• 21:51
  • Friday ,26 December 2014

Some good news for the Egyptian economy... but the challenges persist

By-Ziad Bahaa-Eldin



Friday ,26 December 2014

Some good news for the Egyptian economy... but the challenges persist

In the past few days, the Egyptian economy has seen several positive developments; Fitch raised Egypt’s credit rating indicating an improvement in how the world views Egypt’s ability to meet its external debt, oil prices fell to their lowest level in five years giving the government the chance to reduce energy subsidies (and with them the budget deficit) without new hikes in the price of gasoline and diesel, and the president’s visit to China opens new horizons for economic cooperation with this superpower especially in infrastructure. These developments are timely, coming in the run-up to the economic conference scheduled for March 13 and 14.

But with the improvement in overall indicators and the greater margin of action they allow, the state must use this opportunity to avoid past mistakes and translate these improvements into a genuine, positive change in the lives of the citizens. It must set right the precarious social structure and minimize the growing gap between rich and poor who now live in entirely separate worlds that rarely meet.
I find this troubling not because I assume the current regime is necessarily an extension of the Mubarak regime or because it has fallen under the spell of the same coterie of businessmen or is intent on disregarding the poor. In fact, I believe that current state officials intend to distinguish themselves from the Mubarak era in three ways: avoiding a return to major corruption, not falling prey to a group of businessmen seeking wealth and power, and trying to improve the conditions of the poor. But good intentions are not enough. Given the lack of a comprehensive vision for social justice and a reliance on the same old tools and policies, the outcome will be the same: rapid economic growth and financial stability, but continuing social dysfunction and the absence of institutional mechanisms to realize justice.
If the state truly wishes to exploit the improved economic indicators to initiate a new phase of fair, sustainable economic development, it must commit to instituting the social security system that has been under study and preparation for years and the Ministry of Social Solidarity can set it in motion if the political support is forthcoming. This system will provide a school meal for 12 million primary students, a basic pension to the disabled, elderly, and those unable to work, cash transfer for the poorest families, comprehensive health insurance, a fair social housing system, and investment to improve standards of education and teachers’ conditions. All of this is no less important—and no more costly—than the megaprojects currently underway and will bring higher economic and social dividends.
Moreover, the government’s efforts to attract Gulf and foreign investors and its responsiveness to their demands should be matched by similar concern for the problems and needs of small and medium local businesses, the obstacles they face, and the support they need in financing, training, information, marketing, and tax treatment . These businesses are the only way to make great strides in reducing unemployment and achieving the hoped-for social justice.
Finally, the economic breakthrough that Egypt needs will require a political thaw that can dispel the general polarization and tension, restore youth’s faith in the future, ensure respect for the constitution and the rights and liberties it upholds, and let loose the energies of civic associations, youth initiatives, political parties, and trade and student unions. Sustainable, fair economic development cannot be achieved in a restrictive political environment, when freedom of association, expression, and protest is being suppressed. The economy cannot advance unless all of society takes part in the debate and discussion, helps set priorities, and monitors their implementation.
There is a chance to turn a new page on the policies of the past, to achieve both economic development and social justice, but clinging to the same old methods, objectives, and priorities will not bring different results.
*Ziad Bahaa ElDin holds a PhD in financial law from the London School of Economics. He is a former deputy prime minister, former chairman of the Egyptian Financial Supervisory Authority and former chairman of the General Authority for Investments.