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Al-Ahram Weekly 9 - 15 December 1999 Issue No. 459 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 9 - 15 December 1999 Issue No. 459
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Debate Features Profile Living Travel Sports People Time Out Chronicles Cartoons Letters A shift in strategy
By Aziza SamiThe World Bank is launching a new programme in Egypt -- a three-pronged initiative intended to alleviate poverty, create employment opportunities and enhance export performance.
A World Bank delegation, headed by Kemal Dervis, vice president of the Middle East and North Africa Region of the World Bank Group, arrived in Cairo this week to examine details of the programme the aim of which, he said, "is to sustain growth".
The World Bank delegation met with Egyptian officials, headed by Minister of Economy and External Trade Youssef Boutros Ghali, to discuss the funding of four major programmes.
The first will involve extending micro-credit schemes to more low-income individuals and families, assisting limited income groups and launching new income-generation enterprises. The World Bank will also increase funding of the Social Fund for Development (SDF) as part of its job-creation strategy.
The second of the four programmes will include extending technical assistance to provide new graduates with marketable skills, thus enhancing their employment prospects.
Areas in which Egypt enjoys a competitive advantage in international markets will also be explored, in an attempt to boost exports, initially concentrating on 81 already identified commodities.
The fourth programme will focus on the creation and consolidation of an advanced high-tech base, and is to be initiated by a joint study between the government and the World Bank to determine the most appropriate potential export markets.
Although in its 1999 annual report the World Bank recommended that Egypt accelerate its privatisation programme its current position signals a shift in policy, not only as applied to Egypt, but internationally. The bank's attention is moving away from funding government activity, and towards formulating programmes designed to both support social development and protect vulnerable groups while at the same time support economic growth.
"With globalisation and liberalisation, there is evidence that in most countries this has led to an increase in poverty" Dervis said. "I am not against liberalisation, but with it there is a tendency for poverty to increase. So there is a need to set up protection for the most vulnerable groups through good social policy."
"The Egyptian economy is in transition, and there are challenges which must be addressed so as to ensure a sustainable and predictable growth," Dervis told members of Egypt's International Economic Forum on Tuesday.
"In Egypt the fundamental problem is that the economy's growth rate of four or five per cent is not enough. It must reach six or seven per cent, given [the country's] demography and labour over the next 10 years otherwise there will be a lot of unemployment and social instability."
Dervis continued: "The kind of macroeconomic mix needed to achieve this growth rate is different from that of the past five years. There will be more savings and investment with higher growth rates but also more risks. It is necessary therefore that policy becomes focused and result-oriented and that the intermediate level of civil servants who are in key decision making ministries be supported through the salary scale."
The economy's current trade deficit, a workable mortgage mechanism and the development of a stable securities market are all issues that must be addressed, Dervis said, adding that the World Bank "will be able to work with the government and the private sector so as to surmount [the] challenges".
"In Egypt we need a better formation of skills, and the development of service-oriented industries, IT and especially tourism, where 'the sky is the limit'."
Dervis voiced criticism of the government's policy of "pursuing a path to liberalisation, where there is a dominant market protection by 40 and 50 per cent tariffs. To develop an export drive and at the same time increase protection is not possible." He stressed also that all this will require "a good social policy" in order to protect the poor and lower income groups in general.
Dervis was asked whether the reason he gave for the Asian financial crisis -- "open capital accounts accompanied by a fixed exchange rate" -- would not apply to Egypt, whose pound is pegged to the US dollar. In reply, Dervis insisted there was no need for alarm in the Egyptian situation. "There is," he stressed, "no large current account deficit in Egypt, [it is] nowhere near Asia. But you need a consistent monetary policy to correct the slight imbalance that has happened. A small current account deficit which can be financed by FDI's and some long-term capital flows, especially from the World Bank, is acceptable. In fact it is good for development."
