Egypt needs 7% growth to reduce unemployment rate, restrain population growth, improve incomes: Mohieldin

Targeted growth should be 6-7%, which requires direct investments of 25-30%

Washington – Mahmoud Mohieldin, World Bank Group senior vice president for the 2030 Development Agenda, United Nations relations, and partnerships, said that the growth rates targeted by the Egyptian economy in recent years, ranging from 3.5% to 4.5%, are not sufficient to reduce the unemployment rate, curb population growth, and improve the average per capita income. He noted that the targeted growth should be 6-7%, which requires direct investments of 25-30%. "Until we can reach this ratio, bridging this gap can only be done through foreign borrowing, especially as direct investments return to their rates prior to the global crisis and amid expectations of slow global trade and the low saving ratios in the Arab region and Egypt," he said.
According to the latest World Bank report, savings in the Arab region do not exceed 14%, which is very low, compared to sub-Saharan Africa, where the ratio is 34%. It should be noted that the ratio is 14% is in the Arab Gulf states such as Bahrain, while it is less in other countries, including Egypt.
At a press conference with the press delegation accompanying the American Chamber of Commerce in Egypt's (AmCham) door-knock mission to Washington DC, Mohieldin stressed the importance of the Egyptian government establishing sovereign funds tasked with managing the country's financial assets, whether it is in foreign currencies or the local currency, in order to maximise the returns of these assets and use them optimally.
Mohieldin said that three funds should be established, one to manage hard currency revenues from oil and gas exports, another to manage surplus of public companies and government-affiliated agencies and invest them in establishing new companies with high profitability to stop losses and improve the National Investment Bank, and a third fund to exploit the funds of insurance and pensions.
Mohieldin suggested benefiting from the experiences of other countries in this field, especially Norway and Singapore, with regard to foreign currency funds, as they are characterised by a high level of disclosure and transparency and good governance, also calling to benefit from the experiences of Ireland and Malaysia regarding funds in local currency.
He explained that there are international standards that control the management of these funds called the Santiago rules that ensure good governance, transparency and integrity, and achieving higher returns and asset quality. He urged the Egyptian government to pen the policies to launch and manage these funds along with the needed accompanying laws.
"These sovereign funds encourage savings, where it is known that the rate of savings is very low in the Arab region and Egypt," he said, noting that the government should take interest in the study prepared by the World Bank on saving in Egypt in 2010.
The development of savings, according to Mohieldin, should include the savings of the government, the private and public sectors, and the household sector.
One of the most important points to increase savings in the region, he explained, is to bring women into the umbrella of financial inclusion because their dealings with the financial and banking sector are much lower than men and are almost non-existent in some regions and at the age groups under 25 years old.
He suggested that banks should open a savings account for each child when entering school, even if with a limited amount, noting that this idea will benefit all parties, including the banking system, even if the banks themselves allocate a symbolic amount for the account of every child.
Mohieldin explained that he is currently working to support the direction of local development with all the required funding and rational management and to build priorities that meet the real needs of citizens, pointing out that this has nothing to do with the centrality or decentralisation of the system of government. "The experience can succeed only with the accumulated development experience and the use of an extensive technology and rapid interaction with citizens," he said.
He said that social protection is needed not only for low-income people, but also for the middle class, each with its own programme, but the experience of designing middle-class programmes is still in its infancy. "International institutions seek to strengthen the protection of these classes and advise countries by providing a good level of services of education and health," he added.
The recent World Bank report on education in Egypt revealed that the existing education system is costly and has little return. "It is therefore necessary to change the pattern of education in schools and universities, end family exploitation, and expand the use of information technology in teaching students and quickly transfering new knowledge to them," he added.
Mohieldin explained that the World Bank is determined to continue the approach that it has worked towards for some time, which stipulates that any project that can be undertaken by the private sector, the bank will not finance. "This would prevent the government from competing with the private sector. The World Bank will, however, offer all funding to the government for all other projects that are important to society as a whole, especially education, women's care, social security networks, and sanitation and clean water," he elaborated.
According to Mohieldin, the World Bank does not fund projects on a political basis, but provides funding to countries that have a one-party regime, democratic countries, and states in between. "What we care about is the state's commitment to governance and the rule of law," he confirmed.
Mohieldin warned of the emergence of new crises waiting for the opportunity to explode, due to financial bubbles and what is happening in the field of encrypted digital currencies, which cannot be considered real currencies, but ultimately a kind of financial asset, as pointed out by International Monetary Fund Managing Director Christine Lagarde.
Mohieldin warned strongly against speculating on those currencies and said it was similar to money-making activity, where winners appear at first, but the losses explode after a while and become more violent with those who want quick enrichment and sell real assets to buy those currencies.
"Bitcoin and other cryptocurrencies are not subject to any type of control and supervision. There is a trend to look into the benefits of those currencies to use their technological base and develop new means to issue official digital currencies governed by central banks. Some countries have plans for this," he explained, warning that dealing with these currencies can be used to finance terrorism, crimes, and drug trafficking, along with money laundering and causing economic bubbles.