'economic growth' as a measure of success of a country's development to a concern with sustainable development which incorporates development theory and an awareness of the political context in which economic reform is implemented.
But if the views of Yusuf are to be taken as an indication, then the message is clear: comprehensive development aside -- and this is unequivocal -- real development will only come about through a 'multilateral' liberalisation of trade and the speedy opening up of economies to foreign investment.
Yusuf's assessment -- as well as that of the report -- is that regional arrangements, such as the Egypt-EU partnership, are a short-sighted view to global interaction.
"There are different types of preferential agreements, such as those with the EU, not all of which would benefit Egypt," says the report. "They could lead Egyptian importers to shift their purchases away from the most efficient foreign supplier to EU firms whose cost of supplying the Egyptian market is artificially lowered because they pay no tariffs. A broad preferential trade agreement with the EU would enable Egypt to harmonise its regulations, but would not substitute Egypt's participation in the forthcoming millennium round of WTO negotiations, which holds out the promise of multilateral reforms in services and agriculture, the report continues.
Yusuf is full of admiration for the East Asian experience, where growth was harboured by a massive infusion of foreign capital in the services and financial sectors. The Middle East must follow the course "of countries which had little mineral resources," but where the catalyst of growth was exports, believes Yusuf. "How do you go about it?" he asks, other than "by exposing economies to much more competition."
"Foreigners, as is apparent in the case of China, Korea, etc., could, in a very short period of time, provide a competitive edge. The initial shock of it will probably be quite severe. A lot of industries could shrink, but new industries would spring up. It will be painful, the workforce has gotten accustomed to employment, good wages and not being out of jobs," said Yusuf.
"I think there is a political bridge to be crossed. It might be that there is a large public sector in each country which is a principle employer, and this is the one which is going to be the most exposed. But even as you shrink back some state enterprises and let others go bankrupt, you are both creating jobs and becoming rich enough to provide the needed safety nets. Governments must realise that if they are not going to take this rather bold step forward, they are going to have a political situation (later) which they must deal with."
Yusuf takes China as an example; a fast-growing economy which maintained a 9.5 per cent growth rate for two decades, primarily because of its capacity to absorb and utilise foreign investments, specifically in the services and financial sectors.
The WB report emphasises that while Egypt "has been steadily liberalising its trade policies, which has contributed to economic growth, the benefits from liberalised trade have been stymied by "domestic constraints, including an inefficient services sector."
"Egypt is growing at five per cent," says Yusuf. "This is momentum; now is the time to take some bold action, not when you're growing at two per cent -- then I'd be worried."
The recommendations for economic liberalisation are clear in the report's case study on Egypt. But there has been no mention of how the WB would propose dealing with "fallout" from accelerated liberalisation. Perhaps the general theoretical framework embodied in the report on 'development thinking' is deemed sufficient here.
While the WB is addressing developing nations in politically reassuring tones of mutual 'partnership' and "the need for these developing countries and not assistance agencies to determine the goals and sequencing of their development programmes," the bank itself has redefined its role according to the tenets of 'globalisation'. Other than the admonition to "integrate", it offers developing countries little option.
