Sherine Nasr asks if the government, revelling in its success in stabilising the economy, can claim to be on track towards a matching achievement in terms of poverty alleviation, while Mona El-Fiqi ponders whether Egypt's unprecedented figures of foreign direct investment flows this year are on a par with the country's comparative potential in attracting capital The Egyptian economy has been doing exceptionally well over the past three years. For the first time in decades, the cabinet is talking of a seven per cent growth rate, which is forecast to continue to grow to eight per cent in 2008. The country has attracted some $11.1 billion in foreign direct investment (FDI) this year, securing Egypt the position of top African earner of FDI for the year -- a huge bound from the $500 million mark at the beginning of the century and the meagre $2 billion figure of 2003/ 2004. More reasons to rejoice: the private investment growth rate is approaching an unprecedented 64 per cent of GDP, the exchange rate has been stable for the past three years, international reserves have risen to $31 billion and the balance of payment surplus has hit $5.3 billion this year. These and many more achievements represent the solid outcome of substantial reform policies that have finally borne fruit. Has this apparent economic prosperity trickled down to tangible benefits felt by average Egyptians? The majority would answer no. To put bread on the table, to cope with a tight monthly budget and to afford good health and education services are still daily struggles for most Egyptians. "The government has been concerned with the social aspect of economic development. A new perspective for the fair distribution of subsidies is now being studied so that we can guarantee that subsidies are received by only those who need them most," said Prime Minister Ahmed Nazif, on behalf of President Hosni Mubarak, during the inauguration of the second Cairo Investment Forum held on 9 and 10 December. Nazif said there was no intention on the part of the government to privatise Egyptian railways or ports to fulfil this goal, but that the subsidising of basic necessities, such as bread and fuel, will continue anyway. Jassim Al-Mannai, chairman of the Arab Monetary Fund and Chief Executive of the Arab Trade Financing Programme (ATFP), underlined some major problems that need immediate intervention by the government. "The budget deficit, the high public debt and inflation still constitute major obstacles facing the Egyptian economy," he said. "Fixed assets will not always be there to sell and the government has to think of more sustainable alternatives." It is his view that accumulated liquidity in the region can and should nourish the Egyptian economy with investment influxes that far exceed the 2007 $11 billion FDI. "The Arab region is witnessing rare times in which gigantic surpluses, particularly in oil exporting countries, have been multiplied due to unprecedented increases in oil prices. This capital is looking for good investment opportunities around the world, so why not in Egypt?" Opined Roaf Abu Zaki, general director of Al-Iktissad Wal-Amal Group, the forum's major organiser. According to Minister of Investment Mahmoud Mohieldin, Arab investment around the world is estimated at $540 billion, of which only 11 per cent is directed to the Middle East. "In Egypt, Arab investment constitutes 13 per cent of total FDI to the country, compared to 16 per cent of foreign investment," said Mohieldin, refuting the claim that Arab investment in Egypt is mainly concentrated in the real estate sector. Giving examples, he said 37 per cent of Saudi investment in Egypt is in the industrial sector and 27 per cent is in the tourism sector. Meanwhile, 57 per cent of the UAE's investment is in the industrial sector and 20 per cent in the financial sector. The majority of Libyan investments to the country falls within the agricultural sector, while 48 per cent of the investment from Bahrain is in the industrial sector. "This is an indication that Arab investment in Egypt is quite diversified," said Mohieldin. While improvement of the business climate in Egypt remains a cornerstone on which some concrete results have been achieved, developing the human element remains the major challenge. "We have to bear in mind that technology is almost the same worldwide. What makes a difference is the ability to compete in the international market and this relies basically on highly trained labour," said Helmi Abul-Eish, member of the Egyptian Junior Businessmen Association (EJB) and managing director of Sekem Group. Abul-Eish said that ever since the Egyptian private sector began playing a more significant role in development, the lack of skilled labour needed by newly developed sectors has been a persistent reality. According to Samir Radwan, chief consultant at the General Authority of Investment and Free Zones (GAFI), the labour force in Egypt is estimated at 22 million, 20 million of which are employed. "Only two million out of 20 million are well-trained and can reap the benefits of the ongoing improvement in the business climate. The bulk of the Egyptian labour force are either civil servants, estimated at 5.7 million, who constitute a burden on the government budget, or farmers in the fragmented agricultural sector, estimated at 5.6 million. Those are overworked, underpaid, untrained and have no access to technology to upgrade their obsolete harvesting techniques," said Radwan. In an effort to remedy the situation, the Industrial Training Centre has allocated LE560 million to train nearly 280,000 workers to fill the gap in the skilled labour market. "Unless human resource development goes hand in hand with economic development, Egypt's prosperity will remain an unfulfilled task. It is a question of life and death for this country," concluded Abul-Eish.
