Going global, thinking local
Experts in Alexandria wrapped their minds around the global integration of the Egyptian economy. Mona El-Fiqi listened in
For all the popularity of calling globalisation a lot of baloney, or "globaloney" as the buzzword goes, Egyptians from the public and private sectors -- like their counterparts in similarly situated liberalising countries -- are taking their economy's ability to compete very seriously. Concerns over global integration were addressed explicitly at a seminar in Alexandria this week. Proposed remedies aimed at rescuing Egypt's stagnant economy were, however, of a largely local character.
The seminar was organised by Cairo University's Centre for Economic and Financial Research and Studies (CEFRS), in cooperation with Friedrich Ebert Stiftung, a German non- profit cultural development organisation.
Officials, economists, businessmen and bankers in attendance agreed that to weather the storm of external challenges the government must rigorously address Egypt's internal economic problems. Emphasis fell on expeditious privatisation, the unfavourable currency exchange rate, boosting exports, attracting investment and developing human resources.
The dollar was again at centre-stage.
Experts blamed the government for being the main cause of the dollar shortage that triggered its soaring price. Former Minister of Economy Moustafa El-Said said that the government should have been certain that the dollar would be available in the banks before floating the Egyptian pound in January. He added that stabilising the exchange rate is critical in easing the recession in Egyptian markets.
Businessmen also criticised the government's methods of dealing with the dollar shortage, especially the decision to force tourists to pay hospitals and hotels in foreign currency. "This decision did not help. To keep dollars available means to limit the exchange process to the banks and brokerage companies," said Sherif Delawer, chairman of Advanced Establishing Systems.
According to Delawer, unless urgent measures are taken to solve the exchange rate problem, businesses will sink further into financial trouble and the recession will worsen.
A number of others shared Delawer's opinion. Amr Badreddin, chairman of El-Badr Company, said that stability in foreign exchange rates, even for just a few months, would increase investor confidence in the Egyptian economy and attract local as well as foreign direct investments.
According to CEFRS figures, foreign direct investments in Egypt dropped from $783 million in 1995 to $467 million in 2002.
Bolstering declining Egyptian exports, which unchecked precipitate an increasing balance of trade deficit, was also highlighted at the seminar. Reasons for this decline identified by a CEFRS study presented at the seminar included the tedious bureaucratic procedures involved in exporting and the fact that Egyptian products remain uncompetitive in foreign markets because of high prices or poor quality. Even traditionally strong Egyptian products such as cotton have lost their competitive edge.
During the seminar experts stressed that unless Egypt finds a mechanism to overcome these problems, it will find it impossible to catch up, given the pace of global trade.
Said El-Boss, an adviser to the minister of foreign trade, said the failure of the World Trade Organisation's (WTO) fifth ministerial meeting held last month in Cancun, and the ensuing delay in trade talks, serves the interests of Egypt and other developing countries. Experts at the seminar agreed that Egypt should benefit from the delay of a new WTO negotiations round as this will allow it time to gear its economic policies towards trade liberalisation.
Since banking is one of the sectors most affected by liberalisation, seminar participants wondered how ready Egyptian banks are for the process.
Bassant Fahmi, general manager of Misr International Bank, warned that in the short term global integration will have a negative impact on the banking system in Arab countries. Fahmi recommended bank mergers as the only way to increase Egyptian bank competitiveness. She acknowledged that Egyptian banks have already felt the threat of international obsolescence and are starting to upgrade their services.
Experts concluded that a clear policy for economic development to achieve sustainable growth should address privatisation, exports and foreign investment. Elaborating on this recommendation, legislation that supports liberalisation, such as consumer protection and anti-monopoly laws, should top the government's agenda.
