News / Middle East

If Egypt’s Economy Doesn’t Improve, Does Democracy Matter?

A jewelry vendor outside a store in the Khan al-Khalili area of Cairo (file photo)
A jewelry vendor outside a store in the Khan al-Khalili area of Cairo (file photo)
Mohamed Elshinnawi

This is Part 2 of a 3-part series: Egypt’s Transition
Parts 1 / 2 / 3

Eman Mahran can’t find a job. The unemployed biomedical engineer has been looking for work for four years and her plight represents a large and troubling aspect of the ailing Egyptian economy.

“I graduated in 2007 and I thought I would have a bright career because of my specialty. But I lost hope, joining my unlucky generation of young Egyptians,” said Mahran, who is unmarried and lives with her retired father.

Main challenges

Egypt’s unemployment rate is approximately 12 percent, according to the International Monetary Fund. Even those who have jobs are worried. Egyptians, such as Magdy El Meshmeshy, a vice president of a manufacturing group, complains that the current political situation in Egypt is not helping the economy. “Social unrest, a security vacuum, continued instability, shrinking production and lack of incentives for medium-sized enterprises are not the right way to revive the troubled economy,” said El Meshmeshy.

Magda Kandil, the executive director of the Cairo-based Egyptian Center for Economic Studies, agreed. She listed several challenges facing post-revolution the Egypt.

“At the top of these challenges, we should mention security failure,” the economist said. “Also, corruption charges have tarnished the image of the private sector and have made it very difficult to reestablish a good image of private-led growth.” Kandil also called political instability a “genuine concern.” In addition, she listed other factors as major sources of Egypt’s economic malaise: the loss of foreign capital influx, the decline of tourism,  slumping foreign direct investment, and capital flight after some Egyptians decided to just “liquidate and leave.”

Sobering facts and figures

Kandil also warned that the transitional government and the Supreme Council of the Armed Forces that now rule post-revolution Egypt must tackle the economic challenges more seriously. With a budget deficit that accounts for 10 percent of the GDP, an unemployment rate of 12 percent, an 11.8 percent rate of inflation, a 33 percent drop in tourism and a 12 percent decline in the value of the Egyptian pound relative to the Euro, the prospect of economic recovery is gloomy.

Kandil is also worried about the national debt, estimated at $35 billion, and the fact that Central Bank reserves are being used to pay for minimum wage increases. Foreign currency reserves have dropped from $36 billion to $26 billion since the revolution, according to the Egyptian Center for Economic Studies.

Then there is the issue of costly subsidies, such as the $70 billion the Egyptian government spends to support petroleum products. There is general agreement among economists that such subsidies should be slashed drastically with monies only going to the most vulnerable enterprises. They say that the huge resulting savings could help improve education and job training.

Gap between solutions and actions

Ibrahim Oweiss, a professor of economics at Georgetown University in Washington, D.C., says the government has so far not taken any major steps to deal with these daunting challenges.

“The first thing is really to establish a system of law and order to reestablish stability throughout the country,” Oweiss said, “and after that, things could move forward because there are great potentials for the Egyptian economy in the future.”

Magdy El Meshmeshy feels there is a wide gap between the available solutions and the way the ruling military council and the transitional government are handling the situation. “There is no articulated road map for the economy or a medium-range strategy so far. But if the new government starts to deal with the corruption and restoring security, investors will feel more comfortable to come back and help the Egyptian economy,” El Meshmeshy said. He argues that small and mid-sized enterprises could create more jobs and contribute to reviving the economy.

What the economy needs

Experts agree that priorities should be focused on improving security, and on political reforms that ensure good governance and accountability. These reforms should be coupled with a well-defined and forward-looking economic strategy that will restore confidence and bring back domestic and foreign investment.

“There is a lot to be desired in terms of legislation to fight corruption, red tape and bureaucracy,” Kandil of the Egyptian Center for Economic Studies said. She complained that the ruling military council and the transitional government did not articulate a clear vision for the post-revolution economy. “They need to press ahead with reforms to ease controls on lending to small and medium size enterprises, reform existing labor laws, reduce waste in government spending and increase efficiency in tax collection to boost revenues.”

Many Egyptians feel that after years of organized corruption, an economy dominated by government-protected business monopolies, and stark injustices in wealth distribution, there is a need to build  a private sector that will put the economy back on its feet. El Meshmeshy put it this way: The government needs to come forward with “a clear message about the private sector leading the growth and creating jobs, more incentives and a new image of the private sector away from the corruption that tarnished the reputation of businessmen during the Mubarak years.”

The consensus among experts is that crony capitalism basically prevented the fruits of Egypt’s past economic growth from reaching the working class. Consequently, there is now a need to put special emphasis on promoting sectors with employment opportunities that will help the wealth trickle down.

Eman Mahran, the unemployed biomedical engineer, agrees. “With less corruption and more focus on the quality of education and health care, more jobs would be available for qualified people and that will help me join the work force in the near future,” she says hopefully.

Follow our Middle East reports on Twitter
and discuss them on our Facebook page.

You May Like

In China, Mixed Signals on Ebola Controls

How authorities are monitoring at-risk individuals remains unclear, including whether there are quarantines for Chinese health workers returning from West Africa More

Video Women Voters Anxious Ahead of US Elections

Analysts say if women are focused on national security, it could be bad news for Democrats More

Solar's Future Looks Brighter

New technology and dropping prices are contributing to a surge in solar power More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Women Voters Anxious Ahead of US Electionsi
X
October 31, 2014 4:10 AM
Public opinion polls show American voters are deeply dissatisfied with their government and anxious about threats from abroad. This is especially true for a key voting group both Republicans and Democrats are trying hard to win over: women. Analysts say if women are focused on national security, it could be bad news for Democrats, with majority control of the Senate at stake. VOA’s Cindy Saine looks at the crucial role women voters will play in deciding the elections.
Video

Video Women Voters Anxious Ahead of US Elections

Public opinion polls show American voters are deeply dissatisfied with their government and anxious about threats from abroad. This is especially true for a key voting group both Republicans and Democrats are trying hard to win over: women. Analysts say if women are focused on national security, it could be bad news for Democrats, with majority control of the Senate at stake. VOA’s Cindy Saine looks at the crucial role women voters will play in deciding the elections.
Video

Video Victorious Secularists Face Challenge to Form Government in Tunisia

Official results from Tunisia show the Islamist Ennahda party has failed to win the second free election since the so-called "Arab Spring" uprising in 2011. Ennahda, which handed power to a government of technocrats pending the elections, lost out to the secular party Nidaa Tounes. Henry Ridgwell reports from London that the relatively peaceful poll offers some hope in a volatile region.
Video

Video Africa Tells its Story Through Fashion

In Africa, Fashion Week is a riot of colors, shapes, patterns and fabrics - against the backdrop of its ongoing struggle between nature and its fast-growing urban edge. How do these ideas translate into needle and thread? VOA’s Anita Powell visited this year’s Mercedes Benz Fashion Week Africa in Johannesburg to find out.
Video

Video Smugglers Offer Cheap Passage From Turkey to Syria

Smugglers in Turkey offer a relatively cheap passage across the border into Syria. Ankara has stepped up efforts to stem the flow of foreign fighters who want to join Islamic State militants fighting for control of the Syrian border city of Kobani. But porous borders and border guards who can be bribed make illegal border crossings quite easy. Zlatica Hoke has more.
Video

Video China Political Meeting Seeks to Improve Rule of Law

China’s communist leaders will host a top level political meeting this week, called the Fourth Plenum, and for the first time in the party’s history, rule of law will be a key item on the agenda. Analysts and Chinese media reports say the meetings could see the approval of long-awaited measures aimed at giving courts more independence and include steps to enhance an already aggressive and high-reaching anti-corruption drive. VOA’s Bill Ide has more from Beijing.
Video

Video After Decades of Pressure, Luxembourg Drops Bank Secrecy Rules

European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video Kobani Refugees Welcome, Turkey Criticizes, US Airdrop

Residents of Kobani in northern Syria have welcomed the airdrop of weapons, ammunition and medicine to Kurdish militia who are resisting the seizure of their city by Islamic State militants. The Turkish government, however, has criticized the operation. VOA’s Scott Bobb reports from southeastern Turkey, across the border from Kobani.

All About America

AppleAndroid