Monday,23 October, 2017
Current issue | Issue 1213, (11 -17 September 2014)
Monday,23 October, 2017
Issue 1213, (11 -17 September 2014)

Ahram Weekly

As bad as it gets?

Egypt has fallen a further one point in the World Economic Forum’s Global Competitiveness Report, after losing 49 positions over the past five years, writes Mona El-Fiqi

As bad as it gets?
As bad as it gets?
Al-Ahram Weekly

 

Egypt moved down one point to 119th position out of 144 countries listed in the Global Competitiveness Report, issued last week by the World Economic Forum. The annual report attributed Egypt’s drop to many reasons, including political instability.
“The fragile security situation is improving slightly, although tenacious political and policy instability are undermining the country’s competitiveness and its growth potential going forward,” the report said.

“Egypt retreated by only one point compared to 2013, while it dropped 11 points the year before,” said Amina Ghanem, director of the Egyptian National Competitiveness Council, an independent policy advisory body. “This means the economy is stabilising despite the extraordinary circumstances it is currently facing.”

Ghanem added that Egypt has improved on some of the report’s criteria and she expects an upgrade to the position next year due to the carrying out of further reforms.

However, other experts are not so sanguine. “Any improvement is on the surface, but if we look deeper there are still many problems,” said Doha Abdel-Hameed, an international expert.

Abdel-Hameed pointed out that Egypt was ranked at 70 in 2009 and has now fallen to 119, meaning that it has lost half of its competitiveness over the past five years.

Moreover, the rankings of many other Arab countries looked at in the report have improved and overtaken Egypt.
Qatar, in 13th position, tops the regional rankings, while the United Arab Emirates, ranked at 19th, enters the top 20 for the first time. Although the ranking of Saudi Arabia has declined from 18 to 20, it remains in the top 20. Tunisia re-entered the rankings at 83rd.
The report’s assessment of a country’s performance is based on a set of institutions, policies and factors that cover 12 categories determining the productivity level.

The categories include institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication and innovation.

In Egypt’s case, the report highlighted the deterioration of the macroeconomic environment due to the widening fiscal deficit, rising public indebtedness, and inflationary pressures.

Ghanem said that Egypt’s growing fiscal deficit has led to a reduction in expenditure in vital sectors such as education and health, causing a deterioration in the levels of service.

The report stressed the need for a credible fiscal consolidation plan in Egypt, accompanied by structural reforms. Revisiting subsidies was a prerequisite for reforming the budget, it said. Egypt’s energy subsidies account for a considerable share of public expenditure; removal of the subsidies is considered politically difficult.

The government’s success in reducing energy subsidies in the 2014-2015 budget was a step in the right direction, Ghanem said.
In order to control the budget deficit, at 14 per cent this year, Abdel-Hameed suggested the introduction of performance-based budgeting, successfully applied in 2000 and praised by international associations at the time.
Abdel-Hameed said that Egypt has the potential needed to improve its economy and competitiveness. But there must be political commitment and reforms must take welfare issues into account.

“Consecutive governments have ignored the importance of engaging in social dialogue, leading to people complaining that they are not getting the services they need,” Abdel-Hameed said.

Egypt’s ranking in terms of investor protection also fell from 69th to 117th place, despite the recent introduction of a new investment law that protects contracts between private investors and the government from being challenged by third parties.
Abdel-Hameed said that the handing down of court rulings on privatisation contracts, concluded many years ago, gave the local investment environment a bad reputation internationally.

In terms of infrastructure, the country has dropped to 121st place from 118th in the previous year, the report said, attributing this to the power cuts that have taken place over the past year.

Another negative factor is the labour market, with the report saying that Egypt ranked 130th in terms of flexibility and 139th in terms of efficiency. If measures are taken to deal with both problems, these will allow the country to increase employment in the medium term and provide new entrants to the labour market with enhanced opportunities, it said.

Abdel-Hameed said that the problem of labour markets in Egypt will not be solved by setting a minimum and maximum wage rate. “The government should deal with problems at the grassroots and have a comprehensive vision for the future,” Abdel-Hameed said.
Regaining political stability and establishing confidence through a credible and far-reaching reform programme are vital to Egypt’s future, the report concluded.

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