Ghali suggests more customs cuts; Moheiddin to accelerate privatization
CAIRO: Minister of Finance Youssef Boutros Ghali announced the economy has achieved 6.9 percent growth rate, adding he expects the number to reach 7.4 percent by year s end with more reforms in the pipeline, possibly including more customs cuts.
The minister s remarks came at the opening of the 11th annual Euromoney Egypt conference, bringing together more than 1,200 businessmen, politicians and prospective investors.
Ghali spoke following Prime Minister s Ahmed Nazif s opening remarks which summarized the government s achievements over the past year. Nazif also said he is undisturbed by recent reports of the rise of the inflation rate to 8.4 percent, saying it is only a temporary byproduct of strong economic growth. Meanwhile, Ghali focused his remarks on sustainability of the achieved growth and ensuring the benefits reaching the country s low-income groups. Moheiddin followed by responding to growing public criticism of the government s privatization program citing the growth in foreign direct investment (FDI).
We have problems with credibility, Ghali says. We say we ve created so many jobs; nobody buys it. We say we are going to create so many jobs, nobody buys it. People want to know when they will see change in their everyday lives, and the answer is: soon.
Ghali s speech surprised many in the traditionally investment-attraction event. Samir Radwan, managing director of the Economic Research Forum and a panelist at the conference, says the government is now in a position that requires addressing the concerns of the low and middle classes.
It was a welcome part of his speech, says Radwan. I think the government is moving in the right direction. Whether the president is committed or not, I think he has no choice because of the opposition which has played nicely on this issue. There s real pressure now from the rank and file . People want to feel it in their pockets.
Ghali says the most important element of ensuring economic growth reaches the general population is sustaining growth. He says reforms implemented in the past two years including The New Tax Law and accelerating the privatization program have helped lower the dependence of the economy s growth on public spending.
The nature of our growth has come closer and closer to becoming self-sustaining, Ghali says. This is not something that comes overnight, but more importantly, it s not something that goes away overnight either.
Roy Allen, United Nations Conference on Trade and Development principal investment advisor, says growth might be sustainable in the short term, but longer term sustainability will depend on the economy s ability to transform to attract more efficiency-seeking investment in the industrial sector. Currently, he says, Egypt is attracting mostly investors seeking resources or a large market for their businesses.
Another delegate, Matthew Kirk, Vodafone Group Services director of external relationships, says the government needs to implement more reforms to reduce bureaucracy in small practical steps in order to make a tangible difference for incoming and existing investors.
Since 2004, FDI has increased from $2 billion to $6.1 billion, Minister of Investment Mahmoud Moheiddin says. But even more significant, he adds, is more than 50 percent of the current figure has come in the form of green-field projects, plus 10 to 15 percent from privatization revenues. Oil-sector investments, which constituted 70 percent of FDI in 2004, now account for just 30 percent, he says.
Moheiddin adamantly criticizes last week s World Bank report ranking Egypt No. 165 out of 175 countries in ease of doing business, saying the report relies on mainly external sources and does not identify the real challenges facing Egyptian businesses such as financing, dispute-settlement, land acquisition procedures and bureaucracy.
In line with the Ministry of Finance s policies to use privatization revenues to improve public services, Moheiddin announced about half of the $1 billion Sidi Abdel Rahman deal will be allocated to construction of the Upper Egypt-Red Sea highway due to enter the construction phase this month.
As for subsidization, Ghali says his ministry is not considering reducing the government s subsidy budget, now standing at about LE 100 billion, but is debating the allocation of those funds. He called into question the allocation of LE 40 billion for energy and a combined LE 30 billion for education and healthcare. With more privatization, he says, the government can shift its production capacities from producing textiles and petrochemicals to education, healthcare and transportation.
After August s Qalyoub train crash, the government allocated LE 5 billion of the LE 16.7 third mobile operator license sale to improve the country s ailing railway system. The accident claimed the lives of 58 and injured 144.
The less privileged in this society deserve better, Ghali says. And we have the assets to make their lives better.
