Bonus commitment

Niveen Wahish reads through President Mubarak's Labour Day speech

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In his Labour Day speech yesterday President Hosni Mubarak confirmed that social bonuses, paid annually to government employees since 1987, will continue to be distributed, ending weeks of speculation that the payments were about to be suspended.

Unlike last year, when Mubarak surprised his listeners by announcing a 30 per cent bonus, he did not specify the size of the payments promising to do the utmost to secure the resources needed. As for the bonuses, the president said he would urge parliament to be as generous as possible, within the constraints of the 2009/10 fiscal year budget.

Next year's budget deficit is expected to be eight per cent, a result of increased government spending, including a stimulus package to help the economy through the current international financial crisis, at a time when revenues from exports, tourism, the Suez Canal and local and international investments are falling.

Mubarak stressed the government's continued commitment to reform, highlighting its determination to create more employment opportunities. He urged employers and employees to work together in the current crisis, and to engage in dialogue to hammer out any differences rather than strikes, which hamper production and harm the economy. He also advised affluent businessmen to be less ostentatious in their consumption and to show more concern for the poor.

"Not specifying the size of the bonus was a rational thing to do," Abdel-Fattah El-Gibali, senior economic analyst at Al-Ahram Centre for Political and Strategic Studies, told Al-Ahram Weekly. "Last year was just an exception. The figure has to be set by parliament."

El-Gibali argues that the bonus should be set at 10 per cent, a figure that would cost the government around LE1.7 billion and help out some 6.5 million government employees eligible for the bonus. He does not, however, rule out parliament opting for half this sum.

"Anything would be better than nothing," says Howaida Nasr, a government employee who is thankful the bonus was not scrapped.

In recent months, as the new budget was being discussed, Minister of Finance Youssef Boutros Ghali proposed that bonuses be withheld this year, freeing up funds to establish new projects that would help create jobs. He argued that every LE1 billion increase in public spending could create up to 100,000 new jobs.

Since being introduced the rate of bonuses has varied, though most years they have been paid at between 10 and 15 per cent ( of the monthly salary. Last year's 30 per cent was a one off payment intended to help lower-income civil servants cope with spiralling commodity prices, though its impact was offset by an equally unexpected increase in gasoline prices.

The possibility that this year's bonus will also be followed by price hikes worries Hani Abul-Fotouh, director of Policy and Corporate Affairs at CI Capital.

"As soon as the bonus is announced the prices of goods go up as well as fees charged by professionals and handymen. There should be some mechanism to control unjustified price hikes," he says, arguing that for the bonus to make a real difference in people's lives it should be set according to the average inflation rate over a period of not less than six months.

El-Gibali does not expect any increase in prices this year.

"Last year's hike in gasoline prices was needed to raise funds for the bonus which was disbursed before the new budget came into effect," he says. More importantly, during a global recession the trend is for lower prices. In such an environment "it would not be easy to raise prices".

El-Gibali is far from convinced that Ghali's argument about public investment leading automatically to jobs being created is correct. "If that were the case," he points out, "then increased spending through the stimulus package should have resulted in 1.3 million new jobs. Yet unemployment is on the rise."

"A more effective way to combat the recession is to boost spending," he says. Since local demand has played a major role in helping the economy grow in recent years bonuses should not, El-Gibali insists, "be viewed as a burden on the government budget but rather as a way of stimulating growth".

Nor, says Abul-Fotouh, should bonuses be seen as a right. They should be based on performance and used as an incentive for greater productivity.

In his speech Mubarak acknowledged that levels of production remained a problem. "We must establish a culture of training and higher productivity," he told his audience. "This is one of the greatest challenges we face."

Mubarak's warnings of difficult times ahead were not confined to economic turmoil but encompassed regional politics. Though it was not named in his speech, few doubt that Mubarak had Iran in mind when he spoke of "regional powers" whose "plans accommodate terror and extremism and openly reject peace".

Mubarak brushed aside an anti-Iranian remark made by one of the few hundred selected workers in the audience. When another attacked Hizbullah leader Hassan Nasrallah he responded by saying "let us not insult anyone".

Not insulting people is one thing. But when it comes to Egyptian national security Mubarak was in confrontational mood.

"Now that these powers and their agents have dared to violate Egyptian security and sovereignty, I must warn in no uncertain terms that violations will not be tolerated and anyone attempting to tamper with Egyptian security and stability or harm the fate of its people will be promptly intercepted."

"Egypt," he added, will "remain steadfast in the face of all plots and conspiracies." (see pp.2&4)