Thursday,23 May, 2019
Current issue | Issue 1126, 13 - 19 December 2012
Thursday,23 May, 2019
Issue 1126, 13 - 19 December 2012

Ahram Weekly

Costly politics

Political discord continues to rattle the economy, writes Aziza Sami

Al-Ahram Weekly

The Federation of Egyptian Trade Unions directed an appeal this week to political factions that have been deadlocked in a struggle over the constitutional declaration issued by President Mohamed Morsi on 22 November and that was eventually annulled Saturday. The statement issued by the federation, which represents some four million traders, urged that a “consensus must be reached by means of rational dialogue” in order to avert negative impacts of instability on Egypt’s trade sector.

The federation’s chairman, Ahmed Al-Wakil, said that the brunt of the ongoing political strife is being borne by the economy’s investment, business and productive sectors. Despite the annulment of President Morsi’s declaration, the political impasse continues unabated over whether a referendum on the draft constitution scheduled for Saturday, 15 December, should be held or postponed.

And while Egypt’s economic fundamentals and potential as a market attractive to investors are assessed as being resilient enough to withstand the current political bottleneck, figures indicate the extent to which the need for generating funding for expenditure has become pressing, with the public debt reaching LE1.2 trillion at the end of November. The lower-than-anticipated growth rate of 1.8 per cent in 2011/2012 also continues to beleaguer efforts to generate the 500,000 jobs promised by President Morsi’s government.

On Saturday, Muslim Brotherhood Supreme Guide Mohamed Badie said that pushing forward the constitutional referendum would give an important boost to economic stability and soliciting investments. The paradox, however, may lie in the fact that the constitution itself, in the event of its passing by means of a majority vote in the referendum, could actually exacerbate political tensions on the economic front, given that independent labour unions are contesting some of its articles relative to constraints on the freedom of association and union activity. One particularly contentious line in the draft constitution allows for the actual “dissolution” of unions by means litigation, a clause that was absent from the prior 1971 constitution.

Since President Morsi took office in July, government plans to alleviate the economic burden from disadvantaged groups have been announced in piecemeal fashion rather than being part of a comprehensive economic and social development strategy. This could in part be attributed to the eclectic formation of the government, which was selected from former National Democratic Party affiliated and independent figures, as opposed to an ideologically or politically homogeneous team formulating its vision of economic policy.

High media publicity has been given to a future project to develop the Suez Canal zone as an international services hub, but apart from that, there have not been specific measures presented to bolster Egypt’s currently ailing industrial and productive sectors. The sole concrete step undertaken by the government to date has been to solicit the IMF loan of $4.8 billion with the aim of boosting falling foreign currency reserve levels.

This week the government announced that it would reduce the interest on loans to small farmers who constitute some 90 per cent of Egypt’s agricultural sector. The measure comes at a time when the sector is suffering from compounded problems, such as water shortages and problems with the marketing of important staple products, such as rice and cotton. Pledges that were made by President Morsi on Farmer’s Day to drop all farmer debts and bolster the sector by buying rice and cotton crops at prices lucrative to farmers did not materialise. Infrastructural problems have undermined the announced policies.

According to Ali Abdel-Hadi, a farmer and teacher at the Al-Sinbilawyn Agricultural High School in Daqahliya, “the number of government mills is barely sufficient to receive the amount of production, and small farmers cannot afford the cost of transportation as well as the cost incurred by waiting for days on end to deliver their crops to government mills.”

But the biggest problem of all, Abdel-Hadi says, is the absence of a long-term plan for agriculture. “Not one measure to improve matters has been undertaken since Morsi’s government took over,” Abdel-Hadi says, “not even one as straightforward as reinstituting the crop rotation cycle, which any farmer knows is needed, instead of the current chaos in which the same crops are grown, season in and season out.”

It is no coincidence that Daqahliya’s capital city, Mansoura, with its rural backdrop, also saw intense protests organised by the National Salvation Front, as did several other Egyptian governorates.

Meanwhile, as the government navigates its budget plan for supporting investment and production, it remains hostage to the political reverberations that continue to adversely impact economic fundamentals.

This week, Finance Minister Momtaz El-Said announced that the state budget for 2012-2013 would realise the social and economic reform plan “without negatively affecting or adding new burdens to the poor and limited income groups.” Newly instituted price hikes in electricity and gasoline are being implemented incrementally so as to bear mostly on higher-income groups.

On Sunday, only hours after a decision to impose new taxation on services and commodities was announced, a presidential spokesman said the decision had been retracted. The new taxes, issued at the very moment in which the political opposition is bracing itself to mobilise against President Morsi’s decision to hold the constitutional referendum, would have added fuel to protests. The retraction, even if temporary, shows that the government is aware of the fact.

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