28 March - 3 April 2002
Issue No.579
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Al-Ahram Weekly Online 28 March - 3 April 2002 Issue No.579 |
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Low globalisation
Is Egypt up to the globalisation challenge? Niveen Wahish looks for an answer at a recent workshop
The second annual 'Globalisation Index,' as measured by management consultants AT Kearny in cooperation with Foreign Policy magazine, ranks Egypt 45th out of 62 countries in terms of how globalised it is. The index assesses the levels of global integration in dozens of advanced economies and key emerging markets.
Mark Strauss, one of the authors of the index, presented its findings to Egyptian journalists during a globalisation workshop organised by the Centre for International Private Enterprise (CIPE), administered by the Institute of International Education and held in Washington. The index is calculated from various criteria, including the size of a country's trade, the amount of foreign direct investment and portfolio capital flows, and income payments and receipts. It takes into account the size of international travel and tourism, international telephone traffic and cross-border transfers. The index also assesses the number of Internet users, internet hosts and secure servers, the degree of membership of international organisations and the number of foreign embassies.
The index covers 85 per cent of the world's population and more than 90 per cent of its economic output.
Although it ranks countries, the index does not emphasise countries that oppose globalisation, those who, as John Sullivan executive director of CIPE put it, "dread globalisation for fear of being left out in an increasingly interdependent world." On that issue, Thomas Donohue, president and CEO of the US Chamber of Commerce, believes that "the evils [that worry] protesters against globalisation would be five times worse if we did not have a system of interdependence." He views globalisation as a helping hand to "a better economy, not paradise, but better jobs, and higher standards of living,"
To achieve such things as more and better jobs for their workforces, countries, according to Sullivan, should figure out how to view "globalisation" as an opportunity not a curse. To avoid marginalisation, Sullivan recommends investing in good negotiators and being present at the negotiating table; according to him globalisation is a process of change and developing countries have to be there to make a difference.
Sullivan also urged the importance of a free, open market, as well as the implementation of investment-friendly policies, two key components of the globalisation index. In fact, according to the index, the reason that some emerging markets, including Egypt's, are falling behind in the index (last year Egypt ranked 36th out of 50), is an inability to keep pace with the increased movement of goods, capital, people and ideas as well as world technological developments. Another cause is pointed to in the index itself; it cites the steep drop in emerging markets' share of total flows of new foreign direct investment (FDI). In 1997, emerging markets won 43 per cent of FDI; in 2000, that had fallen to a lowly 21 per cent.
The importance of FDI was reiterated repeatedly not only in the index, but throughout the workshop meetings. How much foreign investment a country enjoyed was one of the criteria marking how globalised it was; FDI was also described as essential if developing countries are to meet the challenges that globalisation brings.
Many speakers stressed that Egypt needs to do more to provide an investment-friendly environment.
FDIs will only go to areas of the world that are more secure, with an inviting investment climate, political stability and limited risk, said Willard Workman, senior vice-president for international affairs of the US Chamber of Commerce. "If you have a punitive tax system, no one will invest in your country, even if the political system is stable." he added. He pointed out that Egypt has the potential to attract investments because of its educated workers and the size of its market, but he also pointed out that competition is fierce. Even the US, which received $79 billion-worth of FDI in 2001, is fighting to attract more. He pointed out a number of issues that investors look at before deciding to enter a market: the size of the domestic market, the purchasing power of consumers, the extent of government intervention in the market, available workers and raw materials, currency rates, the freedom to repatriate profits, intellectual property rights and tax incentives.
Other speakers rehearsed the same view. A US government official, who preferred to remain anonymous, acknowledged that Egypt is a prominent candidate for FDI from the US and elsewhere; it is the largest market in the area, the most stable, has the potential to grow and has a growing and educated labour force. But she added that investors are worried about red tape, currency controls, customs and tax. "Egyptians have perfected bureaucracy" she remarked, adding that stories of good deals gone sour are affecting investments. Money is going to Jordan, Bahrain, Doha and Dubai, even Saudi investments.
She pointed out that the Egyptian economy needs to grow at 7-8 per cent a year if it is to provide jobs for its rising population. But the government cannot achieve that alone; that is why it has turned to the private sector for help. But, the official observed, they need better incentives, such as a cut in corporate tax. She also said that encouraging exports is essential for job creation.
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