Prime Minister Ahmed Nazif's policy statement lauded his government's economic achievements, reports Gamal Essam El-Din The two-year stand off between Prime Minister Ahmed Nazif and deputies from the ruling National Democratic Party (NDP) appeared to come to an end this week. NDP MPs, who had been critical of the government's performance, came to the People's Assembly on Tuesday ready to heap praise on the economic achievements and social policy of the government. Delivering his government's policy statement, Nazif boasted that gross domestic product (GDP) for the financial year from July 2005 to the end of June 2006 had reached levels not seen since the early 1990s. In 2005/2006 GDP grew by 6.9 per cent compared with 5.1 per cent for the year before. "In the first quarter of the financial year between July and September, GDP climbed to an unprecedented 7.1 per cent and it is hoped it will hit 7.5 per cent by the end of the current financial year," Nazif told the assembly. As a result, he continued, the World Bank had raised Egypt's competitive economic ranking from 46 to 42. The most serious challenge facing his government was maintaining high economic growth rates while moving economic reform programmes forward. "The major objective behind these achievements is improving the standard of living of ordinary Egyptians," he said. The improved economic climate, argued the prime minister, has been spawned by unprecedented confidence in the Egyptian economy on the part of foreign investors. Foreign direct investment (FDI) flows into Egypt, rose from $2.1 billion in 2003/2004 to $6.1 billion in 2005/2006. "A major objective is to boost the volume of FDIs to $8 billion by the end of this year," he said, pointing out that FDIs no longer focus on the oil sector. Out of a total $6.1 billion last year just $2 billion went towards petroleum and related industries. Growing foreign confidence in the Egyptian economy was reflected in the growing number of tourists coming to Egypt. Tourist traffic climbed from 8.1 million in 2004/2005 to 8.7 million in 2005/2006, generating $7.7 billion in revenues. Nazif said he expected tourist numbers to hit nine million by the end of the current financial year. "All of these figures signal that the Egyptian economy has restored confidence and is now standing on solid ground." Nazif attributed his government's economic success to the benefits of the liberal market reforms implemented over the last two years. Privatisation has divested the government of many loss-making companies and boosted the profits of public sector companies from LE604 million in 2004/2005 to LE1.5 billion in 2005/ 2006. "During the period from July to November, proceeds from privatisation hit LE27.5 billion," said Nazif. This sum has been used to pay corporate debts to banks and fund development programmes. The benefits of liberal economic reforms, he told MPs, were not confined to moving the privatisation programme forward. "These reforms go hand in hand with social development programmes, two sides of the same coin, fostering comprehensive development across society," he said, pointing out that the proceeds of privatisation (such as the sale of a third mobile phone network and the Bank of Alexandria) go to tackling key social programmes. "LE5 billion, for instance, will go to upgrading Egypt's railway network, while another LE1 billion will be earmarked for streamlining the investment infrastructure of upper Egypt... which shows that the privatisation programme is not an end in itself, but a tool for turning loss-making companies into profitable ones while simultaneously serving social programmes." The positive effect of privatisation, said Nazif, also impacted on the state budget, leading to a reduction in the budget deficit from 9.6 per cent of GDP in 2004/2005 down to 8.6 per cent in 2005/2006. At the same time tax and tariff reforms had resulted in a boost to "sovereign tax revenues of 31 per cent". They grew from LE111 billion in 2004/2005 to LE146 billion in 2005/2006. Nazif explained that his government now intended to focus on implementing President Hosni Mubarak's presidential election programme by reducing unemployment, cutting inflation and improving public services. He claimed the government had been successful in achieving the targets set in the first year of Mubarak's six-year programme. "Out of a targeted 500 schools we have built 530, and more than doubled our goal of creating 100,000 new job opportunities, creating 283,000 instead." Nazif did note, however, that some objectives will take time to be achieved, including reclaiming one million feddans and building 400 villages. His government's strategy in reducing unemployment, said the prime minister, is to support labour-intensive projects and to direct FDIs towards "industrial projects in new industrial communities". Increased inflation, he said, which grew from 3.1 per cent at the beginning of 2006 to 11.8 per cent last month, "was due to the rise in individual incomes and global commodity prices". "This is natural in market economy but we are closely coordinating with the Central Bank to contain inflation and make sure that the market is free from artificial price hikes." Nazif's statement also focussed on the education and health sectors. After building more than 500 schools in one year, his government now intended to focus on raising the salaries of school teachers, while in the health sector plans were underway for a major review. "In the meantime, we are currently focussing on improving rural health units to reduce medical treatment costs and contain family growth rates," he said. Mustafa El-Said, a former economy minister and the current chairman of the assembly's Economic Affairs Committee, told Al-Ahram Weekly that "Nazif's policy statement concentrated on quantity rather than quality". "It is not a just a question of statistics but of how much the government can raise the quality of education and health services," said El-Said. While Nazif's government has been able to attract record levels of FDIs to Egypt and it has successfully pursued banking reform, its achievements are threatened, believes El-Said, by the failure to implement political reforms alongside economic ones. Ahmed El-Sayed El-Naggar, an economist at Al-Ahram Centre for Political and Strategic Studies, agrees that Nazif's government has been successful in moving towards a liberal economy. "But the problem is that most of these steps have favoured wealthy businessmen in the ruling party and the small circle around them while the vast majority of poor Egyptians have yet to see any benefit." In general, El-Naggar believes that Nazif's policy statement was unduly optimistic. As expected, Nazif's statement was short on politics. The prime minister contented himself with repeating President Mubarak's announcement that 2007 will be a year of sweeping constitutional reforms. He did, however, conclude his statement by saying the government intends to place seven new laws before the assembly dealing with construction codes, real estate tax, public sector jobs, traffic regulations and commercial, civil and criminal litigation.
