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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 Ensuring effective participation
By Foreign Minister Amr Moussa *
The struggle to achieve equitable development has been one of the greatest and most difficult challenges of the 20th century, a century that has witnessed humanity's greatest achievements, as well as countless tragedies.
Egypt enters the 21st century with a dynamic and varied set of perspectives emanating from its historical leadership role, its sense of solidarity with developing countries and its ambitions and needs as a successful emerging economy. Above all, it enters the coming century with a deep commitment to justice, peace, equity and global prosperity.
Egypt is also part and parcel of the developing world of nations, sharing their aspirations for a better future and their determination not to be left behind. In this capacity, and as you are well aware, Egypt has played an active and leading political role in advancing the goals of developing countries in global forums such as the UN, the WTO and all the various international economic institutions. However, we have adopted an approach which stresses the need for a positive sum game, a win-win global agenda, whose greatest victor is global sustainable development.
We have entered international trade negotiations with a commitment to ensure that both developing and developed nations are assured that their interests are being catered to and their role is not marginalised. At the same time, Egypt enters the 21st century with a fundamentally sound economy, the product of a successful economic reform programme that has made our economy a lucrative emerging market. The ambitious and solid private sector has great expectations and needs on the national and global scene. This rising and vibrant entrepreneurial class, much like its counterparts all over the world, views the globalisation process from a cost-benefit frame of mind eager to capitalise on the benefits of free trade by joining promising trade arrangements and fully integrating into the global economy.
In this respect, we are pursuing progressive trade agreements both regionally and globally. We hope to sign a partnership agreement soon with the European Union that would establish a free trade area between Egypt and the European Community; a parallel process for the Mediterranean is underway. We have recently joined COMESA, the Common Market of East and South Africa, which comprises around 400 million people. A free trade area will be fully established next October. We are also part of the Arab Free Trade Area agreement, which will be fully implemented in 2007. Finally, we have signed the Egyptian-US Trade and Investment Framework Agreement, which we hope will be a stepping stone to a free-trade agreement with the US.
Globalisation, the hallmark of the next century, is not a proposition we can afford to ignore. In fact, we are deeply cognisant of the huge benefits and opportunities to be reaped from the process. The risks and dangers have also become apparent in recent years. Precious time should not be wasted weighing pros and cons, however. We must concentrate on maximising the benefits while facing the challenges of globalisation.
Although for the first time in modern history a number of developing countries have been able to participate more actively and compete effectively in the global economy, the past few decades have witnessed a widening economic gap and growing disparities among and within nations. These gaps have strained the global social fabric.
With the advent of a new century, hopes have been raised that somehow things will or can be different. This hope is mirrored in the efforts of various institutions like the Global Panel, which has attempted to take stock of what we have, and to make a difference. By mobilising and gathering world leaders, intellectuals and business executives, various fora have highlighted some of the major issues that will shape the global agenda in coming years.
The theme underlying these efforts has been that the forces of globalisation may provide unprecedented opportunities for growth and development if properly managed. There is an emerging consensus that governments alone cannot face the new challenges; business communities, NGOs and think-tanks play a significant role in defining the issues and formulating blueprints for common solutions. These actors will become even more influential in the future.
The World Economic Forum's annual meeting earlier this year was themed "Responsible Globality". The theme of the Global Panel "Investing in Responsibility" underscores again the need for fair, just and ethical principles in investment.
These numerous brainstorming sessions have been critical in helping to identify and broaden areas of common ground and deal constructively with areas of differences.
"Globalisation with a Human Face" is also the theme of this year's UNDP Human Development Report. It highlights the fact that, as human lives are becoming even more integrated, aided by a revolution in communication technology, the world is becoming more polarised between rich and poor. This gap is causing insecurity and growing concern over the prospects of growth, employment, health and the environment.
The point deserves emphasis: the fruits of globalisation are not reaching many people. Millions are being excluded and marginalised, both in developing countries (particularly Africa) and in advanced economies. Globalisation must yield equitable benefits for all countries and all people. All this has prompted the need for a fresh approach.
This issue became the subject of intense debate after the Asian financial crisis startled the world with its magnitude and contagion effect. The Asian economic miracle, universally seen as a model worth emulating, has suffered a setback. What initially seemed to be a regional crisis became international. Global responsibility was no longer a slogan, but a call for action.
Several scholars dubbed the Asian financial crisis "a crisis for development", first because it almost exclusively hit developing countries, resulting in slower growth, falling commodity prices, and capital flight; and second, because it was extremely disruptive to the more advanced developing countries. This raised doubts about some of the fundamental premises of development -- for instance, the idea that development reduces vulnerability to external shocks.
The lessons learned from the crisis are crucial. We now have a better understanding of the role of governments, the importance of social safety nets, the need for prudence in liberalisation, particularly in capital accounts, as well as the need to improve transparency and prudential supervision and to address the role of the private sector in financial crises.
The need to reform the international financial and monetary system is widely recognised. As prospects for the global economy improved and as concerns over a global recession vanish from the headlines, however, fading fear should not give way to complacency.
One of our greatest challenges is to achieve equitable and environmentally sound development. Our responsibility lies in defining a more humane vision of global development built on the crucial principle of "balance" -- equilibrium between the primacy of market forces (now universally acknowledged as an efficient mechanism for resource allocation), and the primacy of social development, placing people at the centre of all endeavours.
A development model based strictly on market forces cannot secure the objectives of sustainable development. The drive for competition has to be balanced by equity and responsibility. We must resolve the conflict that sometimes arises between efficiency and equity. There is no need to reinvent the developmental wheel here, but we definitely need to readjust some of the spokes. The international community should promote a development paradigm based on a people-centred philosophy of growth, stability, equity and the positive integration of developing countries into the global economy.
In the information age, knowledge is becoming the basis of economic progress and one of the primary factors of production. Knowledge has the potential of changing the dynamics of sustainable development. The information revolution can transform and advance the process of development, empowering the poor by eradicating ignorance; establishing policy and regulatory frameworks for the information economy; and fostering science and technology in developing countries.
The question is whether the information revolution will allow the developing economies to take a great leap forward, or exacerbate the existing gaps between haves and have-nots by creating an additional gap between the "knows" and the "know-nots". A widening cleavage is both unacceptable and unsustainable.
Although there is no apparent panacea, there are commitments and policy recommendations that, for long, have not been taken seriously. As a result, the difficulties we face at this juncture have been compounded.
For over three decades, many have seen technology transfer as a means of achieving balanced and sustainable development. This objective was not taken seriously and was simply a part of the intellectual debate on development rather than an action-oriented agenda. Many developing countries feel that a real transfer of technology -- particularly environmentally sound technology -- has yet to take place.
On trade issues, as the international community prepares for the Third Ministerial Conference of the WTO in Seattle later this month, many developing countries have expressed real concerns that they are not getting an equitable share of the benefits of the multilateral trading system. This imbalance should be redressed as we move forward to new obligations.
Rapid trade liberalisation has led to a sharp increase in trade deficits in many developing countries, including Egypt. Liberalisation has resulted in increased imports and lagging exports. Growth has therefore depended on attracting capital of any kind, leading to increased external borrowing or a heavy dependence on short-term capital, which can be an unstable element in the process of development.
In 1996, the World Food Summit agreed to halve the world's undernourished by the year 2015. We need to be much more aggressive and determined if we are to achieve the objectives that we have set for ourselves.
The Egyptian economy, like the rest of the world, is seeking to deal with many of these global and national challenges. President Mubarak has recently commissioned a new government with the task of formulating a comprehensive and dynamic development vision. We are determined to accelerate our economic reform program. Liberalisation, private sector leadership and social development are the foundations of the economic future.
Among the first priorities announced by the new government was the need to cultivate a second and third tier of leaders to assume responsibilities in a dynamic outward-oriented economy. This is part of our determination to empower young people, the country's most valued asset in the process of development.
The sweeping and comprehensive economic reform programme launched in 1991 continues to put the private sector in charge. We have a new, highly energised business climate. In fact, we have reduced the size of the public sector by more than 40 per cent. The private sector now accounts for almost 70 per cent of GDP.
Egypt has already achieved many of its goals, stabilising the economy, cutting the budget deficit, trimming inflation and liberalising the exchange rate. Since 1991, Egypt's GDP has increased by 88 per cent; foreign debt has dropped by 64 per cent; growth is around six per cent, inflation is down to 3.6 per cent, and the budget deficit is one per cent. Foreign currency reserves stand at around $17 billion.
Despite these achievements, we still face many challenges. Exports, for example, have not taken off yet. Hopefully, the ambitious restructuring of Egypt's industries and the reliance on a more focused export-led strategy will yield the anticipated results. Nonetheless, reforms have strengthened the immunity and health of the economic body. Most of the strategic sectors of our economy are now in private hands. Areas that were once the public sector's domain, such as power stations, utilities, airports and telecommunications, are being privatised.
Central to this campaign is the Build-Own-Operate-Transfer (BOOT) programme. It provides for the phased opening of key industries to private capital and management. Under BOOT, infrastructure projects alone are expected to generate more than $11 billion in new private sector contracts over the next few years. For example, 10 per cent of Egypt's private utility, Cairo Electricity, will be sold on the stock exchange in the near future. This will be followed by sales of stocks in the remaining six regional power providers. These companies serve 8.5 million consumers and have an estimated aggregate value of around $12 billion. Privatising the electricity sector is the government's largest undertaking ever, and it should stimulate the Egyptian stock market tremendously.
Recently Merrill Lynch, in its outlook report for Middle Eastern economies, raised Egypt from the category of neutral to over-perform. The recommendation is based on the country's market-oriented government policies and expected entry into the Morgan Stanley Capital International Index, a benchmark for global investors.
The improved business climate is reflected, too, in the rise of Foreign Direct Investment. We continue to attract enough foreign capital to rank among the top 10 developing countries attracting FDI.
According to the World Economic Forum, FDI declined in all emerging markets last year with the exception of Egypt, Turkey and India. FDI in Egypt is likely to reach $2 billion this year. In absolute terms, the sum is not overwhelming, but it is an increase of almost 100 per cent in a period of diminished enthusiasm for emerging markets. Moreover, returns on FDI in Egypt averaged a high of 29 per cent, against a world average of only 12 per cent.
In March 1999, the UNCTAD annual report predicted that Egypt will become the largest African economy in terms of FDI inflow, crediting it with political stability, strong rates of growth, skilled and educated labour, and progressive trade agreements. We are currently initiating policy reviews to evaluate and improve the regulatory environment for investments.
Our economic objectives are clear: to strengthen export promotion and attract FDI; to further strengthen our institutional infrastructure, creating the regulatory framework needed for growth and stability; to create a permanent home for international capital, so that when investors come to Egypt, they are here to stay; to accelerate the establishment of mega-projects which have already attracted international attention; to boost investments in human capital and technology -- especially IT; and to empower Egyptians by improving education, upgrading health care, preserving the environment and building cultural bridges.
President Mubarak recently launched a new national project for a comprehensive technological revival. The main objective is to create an advanced information and technological industry in Egypt and transform it into a knowledge-based society capitalising on the huge potential of cyberspace.
One of the key components of an information industry is software development. The software market in Egypt is growing at a rate of 32 per cent per year, the second highest in the world. More than 400 companies are operating in IT, and the Egyptian business community is reaching out to forge alliances with its counterparts in more advanced economies. Computer giants are recruiting Arabic software programmers from Egypt. We are gradually becoming the hub of Arabic software in the world.
Creating a knowledge-based economy remains our greatest challenge. We have much work to do. But we have the stability and the willpower to succeed. We are building an economic model that will ensure steady integration into the new global economy. We are strengthening our financial institutions to help us withstand inevitable domestic and international shocks.
As for the Middle East region and as a result of our joint intensive efforts with the US, the Sharm Al-Sheikh agreement has injected life into the peace process after three years of continuous disappointments and regressions. The peace process is "back in business". Oslo is another event which we sincerely hope will boost the current momentum of the peace process, and help crystallise a road map for negotiations on more difficult final status issues, particularly refugees, borders and Jerusalem.
At times, Palestinian and Israeli positions may seem impossible to reconcile. But this is when hard decisions will have to be made since the region cannot afford another relapse into mistrust. Symbolic gestures no longer suffice. It is time to demonstrate a true commitment to peace. The Palestinians have demonstrated this commitment; Barak has also indicated his desire for peace. The initial steps to implement the Sharm Al-Sheikh agreement are reason for cautious optimism. Good intentions, as crucial and instrumental as they may be, are insufficient, however, since progress will be judged by the situation on the ground.
Although the Palestinian track remains the cornerstone of the peace process, peace will not be comprehensive or lasting without a fair settlement on the Syrian and Lebanese tracks. We are pushing for progress on all tracks to open the doors of opportunity through regional cooperation. The world knows that regional economic cooperation depends on progress in the peace process.
Yet we remain hopeful, and have therefore decided to host the next Middle East and North Africa Economic Conference in 2000.
Another huge event will take place in Cairo in February 2000: the COMESA Business Conference, the first of its kind in Africa, is designed to focus on investment opportunities and building partnerships between Africa and the rest of the world.
Our ultimate objective is clear. Egypt aims at becoming the leading market and financial centre in Africa and the Middle East. Our political leadership is being complemented by our new economic clout. Our pastures may not yet be the greenest in the world, but they hold a promise of unprecedented opportunities.
* Based on "Shared Responsibility": Egypt's perspective on globalisation at the turn of the century, a speech delivered by Minister of Foreign Affairs Amr Moussa on 2 November at the Global Panel in the Hague.
