Al-Ahram Weekly 4 - 10 November 1999 Issue No. 454
Published in Cairo by AL-AHRAM established in 1875

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Setting the menu

By Aziza Sami

The Egyptian government is now working to attain a 7 per cent growth rate, and boost exports substantially in order to compete in the global economy.

Although it has effected a rigorous reform of the financial and monetary system, some issues, such as the policies needed to reinforce the private sector, boost production and formulate future fiscal policy, remain on the agenda ahead.

Khaled Ikram, head of the Egypt Division of the World Bank and the WB representative in Cairo spoke to Al-Ahram Weekly of his views on some of these issues.

How would you assess Egypt's privatisation process from a World Bank perspective -- its pace, priorities and manner of implementation?
Obviously, you can't go at the same pace every month and every week. But over the past three years, (privatisation) has been (going at) a reasonably fast pace.
I think that the government has been reasonably considering share prices, how to obtain anchor and strategic investors, (as well as) the compensation of labour.
IMF studies have shown that you can measure the success of privatisation by the amount of privatisation receipts as a percentage of GDP. (By this measure) Egypt ranks fourth in the world. I think this is something very creditable.

There have been discrepancies in the assessment of company prices between the government and private investors, as in the case of "internal trade companies" scheduled to be sold this month. Investors evaluated them at a much lower price than that given by the government. Are you acquainted with this?
No, but frankly it doesn't surprise me. There is no magic formula to fix the price. The government must make a balance between two things: one is a price at which the market will buy the company, the other is that you don't want to give the country's assets away to big businessmen etc.
Citizens should get a fair price for what, after all, is theirs.

What additional structural or policy measures do you believe are needed to reinforce the Egyptian private sector?
The Egyptian private sector needs to become more competitive if it is to face competition from Europe and the rest of the world and for that I think you need adjustment of tariffs so that they (can) compete more. They (also) need access to better technology and better training of labour. There is no reason why Egypt cannot compete with anybody in the world.
As far as the WB is concerned, we are preparing a project on the enhancement of skills. The idea here is to concentrate on the skills needed for a new economy and we want to involve the private sector in this.

What are the World Bank's plans in Egypt in the coming phase?
What the World Bank is planning to do is to have a talk with the new cabinet about its new priorities and how the WB can assist. I expect this meeting to take place in early December. I expect that a number of colleagues, including Mr Kamal Dervish, the vice president, should be coming from Washington.
The areas where we can help are those related to human resource development, especially education, health and employment, in which we have been working (here) for some time and where we are already quite busy.
Other areas where the government might find us useful might be in the alleviation of poverty. This is a big thing, I don't think the WB alone or anybody alone can do it, but we can bring to the government what other countries in similar situations have been doing.
We do poverty assessments and studies on a regular basis, so we can put all this at the government's disposal.

What is the World Bank's current portfolio in Egypt and are there plans to expand it?
The number of projects we have at present, both under implementation and approved by the (World Bank) board and waiting to start implementation, is (worth) about $1.6 billion. Total lending from 1973 until now (is) in the neighbourhood of around $7 billion.
I am hoping that (as a result of) the December meeting, the government will tell us 'we want this much help by way of financing, analysis, and by way of coordinating with other donors."
We get the menu from the government.

How would you diagnose Egypt's "export problem", its causes and remedies?
There are probably three or four issues here. One is that the services provided to exporters to move their goods out of Egypt and to bring in imports upon which exports are based take too long. Port services are slow, especially when we compare them to Egypt's competitiveness.
Progress is being made, but it is no good saying two years ago we took 30 days and now we take 25. You have to say how long does Korea, Taiwan, Singapore, Morocco or Jordan take. It's no good comparing Egypt with itself in a previous period, you have to compare it with its competitors
The other problem is that the government has put in a number of incentive schemes for exporters. If you import something to be used for an export, you pay duty on the import and you are to be repaid this duty when you export the commodity. But all my exporter friends tell me the system does not work very smoothly. It takes a long time before you recover the money. It's quite a hassle getting it. This should not happen. This is another area where Egypt has to accelerate the implementation of a perfectly good plan.
A third point is that Egypt needs more information about the markets it is trying to penetrate. The (global spare parts trade) is an area where Egypt's engineering industry can make a tremendous impact. You are on the doorsteps of Europe, but more market knowledge is needed here -- you must know what is wanted (for export to the spare parts market).
Another (point) which foreign importers keep telling me is that the quality of Egypt's exports is variable. This needs to be made more constant. Once this quality question is stabilised, you will be getting much higher prices for the same thing. The philosophy here is that you must make it profitable for exporters to export.
The new cabinet headed by Prime Minister Ebeid has initially stated that the government's current fiscal and monetary policies will not change in the foreseeable future? How do you assess these policies?
On the fiscal side, the budget deficit has been brought down to one per cent of GDP, so I don't think that they are doing too many wrong things on the budget. Although, of course, some people say that the sales tax should be generalised further so that you (attain) a good surplus, (instead of) even a deficit of one per cent.
Maybe you need some improvement ...there on the budgetary side. On the monetary side, I think you need better coordination with the fiscal side and I think a certain degree of flexibility will be reached.

One of Egyptian exporters' most pressing demands is liberalisation of the exchange rate. They believe that when the Egyptian pound is tied to a basket of currencies, this will help them become more competitive. What is your view on this?
The exchange rate view is really the province of the International Monetary Fund.

But still, as an expert on fiscal and monetary policies, what is your view? Does the state of the Egyptian economy allow for this to happen in the near future?
Yes, I think that the government is aware of this. I think it will be watching the performance of, let's say, the euro. Linking the Egyptian pound to the euro at some point might be advantageous and if the government, after seeing the performance of the euro after a certain period, feels it is advantageous, it would do it, or (link it to) some other basket.
But I think in general a lot of Egypt's exports are not tied to the dollar, and so there may be some merit in the exchange rate also not being tied only to the dollar. But the exchange rate is a sensitive question and the government is right to examine the alternatives carefully before it takes any decision about which basket or currency to link it to.

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