The aforementioned title was inspired from two important article titles written by hon. POE Sissi >> http://www.dailynewsegypt.com/2014/09/16/egypts-blueprint-stability-investment-growth-president-abdel-fattah-el-sisi/ ,, and hon. Economist Dr. El-Erian >> http://www.dailynewsegypt.com/2014/09/17/despite-difficult-challenges-egypt-considerable-economic-upside/ ,regarding their outlook for the Egyptian economy and investment climate. The latter presented an inclusive anatomy for Egypt’s urgent and chronic economic problems besides suggesting solutions and short term alternatives. Whereas the former presented a more comprehensive macro and micro blueprint tackling many current economic and political issues and concerns, thus, eliminating any ambiguity concerning the Egyptian government contemplated economic and investment outlook. That being said, I highly think that both articles are completing each other, yet it still triggers further thoughts on some economic and investment ideas mentioned in both articles that could be summarized as follows:
- Monetary / Fiscal policies are used to expand / contract economy by addressing and stabilizing one or more aspects of any economic problem. In my opinion, the real challenge lies in solving one economic indicator problem without triggering negative impact on other indicators. By other words, fixing Egypt’s sluggish economic growth and unemployment rates by further inducing and stimulating investments should not be on the expense of triggering further inflation that Egypt is currently suffering from. I guess Egypt’s success in reaching its optimum designated economic indicators as mentioned in POE article conclusion relies on choosing the right mixture and bundles of monetary / fiscal policies along with their application at appropriate timing and amount with great attention to the policies multiplier effect and necessity of policy periodic follow up.
- Achieving the ambitious contemplated growth rate of 6% mentioned in POE article requires in my opinion attracting extensive new investment whether local or FDI and implementing several mega projects during the upcoming five years. According to the attached figure, in the upcoming 5 years Egypt is aiming at achieving a growth rate that is almost double the world growth for the same period. By examining the attached figure, it is quite obvious that growth is expected to be booming in China, India and other emerging economies than those of the mature ones. That being said, I think that Egyptian efforts should be directed in the upcoming couple years towards attracting and booking FDI from all possible countries with special concentration on Chinese investments and other emerging economies “i.e. India, Brazil, Latin America, etc.” stemmed from the fact that those countries will be having huge investment appetite to achieve their skyrocketing growth rates. In my opinion this could be done by precise planning, effective roadshows and effective utilization of Egypt’s soft powers incorporating development diplomacy.
- Since the devil lies in the details, I assume further analysis to Pre January 25th revolution growth rates determinants will be of great value added in precisely standing upon the future contemplated economic structure and required investments. In my opinion, great percentage of such growth was stemmed from economic policies and reforms that made Egypt’s economy heavily relying on service sector proceeds “ mainly Tourism and Suez Canal FC revenues” on the expense of developing a more solid agriculture and industrial sectors. Another aspect was resorting to privatization for its immediate lucrative profits and short term benefits in addition to attracting many FDI mainly in service sector with short term duration investments aiming at an exit plan within 2-5 years creating what is known by “hot money investments” except for some FDI investments in Oil and Gas sectors aiming for a longer term duration. These policies altogether definitely lead to a higher lucrative growth, nevertheless, it had two main shortcomings: first it was short term gains with no clear social justice measures applied to preserve the society’s coherence. Secondly, relying heavily on service sector as a sole engine for boosting economy exposed the country’s economy by being more vulnerable towards political instability and uprising, thus leaving the country with no second best solution leading to a crisis and stagnation similar to the economic tight situation that occurred during the past three years. That being said and to achieve in the near future a solid growth as desired, more attention should be given to restoring immediately the tourism sector in the same manner mentioned by Dr. El-Erian article as an immediate economic relief besides shifting the economy structure gradually towards more concentration on true genuine long term growth determinants represented by mega agricultural and industrial projects as mentioned by POE. No economy could completely avoid hot investments, but it can entice more stable long term FDI in mega infrastructure projects.
- In my opinion, “laissez faire, Laissez passer” terminology could not be fully applied in the most capitalist and liberal countries and the 2008 subprime crisis is of a good example of country’s financial intervention to fulfill its social obligations towards its citizens rights. That being said, I think that instead of privatization, a Public – Private Partnership “PPP” program could be initiated to restructure the current public companies by utilizing local private sector managerial expertise in exchange for management fees or compensation instead of ownership sale.
- The need for stronger institutions mentioned in Dr. El-Erian article is of great importance in building a solid economy. I think most of the Egyptian institutions require embedding a modern “system” with a clear and specific plans and goals besides creating several youth leadership managerial lines and posts. I assume this restructure and development may be one of the tasks of the Supreme Council for Scientists and Experts that was launched few weeks ago through suggesting a scientific restructure plan to achieve institutions efficiency. In addition, lately the government announced explicitly its solid commitment towards creating several youth managerial lines in all institutions to avoid managerial gaps that may lead ultimately to institution collapse.
- Small and Medium Enterprises “SME’s” are of great importance in solving unemployment problem. Many countries deployed its economic renaissance by embracing and adapting such solution. I assume this solution is definitely on the table as tackled by POE article. I think encouraging and embedding youth SME’s in Egypt’s contemplated mega projects through forward and backward integration will be of a great plus. That being said another opportunity could be available in encouraging youth programming and IT projects by establishing silicon valleys that nurture youth SME’s project.
My opinion, if such blueprint and comprehensive planning along with suggested economic short and long term solutions were applied and implemented professionally and carefully, Egypt will be able to finalize successfully all of its contemplated projects and planned agenda for development “as it succeeded last week in raising almost $8 Bn in 8 days period” thus transforming Egypt into a major economic tycoon within no time during the upcoming few years.