(AFP Photo)
Egypt has slid 13 places on a Global Competitiveness Index (GCI) issued by the World Economic Forum (WEF), with a report issued on the Arab world citing the country’s political turmoil as the maib cause.
The GCI ranked Egypt 107 of 144 countries. Egypt was ranked 94 of 142 countries in the 2011-2012report.
According to the analysis, even though Egypt has achieved improvements in individual areas such as corporate ethics, favouritism of government officials, wage determination and alternative ICT uses, other determinants of the GCI saw a decline.
The assessment was significantly influenced by the unsteady political transition since 2011, the report said.
“The data points to a number of areas where Egypt has slipped in the rankings, including the quality of institutions, corruption, the effectiveness of the legal framework and on corporate governance,” the report explained.
The report focused on three main areas: the country’s macroeconomic environment; domestic competition; and increased efficiency.
The macroeconomic environment deteriorated, dropping Egypt to 138th position, mainly due to a widening fiscal deficit, rising public indebtedness and persisting inflationary pressures.
“A credible fiscal consolidation plan will be necessary to maintain macroeconomic stability in the country,” the report said, despite the difficulty of doing so amid an ailing economy.
Egyptian government efficiency dropped by 22 places to 106th, whereas the security situation, which was heavily affected by the political transition, has deteriorated significantly by 40 places to 128th.
The analysis reveals further challenges, such as the macroeconomic situation and significant infrastructure deficits.
“Macroeconomic imbalances are reflected in a widening government budget deficit, high inflation, albeit lowering in 2012, and a weakening of the country’s credit ratings,” the report said. Egypt’s long-term sovereign credit rating was downgraded this month by Standard & Poor’s for the sixth time since the 2011 revolt to a record low of CCC+ from B-, which is the agency’s seventh lowest level below investment grade.
To overcome the current GCI challenges, the report stated that a clearer legal framework should be encouraged to challenge the government’s actions and help resolve private business disputes, citing the need for “higher levels of transparency”.
It additionally suggested that the government enforce a research strategy that examines the quality of public research institutions and addresses the absence of collaboration between universities and the private sector.
It stated that, in this way, the government would ensure that public research and development agendas cater to contemporary research priorities and interests.
“The country will have to raise its productive potential across the government spending on wages, subsidies and interest payments, which has come at the expense of investment expenditure,” the report suggested.
It further explained that expenditure, particularly on infrastructure, should be made a priority, especially when it comes to health and education.
“Egypt further needs to raise additional revenue through a broader tax base and better tax compliance,” the report said.
