Living with the pain

While policymakers and economists squabble over the nuts and bolts of turning Egypt's economy around, Gihan Shahine looks for the human face of Egypt's recession
"We are all frustrated; I don't know, but it just seems to be the norm these days," a friend told me recently. Ask people what the root of this frustration is and the answer is always the same: economic recession. Now that the few glimmers of economic upturn have petered out, people have been forced to accept recession as a fact of life.
Resignation may be giving way to alarm, however, as the Egyptian economy slides further into a persistent slump. The economy is blamed for virtually every social ill: from obvious woes like unemployment, high prices, salary-cuts and layoffs, to more indirect repercussions, like the break-up of marriages. And though the government periodically issues statements signalling a turnaround, people have ceased paying any mind. A recent plan of economic reform was touted by the government as a sure way to jumpstart the economy within 90 days. But almost a year later, the fruits of this effort have yet to be seen.
Ismail Osman, chairman of the Arab Contractors Company says he expects the current slowdown in the construction sector, which witnessed a 25 per cent reduction in its operations in the year 2000, to continue at the same rate. Osman noted that the economic slowdown is a result of failure to implement even "basic financial, legal and security polices." He also cited political instability in the Middle East as an additional deterrent for foreign investment.
But while recessions are often talked about in terms of figures and numbers, one need only walk the streets to find the reality of Egypt's recession. Shops are crammed with unsold stock and floundering businesses and bankruptcies are on the rise. Even a new government plan that would ostensibly stabilise the exchange rate of the pound has elicited little enthusiasm. "We can do nothing but hope for the best," sighed one taxi driver. "Every day the government issues optimistic statements, while conditions are only worsening," he said. "Life has become increasingly expensive, especially after the imposition of the new sales tax. How can we live?"
One local souvenir manufacturer indicated that his business has been strongly affected by the so-called liquidity crisis, saying that the recent imposition of the second and third phases of the sales tax have compounded the problem. "As a consumer," he added, "I am also affected by the imposition of the latest phases of the sales tax, which have caused a substantial hike in prices for things that I cannot avoid buying." With his business failing to make a profit, basic necessities like electricity, rent, taxes and workers' wages are eating away at his funds, while he remains unable to repay his bank loans. "I hope that I will not be forced to shut down my shop -- I would have no way of supporting myself."
Khaled Abu Ismail, chairman of the Federation of Chambers of Commerce has his own theory. He suggests that the estimated LE9 billion being poured into the IT sector has deepened the recession, as half of that sum was previously spent on "buying products and activating the market." Abu Ismail also pointed to the stringency of banks in extending credit as an additional reason for traders being strapped for cash.
Recessions are self- perpetuating: a lack of faith in the economy forces people to refrain from investing in projects and fear of what lies ahead encourages people to save obsessively, slowing spending. Talking to small business owners and other professionals, it becomes clear that consumers are tightening their belts and preparing for the worst. Ahmed, the proprietor of a once-brisk business in ready-made clothes, has seen the clothing industry fare perhaps the worst of all economic activities. His now languishing business has left him in debt and he has had to transfer his two daughters to public schools to save on tuition and sell one of his cars in order to make ends meet. "Shops just aren't selling anymore, so they don't accept large stocks. And they won't give the money until they sell, and they never sell, so I never get the money."
"The problem is that our economy is geared toward consumption, so people just don't have cash anymore," explains Tareq Mamdouh, whose small enterprise in clothes marketing has dwindled dangerously since 1995. "I've tried other fields of business, but it's hopeless. The market is in deep slumber. And it's not just me, everybody is suffering."
With businesses ailing, many well-qualified employees are fearing for their jobs, and people are quitting good positions after not being paid for months. One employee at a big insurance company says the company is having difficulty overcoming the loss of two large firms as clients. "They say they can't pay LE30,000 for insurance when they can't even pay their employees," he explained. "We are in a bad state."
One woman working at a well-known IT firm says she is worried about the lay-offs at her company. "We are left with only one customer in the Internet advertising department," she says nervously. "And now, of course, we don't get a monthly incentive or an annual raise."
Even traditionally untouched professions are feeling the bite of recession. One lawyer, who asked anonymity, says that his previously-booming practice is now scraping for clients, and that the few he does get don't always pay. People are keeping their expenses to the most essential, notes one dentist, who says his patients are definitely fewer these days. "They rely more on insurance and don't even bother about the rot in their teeth until they can't bear the pain."
Many factories and firms have already closed down. Yehia Esawi's clothing manufacturing factory closed down two years ago, after 30 years of prosperity. A deep sense of bitterness drove him to lock himself up in the privacy of his holiday home on the North Coast. "I'm jobless now," Esawi told Al-Ahram Weekly. "I've been depending on my savings for almost two years now. They're starting to run out, and I'm so worried. It's not only me -- it's everybody."
One industry that tends to feel recession the least is the fast-food industry. According to the latest figures from the Central Agency for Mobilisation and Statistics (CAPMAS), spending on food scores the highest of all expenditures: an annual LE56 billion, compared to LE12.8 billion on clothes, LE6.2 billion on education, LE2.6 billion on private lessons and LE4 billion on tobacco. And yet, big chains seem to be coming up with special offers and deals with astounding frequency. Though no one in the industry would spell it out, they seem affected as well.
Interestingly enough, a recent CAPMAS census showed that people are spending slightly more on clothing -- 10.5 per cent of their income in urban areas, compared to 9.7 in 1996, and 9.5 per cent in rural areas, compared to 8.5 per cent in 1996. CAPMAS chairman Ihab Elwi explains that this corresponds to a small increase in the average annual per capita income (about LE216 a month). But Ali Fahmi, a social and legal consultant at the National Centre for Criminological and Social Research, dismisses the CAPMAS study as a "trick of numbers."
"There is a big discrepancy in the distribution of national income," Fahmi told the Weekly. "So the average doesn't tell you anything. There is a huge gap between the filthy rich and the miserably poor, with a languishing middle class in between." By this logic, the "filthy rich" must be the answer to increased spending. But Fahmi shoots down this theory: "They are few in number, their savings are mostly invested in overseas banks, and their spending is drained in highly luxurious commodities, like North Coast villas."
When recession hits the market, prices should normally go down, but sadly, this has not been the case. Fahmi says that this is because big traders don't care to sell. "Many investments are no more than money laundering businesses," he claims. On the future impact of today's recession, Fahmi's outlook is grim. "It's a time bomb," he groans. "If this recession persists, the government will probably have to face fierce public backlash. We shouldn't ignore the strikes that erupted recently in Upper Egypt and Delta over the issue of unemployment. And that's only the beginning, I'm afraid."
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