“We’ve been lucky, Tarek Mansour, PricewaterhouseCooper (PwC)’s Country Senior Partner told Daily News Egypt as he described 2007’s economy. He was right.In spite of a 7 percent Gross Domestic Product (GDP) growth rate and an influx of Foreign Domestic Investment (FDI), mostly from Gulf nations in the real estate and telecommunications sectors, Egypt still has a long way to go if it is to sustain this growth.All year, officials have been promising that their reform policies will extend an arm to the under-privileged, nevertheless, the lower-income bracket has yet to feel these changes and “social justice is yet to be achieved. To address this issue, towards the end of the year government statements have been rife about the revision of Egypt’s subsidies system. To date, the statements have not materialized into action, and that could be difficult with a counter argument that suggests that the government has no database of the most deserving of subsidies.”Subsidies need to be targeted towards the people who need them the most. I would love to see the commodities priced at normal ranges and the subsidies converted to cash and given to whoever needs them, Yasser El-Mallawany, chairman and CEO of EFG-Hermes told Daily News Egypt. If this is done, at least 40 percent of the waste will be reduced, he said.The first step to “adjust the subsidies system was taken in August, when the Ministry of Trade and Industry announced that energy-intensive industries will experience subsidy cuts over a three-year period. According to Taher Gargour, business development manager of Lecico Egypt – one of the 40 companies that will conform to the new energy-pricing system – these decisions are hasty and will not affect the average consumer. Instead of raising the prices of fuel and energy, the government should think of ways to impact the average citizen first, he said.The subsidies reform, along with tax reform – which is considered a success – are all means of adjusting the nation’s monetary policy, by securing channels that will provide “fast cash. After applying the new tax system, 1.2 million tax payers generated LE 2.4 billion in revenues, Taher Helmy, attorney at law at Helmy, Hamza and Partnersr, told the Daily News Egypt. The government will garner even more money with additional privatization projects. Nevertheless, with an aura of dissatisfaction among average citizens, the government’s last privatization attempt – Banque Du Caire – was met with harsh criticism from the public and the press.According to Helmy, privatization has not been “marketed properly. “We should explain to the public the benefits of a market economy. We lack that kind of communication, he said.Another problem could be that the government does not inject a fraction of what it harvests into investments that benefit society – or at least the average citizen says. “We would like to see LE3-4 billion of the privatization profits translated into hospitals or schools, Gargour said. Maybe then, the public will comprehend the benefits. Despite the mishaps that are primarily felt by the lower income brackets, the much-lauded reform economy has succeeded in attracting FDI, and more importantly “diversified FDI from more than just oil exploration projects, El-Mallawany said.The government was able to make Egypt an appealing place for investment, giving the chance for the economy to be free and “breathe, Angus Blair, head of research at Beltone Securities told Daily News Egypt. “Egypt now is not the same country it was before, he said. Yes, we do have internal poverty issues to settle, but now Egypt is the place to invest in following the tax, customs and investment-registration bureaucracy reforms that have been passed. As a result of the foreign investments in Egypt, the consumer’s purchasing power has changed. The simplest example being in the success of Egypt’s first full-fledged, multi-storey shopping mall, CityStars. The international retail stores in the mall admit that they are making more profit here than they are in Dubai, the Middle East’s shopping capital, Blair said. Most of this year’s FDIs targeted the real estate sector. With Cairo’s expansion to the east and west, the opportunities to invest in land – that is considered cheaper compared to international prices – were abundant. With the increase in spending within the country s niche, Gulf real estate companies have garnered billions in profits. Sodic, a local real estate company acknowledges that the competitive environment in Egypt has changed. However, “the amount of competition coming in is not selling enough units to cover the demand in Egypt right now, Maher Maksoud, general manager of Sixth of October for Development and Investment Company (Sodic) told Daily News Egypt. Telecommunications is also a sector that has witnessed an influx of Gulf liquidity, namely through the purchase of the third mobile license, which was awarded to UAE-based Etisalat for LE 16.7 billion.Etisalat has seen success not because of their line usage as much as their operations in other Arab countries. Proceeds from “international traffic, for example, should be one of the main revenue streams at least in the beginning, Chief Executive Officer of Information Technology and Services Co. (ITSC) Rahim El-Kishky said. El-Kishky is optimistic about Egypt becoming a regional IT hub, saying that the ministry’s initiatives are boosting the country’s chances to compete globally. However, many would disagree with him, on the grounds that Egypt is facing dire challenges it must overcome before these expectations are realized.The education system and the availability of skilled labor remain pending issues that affect all industries. “Our human resources are not qualified enough to meet the market’s increasing demands. This goes back to the education system, Helmy said. Time and money must be invested in the development and training of the workforce. All sectors – including banking – found themselves in need of professional calibers which were not available due to the setbacks in the education system. People weren’t prepared for the boom, Hisham Ezz Al-Arab, chairman and managing director of Commercial International Bank (CIB), told Daily News Egypt.”When the current government came on board in 2004, most people thought they were temporary – like painkillers – not committed to the painful process of changing the economic structure. Now, although there are drawbacks, Egypt is on the map and people want to invest in it, he said.Furthermore, with the expansion of Cairo’s suburbs, transportation continues to be an issue that is overwhelmingly unaddressed.Despite the numbers and the achievements, 2007 might have ended on a high fiscal note, but the challenges and public dissatisfaction have drowned the festivities. The government’s biggest challenge is to “make sure that these reforms trickle down to the average man on the street. The upper class is benefiting from this boom, but the majority of the people are dissatisfied, Mansour said.
Economy in 2007: A huge success or public disappointment?
