25 - 31 January 2001
Issue No.518
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Al-Ahram Weekly On-line 25 - 31 January 2001 Issue No.518 |
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Addressing the issues
The prime minister's annual policy statement came in the wake of last year's liquidity crisis, sluggish economic growth and the depletion of currency reserves spent in a vain attempt to support the pound. There were, too, some positive developments: a growing savings rate, higher levels of direct foreign investment, a doubling of oil revenues and continued growth in the tourist sector and in non-petroleum related export trade. Such ups and downs are symptomatic of an emerging economy and, in this respect, the prime minister's address serves as a guideline for avoiding previous pitfalls and spurring stronger growth.
The prime minister's address reflects the priority the government has accorded to the social impacts of economic policy. Some 600,000 families will benefit from the monthly security pension scheme, an indication that the government is committed to fulfilling its pledge to help the poor. Furthermore, it is expected that the number of families eligible for the pension will rise to a million during the current year, making the scheme a major plank of the government's fight to eliminate poverty.
Ensuring a minimum standard of living for all citizens is vital to social and political stability, which, in turn, is essential to a favourable investment climate.
The prime minister listed several other areas of support for the most disadvantaged. Subsidy allocations, he said, will be increased to almost LE8 billion. Towards eliminating substandard housing, the government has set into motion a plan to grant land ownership to the residents of upgradable random housing developments. More than 97,000 square metres of such land -- charged at LE50 per square metre -- have already been transferred to private ownership, while essential utilities have been extended to 62,300 housing units in these areas. In the field of education, more than 200,000 students have benefited from the LE100 million government allocation to finance study loans for the poor. The LE500 loans are repayable over a period of 40 years and thus represent an important guarantee that the poor will have equal access to a university education.
The government's commitment to the disadvantaged extends deep into the rural sector, with an allocation of LE100 million to buffer farmers against fluctuating international crop prices. The importance of this measure to thousands of Egyptian farmers cannot be underestimated and it may be necessary over the course of the year to increase the allocation in the manner stipulated by last year's budget. And in the interests of improving living standards in the countryside as a whole the government is forging ahead with its plan to ensure that all Egyptian villages and new urban developments are supplied with potable water.
Tackling unemployment presents a multifaceted problem. Reducing the unemployment rate to 4 per cent means creating at least 833,000 jobs a year in order to accommodate new entries to the labour market. Work opportunities will be generated through expanding micro-credit schemes and extending the activities of employment bureaus, while the government itself is committed to absorbing 150,000 new workers annually. Success in reducing unemployment will have major economic and social spin-offs.
The economic indicators cited by the prime minister give some cause for optimism. If the 5.5 per cent growth in GDP fell short of the 7 per cent target, the rate was not unreasonable in light of the problems that beset our economy in 2000. Meanwhile the savings ratio, one of the lowest in the world, has improved, rising from 15.6 per cent of GDP in 1998/99 to 16.4 per cent in 1999/2000. It is also heartening that revenues from petroleum exports have more than doubled, reaching $2.273 billion in 1999/2000, up from approximately $1 billion in the previous financial year.
Long term economic prospects received a strong vote of confidence in the form of direct international investment, which totalled $1.656 billion in 1999/2000, up from $711 million the previous year. Tourism, too, is continuing its upswing, with a more than $1 billion increase, reflecting growing faith in Egypt's stability.
Egypt has also lived up to its commitment to reduce its foreign deficit, reduced over the past year from $27.8 billion to $26.5 billion.
The importance of improving our balance of trade profile cannot be stressed enough. Egyptian diplomacy has worked ceaselessly to open up markets for Egyptian exports through the promotion of bilateral and multilateral free trade agreements in Africa, the Arab World and Europe. But the private sector, too, needs to double its efforts to develop and manufacture products capable of competing in international markets.
The prime minister announced that the government will adhere to its strategy of a managed float, entrusting the Central Bank with the task of monitoring the exchange rate.
The prime minister's annual policy statement illustrates that the government has taken the lead in steering the economy by investing in education, scientific research, health care, defence, internal security, infrastructure and other areas vital to economic development. We should note, too, that the government has pressed ahead with the registration of deeds of title in order better gauge the size of the national economy and to bring fringe economic activities into the mainstream, a task which can be seen as part of the government's responsibilities to balance budgets, prevent monopolies, protect the consumer, subsidise essential goods for the poor, provide free education and supervise the effective running of public services and utilities.
Achieving the economic and social aims outlined in the prime ministerial address demands not just the effective participation of all, but also the ability of all to learn the lessons of recent developments both in Egypt and in other countries in the process of economic transition.
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