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One-on-one with Minister Rachid Mohammed Rachid - Daily News Egypt

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One-on-one with Minister Rachid Mohammed Rachid

Minister of Trade and Industry speaks on condition of economy CAIRO: More than two years after taking the helm at the Ministry of Trade and Industry, Minister Rachid Mohamed Rachid is starting to see the fruits of his labor as part of Prime Minister Ahmed Nazif s economic cabinet pay off. A 15-year high 6.9 …


Minister of Trade and Industry speaks on condition of economy

CAIRO: More than two years after taking the helm at the Ministry of Trade and Industry, Minister Rachid Mohamed Rachid is starting to see the fruits of his labor as part of Prime Minister Ahmed Nazif s economic cabinet pay off.

A 15-year high 6.9 percent economic growth rate, double-digit increases in bilateral trade with global giants such as the European Union, China and Russia and foreign direct investment up to $6.5 billion from $2 billion in 2004, have all been good signs.

On the other hand, an 11.8 percent inflation rate, a continually-rising LE 600 billion public debt figure – more than 90 percent of GDP – and growing public discontent with the government s privatization and general economic policies, and their seeming inability to lift the burden and improve the quality of life of the ordinary Egyptian, have cast heavy shadows on most of what has been accomplished.

The Daily Star Egypt interviewed Rachid in a two-part interview in which he put the progress of the Egyptian economy in the past two years into perspective.

Rachid outlined the government s future plans as it continues to fight its way through the now almost 30-year transitional phase from socialism to capitalism.

Is the strategic shift to the East, as referred to by yourself and Minister of Investment Mahmoud Moheiddin, a purely economic strategy? And how much of a role do politics play?

The shift that I spoke about, Minister Moheiddin spoke about, and what we have discussed during the presidential visit [to Russia and China] is very much economic. It is actually following our plans for the economy and the realities of today s trade in the world. The reality now is there s more and more trade and economic activity in the East than there used to be.

We just saw today pictures of President Bush wearing Vietnamese clothes in Vietnam and taking part of the [Asia-Pacific Economic Cooperation Summit]. By the way, this is not his first trip to Asia. He has attended almost every meeting there.

The Europeans also are moving East, and trade is moving East. Egypt, of course, will continue to have very important relationships with the United States, Europe, and our basin, the Middle East and Africa. But at the same time, we need to make sure we re not missing what is happening globally, which is very significant trade activity on the Asian side. Our numbers reflect that; our trade with the East is continually growing.

Now that we are embracing a market economy, we do not control, as a government, who we actually trade with. And the market dynamics show us there will be more trade with the East, whether we pursue it as a government or not. So it was actually proactive from us to say well, let s try to establish that relationship in a way that can be more win-win, instead of being passive and being the losing partner in that equation.

But some analysts suggest you cannot implement an economic shift without implementing somewhat of a political shift. The logic follows that since Egypt remains a strong Western ally, especially to the US, that it would be hard to make that shift to China and the East.

I think Japan is a fantastic ally to the United States. And it s probably the number one trading partner with China; there s no conflict there.

Politics, in a way, will not contradict with the interest of any economy. Even the West today, I think the US’s level of trade with China is $200 billion, and Europe is close to that level. Because of what s happening globally, I don t think the move to the East economically has the political significance that people are trying to dig.

On the other side, if you re asking if China is going to be more politically active in the next 20 years, my answer is: Of course, yes.’ That will come because they have growing interests and they want to protect those interests, which means they have to play a bigger political role.

As far as Egypt is concerned, this [shift to Eastern markets] is led by economic potential. It s led by a self-serving move for our population and business community. And it s not an either-or situation. It s not that we will do business with China and stop with Europe or do business with Russia and stop with the United States.

This is a complementary approach to have a balanced network around the globe, as far as our trade is concerned.

Does 11.8 percent inflation worry you?

Yes, it does worry me. But in our case today, I am less worried because most of the numbers of increasing inflation are cost induced. This is very much related to two or three factors: one is bird flu, which has had a 2-3 percent impact [on the inflation rate] because all the protein products in Egypt have increased in price.

The second is the government s move in July of this year to increase the cost of energy and it had an impact on the cost of many products. These are all cost-induced factors. These are one-time factors, which means we will see [the inflation rate] coming down very quickly in the next few months.

Inflation is always a percentage compared with the previous period. So if the price of chicken starts to drop; that will drag inflation down. If the price of sensitive products to energy costs stays as it is, then inflation will be zero on those products. So I expect to see a quick adjustment in the near future.

Prime Minister Nazif said earlier this week we are beginning to realize the fruits of reforms implemented since 2004. How much truth do you see in that statement, and what do you say to an ordinary Egyptian who might, in view of higher inflation, feel that statement is not entirely true?

First of all, I see the economy s improvement as a reality. Looking at the situation in trade and industry, I can see very clearly that the activity of the companies, the establishment of new companies, and the profitability of operations in Egypt are all going up. You can see it in public companies listed on the stock exchange.

Look at the balance sheets and you ll see profitability going up. You will see the registration of new companies going up. You will see new factories coming in. And, of course, all those factors are showing the situation is improving.

Then of course, the second question is: when is the ordinary person going to feel it? My response to that is: give me his name, because it varies from one individual to another. There will always be people who will never feel it until a certain period.

But for the people who have already been employed in some of the new factories, or if we go to a place where they have suffered from a significant shortage of employment such as Port Said, where the starting salary of unskilled labor averaged LE 300 two years ago and today it s LE 800, that s a different scenario. Some of those laborers have had their wages increased by higher percentages than the inflation rate.

The problem is when you try to take an average. And of course people are not averages; they are individuals. And every individual will have a different perception about economic development.

We know that to initiate economic growth, there are a number of steps that you have to go through. First of all, you need to see investment flowing in. When investment starts to flow as we have today, you see local investment going up by 20 percent and FDI going to $6.5 billion, this means the investment happening in 2006 will translate into employment probably 18 months later.

Because if you decide to have a tourism project today in Sidi Abdel Rahman, or if you acquire a new mobile operator s license, those projects will probably be ready in the next one to three years, and translate into jobs during that period of time. That s the evolution of any growing economy.

I feel a certain segment of the population is feeling the positive effects of economic growth. Another segment is probably not feeling much difference. And there s probably a small part of the population that is actually seeing the negative impact of it because it has been isolated, not really accessing jobs, and it s seeing prices going up
all around and it s seeing the brunt of that impact as a result.

But that s exactly what we are trying to take care of as a government by increasing our social security budget. We are now including more than 1 million Egyptians in our social security umbrella. We have a subsidy bill today going up to LE 100 billion to make sure that portion of the population that is not yet benefiting is covered.

Does the publicity associated with being identified by local newspapers as one of the wealthiest cabinet ministers bother you?

Well, this is their information. It does not bother me.

With that in mind, what are your views on increasing public sentiment, as shown among the spectrum of local media, of the government growing more isolated from the people?

Well, we are living in a time of free press in Egypt. The free press means they can say whatever they want. Of course, people have to be responsible and they have to be held accountable for what they say. But the reality is we have free press. And free press will mean for us, as responsible officials that we will have to accept many of the things that will be published will not be things that we will be happy about.

They can, of course, reflect things that could be positive in the sense that it could lead us to some changes. Others will be critical of certain things that probably are not, in our opinion, fair.

Topics: FJP

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