24 - 30 May 2001
Issue No.535
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Al-Ahram Weekly Online 24 - 30 May 2001 Issue No.535 |
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Ambitious goals
During this week's People's Assembly debate on the government's proposed development and budget plan for 2001-2002, Ahmed Ezz, head of the Planning and Budget Committee, argued that economic policy should be geared towards securing an eight per cent growth rate with the private sector contributing some 90 per cent of total GDP. Three Asian tigers -- Korea, Malaysia and Indonesia -- were cited as instances of economies that had successfully engineered growth rates as high as 10 per cent. Ezz also stressed the importance of more fully engaging the private sector in reaching economic and social development goals that include, he said, an industrial modernisation programme alongside the boosting of current levels of domestic savings and investments.
Ambitions are easily stated, less easy to fulfil. And while holding up the Asian tigers as an example may well be inspiring, it should not encourage us to ignore the differences between the problems faced by the Asian economies following the financial melt-down of 1997 and those with which the Egyptian economy must currently contend. Indeed, the very criticisms which Ezz voiced vis-à-vis the government's proposed budget plan served to underline such differences.
Domestic debt, currently estimated at LE164 billion, has registered an 11.5 per cent increase, much of it financed by external funding. The current account deficit, which stands at LE11.2 billion, has further necessitated the seeking of external borrowing.
In the absence of any significant improvements in savings and investment ratios and in levels of productivity it is likely to become difficult to maintain current growth levels at around five per cent, let alone engineer a three per cent increase.
Even at the height of the 1997 crisis the south-east Asian economies could hardly be accused of suffering from problems related to low productivity or sluggish growth. Nor could it be argued that their problems were exacerbated by unjustifiable levels of bureaucratic and administrative intervention, or by regressive taxation systems. They had, for almost a decade, made major developmental strides and enjoyed growth levels surpassing those attained by many G7 members. They had attracted substantial levels of foreign investment and had captured a sizeable portion of global trade. The problems of the Asian tigers were not those of a fledgling private sector left -- in the absence of a proper monetary and fiscal environment -- to randomly squander resources on redundant and unproductive activity. And while there might be some similarities in the manner in which an inflated real-estate market, and speculative real-estate development, contributed to liquidity problems, the Asian crisis was in the end triggered by speculation in an over-heated capital market. Quasi-political and administrative problems of the kind Egypt faces were not a significant component.
Consequently, the already open-market environments of south-east Asia were able to reestablish themselves on a firm footing once checks and balances were put in place. When we hold up the Asian tigers as an example, all of these factors must be taken into consideration.
Any route out of the current impasse must, then, involve tackling contradictions that have for too long dogged monetary and fiscal policy. The government also needs to more clearly define its relationship with the private sector, engaging in democratic dialogue and providing a coherent regulatory environment within which business can operate.
Confidence building is in order if, as Ezz so ambitiously declared, Egypt's private sector is to become the catalyst for development, if entrepreneurship is to take off and propel the economy towards higher levels of growth.
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