While Egypt's global economic ranking is improving, systemic weaknesses hold real progress at bay, Sherine Nasr reports Egypt advanced 11 positions to rank 70th out of 133 countries according to the 2009/10 Global Competitiveness Index (GCI) announced Monday by the Egyptian National Competitiveness Council (ENCC). But the sense of satisfaction that followed the news soon faded, given that Egypt's relative improvement is due to the stumbling of other economies amid last year's economic meltdown, rather than to a genuine progress in the national economy itself. "Although Egypt rose from 81st to 70th in this year's ranking, Egypt's score during the past three years hovered around four, which actually means that the country has maintained the same level and no substantial improvement could be traced," said Mona El-Baradei, executive director of ENCC. A scale from one to seven indicates the lowest and highest improved economies. According to the index, Egypt improved in a number of specific areas. These improvements, however, were balanced by decline in other areas. In overall ranking, Egypt was graded lower than most Middle East and North Africa (MENA) region countries, though higher than Morocco (73rd), Algeria (83rd), Libya (88th) and Syria (94th). Notably, eight Arab countries surpassed Egypt, with Qatar on top ranking 22nd, followed by the United Arab Emirates at 23rd, Saudi Arabia at 28th, and Bahrain at 38th, to name some. The index further indicated that Egypt is among other seven Arab countries -- including Algeria, Kuwait and Qatar -- that are in a transitional stage from a factor driven economy to an efficiency driven economy. The GCI is based on 12 pillars and 140 specific indicators. The pillars include institutions, infrastructure, macroeconomic stability, health and primary education, higher education and training, goods market efficiency, and financial market sophistication. According to the index, Egypt improved both in terms of ranking and scores in areas of infrastructure, higher education and training, and labour market efficiency, compared to other countries. According to Malak Reda, senior economist at the Egyptian Centre for Economic Studies (ECES), the most striking improvement was traced in the area of financial market sophistication, which has advanced by 22 positions to rank Egypt as 84th this year compared to 106th last year. Egypt moved up five ranks in the pillars of infrastructure and business sophistication, the former is due to improvements in fixed and mobile services, electricity extension, and air and marine transportation facilities and infrastructure. The worst infrastructure score was related to the quality of roads, where Egypt ranked 73rd. "The low quality of roads undermines Egypt's potential as one of the leading global tourism destinations, thus hindering the improvement of Egypt's travel and tourism competitiveness," indicated the report. Another improvement was noticed in the area of technological readiness, manifested in the increased use of the Internet, personal computers, and the volume of foreign direct investment in the sector and the transfer of knowhow. "However, the improvement in this area is strictly related to the wider use of technology, but not the production of technology," commented Reda. Egypt's typical comparative advantage continues to be the large market size, which earned Egypt a ranking of 26th. Other key comparative advantages include fighting organised crime, in which Egypt ranked 15th, public trust in politicians (37th), and the efficiency of the legal framework in settling disputes (39th). However, the long-term ailments of the Egyptian economy continue to hinder its ability to grow. Macroeconomic stability (Egypt ranked 120th) continues to be a major factor undermining Egypt's competitiveness. "The fiscal deficit, high inflation, negative real interest rates, and high government debt are among the challenges that should be efficiently addressed by the government," said Amina Ghanem, deputy minister for international relations at the Ministry of Finance. Although available data to measure macroeconomic stability goes back to 2008, it is noticeable that the government gross debt to GDP ratio was as high as 85.9 in 2007-08. Inflation increased from 11.7 per cent in 2007-08 to 16.2 per cent the following year, before returning to 13.6 per cent in January 2010. "This is comparatively high compared to other countries. Double-digit inflation is generally considered harmful," Ghanem acknowledged. Meanwhile, Egypt's national savings rate as a percentage of GDP was among the lowest in the MENA region. Ghanem underlined that budget rigidities are a major challenge to the government. "The main bulk of the budget is meant to cover subsidies, interest payments and public sector wages. This leaves the government with little space to spend on health, education and infrastructure, which are believed to be the main tools to create a competitive economy," said Ghanem. Despite the modest increase in ranking for higher education and training, Egypt remains among the world's worst performers in terms of quality of education (121st). "Within the MENA, Mauritania and Libya are the only countries with a lower ranking than Egypt," said the report. Egypt's ranking is lower yet in labour market efficiency (126th). Although improving by eight points compared to last year, "heavy regulations combined with brain drain and low female participation in the labour force continue to limit Egypt's success in this area." An efficient education system with a well-trained workforce and firm control over macroeconomic indicators is the formula Egypt should adopt to achieve competitiveness and growth.
