Al-Ahram Weekly Online   1 - 7 May 2008
Issue No. 895
Front Page
Published in Cairo by AL-AHRAM established in 1875

May's hopeful tidings

President Mubarak announces a support package for those on low incomes while security measures against "havoc" are enhanced, Dina Ezzat reports

An unprecedented 30 per cent raise in salaries for all will go into effect starting this month, President Hosni Mubarak announced in a much-anticipated pre-Labour Day speech Wednesday. "We are not going to wait for the new fiscal year," Mubarak said to the applause of an audience of workers and civil servants and to the pleasure of those who followed the annual speech on television in anticipation of the raise.

Aisha Abdel-Hadi, minister of labour and immigration, and Hussein Megawer, chairman of the Syndicates Union, both hailed the raise as an important socio-economic step. Workers and civil servants interviewed across the nation by state-run media expressed "much happiness" over the raise.

The objective of the raise, Mubarak elaborated, is to create a better balance between salaries and prices. This balance has been called for repeatedly in opposition quarters. Mubarak said that the raise, that he "pressed the government to find the necessary resources for", is designed to help the lower-income echelon of civil servants face the spiralling increase in the price of basic commodities -- attributed largely by the president to a worldwide hike in food prices. Mubarak also called on the private sector to follow suit and raise wages by the same percentage for its workers.

In line with the raise, the president announced "firm" instructions to the government to adopt a package of market management measures to prevent new "artificial" raises in prices. These measures, according to Mubarak, would have to be in conformity with the economic liberalisation scheme that Egypt is committed to. "Without the economic reform measures that we adopted it would have been impossible for us to face the current economic challenge," Mubarak stressed.

According to the presidential speech, press statements by concerned government officials, and parliament sources, these measures will include an expansion of social security and subsidy services to many currently not eligible. This expansion will be backed by the reintroduction of government- managed basic commodities exports and anti-trust and distribution control measures. Primarily, however, the government is to promptly restructure its subsidy-management agencies to unify an otherwise divided planning system that economists have argued has aggravated the recent food crisis.

President Mubarak also promised that this economic package would be linked to measures to confront corruption and bureaucracy. Mubarak called on the government and parliament to work hand-in-hand but without compromising the demands of the free market economy. As Mubarak was delivering his speech Wednesday, government trade sources were already reporting a slight drop in the prices of basic food commodities as a result of regulatory measures enacted during the past few weeks.

According to Reem Mansour, an HC Securities analyst, the question is not whether the announced raise is enough for the medium term, but rather one of how far the government would go in efforts to control the current crisis. "While catering for the social instability concern, which is vital to any government, an eye must be kept on the impact of government control measures on investment, especially in light of high inflation rates," she said. According to Mansour, the government should stick to a tacitly suggested September deadline for its market intervention; otherwise investments -- especially foreign direct investment -- could be discouraged, which would only worsen the crisis.

In parallel, there are other basic economic concerns. Number one is the scope of the 30 per cent raise. Government estimates suggest that employees in the public sector amount to no more than 28.1 per cent of the total workforce. Some 70.3 per cent is currently in the private sector with 1.6 per cent in the investment sector. There are no clear figures on the percentage size of the informal work sector, but some economists have privately suggested that it could be of parallel volume to the formal workforce.

Independent economists warn that the announced raise could lead to an increase in demand. If this increase is not matched with an increase in supply, then those working for the informal sector -- the worst affected by any economic crisis -- could be worse off as a result of the raise. Government officials dismiss the scenario of any increase in demand, sudden or otherwise, as unlikely.

Moreover, economists voice concern over the ability of the draft budget that will soon be reviewed by parliament to effectively accommodate this raise in view of other increased public spending, especially health and education services. They argue that a lower raise in salaries -- of around 20 per cent -- would have been more tolerable to an already strained budget.

According to Abdel-Fattah Al-Gibali, senior economics analyst at Al-Ahram Centre for Political and Strategic Studies, reviewing the management foreign currency generated by state- owned bodies, especially in the oil and gas sectors, could provide the resources necessary to meet the salary raise without undermining existing public spending. Abdel-Rahman Baraka, member of the ruling National Democratic Party and of the People's Assembly Economic Affairs Committee, adds that the measures ordered are bound to produce a marked improvement in the situation of civil servants who provide the state with considerable tax revenues. Baraka said that Mubarak's decision to double the traditional annual raise of 15 per cent will help contain the current crisis within "a few months".

For Baraka, the economic ease that should come with the president's announced measures will naturally absorb much of the social frustration demonstrated recently. "There is no political frustration as such. It was the economic crisis that was used by some factors to instigate public anger in order to serve narrow political agendas," he said. Others disagree. Opposition figures argued that the raise should be coupled with political reform. They insist that the government needs to reach out to the opposition with a conciliatory vision for the future. MP Hamdi Hassan, of the Muslim Brotherhood, called on the president to personally lead a national dialogue. "When he first took office the president initiated a series of meetings with representatives of all political groups in Egypt. It is this tradition that we want the president to re- institutionalise," he said.

In his speech, President Mubarak warned pointedly against attempts to "wreak havoc in society", alluding to calls for future strikes and demonstrations similar to those staged early last month. "The fates of nations and peoples should never be allowed to be manipulated by empty slogans," the president said. He affirmed that the state would "use the power of law to firmly confront those targeting the nation's stability and the interests of its people. We will confront rumour and frustration mongers."

Official and non-official sources have privately told Al-Ahram Weekly that security measures designed to face up to agitation for strikes and demonstrations have been stepped up. These measures, sources say, are focussed especially on mobile and Internet services, which have been used by political and civil society activists to call for action over the past few weeks. New restrictions are now in place on mobile and Internet services. Commercial providers are now required to gather identifying information on clients. Meanwhile, the security apparatus is on high alert, with clear directions given to deal "without hesitation" with "troublemakers".

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