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Al-Ahram Weekly On-line 28 Sep. - 4 Oct. 2000 Issue No. 501 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly On-line 28 Sep. - 4 Oct. 2000 Issue No. 501
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Elections Region International Economy Opinion Culture Special Travel Living Sports Profile People Time Out Chronicles Cartoons Letters Talk too soon
By Aziza Sami
The government has announced that LE100 billion worth of construction projects -- mainly in the areas of education and health -- are to be financed under BOT arrangements. But this ambitious investment programme -- and not for the first time -- has been launched suddenly, without prior discussion with private investors. It is supposed to meet with the approval of financial institutions -- all of which, as Minister of Finance Medhat Hassanein announced a few days ago, is supposed to take place within three months, a timetable that cannot possibly accommodate the feasibility studies, or profit assessments, that investors will want to undertake.
Keen to signal that the banking sector remains sound the government -- as one can infer from statements last week by Prime Minister Atef Ebeid -- has further insisted that these projects will be funded primarily by the banks, and this despite the fact that the banks are themselves notoriously over-exposed, and are facing severe restrictions on the amount of credit they are in a position to create.
More serious, perhaps, is the fact that such headline making announcements appear to continue a pattern of sound-bite economic policy making. Ambitious investment schemes are suddenly announced, garnering headlines and massive media coverage, largely to be financed by an already overstretched banking sector without any attempt to make recourse to other financial institutions in the capital market .
Nor is there, in a country where the government has for so long controlled economic life, any preparation of public opinion on the merits of investing, for instance, in joint stock companies, with all the potentials for production and profit that they hold, as opposed to the limited interest obtained from the banks.
Minister of Finance Medhat Hassanein has announced that the construction of 2,000 schools and 2,000 health units, as well as a new road network, will be tendered to private investors. And while this constitutes a positive step in the direction of encouraging private involvement and will, albeit indirectly, benefit the economy, it is still far off encouraging the productive private enterprises whose success will ultimately determine the future prospects of the national economy.
The government -- in the wake of the recent National Conference on Social Development inaugurated by President Mubarak -- has announced an ambitious programme geared to improving the living standards of limited income groups, a programme that is expected to be largely financed by private investments. But while the private sector may contribute in providing the facilities for health and education services, this is not its primary role. The role of private investors is to enter into projects which contribute in adding value to the economy, while at the same time bringing investors profits that they should be in a position to assess realistically on an annual basis.
The government is in dire need of realistically assessing how production structures can be improved, how input is to be obtained at competitive prices, and how education and government administration might support economic productivity and not impede it. It should not deal with the economy solely through administrative decrees initiating ambitious programmes which, as experience has shown once too often, are likely to be retracted, shelved away or left to sink in to obscurity.
Claims by the government that it is encouraging projects are not enough if they are unaccompanied by a radical policy tackling the legal and bureaucratic problems faced by investors. The tendency to make impressive statements unsupported by actual actions may give the impression that the economy has been reduced to just one more item on the government's political agenda. Unfortunately, dealing erratically with the market, in the hope that people's memories are short, can only lead to serious repercussions in the long run. Investors, and any impartial observer, for that matter, are increasingly left with the feeling that as the government's ability to interact with the economy's actual problems diminishes, its claims that it is resolving them ring ever more loud.
