Tuesday,12 December, 2017
Current issue | Issue 1265, (8 - 14 October 2015)
Tuesday,12 December, 2017
Issue 1265, (8 - 14 October 2015)

Ahram Weekly

Behind the pack

A recent report says Egypt is continuing to lag behind in competitiveness, writes Niveen Wahish

Mena
Mena
Al-Ahram Weekly

If you are looking for Egypt in the Global Competitiveness Report for 2015-2016, you will not have a hard time finding it. Just scroll down towards the bottom of the list, and there it is, in 116th place out of a total of 140 countries.

While Egypt moved three positions up the scale from 119th out of 144 countries last year, in large part this was due to por performance of other countries and some countries not being included in the Index this year, among them Angola, Barbados and Burkina Faso.

Egypt’s improved competitiveness this year is very slight, said Omneia Helmy, director of research at the Egyptian Center for Economic Studies (ECES), a think tank, at a seminar organised to present the report’s findings.

In reality, Egypt’s position could be considered to be stable, she said, with its performance going from 3.6 to 3.7 out of seven, with seven being the highest and one the lowest. This has been the average performance of the Egyptian economy for the past three years.

The report categorises competitiveness into three main areas. The first includes basic requirements such as institutions, infrastructure, the macroeconomic environment, health and primary education.

Then come efficiency enhancers, which include higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness and market size. Lastly, there is innovation and factors including business sophistication and innovation.

In the area of basic requirements, Egypt scored 3.8, with areas such as institutions and infrastructure receiving a much higher score than the macroeconomic environment, which came in at 137th position. This was on the back of factors including high government debt to GDP, which stands at 90.5 per cent, and low national savings of 13.2 per cent of GDP.

In the efficiency enhancers category, labour market efficiency came in poorly at 137th. Financial markets development came in at 119, though within it the soundness of Egypt’s banks was ranked at 70. However, the affordability and availability of financial services fared badly at below 120, as did the ease of access to loans.

Within the higher education and training category, the quality of the education system came in almost at the bottom, as did the availability of specialised training services. The report said that reform in this category is crucial to private-sector growth.

In the third category, innovation as a whole came in at the 120th position. Though the component of the availability of scientists and engineers came in at 45, the capacity for innovation came in at 133. One area where Egypt had a stellar performance was that of market size, where it was ranked at 24.

The report also highlights improvements in “levels of physical security (up by seven places although still, at 133rd, an important hindrance to economic growth), a more efficient judiciary in settling business disputes (up by 23 places), and better protection of property rights (up by seven).”

It continued, “The upward movement reflects recent reforms, including a reduction of energy subsidies, tax reforms, and a strengthened business environment, as well as greater political stability after years of turmoil.” However, the report recommended that Egypt continue its reform effort “to create favourable conditions for private-sector growth.”

Looking at these figures, economist Abla Abdel-Latif, head of the President’s Economic Development Council, questioned the extent to which the GCR can be used to judge Egypt’s economy.

Abdel-Latif pointed out that the scores depend on the results of highly subjective questions. While not denying the existence of chronic problems in the areas of education, health and training, she said that given the circumstances that Egypt has been through it would not be fair to judge it based on such scores. There is a need to wait and see, she said.

“When Egypt’s economic performance improves, no one will care to check Egypt’s position in the GCR,” she said.

Approximately two thirds of the data used in the GCR are derived from its executive opinion survey and one third is derived from international statistics. According to a government development strategy for 2030, many of the issues where Egypt is faltering in the report, such as the need for better education, training and technical training, is being addressed with specific initiatives, said Nihal Al-Megharbel, an assistant to the minister of planning, at the ECES seminar.

However, some believe Egypt cannot afford to wait that long. “We cannot wait until 2030 or all will be lost,” said economist Ola Al-Khawaga.

“We hope this Index is used to evaluate the performance of the government,” said Seif Allah Fahmy, chairman of the Egyptian National Competitiveness Council. He pointed out that the scores of countries that have focused on education and innovation had improved, and “Egypt has to focus on these two areas and stop wasting one year after another.”

He added that in all the countries listed by the GCR growth was synonymous with competition. “There is a direct correlation between the two, which is why it is important that Egypt pays attention to these indices,” Fahmy said.

Egypt is at the bottom of the list not only globally but also regionally, and it does not make the list of the ten most competitive Middle East economies. This list is topped by Qatar, in 14th position, and includes Jordan, Morocco and Algeria. The report says that other countries in the region, including Egypt, “must focus on reforming the business environment and strengthening the private sector.”

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