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Economic Summit: Egypt's economy in dire straits - Daily News Egypt

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Economic Summit: Egypt’s economy in dire straits

The touchstone here is what comes after the conference, especially in the nature of companies that can invest in a country like Egypt, one that is on the brink of a political explosion

Emad El-Sayed
Emad El-Sayed

By Emad El-Sayed

Many observers believe the current system will do the impossible, holding the Economic Summit at any cost, especially that Egypt’s economic situation has become catastrophic.

Many were deceived at seeing the scene of military cars carrying banners “the people’s protection forces”. Those who were keeping up with the public situation would realise that it is nothing but a message of reassurance conveyed to those who will take part in the economy. They say that Egypt is safe, and the army as well as the police are only after people’s security and safety, that nothing can disturb this historic event.

The notion of holding the summit is a message that the regime is standing on a strong basis and can do whatever it wants at any time; nothing can convince it to even think of postponing the summit.

It seems that the regime stopped relying so much on the Gulf governments’ official support, especially after the manipulation in oil prices by Europe and the US using Gulf states to achieve their aim of tightening measures on Russia after the Ukrainian crisis. It also had the effect of placing more pressure on Iran that may reflect on Tehran’s strict position regarding the issue of developing nuclear power.

Consequently, the Egyptian regime is trying to encourage the Gulf private sector to either double its investments in Egypt or open new markets for companies that have not existed before in Egypt. This is unlike the West and the European private sector, which questions and worries about what is going on in Egypt politically, economically and judicially.

Everybody knows that the Gulf is facing a real financial crisis that will be obvious in the medium term because of oil prices. Perhaps Saudi Arabia is the least affected for the enormous surplus it has. However, the Gulf countries’ economies that support the Egyptian regime are not as strong as the Saudi regime. Messages in this context have already been sent to the Egyptian regime. Perhaps the most obvious was the Kuwaiti message that it will not support Egypt financially in the future.

If this was the situation before the leaks, what would it be now that the Gulf and the entire world listened to it?

Also, a number of international reports on the Egyptian economic situation were published. The most important may be what The Economist published regarding the challenges the investment climate in Egypt faces, and how the government cannot fill the deep gap in the direct foreign investments sector.

The report mentioned that investors, such as the International Monetary Fund (IMF), expressed optimism about the reforms package that the Egyptian regime adopted including decreasing fuel subsidies. The subsidies reduction helped reduce the budget deficit to 12% of GDP, and is expected to retreat to 10% this year according to estimates. This comes in addition to the free Egyptian pound exchange rate, giving it the chance to decrease, which would support both sectors of exports and tourism.

However, most companies pumping their investments in Egypt are already present in the country, such as Swiss Nestle and British Petroleum (BP), in addition to Gulf companies which joined the Egyptian market later.

The report says the tourism industry, contributing to GDP with more than 10%, is going through a disastrous situation. This is obvious in the decrease of tourist numbers visiting Egypt last year, which were half the numbers of 2010.

The report points out that Egypt needs to do more than get back on its feet again. It still suffers from lack of energy sources and deterioration of roads, schools, hospitals and the housing sector as well, in addition to a high rate of unemployment in a country with a population expected to increase to 116 million people by 2030.

The Economist report reveals very critical information from the World Economic Forum, which showed statistics about Egypt including:

1-Egypt occupies 100th place among 144 countries in the transport, electricity and communication sectors.

2- Egypt occupies 140th out of 144 countries in terms of security, coming after countries like Chad.

3- It occupies 119th place among 144 countries on the World Economic Forum competition indicator.

4- It stands at 112th place among 189 countries in the business practice survey conducted by the World Bank.

5- Public debt represents 86% of GDP while wages of the public sector and debt services continue to have the lion’s share in the budget.

The report showed that economic experts believe that Egypt needs investments worth $60bn over four to six years to reach target growth rate by 5% of GDP by 2018.

The report indicated that not everyone is convinced Egypt is an attractive investment opportunity, with organisational regulations still ambiguous. Most public funds end up in military companies’ treasuries, in addition to Egyptian unskilled labour which has become more costly with the increase of wages in the public sector.

Despite these shocking numbers, the IMF predicted in its latest report that the Egyptian economy would grow by 3.8% in 2014/2015, with an increase of 5% in the medium term. The growth rate over the past five years did not exceed 2%. The IMF also predicted that economic policies implemented by Cairo are going to reduce the budget deficit to less than 8% of GDP in 2018/2019, and that the country’s debt would fall gradually.

Many expect that the Economic Summit would be amplified by the media, perhaps why the summit’s administration and public relations were assigned to a company around which there are question marks, especially its director and her relations with American decision makers.

The touchstone here is what comes after the conference, especially in the nature of companies that can invest in a country like Egypt, one that is on the brink of a political explosion. There are also questions relating to investment laws and the extent to which they can be amended to suit investors in Egypt and the flexibility that the regime will show in this regard. This is quite apart from the political crisis in Egypt, which seems to be far from being solved anytime soon.

Emad El-Sayed is an Egyptian journalist who has worked in online journalism since 2000. He was the Editor-in-Chief of Masrawy news website and Deputy Editor of ONA news agency in Egypt. He has received awards from BBC and Deutsche Welle.

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