Tuesday,24 October, 2017
Current issue | Issue 1124, 29 November - 5 December 2012
Tuesday,24 October, 2017
Issue 1124, 29 November - 5 December 2012

Ahram Weekly

on the rocks

Egypt’s economic and social reform programme will not be easy to realise if current political instabilities continue, Mona El-Fiqi reports

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Al-Ahram Weekly

“The political scene in Egypt continues to overshadow the economic scene, which is a dangerous indicator. The completion of a political system will reflect positively on the economy, but any delay will have a negative impact on economic stability,” Ashraf Al-Arabi, minister of planning and international cooperation, said this week at a press conference.

Nonetheless, Al-Arabi assured that the political situation will not affect the approval process for the $4.8 billion loan Egypt is seeking from the International Monetary Fund (IMF). Last week Egypt reached a staff-level agreement with the IMF on the loan. Final approval of the loan is yet to be made by the IMF executive board in December. Egypt is expected to receive the first tranche of the loan a few weeks after the board’s approval.

Al-Arabi, who also outlined the government’s economic and social reform plans, said that the government is targeting a 3.5 per cent growth rate next year. But he said political stability is needed to give the economy a chance to pick up.

The government’s strategic plan aims at establishing a democratic system, doubling the country’s national income within 10 years, fighting poverty, unemployment and high prices. It also aims at developing human resources by providing good health and educational services and improving living standards to achieve social justice.

The plan aims at boosting foreign direct investment to $6 billion next year. According to Al-Arabi, the government is also targeting an increase in foreign reserves from the current $15 billion to around $20 billion by 30 June 2013.

The plan also targets the creation of 700,000 to 800,000 jobs in 2012/2013 in addition to training programmes followed by employment to another 100,000 graduates.

But as Manal Metwalli, professor of economics at Cairo University, said, unless people settle down and start to work, the economic and social plan will remain ink on paper. “No progress will be achieved if political instability continues,” she said.

Metwalli believes the government will not be able to meet its ambitious targets, which will in the end mean a loss of confidence by the people. “It is very difficult to provide 700,000 jobs when the public sector is overstaffed, the private sector has been facing a lot of problems for the past two years, in addition to the clear retreat of foreign direct investment.”

The national strategy plan also lacks transparency, according to Metwalli, saying that the government should announce a full detailed programme, explaining how it will finance its projects and how it plans to attract the needed investment.

Although Al-Arabi had said that the plan would be available on the Internet, to allow citizens to have their say, Metwalli believes that it is meaningless when a large part of the population is illiterate. Egypt’s adult illiteracy rate, according to UNICEF, stands at around 30 per cent. “If the government is keen on letting people participate, it should start by getting them involved from the beginning and finding out what their needs are.”

The plan includes details about the government’s targets to improve each sector. For example, the plan aims at boosting growth in the industrial sector to 3.5 per cent in 2012/2013 in addition to increasing the volume of exports by 15 to 20 per cent. The plan targets total non-oil industrial investment in 2012/2013 of LE27.3 billion, an increase of 10 per cent.

As for the agricultural sector, the plan aims to add 1.2 million feddans (one feddan equals 1.038 acres) to cultivated lands by 2017, reaching an extra 3.4 million feddans by 2022. However, Ali Abdel-Rahman, professor of agricultural economics at the Agricultural Research Institute, said that the agricultural plan could never be achieved since Egypt is facing a great water shortage. Egypt’s annual quota of River Nile water is 55 billion cubic metres of water, of which 48 to 50 billion cubic metres is used in cultivating current agricultural land estimated at eight million feddans.

“The annual quota of each citizen in Egypt stands at 600 cubic metres, which is not in accordance with international specifications set at 1,000 cubic metres for each citizen, while in the Congo a person’s quota is 14,600 cubic metres,” Abdel-Rahman explained. According to international specifications, if people get less than 1,000 cubic metres, they are living under the water poverty line. “Since Egypt’s total population is almost 90 million, we need 90 billion cubic metres, but we currently get only 55 billion cubic metres. In consequence, planning to increase cultivated land is a clear mistake,” according to Abdel-Rahman.

“The government should not make fun of citizens by such plans. It would be better if the government plans to increase the agricultural production by cultivating lands in African countries. The other choice is to negotiate with River Nile basin countries an increase of Egypt’s quota of water,” Abdel-Rahman added.

The government’s plan includes three phases. The first short-term phase extends from June 2012 to June 2013. It targets urgent problems, such as traffic, garbage, security and providing basic needs.

The second phase, from June 2013 to June 2014, aims at realising the Freedom and Justice Party’s “Renaissance Project”. This will go hand-in-hand with reforming the administrative and financial sectors to increase resources. The third phase extends until 2022.

According to Al-Arabi, the government has tried to avoid past mistakes while drawing out its plan. For example, he pointed out that before the revolution Egypt witnessed high growth rates reaching seven per cent, but such growth rates were not coupled with job creation. As a result, unemployment today stands at around 13 per cent and the poverty rate is around 25 per cent. The current plan has three dimensions, according to Al-Arabi: increase economic growth, create jobs and achieve social justice through fair distribution of wealth and income.

                                                                                                                                                                 

 

                                                                                                                                                                                                                                                                          

 

Relative growth

 

EGYPT’s economic performance witnessed a positive improvement during the first quarter of fiscal year 2012/2013 (from 1 July to the end of September 2012) when compared to the equivalent quarter the year before due to a moderate increase in investment as well as industrial, agricultural and retail activities.

Egypt’s real growth rate is up from 0.3 per cent in the first quarter of 2011/2012 to 2.6 per cent in the first quarter of 2012/2013, according to Ashraf Al-Arabi, minister of planning and international cooperation. However, compared to the preceding quarter (March 2012 to end of June 2012) when growth recorded 3.3 per cent, growth fell.

According to Al-Arabi, most economic sectors saw a boost in their performance with manufacturing, construction and tourism growing 2.8, 5.4 and 0.6 per cent respectively.

The total gross domestic product (GDP), at current prices, of the quarter was LE446 billion compared to LE402 billion during the same period last year. Agriculture, industry and retail sectors contributed 52 per cent of that increase. Some other sectors contributed negatively. These included the Suez Canal and extracting activities, which lost 3.4 and 0.1 per cent respectively. The number of ships that crossed the Suez Canal was slightly down from 4480 during the first quarter last year to 4380 ships during the first quarter of 2012/2013.  

Total investments during the first quarter of 2012/2013 were LE50 billion compared to LE49.3 billion during the same period last year. “The investment rate currently stands at 11 per cent, which is a moderate figure. We are targeting to increase it to 20 per cent during the coming two years. To achieve a growth rate of seven per cent the investment rate should be doubled to reach 22 per cent,” Al-Arabi said in a press conference earlier this week.

Private sector investment represented 71 per cent of Egypt’s total investment during the first quarter of 2012/13 compared to 66 per cent last year, which is a positive indicator according to Al-Arabi. The private sector injected LE31 billion during the first quarter of 2012/2013 while total public investment during the same period reached LE14.2 billion.

 

 

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