10 - 16 May 2001
Issue No.533
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Al-Ahram Weekly On-line 10 - 16 May 2001 Issue No.533 |
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No signs from heaven
Does Egypt intend to sign the Partnership agreement with the EU or not? The procrastination that followed the conclusion of the agreement in 1999, punctuated by a seemingly endless stream of official statements that rather more than hinted at a desire to backtrack on an arrangement it has taken five years to negotiate, betrays an inability to face realities which, if not faced, can only result in Egypt sliding further down the ladder of economic progress.
The contradictions that have characterised the economic decision making process over the past two years have extended themselves to an international agreement that, if revoked, will irreperably damage Egypt's reputation both as a trade partner and serious destination for investment capital.
This week's announcement by the Prime Minister Atef Ebeid at the German-Arab Chamber of Industry and Commerce that the signing of the Partnership agreement "will be next June" and not, as originally scheduled, on 14 May, came as a surprise to Egypt's negotiating partners, and indicates that far from coming to an end, the prevarication has intensified.
What lies behind the current ambivalence towards the EU Partnership? That Egyptian industries have for long resisted any opening up to foreign competition and the lifting of protectionist measures is well known. The extent of local business opposition to the Partnership agreement concluded in June 1999 was so strong that initialling of the document was delayed for almost six months. And just one month before the initialling the prime minister inexplicably announced that the agreement needed to be reviewed, resulting in a confusion that was only settled when President Mubarak himself declared there could be no going back on the Partnership.
As the five year long negotiations progressed, it became abundantly clear that the desire of Egyptian manufacturers to gain access to foreign markets would be worthless if they did not at the same time engineer significant improvements in production standards. And while a few learned this difficult lesson far more did not, preferring instead to continue to rely on the heavily protected local market where their own products could be sold away from the hothouse of fair competition. Yet even within the domestic market local producers have been losing ground to cheaper and, it has to be said, better imports.
Official policies, sadly, have yet to reflect the realities of this situation. The government, on one hand, seeks to reassure local producers that they will retain a privileged position within the local market, while at the same time levying unjustifiably high taxes on production inputs that have to be imported.
Indeed, the levying of the sales tax on capital imports has become the most graphic instance of the lack of coherence in government strategy. Yet the Ministry of Finance insists on its levying, against the recommendations of the Ministry of Economy which, with the publication of its export strategy, publicly criticised the tax as a major impediment to competitivity.
The result is a depressing pattern in which established businesses work hard to preserve their vested interests by filing anti-dumping claims and stalling over antitrust laws, while the rest of Egypt's fledgling private sector remains oblivious of what free trade with the EU will entail or else views it with an overwhelming sense of helplessness.
Nor has the situation been improved by the ongoing conflict between the EU and the Egyptian Ministry of Industry over the allocation of funds within the framework of the EU's Industry Modernisation Programme. To make up for the time already lost in quibbling, efforts must now be doubled if national industry is to benefit at all from much-needed technology transfer and the upgrading its production lines. There is no sign that this is happening, and for some businesses it is already too late. The Minister of Industry, Mustafa El-Rifa'i, has already predicted that a large number of Egyptian factories will close down with the advent of foreign competition.
If the events surrounding the negotiation of the Egypt-EU Partnership, and the manner in which the government has dealt with its likely fall-out are an accurate mirror of where we stand, then the picture is bleak indeed.
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