23 - 29 August 2001
Issue No.548
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Al-Ahram Weekly Online 23 - 29 August 2001 Issue No.548 |
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Deadlock
Does Egypt need a new generation of government employees, who are redundant, non- productive and barely able to subsist? Or does it need a productive workforce capable of meeting the demands of the "new economy" -- oriented to services and export -- which has now become the sole means of attaining much needed growth? The question is important in view of the current drive to take on even more government employees, either as permanent hires or as trainees. This week, applications began to roll in for an additional 170,000 government jobs the state is offering in an attempt to alleviate chronic unemployment.
In the span of over 10 years of economic reform and "structural adjustment" the state has constantly reiterated that "the government will not forsake its commitment to maintain social welfare by ensuring the man in the street's livelihood." Subsequently, privatisations have proceeded in an ambivalent manner. Although the state was eager to divest itself of the burden of subsidised entities, productive and otherwise, it has also sought to minimise social costs. Accordingly it has repeatedly touted its sell-offs as comprising "the most successful privatisation programme ever," since they have not exacted social costs, in the manner of privatisations implemented elsewhere.
However, the current approach to employment, reveals the failure of the state to reform in the directions required by the "new economy."
The unemployment with which Egypt now has to contend, should not be blamed solely on the current economic recession, but has, in fact, been brought about by policies that, despite the ongoing "liberalisation," have failed to galvanise private initiative, activate the market, or capitalise on the competitive strengths afforded by the economy.
The situation is exacerbated by the fact that this approach, which might have been acceptable at the outset of the economic reform programme, is now rendered unsustainable, in view of the limited number of jobs which the government can offer to -- according to Prime Minister Atef Ebeid -- some 800,000 entrants into the labour market each year.
Unless brakes are put upon this renewed trend to issue policies reaffirming the state as the main provider of employment, the government will soon find itself in a deadlock.
But Egypt can still -- given the right push -- succeed internationally in the services sector, specifically in the areas of tourism and financial services. The IT sector is another area in which Egypt has considerable potential. The country's intellectual resources and preferential access to the EU, once the Partnership Agreement is implemented, are factors that would support a long-term drive to become a major exporter of software. Time and again, it has been recommended that the state offer an incentive package to software development businesses. Such a package would include preferential terms for credit and tax breaks so as to encourage investment in a sector that, through alliances with IT multinationals, might become an important source of hard currency revenue.
Despite the urgency of the state steering a new course, we find the many practical recommendations offered in this regard by economists, and by the Ministry of Communication and Information Technology itself, being constantly undermined. A backward education system, and a hostile bureaucracy are two of the factors slowing development in this sector. And, as though such a fledgling sector needed any other burdens, a rent-seeking state, which can find no recourse out of its current budget deficit, has imposed a 5 per cent tax on software producers in addition to the other taxes they bear.
The current deadlock will continue as long as the state maintains its narrow outlook and rejects alternative solutions to the employment problem in opting for a kind of social containment or appeasement rather than expansion.
Instead of reducing the budget deficit through increased taxation, reverse the trend by providing more incentives for investment in dynamic sectors which will activate the economy. Only this will diffuse the unemployment time bomb.
If the slogan adopted at the highest political level is "export or die" then 800,000 more frustrated, non- productive government employees will hardly help realise this objective.
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