By Amir Makar
CAIRO: Bad management in the face of chronic woes and natural outcomes of the social uprising summarize the current situation in Egypt, believe a panel of distinguished economists, who offered education and human development as leading rescues out of the quagmire.
Renowned economist and American University in Cairo professor emeritus Galal Amin classified Egypt’s economic woes into three kinds; “those that are real and profound but [chronically] old, those that came from revolution but are natural, and those that are neither.”
Amin says the first category has existed for over four decades since the 1970s due to unregulated open door policy, while the latter categories erupted because “those in charge made [bad] decisions which shouldn’t have been made, or failed to make [good] ones which they should have.”
Such decisions include the remaining deteriorating security, “perhaps even worse than the first weeks of the revolution,” which in turn does not encourage tourism nor foreign investment.
Amin disagreed with attributing the lack of security to the transition period, saying it has been prolonged “far too much than necessary,” especially by labyrinthine political decisions demonstrated by the constitutional amendments and declarations and the mystifying situation of foreign aid.
Additionally, rather working to restore security, those in charge were left to stoke afflictions and the media was encouraged to play a negative role that worsened the situation overall.
“It’s hard to say that all these mistakes were out of ignorance,” said Amin, who rather believes them to be aimed towards a certain goal which he said remains elusive to him.
From his perspective, AUC political economy professor Abdel Aziz Ezzelarab said that the current status in 2012 is often compared with the “booming” situation prior to the 2011 uprising, but the reasons and indicators that led to the uprising itself are often missed.
“If we use indicators such as growth and GDP for measurement, it’ll show that [the economy] was growing, but this can be likened to a growing body that also houses a cancerous tumor,” he said, “this is a sign that indicators alone can’t provide an all-rounded insight.”
Among such indicators he cited are the high rates of illegal emigration via the Mediterranean which arose from rising unemployment, and the fact that Egypt was the world’s second largest importer of wheat, resulting in at least half of the ingredients of every loaf of bread being imported.
Ezzelarab warned that “the revolution is composed of episodes … If it doesn’t achieve its goals, it might move into others” that could be potentially more dangerous.
He particularly noted the substantial dependence of the Egyptian economy on the outside, which resulted in the declining emergency stockpile or buffer for average citizens.
“If that backup decreases, suffering will increase faster than the fruits of the revolution happening,” he warned, believing it to actually be a tool used by “all those who wish to contain the revolution.”
Solutions and future opportunities
Mohamed Al-Ississ, AUC assistant professor of economics, highlighted the key issues to be worked on to restore the economy, which are “stopping the bleeding, restoring human dignity to marginalized classes, and education,” the lattermost being “the beginning and the finish-point.”
The first, he said, is accomplished by restoring trust and securing the currency, which he feared might be devalued or – at worst – freefall, resulting in a tragedy where Egypt might not even be able to afford importing its own wheat.
Among the steps that could be taken are dealing with the slums as other countries such as Lesotho have, by giving their residents property rights. Another is funding small enterprises where there is a large prohibitive cost for small investors.
On the long-term, assistant professor of economics and banking sector expert Monal Abdel-Baki said that there are 9 million youth “between ages 20-24 that form a strong purchasing power … almost the equivalent of an entire country.”
She attributed to this, among other reasons, that Egypt will be the “Indonesia of the Middle East” within the next seven to 10 years. Other reasons are the already present “strong economic foundations” along with future financial reforms and fiscal restructuring.
Two other primary factors Abdel-Baki said are crucial; the first of which is independence from rentier economies that are based on tourism, influx of money from foreign workers, and the Suez Canal income.
The other factor that needs to be exploited is the strong but inactive banking sector, which has mostly been operating on family loans, of which she said the Central Bank needs to direct 70-80 percent towards agriculture and manufacturing rather than credit cards.
Abdel-Baki also emphasized stronger regulation on the stock market, cautioning that the value of the pound on the market has to be the equivalent of its real value away from price inflation.
She also warned against imposing capital gains which might lead investors to flee, rather encouraging them to be imposed on ‘hot money’ that remains in the loop for less than a week.
“Egypt has the potential. The qualitative and quantitative indicators show that the Egyptian economy is well equipped,” she said.
