Social justice is not government support: German lesson for Egypt

Roundtable in Cairo discusses what Egypt can learn from the post-Berlin Wall economic experience. The consensus of German and local economists: protect businesses then step back

"Social justice is not about government support but about job creation."
That statement from Magda Kandil, head of the Egyptian Center for Economic Studies (ECES), was a fair summary on the opinions expressed by Egyptian and German economists, politicians and policy advisors on Tuesday during a workshop discussing social justice in post revolution Egypt.
The meeting, under the banner 'Economic Reform and Social Justice in Egypt: Lessons from the German Experience' and organized by the ECES and Konrad Adenauer Foundation, attempted to draw lessons for Egypt from the development model Germany implemented after the fall of the Berlin Wall almost two decades ago.
"The right approach is to invest in the economy then use tax revenues to build a social infrastructure," explained Mario Sander von Torklus, an advisor to the German Federal Chancellery.
Torklus's said creating real value for the economy could be done by improving the business climate which would in turn tap in to Egypt's "entrepreneurial potential".
"Egypt needs a new type of economy, creating a level playing field for everybody. The government should be able to protect businesses from corruption and provide them with basic services," he added.
Most speakers played down the ability of the Egyptian government to effectively intervene and improve social justice, mainly citing concerns over its unhealthy finances.
“With the budget deficit of around 9 per cent and public debt reaching some 70 per cent, the room for maneuover in Egypt is rather limited for budget intensive policies [to achieve social justice]," said Heiko Fritz, an economics professor at the German University in Cairo.
As with other speakers, Fritz agreed on the necessity of a spring clean for Egypt's business environment, clearing the way for small and medium enterprises (SMEs) to lead the economy for the near future.
"The government is unable to create jobs, and big investments are unlikely to come back in this environment. The only thing we have to create potential is to reach out to the small and medium enterprises," Magda Kandil agreed.
Fritz suggested that programmes should be put in place to support SMEs, providing them with proper skills and marketing tools along with access to finance.
Speakers' suggestions, however, did not entirely strip the government of a role in improving the lives of Egypt's millions of impoverished.
Kandil said Egypt's government needed to enact fiscal consolidation so it could better use its resources, suggesting a brace of subsidy and tax reforms, and a review of the government's existing oil and gas contracts.
But she said the time was not right for raising tax rates as a way to increase state revenues, given the current condition of the Egyptian economy where business and investment is already taking a downturn.