Prime Minister Ibrahim Mehleb opened day two of the Egypt Economic Development Conference by outlining the main points of Egypt’s economic program over the last six months, assuring throughout, the government’s “will and courage” to see through the implementation of necessary reforms.
Political stability, he said, has been achieved and will continue moving forward as the government plans on sticking closely to the roadmap. He added that parliamentary elections will take place soon and will be Egypt’s next milestone.
He stated one of the key points of Egypt’s economic program is “giving space to the private sector to push the production wheel forward,” their focus being competition, quality and diversification, all with the ultimate goal of working toward growth. He was careful to add, as other officials have since the opening of the conference, that this growth would be an “inclusive growth whose benefits reaches all.”
But arguably, this will be the biggest challenge facing the government as it focuses its efforts on luring foreign investment to Egypt, which have so far – according to the deals announced so far – been poured into energy, real estate and infrastructure sectors, not starkly different from the main sectors that garnered investments before the 2011 uprising. Their main failing, as critics are quick to point out, was failing to trickle down to the broader population, leading to an accumulation of grievances that eventually boiled over.
The promises being made by officials at the conference are all centered on inclusivity and sustainability, but as the panelists of different sessions pointed out, even if there is no doubt that the government is willing to do this, the challenge will be how this can be seen through.
The official response is that creating a friendly business environment and reforming some key regulations, redirecting some spending and better targeting subsidies, will create the sustainability needed for social inclusion.
Mehleb said that the new investment climate being created by the current government is meant to “allow ease of entry and exit from the Egyptian market.”
There is also focus on developing human capital, which has become “a national goal,” Mehleb stated, pointing to the creation of a new ministry for technical education and vocational training.
He also spoke about the regulatory reforms, which, according to Mehleb, aim for “sustainable growth and social justice, [backed by] the political will that to carry this out, while defying any short-sighted pressures.”
Mehleb pointed to administrative restructuring within the state to eradicate bureaucracy, citing the newly passed civil service law and another in the pipeline for local administration. These will come hand in hand with transparency and accountability, along with caliber-based recruitment, he explained. All in all, he said, it is a modern governance structure that will directly combat corruption.
He cited the unified investment law that improves the ease of doing business by regulating land allocation, making it easier to start a business, promote competitiveness, figure out dispute resolution mechanisms and standardize the tax system.
He explained that mega projects like the Suez Canal development project proves that the government and its actions are legitimate among the people, evidenced by the fact that it raised LE64 billion in just eight days. He added the goal of the Suez Canal development project is to facilitate maritime transport, create jobs and increase revenues.
He also pointed to the Golden Triangle project, which is meant to connect the Upper Egyptian industrial centers of Qena, Safaga and Quseir. There are also plans for the development of the Western Mediterranean and the Damietta logistics center for grains, as well as plans for the infrastructure investment in about 3,400 kilometers of new roads.
Mehleb also talked about the massively ambitious plan to create a new city center in the form of The Capital Cairo, which has been taken on by the United Arab Emirate’s (UAE) Emaar developer. It is expected to cost $45 billion and will be completed in an even more ambitious five years time.
He pointed to the positive news of three international institutions upgrading Egypt’s credit rating, which had slumped into the overly negative territory in the past two years. The International Monetary Fund (IMF,) he said, has endorsed Egypt’s reforms and said that they will lead to stability and growth. This was echoed by IMF’s Managing Director Christine Lagarde in her speech on the first day of the conference.
Two programs were launched to support the families and individuals who are in most need, as part of the government’s plans to widen the social safety net, he said. He defended the package of energy subsidy cuts enacted by the government last July that many feared would harm those who need subsidies most, saying it was these reforms that have garnered a lot of praise from leaders of other governments, international finance institutions and business executives.
Expanding small and medium enterprises (SMEs) and micro enterprises, plans to develop slums and the bread supply system, healthcare for the poorest are among the measures Mehleb described as “our responsibility in front of God and the nation.”
“We have the political will and courage to see this through,” he concluded.
For his part, Central Bank of Egypt (CBE) Governor Hisham Ramez defended the bank’s policies over the past four years, saying it helped maintain the state’s finances in the face of a massive capital flight after the 2011 uprising. “The CBE lived up to its role and supported the economy,” he said.
In the face of a depreciating pound against a stronger US dollar, the bank has recently “adopted a more flexible exchange rate policy to completely eradicate black market.” Ramez said. Given the dynamics of the local market, however, claims that the black market has been completely been eradicated may be a bit too optimistic, although it has definitely faced tighter controls.
During his speech, Planning Minister Ashraf al-Araby said that in the first six months of this fiscal year, GDP growth reached 5.6 percent while investment grew by 20 percent. GDP and investment growth, however, may not be the best indicator of the broad and inclusive growth the government is championing.
Araby also presented Egypt’s Sustainable Development Strategy 2030, a video of which can be seen here. He expects growth to be near the 12 percent rate by 2030, and investments to grow at a rate of 30 percent.
He also made a bold promise to put Egypt at the “top 3 countries in gender equality” by 2030.
In a show of support to smaller businesses, he said, the government recently announced the $1.5 billion Ayady Fund, a direct investment fund for SMEs.
Finance Minister Hany Qadry, speaking about the Suez Canal project, said it is “becoming not just a passage to international trade but also a global logistics hub.”
Qadry also said that new tax policies will “support the foundations for better capital-based investment,” while the “reduced deceleration of the Egyptian pound will allow business to make their choices according to the nature of their businesses.”
He also stated there will be new laws for sukkuk (local markets) and more new tax law as a unified tax law was passed just before the conference. The deficit and inflation, he added, will also be well controlled.
All ministers cited the lowering of energy subsidies as the main achievement of the government. While it is arguably a major reform that has been years in the making, the reason it did not stoke a larger negative reaction may have more to do with a drop in global oil prices than managing price increases.
Noble laureate Ahmed Zewail took to the stage and praised the government for “supporting a knowledge-based society,” saying he knows this is true due to his direct contact with the president as his science adviser.
Speaking to investors, Zewail said, “You have a choice, either look at Egypt microscopically, meaning that you will amplify the image to see problems of unemployment, bureaucracy and security issues. The other choice is the telescopic view, seeing the big picture. Through this, you will see the future, the human capital potential and fertility for investment.
“You should invest using the telescopic view,” he said.
Prominent global economist Mohamed al-Erian said that while there is confidence in the reforms the government is said to be making, “We are less confident about implementation.” However, he added, “If you look at the way the government is approaching it, you will gain more confidence. Institutionalizing implementation, making sure there is continued external support that extends beyond three very good friends in the Gulf, is key.”
He added, “Supplementing mega projects with smaller projects and startups,” is also vital.
“What I’m most confident about is the outcomes. Egypt’s economy will be completely transformed,” he said.
Tony Blair was also on hand, though some of his words were a bit more controversial. “If you want a workforce of the future,” he said, “You’ve got to educate the youth to be open minded and tolerant. We need to make sure women become a major part of the workforce,” he began by saying.
“For the first time in my memory, you have a leadership that understands the modern world, wants Egypt connected to the world in a modern way,” he added.
Asked about democracy, he said, “Democracy is important but not on its own sufficient. You need advocacy and effective government taking effective decisions.”
He went on to claim, “A street protest is not a policy. A trend on twitter is not a government. The job of leadership is to say no as well as yes. To say, this is where we are going, and this is where people gain confidence in leadership.”
On one panel discussion, Telecom tycoon Naguib Sawiris, chairman of Orascom TMT Holding, said that the inefficient civil servants need to be let go, and firm action is needed to attract investment and strengthen the economy.
“Unfortunately, the structures under the ministers are not working as fast and efficient as our current ministers,” Sawiris said. “We’re lucky we have these good performing ministers right now but some of them are stuck with old management from the past when we should have fired all the people under them and brought in new ones,” Reuters quoted him as saying.
Investment Minister Ashraf Salman countered by saying, “We have a silent revolution where economic reform is concerned … we have only had seven months. We have to be more realistic. This economy started to turn around in only seven months,” Reuters reported. He did agree that the number of public employees needed to be slashed to one million from seven million currently.