A recent economic report delivered a scathing critique of the government's performance and its alleged successes. Mona El-Fiqi
A report by Al-Ahram Centre for Political and Strategic Studies (ACPSS) revealed that economies in the Arab world, including Egypt, left much to be desired in 2006. The Strategic Economic Directions Report 2007, issued last month, was harshest about the state of affairs in Egypt, citing the many inaccuracies and misleading figures purported by the government about alleged economic achievements.
This section began with a review of the statements given by Prime Minister Ahmed Nazif to the People's Assembly in December, 2006, about the government's achievements for that year. Nazif asserted that the real Gross Domestic Product (GDP) rose to 6.9 per cent in 2006 from 5.1 per cent in 2005. But according to ACPSS's report, this is an inaccurate figure because it contradicts the International Monetary Fund's (IMF) records which show Egypt's real GDP as 5.6 per cent in 2006 and 4.9 per cent in 2005.
The report further explains that the government's GDP figure is unrealistic since GDP relies on new investments and production improvement in existing projects. "The investment rate in Egypt is one of the lowest rates in the world at 17 per cent according to government records," stated the report. "Meanwhile, the international average rate of investment was 21 per cent in 2005, and even reached 39 per cent in China in 2005."
ACPSS also found fault in the figures Nazif gave for the inflation rate in Egypt which he put at 7.9 per cent in 2006, compared to 7.1 per cent in 2005. Both figures are false in comparison to reality or even official records by the Central Authority for Public Mobilisation and Statistics (CAPMAS). "The inflation rate according to CAPMAS, the Central Bank of Egypt (CBE) and the Ministry of Economic Development is 11.7 per cent in 2005, not 7.1 per cent," it countered, without giving a figure for 2006.
The government also gave the erroneous figures for how many employees joined the work force in 2006, estimating a total of 715,000. But CAPMAS and CBE put it at 400,000. "The government must reconsider its economic programme and strategies to fight unemployment in a more effective and scientific method, not by announcing incorrect figures," asserted the report.
Unemployment rates are rising in a menacing way, continued the report, which threatens society with negative social and political outcomes and the loss of the main component of production, namely the labour force. "Unemployment rates went up from 8.1 per cent in 1999, to 10.3 per cent in 2004, to 11.2 per cent in 2005 and reached 11.9 per cent in 2006," wrote the report's editor Ahmed El-Sayed El-Naggar in the introduction.
Unemployment and the meagre income of public sector employees and civil servants lead to a rise in poverty rates. Although Nazif said the average minimum income rose by 24 per cent during 2006, he did not state what constitutes an average salary. "A university graduate working as a civil servant is paid LE170 in total every month, which means less than one dollar per day," was the report's rebuttal. "This salary causes the employee to suffer real poverty or resort to corruption to make more money."
Another result of high unemployment rates and low income is the increase of child labour. El-Naggar noted that some 640,000 children, representing 6.4 per cent of children between the ages of seven and 14, work to earn their living.
Turning to foreign and local investment figures for 2006, Nazif declared that 116 new mega factories, 115 medium-size factories and 329 small-size factories were established. This, noted the report, despite Egypt dropping to 165th place out of 171 countries rated by the World Bank for easiness of investment.
Finally, Nazif's statement that foreign direct investments (FDIs) nearly tripled from $2.1 billion in 2004 to $6.1 billion in 2006, was described as misleading by ACPSS's report. This is because the government included revenues from selling old projects in this figure. For example, the sale of 80 per cent of the Bank of Alexandria (BoA) to a foreign investor, estimated at $1.6 billion, was added to the FDIs figure, asserted the report.
Other sections in ACPSS's report dealt with the performance of Arab economies and developments in the international economy during 2006. The report stated that Arab countries are currently facing many internal challenges, topped by limited national income -- which represents only 2.3 per cent of total international income. Unemployment, inadequate rates of national savings and slow steps towards Arab integration also made the list of challenges, along with insufficient water resources, foreign debt, lack of technological development and limited flow of FDIs.
Moving on to the world stage, ACPSS stated that according to the IMF, international economic growth rate reached 5.1 per cent in 2006, which is the second highest growth rate in 30 years. The highest was recorded in 2004 when growth reached 5.3 per cent. IMF studies predicted that this rate will drop to 4.9 per cent in 2007.
The international rate of inflation recorded a slight increase in 2006 when it reached 2.1 per cent, compared to two per cent in 2005. In response, developed countries began to raise interest rates in an attempt to decrease inflation. Hence, the inflation rate is expected to drop to 1.9 per cent in 2007 in the industrial countries. On the other hand, the inflation rate in the developing countries was slightly reduced from 5.3 per cent in 2005 to 5.2 per cent in 2006.
Meanwhile, international FDIs continued to flow among the world's countries to reach $1,230 billion in 2006, compared to $916 billion in 2005. Industrial countries received $800 billion, representing 65 per cent of total international FDIs, while developing countries received $367.7 billion -- a figure which is described by the report as a high record.