Egypt's advances in the competitiveness index do not ameliorate the ailments of its economy, Sherine Nasr reports The good news: Egypt moves up 11 places, from 81st in 2008/09 to 70th in the index of this year's Global Competitiveness Report (GCR) thanks to the implementation of more effective procedures to liberalise the economy. The bad news: very little if any improvement can be traced in the most vital sectors, including education and health. The recently launched 2009/2010 GCR underlined that Egypt's main competitive strengths are the sheer size of its market (ranked 26th) that allows businesses to exploit economies of scale, fairly solid private institutions (53rd) and the satisfactory quality of the transport and energy networks (55th). Nevertheless, some inherent flaws in the Egyptian economy continue to present real challenges to the country. "Egypt continues to struggle with serious challenges related to macroeconomic stability (120th)," underlined the report, adding that although government debt has been reduced from 105.8 per cent of GDP in 2007 to 85.9 per cent in 2008, the budget deficit and inflation continue to rise. The budget deficit has reached 6.8 per cent of GDP in 2008 while inflation was among the highest in the world at 11.7 per cent in 2008. Other challenges are manifested in the labour market that continues to be over- regulated and inefficient. The report stressed that although some progress has been achieved, "the persisting labour market rigidities are particularly worrisome." According to the report, inflexible hiring and firing procedures keep the country's unemployed young people -- many of whom are well educated -- from entering the formal market. "This raises the risk of a degradation of human capital, brain drain from the country (123rd) and potentially causes social problems," said the report. When it comes to women's participation in the labour market, Egypt is low in its position (127th) despite the fact that government-tailored programmes have made some progress in this respect. Switzerland has proved itself the most competitive economy this year, knocking the US down to second position. In the meantime, some countries in the Middle East and North Africa (MENA) region came in the upper half of the rankings. Qatar led the improvement at 22nd position followed by the United Arab Emirates (UAE) that managed to climb eight places to 23rd position as a result of progress made in technological and innovation fields. Saudi Arabia (28th), Kuwait (39th) and Bahrain (38th) were also favourably positioned. For the past 30 years the GCR has been the most comprehensive and authoritative index of the comparative strengths and weaknesses of national economies. The report has expanded since it was first published and at present it is considered the main tool to evaluate 134 developed and emerging economies around the world. "This is the main report used by government officials and business leaders when it comes to decision making," said Helmi Abouleish, chairman of the Egyptian National Competitiveness Council (ENCC). This year's report investigated economic development in 133 countries around the world. Country ranking is measured according to the Global Competitiveness Index (GCI) that was developed for the World Economic Forum (WEF) in 2004. The index is based on 12 pillars that provide a comprehensive picture of the competitiveness of different countries in areas related to institutions, infrastructure, macroeconomic stability, health, education, labour market efficiency, market size and innovation, among other aspects. Significant as it may be, economic experts in Egypt, while agreeing with the main findings of this year's report, are sceptical about the methodology through which data is collected and evaluated. "One of the negative aspects about the report is the fact that data collected from official reports is sometimes two or three years old. In the meantime, the report does not take into account small and medium- size enterprises that constitute the major force in the Egyptian economy," said Malak Reda, senior economist at the Egyptian Centre for Economic Studies (ECES), that recently organised a roundtable discussion to review the findings of the report. Reda added that the fact that companies are selected according to the number of workers (20 to 500) makes it barely reflective of the Egyptian market where small business entities often hire less than five workers. "In addition, public sector companies are not included and the geographical distribution of the companies is also not taken into account." Furthermore, the concept of competitiveness as developed by the report is now being reconsidered. "After the world economic crisis, the 12 pillar-base used to measure the competitiveness of an economy is now being reviewed," said Samir Radwan, senior economist and board member of the Egyptian Authority for Investment and Free Zones (GAFI). Radwan underlined that a new concept of competitiveness is now being formed that is mainly based on a country's ability to maximise the utilisation of its comparative advantage. "In the case of Egypt, the labour force is the comparative advantage. We have been discussing the means to upgrade this wealth of human capital but no concrete results have so far been achieved," said Radwan as he referred to the lower position Egypt occupied this year with regards to efficiency of the labour market. In addition to official reports and government-issued data, the GCR is extensively based on the Executive Opinion Survey in which private sector executive directors are asked to answer a number of questions relative to the economic performance of their country. "There are no technical criteria these selected executives can follow to fill in the survey and their view of the related issues can be questioned," said Mohamed Qassem, a businessman who added that this is one important reason why the findings of the GCR can be misleading. "For example, Egypt has advanced -- it is ranked as a more competitive economy -- while the business community is convinced that the country's economic competitiveness is rapidly eroding." As the national partner to the Global Competitiveness Council, the ECES will be holding meetings with representatives of the business community, government officials and NGOs to discuss the means through which the content of the GCR can be reflective of Egyptian market realities. "The Global Council is reviewing many issues at present and it is open for new suggestions," said Abouleish. "In the meantime, different stakeholders will start working on a national competitiveness action plan for the country. The challenges have long been defined; solutions are ready to be implemented. Different partners need to come up with a vision on how to raise Egypt's competitiveness in various areas. This is what we will be busy doing in the coming months."
