A controversial law aimed at restructuring the pension and insurance system was subject to hot debate in the People's Assembly this week, Gamal Essam El-Din reports A few days before it adjourns for the summer recess, the People's Assembly -- Egypt's lower house of parliament -- approved a new law aimed at radically changing the 35-year-old pension and insurance system. On Sunday 13 June, the day the law was finally approved by parliament, Minister of Finance Youssef Boutros Ghali boasted that, "this should be a historical day for all citizens of Egypt." "This law, which is aimed at restructuring the pension system in Egypt, will ensure that every citizen in Egypt gets a pension," said Ghali, also boasting that "Besides, the law will raise pensions of low and medium-income citizens -- those who receive LE300 or less in pensions every month -- by a range of 10 per cent to 300 per cent." Ghali indicated that the new pension and insurance law would be complemented by another on social solidarity: "President Hosni Mubarak insisted that the government should submit to parliament before it adjourns another important law on social solidarity aimed at enabling citizens not covered by any social safety net, or a pension system, to receive support for the first time in the history of Egypt." A report prepared by parliament's budget and manpower committees indicated that the 135-article law also aims at modernising the country's pension and social insurance systems, guaranteeing that citizens, especially low and medium- income brackets, receive a reasonable pension when they reach old age. Chairman of the Budget Committee Ahmed Ezz explained that the main shortcoming of the existing pension system in Egypt is that "citizens get frustrated when they find out that their post-retirement pension is much lower than their last job's salary. The law aims to cover this gap." Although approved by both majority and opposition MPs, the law was hotly debated. Many requested that the retirement age be fixed at 60 rather than 65 as stated by the law. The request was rejected by Minister Ghali who insisted that the new pension and insurance law is based on raising the age of retirement. "Citizens who reach this age will be automatically entitled, by the new law, to get a pension estimated at 65 per cent of the value of their job's last salary," said Ghali, adding that, "this pension will be raised in tandem with the inflation rate to cover living costs." Ghali indicated that the law will be applied from January 2012 and that the state treasury will be tasked with shouldering the costs of all pensions. "This law will cover all those who join the job market after 1 January 2012. Before this, the current law, issued in 1975, will remain applicable," said Ghali. Ghali explained that the new law covers different kinds of pensions. "It offers pensions for old age citizens or those who were forced to retire because of job injuries or physical disability, and ensures that their families get the same pension when they die," said Ghali, adding, "the law offers a social insurance pension against unemployment." "Business employers will have to pay two per cent of every employee's salary every month," as a subscription to cover "a special unemployment account insurance fund." In general, Ghali explained that the law was also designed to regulate the performance of pension and social insurance funds (PSIFs). "The National Organisation for Insurance and Pensions (NOIP) will take charge of running PSIFs," indicated Ghali, adding that, "the money of PSIFs will be procured from the revenues of annual subscriptions, and the returns of their investments." The law, he said, states that one per cent of annual subscriptions and two per cent of PSIF investments will be deposited in PSIFs. Opposition MPs cried foul that the money of PSIFs has long been used for speculation on the stock market. "The Ministry of Finance tinkers with the money of PSIFs, and this is wrong because investing in the stock market is a big gamble that poses great risks to the money of pensioners," said Muslim Brotherhood MP Ahmed Abu Baraka. Responding, Ghali said the return on PSIF investments are very high, exceeding eight per cent. "The money of PSIFs is being invested not only in the stock market but also in many profitable industrial and agricultural projects," said Ghali. The value of PSIFs is estimated at close to LE700 billion. Representatives of Egyptian business associations strongly objected that the new law imposes a three-month prison sentence on private investors and manufacturers found guilty of evading annual subscriptions for employees. A memo submitted by these associations warned that prison sentences would scare many local and foreign investors away from investing in Egypt. The warning, however, was ignored by ministers Ghali and Ezz, insisting that prison sentences were necessary to compel private sector employers to pay the subscriptions. Ezz complained that, "many businessmen do their best to evade paying the annual subscriptions, and this is a crime against their employees."
