5 - 11 April 2001
Issue No.528
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Al-Ahram Weekly On-line 5 - 11 April 2001 Issue No.528 |
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From cub to tiger
A heated exchange that occurred between two economists, one Egyptian and one Japanese at a session on the WTO held in Cairo last week begged a basic question: Is Egypt, regularly, and encouragingly described as an emerging market by western funding institutions, still deserving of the term?
Arranged by the Council for Foreign Relations, in association with Egypt's International Economic Forum, the "Seminar on the WTO" hosted Takase Tamotsu, professor of law at Tokai university and veteran expert at the WTO.
When the Head of the Federation of Arab Banks, Mahmoud Abdel-Aziz, commenting on the negative impact of WTO agreements on developing countries such as Egypt, referred to them as "emerging markets", he was firmly interrupted by Tamotsu, who expressed amazement at the term being applied to what he suggested, in no uncertain terms, could be more accurately referred to as developing countries.
"The emerging markets are the Asian economies -- which are already quite successful, so what do you mean?" he queried.
Abdel-Aziz retorted that "there are 48 emerging markets, as defined by the US, and the World Bank."
Professor Tomatsu was unconvinced: "These are developing countries," he insisted. "They are not called emerging markets. The emerging markets are Korea, Singapore etc."
"But that was ten years ago," replied Abdel-Aziz.
Regardless of whether Tomatsu's position was triggered by chauvinism or an objection to the terminology currently popular, the question proved unsettling, not least because no one present seemed able to defend Egypt's "emerging" status beyond making recourse to the fact that Western institutions had defined it as such.
The incident provides food for the thought, and in its wake we should, perhaps, attempt an objective assessment of where we think Egypt stands, our judgment premised on what we see on the ground rather than on the assessments made in the glossy reports issued by the funding agencies.
An emerging market, after all, in addition to having unexplored potentials must also manifest market liquidity, a stable exchange rate, abundant funding for the private sector, high quality investment decisions and high capital inflows. And taking all of these into consideration, can we really believe that Egypt is soon to become the Tiger on the Nile?
The stark reality is that the economy is currently failing to live up to the promise that induced international agencies such as Moody's and Standard and Poor's to rate it positively three years ago.
Foreign direct investment levels are dismally low. The private sector is finding it increasingly difficult to finance its activities. The banking sector has yet to reform its management of credit. The stock market is at an all time, extended low. Market liquidity remains a major problem. The exchange rate mechanism, despite recent tinkering, continues to inhibit investors. Low levels of productivity continue to fuel unemployment. The economy, in short, has been in recession for over a year. And despite the positive achievement of macroeconomic stability, low inflation, and modest improvements in the trade deficit and current account, there is no positive investment climate which one can speak of.
Yet these are all problems the resolution of which is within the government's control. What is needed, obviously, is better management of credit by the banking sector, a more effective exchange rate mechanism, projects generating employment and an onslaught on the bureaucracy that makes Egyptian, let alone foreign investors, despair. And all of this could be tackled with more efficient economic management. But if the problems are not dealt with, are continually swept under the carpet, then Egypt will run a serious risk of losing its emerging market status.
It will never become a tiger on the Nile, whatever the encouraging noises that, for political reasons, the Western funding agencies continue to make.
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