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How uncertainty managed to negatively affect the Egyptian economy

By Mohammed Nosseir Egypt is in need of a coherent economic vision complemented by explicit economic policies. Undermining both, or using economic initiatives as substitutes and surprising citizens with an assortment of mega investment projects (even if they are beneficial) will not do our country any good. In a very short period, Al-Sisi has managed …


Mohammed Nosseir
Mohammed Nosseir

By Mohammed Nosseir

Egypt is in need of a coherent economic vision complemented by explicit economic policies. Undermining both, or using economic initiatives as substitutes and surprising citizens with an assortment of mega investment projects (even if they are beneficial) will not do our country any good.

In a very short period, Al-Sisi has managed to make the economic future of Egypt both uncertain and truly dependent on his person. He thinks, acts and regulates the Egyptian economy entirely based on his own ideas and understanding. To make matters worse, Al-Sisi has yet to declare what he has in mind. The result is that Egypt’s future is today completely subject to the perceptions of a secretive leader, amidst an economic climate where businessmen are adopting a “wait and see” rather than an “expand and prosper” position.

Egypt is in need of huge investments to revive its economy and reduce its high unemployment rate.  There is consensus among all experts, including current and past governments, on this issue. The question is how can businessmen expand their investments in a country that lacks a clear economic vision, has numerous uncertainties and that is led by an unpredictable president?

Investors, whether they are Egyptians, Arabs or foreigners, need to see a light at the end of their investment tunnel, as well as a good, clear path leading to the end of that tunnel; in other words, an economic vision that determines the government’s economic intentions supplemented with well-defined government policies and regulations. Neither the vision nor the policies have been delivered – nor is there any sign of the intention to do so.

What is presently happening in Egypt is increasing the elements of the unknown and consequently incrementing market risks, resulting, finally, in keeping investors away. The government should be working on minimising economic uncertainty, and leaving investors to struggle with the market risks, not with both. The present poor government policy has kept Arab and foreign investors from investing in Egypt, while Egyptian investors continue to hide their savings abroad.

Al-Sisi is currently demanding that Egyptian businessmen donate large amounts to the ‘Long Live Egypt’ fund, running a massive campaign that aims to collect a total of EGP 100bn – but the type and magnitude of projects to be financed through the fund have not yet been defined. Espousing genuine ideas to revive the economy is not, in itself, sufficient; taking a number of sensible measures to persuade investors to consider Egypt as a profitable investment zone is necessary. That has not yet occurred.

Egyptian businessmen may express their love for Egypt by placing their knowledge and efforts in diversified investment projects and assuming the financial risks involved. However, by encouraging Egyptian businessmen to contribute to the fund rather than to invest directly in their own economic projects, Al-Sisi – deliberately or unintentionally – is conveying the message that the ‘Long Live Egypt’ fund will do a better job promoting the economy than would private diversified projects.

In reality, however, this is an economic drawback! It is certainly a better idea to encourage wealthy Egyptians to invest a large portion of their fortunes in different investment projects managed and owned by themselves. Thousands of ideas and projects, managed and owned by a large number of Egyptian businessmen, means that the risk of failure would be spread among a variety of projects and people. This would definitely have a better impact on the economy than the creation of a single account where one person – who may either succeed or fail – bears the risk of billions of pounds.

Furthermore, the market often reacts strongly to its leaders’ decisions, behaviours or even indications. Al-Sisi, with all his persistence, talent for cornering people and excellent promotional skills, has only managed to bring in less than 10% of the fund’s targeted goal. People willing to contribute to the fund have certainly done so already, in goodwill; the constant repetition of the call for donations is simply perceived as a threat by both Egyptian investors and citizens at large. Further pushing will adversely affect the business environment in Egypt.

A similar phenomenon, but with different arrangements, is now taking place in Egypt; Al-Sisi believes that Egyptian businessmen overprice their products (which is 100% true for many product categories). This is happening because of the government’s poor economic policies that facilitate monopolies, wherein corruption plays a key role.

Thousands or perhaps millions of Egyptians are willing and able to trade in the same products and accept lower profit margins. However, since the government does not back them up by battling corruption, these private businessmen refrain from taking part in corrupt monopoly deals. Al-Sisi’s offer to solve the problem by selling the same products in military outlets at a lower profit margin is a temporary and inappropriate solution. Egypt is in need of proper anti-corruption laws that guarantee a fair and equal chance to all merchants. Once this is done, profit margins will drop significantly and thousands of new businessmen will seize the opportunity and expand their businesses.

The symbolic messages emitted by the Egyptian leader right now will cause the economy to shrink, and people will do their best to hide their money. Rumours that Al-Sisi may nationalise the private sector or apply taxes on personal savings (which I personally believe would be difficult to apply in practice) have already had an adverse effect on businessmen and ordinary citizens, prompting them to reduce their investments or to hide their money.

Mubarak used to boost the Egyptian economy by relying entirely on a limited number of businessmen who were affiliated to him, assigning most of the largest economic projects to them. It was a corrupt structure, but a clear one, wherein many businessmen competed to be included in the former president’s close circle, to eventually obtain a larger slice of the cake. The Mubarak phenomenon is no longer valid. Nevertheless, hoping to revive the economy through a single channel (the president) constitutes another drawback.

Egypt is in strong need of moving away from the Mubarak business era and developing a new one. There are many initiatives that could be placed on the table; maintaining the present uncertain state, in which Egyptian businessmen (whether affiliated to the old regime or not) are not aware of a new economic vision and policy, is definitely harming the economy.

Egypt is a country that can generate millions of investment opportunities leading to very successful projects. Reviving and flourishing the Egyptian economy must occur through enabling fair competition and enacting proper laws that will protect investors from being trapped into corruption. The country needs an entrepreneurial mindset able to identify business ideas that would then be offered to investors to tackle and assume the associated risks. Depending on a single, secretive mind that intends to direct the entire economy is a highly risky venture for the Egyptian economy.

 

Mohammed Nosseir is an Egyptian lberal politician working on reforming Egypt on liberal values, proper application of democracy and free-market economy. Mohammed was member of the Higher Committee, headed the International Relations of the Democratic Front Party from 2008 to 2012.

 

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  • Al Masry

    I thank Mr. Nosseir for sharing his economic vision out of several valid ones. The underpinning of his theory is wrong for ignoring the Revolutionary economic atmosphere and the dire need to act fast and decisively. We do NOT have time to debate about Social justice or national security demands; other than ACTING. History is full of “Economic Bursts” to fill past mistakes and to “Jump Start” economy for the good of all people. Tahya Misr, Allah AKber.

    • bob+++

      I DO NOT KNOW WHO OR WHAT YOU ARE / BUT READ AND STUDY /34 – PSALMS / KJV -BIBLE / THE WISDOM IN THERE WILL PROTECT YOU

  • Al Masry

    Thanks Ms. Rafaat for your visionary articles. Mr. Nossier is not entirely correct about his economic theory or necessarily wrong. For example, I am confused of how to invest my saving in Tahya Misr account or in the new Suez Canal? The investment rules are not yet written and published! Let us all act in revolutionary way. Thanks {resident Al-Sisi for awakening the sleeping giant. Tahya Misr. Allah Akber.

    • bob+++

      invest in real in your hand silver and when the nile dry’s up leave

      • Al Masry

        Crazy comment I do not understand.

        • bob+++

          BAD TIME’S ARE COMEING TO EGYPT INVEST IN – IN YOUR HAND REAL SILVER

      • Al Masry

        Hello! I love your meaningless comments. LOL

  • Al Masry

    In contrary to Mr. Nossair dooms day prediction, investors and bankers are pouring their money in our economy in confidence. Thanks MS. Rafaat for the article. We need more to educate the masses. Tahya Misr.

  • bob+++

    BUY IN YOUR HAND SILVER / CIVIL WAR – NILE DRYING UP -LEAVE – ALL EGYPT WILL LEAVE NAKED AND BAREFOOT- PREPARE

    • Al Masry

      No one using Voodoo economy any more.

      • bob+++

        USE YOUR EYE’S FOR SEEING OR USE THEM FOR CRYING

  • Al Masry

    Mr. Nossier presents one of several economic models; but he forget to consider the revolutionary phase against corruption and unempolymen of youth. President Al-Sisi and his government had to take bold action to turn the economic machine while fighting corruption and terrorists. In a nutshell, we can not wait for social stability. It is like Jump Start a car. Tahya Misr.

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  • Al Masry

    Mr. Boob: As an avid expert in Bible, what will happen when cows come home?

    • bob+++

      all animals will leave with you /mr boob

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https://dailynewsegypt.com/2014/08/24/uncertainty-managed-negatively-affect-egyptian-economy/
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