CAIRO: Egypt’s world ranking has improved a dramatic 11 places. Unfortunately for football fans, Egypt’s dramatic rise was in the World Economic Forum’s “World Competitiveness Report 2009/2010 and not the recent FIFA rankings.
Egypt is now ranked 70 in global competitiveness, up from 81 in the 2008/2009 edition of the report.
The report was generated based on surveys of business executives coupled with publicly available databases. Saudi Arabia and Bahrain moved just a single place forward. Qatar and the UAE remain the highest ranked in the region, both were in the top 30.
Algeria’s shift was even more dramatic than Egypt’s, moving from 99 up to 83rd place. While Tunisia and Oman tripped a few spots in the ratings, Syria took a tumble from 78 to 94.
The report notes the pros and cons of doing business in Egypt. Executives highlighted the size of the Egyptian market, which was ranked 26, as well as the recent improvements in infrastructure.
Egypt has been heavily investing in infrastructure to boost the local economy: a new terminal at Cairo International Airport, completing the Ring Road in Cairo and accompanying bridge. Work has also begun on a new metro line and turning the Cairo-Alexandria Desert Road into a freeway.
Much of the government’s stimulus package was spent on these improvements, which will assist the flow of goods and labor domestically.
Egypt also gets good marks for streamlining procedures to start a business, removing barriers to entering the market and most recently launching e-registration for new companies.
Those surveys noticed it now costs less time and money to begin new entrepreneurial efforts. Entrepreneurship is important to Egypt as it struggles to deal with unemployment.
At the same time, the report criticized the inflexibility of the local labor market, taking issue with the difficulty and high cost of firing employees. This makes employers reluctant to hire and serves to depress employment, especially for women, which prompts many to turn to the informal sector.
Malak Reda, of the Egyptian Center for Economic Studies, which contributed to the World Economic Forum report, noted that, “The situation approaches a dichotomy between the formal and informal labor sector. In the informal sector of course there is no firing and women’s participation in informal and agriculture is huge so we must be cautious with official figures.
Nagla Rizk, a development economist at the American University of Cairo, concurred, noting that “Egypt, like any developing country, has a huge informal sector which sometimes gets left out of the national survey. micro-finance efforts also go uncounted.
Both executives surveyed and Malak Reda noted that corruption is a problem in Egypt where baksheeh is a cultural phenomena. “Dealing with corruption is critical and there must be more effort, Reda said, “The corruption laws need to be enforced and serious penalties need to be applied for those engaging in corruption.
Commenting on the World Economic Forum report, CI Capital said, “Since the onset of the global economic crisis, the government has shown continuous commitment to support Egypt s economy. By pumping in a LE 15 billion stimulus package; announcing a new set of investment incentives; and loosening monetary policy which was reflected in a GDP growth of 4.7 percent in fiscal year 2008/09.
The formalization of the informal sector is also essential, though Reda noted the problems inherent in formalization. “It is quiet difficult you don’t pay taxes and all the sudden you have to deal with a property tax and you don’t understand how it is calculated – it gives more incentive to avoid areas with taxes.
Increasing revenues from taxes is key to economic growth and one of the major reforms the country has undertaken in the past years. “Slowing expenditure, and aided by implementing an efficient tax collection system the fiscal deficit was contained to 6.9 percent of GDP versus a budgeted ratio of 8 percent. Such efforts have been reflected in the improvement in the investment climate and the country’s ranking amid the region, said CI Capital.
Reda doubts the government will be able to fulfill its commitment to reducing the budget deficit. “If they maintain the budget deficit I will be very happy, though of course at the present the government is in need of liquidity, she said.
Egypt also did well in specific categories. Egypt was number 78 in basic requirements, 80 in efficiency enhancers, 71 in business sophistication and innovation.
