Job creation, improving incomes, better public services, broader social insurance coverage and decentralisation are some of the promises the ruling National Democratic Party (NDP) made during its convention last week, and which it aims to achieve in the next five years. Announced by Chairman of the Policies Committee Gamal Mubarak, these pledges will be honoured through what he called “a second wave of reforms,” one that is “more daring and ambitious.” Mubarak said steps towards achieving the objectives will include tripling public and private investment to improve public services, doubling industrial and agricultural exports and improving education as well as implementing a new pension and social insurance law. Difficult decisions need to be made in order to achieve these targets, he said, though he did not give details. Speaking on condition of anonymity, one analyst told Al-Ahram Weekly he believes these difficult decisions are to do with reforms to the system of subsidies. During the past year, the government initiated dialogue on the need to better target subsidies and to consider reallocating funds set aside for fuel subsidies towards investments in education and health. According to the observer, there is nothing new in the NDP's agenda as “it is a reiteration of previous government statements.” Nonetheless, Mohamed Abu Basha, economist at EFG Hermes Holding, said: “It was good to hear them highlighting the priorities and objectives and coming out with detailed plans to realise these goals.” What is new in the NDP's statements, according to Yomna El-Hamaki, head of the Economics Department at Ain Shams University, will be the application of these reforms. El-Hamaki said the ruling party is not taking steps before gauging public opinion and possibly carrying out a pilot project. She cited the example of the public debate over how to better target subsidies, saying that given the current atmosphere of resistance to cash subsidies and a generalised preference for commodity subsidies, the government is now considering making both options available. But subsidies might not be the only sensitive issue the government will have to deal with. According to Abu Basha, “to a much lesser extent [than subsidies], what could also be categorised as difficult is the introduction of the Value Added Tax (VAT), because it is usually accompanied with a one-off spike in inflation.” Indeed Minister of Finance Youssef Boutros Ghali has previously said that the current sales tax will be changed for a VAT system. In an interview published in the Oxford Business Group's 2010 Egypt Report, Ghali said the government hopes to introduce VAT by 2012. While the NDP's statements covered almost all aspects of growth, Abu Basha felt it lacked focus on agriculture. “Besides announcing that farmers will receive better prices for their crops, agriculture did not receive the same attention as other issues on the agenda,” Abu Basha said. He highlighted the importance of developing the agricultural sector as a means of tackling poverty, food insecurity, inflation and water consumption issues. Another topic missing from the NDP convention agenda was inflation. “Inflation should also receive more attention because it is critical, particularly with the increasing prices of food on which citizens spend the bulk of their budget,” Abu Basha said. To Gouda Abdel Khaleq, professor of economics at Cairo University and head of the leftist El-Tagamou Party economic committee, it is not a matter of what is missing from the NDP statements. Abdel Khaleq resented the notion of a second wave of reforms altogether, because he does not believe there was a first wave in the first place. “The procedures put in place in the 1990s and 2005 were marketed as reforms when they were not, because they did not achieve a marked improvement in the standard of living of Egyptians,” Abdel Khaleq said. “Further, they neither achieved efficiency nor equity.” Admittedly, Abdel Khaleq added, there has been growth, but only a few have benefited from it. He resents how the new procedures indicate a shrinking role for the government in economic activity and a greater role for the private sector. “Egypt should have learnt a lesson from the global financial crisis, in which deregulation was the essence of the problem,” he said. Abdel Khaleq added that rather than merely devise plans to tackle poverty, the government should avoid implementing policies that lead to poverty in the first place.
