Despite major global challenges, Egypt's economic reform process is paying off. Nonetheless, Mona El-Fiqi finds out that the country's competitiveness score remains modest The fifth Egyptian Competitiveness Report (ECR) issued by the Egyptian National Competitiveness Council last week reveals that Egypt has no choice but to improve its competitive position in the world, despite the daunting challenges which confront any developing country at this stage. This year's report recognises three crucial global changes which will have serious implications on the economy in general, and competitiveness in particular, of all countries including Egypt. They are peak oil prices, water scarcity and climate change. To enhance Egypt's competitiveness, the report suggests a comprehensive strategy focussing on enhancing productivity which also guarantees that all members of society reap equal gains from growth achieved at the macro level. The report warned that current challenges are due to the slow trickle down of wealth derived from increased growth, a fact which jeapordises public support for the government's reform programme. Entitled Competitive Egypt: Where Everybody Wins, the report emphasises that efforts should be mobilised to achieve one objective, namely enhancing competitiveness and how this can contribute to a better division of the fruits of growth. Samir Radwan, the report's director and lead editor, said that the positive results of reform initiated in 2004 have provided the Egyptian economy with solid resilience. This enabled it to minimise the impact of the global increase in food prices, as well as the fall-off effect of global recession. However, according to the Global Competitiveness Index (GCI) -- a measure established for comparative competitiveness among different countries -- Egypt's rank dropped to 77th place compared to 71st the previous year. The main causes of this regression were related to human resources, with weak scores on basic education and labour markets. Survey results gave Egypt very poor marks on the quality of primary education, with the country ranking 126th out of 131. Furthermore, Egypt came 130th out of 131 countries on labour market efficiency, demonstrating the need to address labour market rigidities. ECR noted that this is the lowest ranking for Egypt and that perceptions of Egyptian worker productivity also fell. The document recommended a thorough overhaul of the educational system and balanced labour market policy, to ensure increased productivity without sacrificing job creation and increase in real wages. According to the ECR, the deterioration of Egypt's competitiveness ranking implies that it is entering a period of more challenging economic conditions. Moreover, Egypt's ranking on the macroeconomic stability component of the GCI was 124th out of 131 countries. The ECR explained that three main factors continue to pose a challenge to the improvement of Egypt's performance. These are inflation, a persistently large budget deficit and unbalanced growth. An important issue raised in this year's report is that unbalanced growth poses a major risk to competitiveness and to economic stability. "The macroeconomic pattern of growth has not succeeded in generating the required job opportunities. In other words, growth is not employed- led," stated the report. There are two reasons, continued the ECR, the first being the fact that the faster growing sectors are not necessarily employment-intensive, and the regional distribution of growth remains highly concentrated around the capital. This neglects rural areas, particularly in Upper Egypt where poverty affects over 65 per cent of the population. Another reason is the mismatch between skill supply and the demand of the labour market. The report urged for a balanced growth strategy. In addition to its annual analysis of Egypt's competitiveness scoring by the GCI, the report has two important dimensions of competitiveness, namely the sectoral focus on tourism and the elaboration of a comprehensive competitiveness strategy. Tourism was chosen because the sector has tremendous potential, represented by the possibility to increase the number of tourists from 9.7 million in 2006/2007 to 30 million by 2020. The tourism sector also has a built-in capacity for broad- based distribution of returns on its activities. The ECR underscored that estimates indicate that by 2020 Egypt will have the capacity to attract 30 million tourists, providing that necessary investments are made and constraints on the sector are eliminated. The report analysed Egypt's ranking according to the Travel and Tourism Competitiveness Index published for the second year by the World Economic Forum. This shows that Egypt's rank is relatively modest -- 66th out of 130 countries -- and has in fact declined in comparison to last year when it ranked 58th of 124 countries. The report delved into the details of competitiveness in an attempt to identify the strengths as well as the weaknesses of Egypt's tourism sector. To improve Egypt's competitiveness, the report recommended a strategy including a number of high level objectives, notably sustaining the present economic growth rate of seven per cent at least until 2012, and maintaining the momentum through 2020; reducing open unemployment below five per cent as indicated by the five-year plan (2007-2011); and halving poverty by the year 2012 as declared by the millennium development goals. This would require choosing leading sectors, an aggressive attack on productivity constraints especially bureaucratic regulations, and enshrining job creation as an essential objective of growth. This would ensure a broad-based distribution of the fruits of this growth, concluded the ECR.
