First order of business
What is the first order of business as far as the economy is concerned now that Egypt has a president? Niveen Wahish
gauges expert opinion
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Egypt's poor are awaiting economic policies that would alleviate their daily burdens
For months Egyptians have been waiting for presidential elections so they can move beyond the transitional period. Today, after the Supreme Council of the Armed Forces (SCAF) handed over power to a civilian president, the political situation leaves much to be desired.
Victim to a year and a half of political instability, the economy now needs serious attention. The growth rate for the first half of 2011/12 was 0.3 per cent. The governor of the Egyptian Central Bank said that next year he expects growth to range around two per cent. Unemployment, poverty, inequality, a gaping budget deficit and fuel shortages are but a few of a long list of problems screaming for solutions.
These issues, most of which are not new to Egypt, exacerbated in the aftermath of the 2011 revolution. Who is to bear the blame? Most observers would say politics. But now, with a president elect, experts want to go beyond blaming and find strategies to improve the fundamentals. But with so many tasks to accomplish, where is the new president to start?
Samir Radwan, former minister of finance, says it is essential to write out a clear economic plan, a vision, that sets targets for the immediate, short, medium and long term. Such a plan, he said, should be comprehensive and the steps taken should feed into each other to avoid the mistakes of the past, wherein measures taken often contradicted each other.
"The need for security goes without saying," Radwan said, adding that ending insecurity will make a huge difference to investors and the tourism sector. Then, in the immediate term, namely the first 100 days, the president should address bread and fuel shortages, Radwan said. "It is important to make sure that the poorest 40 per cent of the population are taken care of first."
Tunisian economist Nadia Belhaj, senior programme specialist at the International Development Research Centre, also points to the need for forward vision. But in the short term, Belhaj underlined the need to stabilise the economy, managing the widening budget deficit and finding jobs for the youth. She is against handing out government jobs, believing that although it is a step that may help calm people, it does more harm than good in the long run. She suggested that there is much needed infrastructure work to do in areas far from the main cities, and that that could be a source of employment for many.
Belhaj laments that in Tunis the government committed a drastic mistake by taking on thousands of new employees in the government sector. The government also disbursed unemployment benefits it did not have the budget for.
An issue both Belhaj and Radwan agree upon is the need to revisit subsidies. Both believe energy subsidies need to be done away with. Radwan said if that issue were resolved it would free up as much as LE60 billion for Egypt's budget. He does not believe it would be difficult; many businesses run on butane gas cylinders whereas they could work just as efficiently and more cheaply with natural gas.
"It will cost the government a little extra to put in place the infrastructure for natural gas, but it will save billions in the long run," Radwan said.
Egypt's energy subsidies came to around LE95 billion in the 2011/12 budget. The government has said it has a plan to rationalise these subsidies and set them at LE70 billion in the 2012/13 budget.
Belhaj says that the very poor must be compensated for the loss of subsidies through cash support. But to do that efficiently there needs to be specific criteria for who deserves this support and it must be conditional. "People must learn that they should not depend on the government." And if they are taking money there should be a schedule whereby they should be working towards getting out of their current situation, otherwise they will continue being poor forever."
Other immediate measures include training youth to prepare them for available jobs, she said.
In the medium to long term, Belhaj finds that the government must work on improving the banking sector, the business environment and supporting the private sector. "They must realise that it is the private sector that is the engine of growth and jobs."
One of the most important requirements for success, according to Belhaj, is the need for cooperation among the various stakeholders in society, namely the government, civil society and experts. Development in Western societies, she said, is built on compromise between various constituencies.
First and foremost, Belhaj said, no one must be left out. "The people must be part of the process; they should be informed why a measure is being taken and how it will affect them." Belhaj believes that experts who had been working with the former regime need to be kept in the picture. "You cannot throw away 30 years. You need to improve on what has been built."
"We must not reinvent the wheel; there are numerous success stories that need not be copied but could be adapted to suit our situation," she said.
Radwan added that the new president must start with what he called "some quick wins". In the medium term, he wants to see strong support for the tourism and business sectors. "All tourism needs to pick up again is security and promotional campaigns," Radwan said, adding that Egypt is on the frontline of tourist destinations and should be able to exploit that position.
Economist Mohamed Sakr shares a similar view. He believes that reviving tourism, while resolving the problems of businesses that were forced to close down after the revolution because of the economic slowdown, ought to quickly absorb a lot of unemployment.
Sakr believes that stability is crucial. Once the political situation is figured out, trust in the system will be re-established. That, he said, would lead investors to return. And with that comes hard currency, which will reflect positively on foreign reserves and accordingly the value of the currency.
In the meantime, Radwan stressed that people must be encouraged to become self-employed, by making life easier for small and medium-sized enterprises (SMEs). Belhaj agrees, adding that SMEs are the lifeline for millions among the youth. Access to finance is one of the problems that must be tackled in this regard.