(Photo from Al-Borsa News)
By Raghda Hilal
The European Union believes that of the many obstacles Egypt faces in its ongoing transition to democracy, the absence of security is the greatest cause for concern. The EU maintains that failure to adequately address the security vacuum in the country could result in instability throughout the region.
James Moran, the EU’s ambassador in Cairo, has said that Egypt is going through a new phase in which the greatest challenge is security. Moran added that the EU is concerned about the situation in the Sinai specifically, and therefore considers the reassertion of security there to be of paramount importance. The EU notes, however, that such an operation will take a great deal of time despite the relative calm in most of Egypt.
Moran unveiled the EU›s intention to grant Egypt new aid throughout the next two months, although he declined to elaborate on the specifics of the aid package.
He also called for a restructuring of government institutions and economic facilities in an effort to combat waning foreign aid. Moran believes that as it stands, Egypt›s aid infrastructure is stacked against the poorest segments of Egyptian society and is therefore counter to the country›s best interests.
The EU plans to tackle the lack of investment in Egypt through strategies set in place in collaboration with the World Bank and other financial institutions.
The EU currently oversees the largest portion of foreign direct investment (FDI) in Egypt. Moran estimated the value of EU investment projects in the country at roughly €1 billion. According to the Central Bank of Egypt, net FDI grew by over 50 per cent for each of the final two quarters of 2013, finally coming to rest at $1.628 billion.
When asked to evaluate the transitional government›s performance, Moran explained that it was difficult to properly pass judgment on Prime Minister Hazem Al Beblawi and his government, as they had only held power for three months. He added, though, that the Government›s decisions seem to be progressing in a constructive direction. He cited their recent eye towards expansionary policies, an effort that has already begun to stabilize the Egyptian pound in the face of 10 per cent inflation.
Moran said the EU was also concerned about the magnitude of unemployment in Egypt, which remained above 13 per cent last quarter. The EU believed attracting foreign investment, and by extension local investment, would aid in continuous annual job creation and economic growth.
Moran stressed that the EU›s planned €5 billion aid package would not be delayed in light of recent instability, however, €500 million of the total is contingent on the signing of an agreement with the International Monetary Fund (IMF).
Moran said he expected that Egypt would receive the €500 million by next year with the implementation of the agreement, adding that there had been correspondence between officials in Egypt and at the IMF to seal the deal.
Egypt›s negotiations with the IMF for a $4.8 billion aid package were suspended in early July this year following former president Mohammed Morsi›s overthrow. The government said it had no need for a new agreement at the moment, but indicated it would proceed with other planned reforms.
Moran expressed the EU›s concern following weak economic growth in Egypt. In their latest report on Egypt, the IMF revised its growth forecasts for the country downwards from 2.3 per cent to 1.8 per cent, a drop that European observers found highly alarming.
The IMF›s report expresses that the most urgent priority before the government of Egypt was restoring stability to the macro-economy by strengthening public finance, stabilizing the foreign exchange market, reducing inflation, and promoting competition. In the medium term, the IMF report prescribes redirecting government spending to more sustainable ends, which requires reeling in expenditures, reforming energy subsidies and the wage bill and freeing up additional funds.
Moran went on to lament the drop in joint commerce between the EU and Egypt this year. The decline was considered the first of its kind in Egypt›s long history of economic partnership with Europe, a record that went untarnished even in the depths of the January 25th revolution.
Moran stressed that Catherine Ashton›s recent visit to Egypt was evidence of the strong partnership and the increase in commercial exchanges between the European Union and Egypt, and expressed that the EU hopes for a successful democratic transition in Egypt and the establishment of an inclusive government and constitution. Moran expressed his confidence in the people›s ability to overcome Egypt›s current hardships, in light of the nation›s ancient legacy of strong social cohesion.
