CAIRO: Since the ripple effects of the US credit crunch began making their way towards the region, Egyptian officials have enacted a number of strategies to reduce the impact of the global financial crisis on the local economy.
Sustaining Egypt’s economic growth rate will be the major challenge, said Minister of Trade and Industry Rachid Mohamed Rachid.
In an interview with Orbit’s “Al Kahera Al-Youm Tuesday, Rachid said if annual GDP slips below 6 percent, the government will be unable to provide jobs to fresh graduates, offer services or increase the living standards of average citizens.
According to Beltone Financial’s daily market report, “the main developed economies are seeing slower growth, with a number of them in, or entering, recession and emerging markets will suffer from slower export growth or cuts in demand, with other slippages in growth in tourism and general trade.
On Tuesday, President Hosni Mubarak met with Cabinet ministers to review their respective action plans.
With a lack of both liquidity and credit crippling international markets, Egypt is mainly concerned about exports and tourism. On the former, Rachid said the Export Guarantee Co. will increase its capital to allow for an expansion in operations and more insurance coverage for Egyptian exports.
According to a statement from the Trade Ministry, Rachid held a meeting with the heads of the export councils to listen to suggestions on how to minimize the impact of the economic crisis on exports as well as outline the support they would need from the government in order to maintain a competitive edge.
Exporters called for an increase in funding and subsidies, more participation in international fairs to showcase Egyptian products especially in new markets, reducing a variety of fees paid by exporters as well as the reducing the costs of shipping and logistics to make Egyptian products more competitive internationally.
“They agreed that reducing the cost of industry is of pressing importance. They also highlighted the need for extra support of small and medium exporters to help them secure their niche in the export market, the statement read.
During his interview, Rachid also announced that no further increases will be made to energy prices for industry.
Keeping the average citizen “in the know has been on top of the government’s agenda in an attempt to quell speculation and regain investor confidence. Ministers, analysts and government officials have appeared regularly on national and satellite television channels over the past weeks, reassuring citizens that Egypt is one of the lucky nations.
Rachid called on Arab nations to increase their investments in Egypt. “The future is safer if Arab investors choose Egypt as a destination for their funds and surplus investments, he said.
Bilateral trade relations with the GCC stand at only 10 percent, which means there’s room for heightened cooperation, he added.
“We are not saying that there are no issues that we have to face; there is a big challenge we must overcome in the next period, said Rachid.
For one, more foreign investments will be injected into the transportation sector in the short to medium term, especially in ports and roads projects, according to Minister of Transportation Mohamed Mansour.
Meanwhile, the government plans to boost activity in the building materials sector, given the importance of construction as a stimulus in the economy, its link to a number of other activities, and for being labor intensive, said Minister of Housing Ahmed El-Maghraby.
Still, Rachid said, the government will not only focus on boosting labor-intensive industries. “Helping small and medium enterprises (SMEs) is also crucial, as they need government intervention and aid to survive amid the current global crisis, he said.
As financial turmoil shakes up different sectors in the economy, average citizens are anticipating a decrease in the price of many commodities. With a drop in the global price of petrol, wheat, steel and cement, the prices of basic needs are expected to follow suit.
“Citizens should experience decreased prices soon and the government will make sure that happens, he said. The ministry, in collaboration with other entities, will monitor markets to ensure that the new reduced prices are applied on the wholesale and retail ranges. The Trade Industry will also publicize the wholesale price of basic commodities, “so that prices are known to everyone, he said.
Rachid called on consumers and retailers to report any abnormal fluctuations in commodity prices and urged people to buy “responsibly to prevent prices from increasing on heightened demand.
While “the [Egyptian] market has been saved by the very low loan-to-deposit ratio in the banking system and a small total mortgage exposure, according to Beltone Financial, there’s a lot to be learned from the global economic crisis.
“Government has a bigger role in a free market through continuous vigorous monitoring, a factor the United States lacked, leading to the economy’s collapse, Rachid said.
