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Al-Ahram Weekly 20 - 26 January 2000 Issue No. 465 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 20 - 26 January 2000 Issue No. 465
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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 A spate of ruinous rumours
By Ibrahim Nafie
While passing a Ramadan evening among friends in Saudi Arabia recently, one of my dinner companions leaned over to me and whispered that he had heard that the "blacklist" of Egyptian businessmen barred from leaving Egypt had grown to more than 50. The alleged list, to which my friend was referring, was said to contain the names of entrepreneurs suspected of wanting to flee the country in order to avoid repaying enormous loans. To have heard this rumour relayed to me in such a congenial setting made it all the more chilling to realise how detrimental rumours such as this, however absurd and groundless, can be to our national economy.
Because rumours such as this have been seized upon by the press it is all the more imperative to separate fact from fiction. The blacklist rumour is highly reminiscent of the so-called "lists of the blessed", reports of which circulated wildly in the media at the time of the scandal surrounding money investment firms. Those lists also had no basis in fact. But the fiction fed the general panic which, in turn, some businessmen exploited to drive clients away from their competitors. The dynamics of the "blacklist" rumour are very similar.
This is not to say that some individuals have not been barred from leaving the country to prevent them from evading financial obligations. However, in Egypt, as in all other countries where the rule of law prevails, such matters are pursued through the courts. Should a bank have grounds to suspect that one of its clients will attempt to escape prosecution for defaulting on debts, it can file for a warrant to temporarily restrict any right to travel pending the litigation process. The government can only act in accordance with such a court order. It has no right whatsoever to take independent action against individuals suspected of financial misconduct or to intervene in anyway in the legal process.
Another rumour that has run rampant has it that an Egyptian bank gave out loans exceeding $28 billion. The rumour is so ludicrous as to defy the imagination. If each of the 1,600 banking firms in Egypt gave out loans of that quantity, the total would amount to $44,800 trillion, almost double the gross global product of 1998, which stood at $28,862 trillion according to the World Bank development report for 1999-2000. According to the same report, Egypt's GNP for 1998 was $79.2 billion. Would any bank possibly contemplate granting loans amounting to 35.4 per cent of the GNP? To take another figure, the cumulative credit volume obtained by the Egyptian private sector up to September 1999 reached LE146,155 billion, or $42.735 million. Could any bank approve loans equivalent to 65.5 per cent of that figure?
If the previous rumour is absurd, how about this one: Not long ago the newspapers buzzed with the news that a certain businessman had died, bequeathing such an enormous legacy of debts as to precipitate a major financial crisis. It was not long before the man returned from a trip abroad, putting paid to whatever malicious designs were behind that bout of scandal-mongering. Not that it was convincing in the first place, since the man stood accused of borrowing an amount some ten times the total capitalisation of all the companies that he was reputed to own.
In Japan, it is estimated thatthe risk of default on loans could well be equivalent to an amount equal to some 15 per cent of GNP, a frightening statistic to be sure. But in Egypt we are a very long way from such an alarming figure. Whatever the actual volume of suspected defaults, the threat to the economy is nowhere near as calamitous as rumour suggests.
This said, our banking system could well stand some tougher controls on the extension of loans. We could benefit, for example, from some of the strict regulatory statutes governing the American banking system, on the condition that any litigation involving financial misconduct is pursued as speedily as possible so as to contain negative impacts on the investment climate.
Egypt has accomplished so much since it began implementing its wide-ranging economic reform programme in 1991. From modest beginnings, with anti-inflationary and currency deregulation measures to stabilise the economy, the programme has brought us the promise of rapid growth, increased investment and major integrated mega-projects. According to the 1999-2000 World Bank report, Egypt's nominal GDP rose from $22.9 billion in 1980 to $78.1 billion in 1998 while, during the same period, real GDP climbed to $192.5 billion. Steadily emerging from the international economic stagnation at the outset of the nineties, Egypt moved from a real negative growth rate of 3.2 per cent in 1990, to a 1.6 per cent growth rate in 1993. This figure remained relatively constant until 1997, when our economy began to take off, scoring 5, 5.4 and 6 per cent growth rates in GDP for 1997, 1998 and 1999 successively. Simultaneously, inflation has dropped from 21.1 per cent in 1992 to 3.7 per cent in 1999 while unemployment dropped from 11.3 per cent in 1995 to less than eight per cent in 1999, with promises of even greater reductions under the current government.
Rising levels of foreign investment reflect growing confidence in our economy. Foreign investment climbed from $598 million in 1990 to $1,076 million in 1998. That Egypt has also accumulated large foreign currency reserves, lifting its international credit rating, has also increased the attraction of Egypt to investors.
In view of such achievements and the very real prospect of continued growth they offer, does it make the slightest sense to jettison our hopes for prosperity by spreading fanciful myths about blacklisted businessmen? For all Egyptians, Egypt's economic progress is too cherished a goal for it to suffer setbacks caused by nothing more substantial than malicious rumourmongering and sensationalist speculation.
