Growing out of trouble
Achieving high growth rates is the only way Egypt can fight the twin tests of an ever-increasing population and spiralling unemployment rates, Minister of Economic Development Osman Mohamed Osman tells Mona El-Fiqi
Osman Mohamed Osman
The Ministry of Economic Development is concerned with planning for the future. What is your vision for Egypt in 2020?
Talking about the future soon becomes outdated. In 1985 the whole world was thinking about the year 2000 and keen to know how the world would be like. But when 2000 came along, nothing happened and people started to think about the year 2020 and 2050.
In Egypt we have different comprehensive studies for the future such as those of [economist] Ismail Sabri Abdallah about development. There are a lot of studies concerned with different sectors such as a study to develop Cairo and the north coast, and to expand the Nile Valley in 2050. The role of the ministry is to translate these studies into feasibility studies for projects ready to be applied. These projects will be established by private local and foreign investors. When applying these studies it is really important to achieve a balance between our resources and needs.
In 2020 the great challenge facing Egypt will be the increase in population. The question is: how can we manage when Egypt's population reaches 105 million people, a figure which will soon be reached. Our vision for the future is not just a report or a study. When the government draws up a plan for the future, it depends on academic studies as well as our previous experience.
The government has a strategic vision for the future which is translated into a five-year plan, including certain projects in defined sectors and areas. This plan is presented to the Shura Council and the People's Assembly. When the plan is approved, the government is committed to implement it to achieve economic and social development.
Egypt started to apply five-year plans in 1982 and we are proud that we are currently applying the sixth five-year plan. Each plan is a follow-up of the previous one. In application, each five-year plan is translated into an annual programme with defined objectives and a determined budget. It also includes the role of each partner in the implementation of projects. This annual programme, when approved by the People's Assembly, becomes a law.
When the government started to prepare the sixth five-year plan, a comprehensive report was conducted on development during the past 25 years. The report, presented by the Ministry of Economic Development, includes what was achieved and what we planned for and did not achieve. This study will help the government determine our real abilities and reasons that hindered achieving the objectives which were not met. It is not enough to set objectives and dreams without following up their application in terms of our potential.
According to our current potential in various sectors, are you optimistic?
On the personal level and due to being among the policy-makers, I am optimistic. In general, societies are optimistic but the role of the executive authorities is to translate people's dreams and objectives into policies ready to be applied to achieve their welfare.
Believing in Egypt's potential, its characteristics, our achievements during the past 25 years in development and in fighting economic recession, makes me feel optimistic. We were able to pass a great challenge -- namely the global financial crisis -- with limited losses and this means that our economy has good potential and tools to be used when necessary. The efficiency of this potential gives me trust in the future, proving that we can manage to deal with the coming challenges.
Did the presidential programme promised by President Mubarak before the elections replace the government's five- year plan?
The current five-year plan starting from 2007-2012 was set up after the presidential programme was announced in 2005. The programme facilitates the government's mission in achieving certain projects which the president promised; and the government is committed to applying them. The government also has to provide the needed budget for this programme and facilitate the role of the private sector in its projects.
What did the presidential programme achieve so far?
During its annual conference held recently, the National Democratic Party introduced a report entitled We Promised and We Fulfilled. The report includes a clear record of what has been achieved concerning the presidential programme in each sector. About two-thirds of the programme has been achieved in four out of six years.
How can the government fill the gap between Egypt's resources and needs?
Achieving a high growth rate is the key in Egypt's case, similar to other countries such as China. It is the key to achieving the general objective, namely a high standard of living.
High growth rate means more salaries for employees and more job opportunities for new graduates. The recent challenge posed by the financial crisis proved that we are able to achieve the previous growth rate of seven and eight per cent which we did before the crisis.
A high growth rate has many benefits. For example, it helps the government regain its investments in education to use them in improving the educational level and fill the gap between the needs of the business market and the outcome of the education system. This dynamic could not be achieved with a slow-down economy. That is why the growth rate is the golden figure.
The economy is the clue for improving living standards which is our main objective. When the economic cycle goes on, the government will be able to raise the salaries of its employees, allocate more of the budget for infrastructure and provide better services such as water, electricity and waste water disposal. The impact of improving the economy is great. For example, it would help the government to apply decentralisation by allocating larger budgets to the local authorities. Decentralisation will help to solve great problems in the governorates and save money. Lack of resources leads to big problems. An adequate budget helps the government to apply its plan.
In the wake of the financial crisis, there was a decline in revenues from the Suez Canal, tourism and remittances from expatriate Egyptians. How has the government dealt with the lack of resources?
In the fiscal year 2008/2009 we lost real revenues estimated at $11 billion. This showed in the state of economic slowdown and the drop in the growth rate from seven per cent to 4.7 per cent. But now this is over. Now we are trying to improve the growth rate to reach our previous levels. The government allocated an additional budget for investments to balance the drop in the private sector and foreign investment due to their losses. In 2008/2009 the government allocated LE15 billion of which LE10 billion went to infrastructure investments while the remaining five billion were allocated for exports. The current fiscal year includes LE15 billion for infrastructure projects.
How did the government get funding for infrastructure investment?
According to the law, when there is a lack of resources, the People's Assembly should help the government find the necessary funding. Most probably the government will take out loans to provide these additional expenses.
Wouldn't you agree these debts are a burden on the government?
The government has a clear policy to achieve economic improvement without having any financial problems. We keep debts at the safe level. New investment budgets should be studied well before being approved. Though government investments yield both economic and social benefits, we take into consideration that raising the government's debts from the banking system might badly affect the private sector's share of loans.
As minister of economic development how concerned are you with poverty and the unemployment rate in Egypt?
Egypt's growth rate should not be less than seven to eight per cent and should reach 10 per cent during the next two years. It was proven that the real solution to the poverty problem is to raise the growth rate. The high growth rate will help in providing jobs for the unemployed and take them above the poverty line. The government's role is no longer providing money for jobless people but to help them find jobs. The government will not provide monthly salaries except to families in difficult circumstances. In such cases the Social Fund for Development provides these families with financial assistance.
The real challenge in my opinion is unemployment: how to change huge human resources from being a burden to being human capital resources, particularly when the unemployed individuals are educated.
Why is there an unemployment problem?
The reason is that the number of new graduates is bigger than the ability of the economy to provide job opportunities. The second reason is the mismatch between the outcome of education and the market's needs. To overcome this problem the growth rate should be high and sustainable for 10 years. The growth rate should be directed into sectors of intensive labour needs. The education system should be developed, particularly technical schools. A few years ago, when the industrial sector was being developed, businessmen could not find trained workers, but it is actually an easy task to train them. The Ministry of Trade and Industry provided good training programmes for them.
What's the current unemployment rate in Egypt?
About 10 per cent, according to figures of the Central Agency for Public Mobilisation and Statistics which calculates it according to international criteria.
Why didn't local prices fall when international prices dropped due to the global recession -- leading to a high inflation rate -- during the past few months?
The main reason is that the internal trade sector needs to be regulated, and production needs to be increased to create supply which would help in reducing prices.