They're only three but they may be carrying the burden of the entire government, writes Niveen Wahish Rachid Mohamed Rachid, Mahmoud Mohieddin and Youssef Boutros-Ghali are a ministerial trio. Ever since Ahmed Nazif first became prime minister in 2004, the three -- minister of trade and industry; minister of investment; and minister of finance respectively -- have been working as a team, complementing each other. And now, in Nazif's new government, they are driven by the task of realising the most important target of President Hosni Mubarak's electoral campaign: creating some 4.5 million jobs in six years and improving the standard of living. Rachid is at the helm of the ministry that is expected to back up the growth of the industrial sector, boost production and multiply exports. And with last week's cabinet reshuffle, the job of regulating internal trade and monitoring consumer interest has been added to his portfolio. Rachid is expected to continue efforts started in 2005 to improve the general climate for the growth of industry. Already these efforts have borne fruit. 865 new factories were set up last year and 339 factories expanded their capacities. Exports grew in 2004/2005 to $13.816 billion up from $10.452 billion in 2003/ 2004. Further growth of 20 to 25 per cent is targeted in 2006. And industrial growth is targeted to increase by 5.5 per cent. This should be achieved because of the ministry's close coordination with the Industrial Modernisation Centre and the General Authority for Industrial Development (GAID) established in October with a mandate to increase the competitiveness of local industries. GAID has yet to receive a board of directors in the next two weeks. Rachid is also expected to activate the Competition Authority and stand behind a consumer protection law to be presented to parliament. He will also promote the role of consumer protection associations. While dealing with the task of overhauling Egypt's industry, Rachid is guided by Egypt's industrial strategy launched late last year. The plan seeks to engineer a gradual shift from resource-based to medium- and high-tech industry, making Egypt a pioneer exporter in the Middle East and North Africa of medium-tech based products. Areas in which Egypt currently enjoys a competitive advantage include textiles and clothing, engineering, food products and furniture. Several medium-tech areas in which Egypt could carve a niche for itself include labour intensive consumer electronics, automotive components and biotechnology. All of these, Rachid stresses, will require substantial investment in human resources and technology. To be successful the strategy requires investments of some LE45 billion by the year 2011 in the industrial sector. Rachid's work within trade will also involve completing negotiations over the Doha Development Agenda, with 148 World Trade Organisation members, by the end of 2006. Another task that Rachid is expected to bring to fruition is the launch of negotiations for the establishment of a free trade agreement with the US. Meetings with US officials last year, Ministry of Trade and Industry officials have repeatedly said, were positive and indicate progress towards signing an agreement. Mahmoud Mohieddin heads the ministry that is expected to push for an overall improved investment climate, be it direct or portfolio. At the rate Mohieddin has been going, 2006 should see him outperforming himself. In fact, he recently forecast a 25 per cent increase in foreign direct investment in non-oil sectors. In the meantime, other areas under Mohieddin's authority that have not seen much improvement should come into the limelight. These include the mortgage sector which, despite the issuance of a 2001 law, has not taken off as desired. It is expected that with Ahmed El-Maghrabi, former minister of tourism, taking over the portfolio of the Ministry of Housing, life will be breathed into the real estate finance area. The insurance sector is another area where Mohieddin has much planned for 2006. In 2005, the government embarked on the valuation of the sector and plans to divest one of the four public sector insurance companies next year. The public assets managed by this ministry are also set for a major shake- up with chunks of companies like Middle East Oil Refinery (MIDOR) and the Bank of Alexandria lined up for sale. Mohieddin has said privatisation proceeds will double to an excess of LE10 billion during fiscal year 2005/2006. Youssef Boutros-Ghali may have the toughest job of the three. 2006 will put to the test the reforms he introduced into the tax regime. It remains to be seen whether he will be able to collect some LE3.5 billion he will be losing by cutting taxes, and whether the media awareness campaign his ministry launched to encourage individuals to come forward with their tax statements will have had any impact. He hopes the outcome will be less as was the case with the customs revenues. He had predicted a drop of 37 per cent, but ultimately there was only a 16 per cent fall. The outcome should affect how the overall budget deficit and public debt, deemed in dangerous ground, will do. Should revenues not improve, the deficit will continue to worsen. It currently stands at around nine per cent of GDP. Whether revenues improve or not, Boutros-Ghali still needs to act by cutting expenditures through streamlining subsidies both direct, such as bread subsidies, as well as indirect subsidies to items like fuel. The overall subsidy allocation in the 2005/2006 budget is LE35.4 billion. That should be a gruesome task given that the government has put it off last year to avoid social unrest during an election year. Boutros-Ghali also needs to get the public debt under control. In September, total domestic public debt, according to Central Bank of Egypt figures, stood at 82.9 per cent of GDP. This includes domestic government debt, economic authorities debt and National Investment Bank debt. An International Monetary Fund report presented earlier this year emphasised that implementing a multi- year strategy of fiscal consolidation that lowers total government borrowing and places public debt on a firmly declining path would be crucial for achieving a robust response from private investment and growth. Boutros-Ghali too has an addition to his portfolio. Following the cabinet reshuffle, he is now in charge of the social insurance system. And he will have to deal with reforms that are seen as late in coming. Critics have pointed out that the way the system is currently managed is unsustainable and in dire need of reform to avoid the possibility that social insurance contributions will not cover commitments, particularly with the demographic changes of increased longevity and fewer children resulting in the payment of more pension benefits with fewer workers to support them. The country's relatively young population has enabled its pension system to accumulate large long-term savings representing 37 per cent of the savings available to the Egyptian economy. This is almost equal to the savings available in the banking system. It boasts around LE174 billion in reserves deposited in the National Investment Bank (NIB). So far the contributions from those who subscribe to the system exceed the benefits paid. Around 18 million social insurance subscribers support some seven million pensioners. Taking the pension system under its wings, the Ministry of Finance may be able to carry out a proposal it had aired in 2004 -- investing its debt to pension funds, which it borrows through the National Investment Bank, in profit- making economic entities as a form of investment.
