On Thursday, the Financial Times ran a 12 page special report on Egypt, which I recommend to all those who are interested in contemporary economic, political, and social trends in the country.
The FT is one of those newspapers with a certain bent: it focuses on economics and financial markets, and has a leaning towards free-market liberalism. True to form, the report has a number of articles on the Egyptian economy. But it also has some interesting analysis of the state of Egypt's higher education, its environmental problems, its agriculture sector, and the publishing industry (it also includes the same tired guessing games of who will succeed Mubarak). For those interested in something of a snapshot of where Egypt stands at the end of 2009, it is worth a read. I thought I'd lay out some of the more interesting statistics from this piece, as well as my responses to them:
70% of Egypt's GDP is made up of small and medium-sized businesses (SMEs), and they employ more than half the population. Yet, despite the importance of these businesses to the economy, they have low access to credit and receive little support from the government. Egypt's banks remain relatively well-capitalized; they avoided the worst pangs of the credit crisis as they were largely disconnected from global financial markets. But they are also extremely risk averse and prefer to loan money to the government and to large companies. The result is that SMEs struggle to gain loans and to scale up their operations when they need to, making it very difficult for the sector to grow or flourish.
The Egyptian stock exchange is capitalized at $90 billion and many analysts said it was better positioned than any other stock market in the region to have high growth next year. This in many ways struck me as the flip side of the previous point. As SMEs remain starved for capital, unable to grow or prosper, Egypt's large companies are earning record profits and are set to take off next year. The FT also points out that much of this strength has come from a government stimulus package of over $2.7 billion -- I wonder why they couldn't have directed more of this money to helping the little guys?
9.6% of Egyptians are unemployed but 40% live in poverty. That means that although the country's unemployment rate is lower than the United States', its poverty rate is almost three times as high. It also means that there are a lot of Egyptians out there with jobs who still do not earn enough to support themselves and their families. For a country growing at 4.7% (this year's GDP growth), this strikes me as unacceptable. Governments tend to focus on the absolute number of jobs in the marketplace. The FT interviewed Egypt's finance minister, Youssef Boutrous Ghali, who bragged that the government had created 3.5 million new jobs with its stimulus package. The two problems with this kind of job creation is that a) it may not be sustainable, as those jobs will disappear when the infrastructure projects are completed and b) there is no explanation of what those jobs are paying or how the workers are treated. There was no discussion in this interview or any of the other articles of how Egypt plans to tackle the poverty rate -- a striking oversight, in my opinion.
12.6% of Egyptian workers are employed in the tourism industry, which seems a bit precarious to me. Tourism is one of those industries that can disappear in the blink of an eye. This happened in 1997 when the Luxor terror bombings scared away Western tourists for years. This is not to suggest that such attacks will happen again; in fact I'm inclined to think that the threat to tourists from violent extremism is pretty low. But tourism can be volatile and I worry that Egypt may be staking too much of its economy on an industry that can dry up overnight.
Egypt's food exports could reach $20 billion by 2020, making it a net food exporter, rather than a food importer. This strikes me as very good news for a country that has faced troubling food shortages and food riots in the past. The report has a fascinating article about the rising investment in farming in Egypt, as developers reclaim desert land and turn it into arable fields for growing fruit and vegetables for domestic consumption and export to Europe. In fact, many of the new farms have adopted cutting edge drip-irrigation technology, which provides plants with precisely the amount of water that they need to grow. For a country with a discrete supply of water (the flow of water from the Nile is predetermined through international treaties), such high-tech irrigation techniques are necessary to increase the supply of food, feed a growing population, and continue to develop a valuable export good.
270 Turkish companies invest in Egypt, many in the textile sector. I have always though that intra-Middle East trade and investment can help the region grow and can allow some of the poorer countries to capitalize on the growth of richer ones. Moreover, drawing investment from countries in the 'near abroad' can be a good step toward proving that a market's investment climate is favorable and can further attract investment from places farther afield, like Europe or North America.
There are 180,000 undergraduates at Cairo University. The current higher education system in Egypt faces a number of problems, most of which boil down to the difficulty of offering free education to too many students with not enough resources. The system needs more facilities, more professors, and more jobs for graduates once they leave. I think that eventually Egypt is going to have to start charging tuition on a tiered basis (by income level) if it wants to maintain a robust university system. And the government is going to need to set aside a good chunk of its future budgets to investment in education. Otherwise Egypt is no longer going to be able to brag of having one of the best educated workforces in the region.
The Egyptian government killed 200,000 pigs this year, when the swine flu epidemic broke out. Those pigs used to eat 60% of the garbage collected by the zabaleen community of Coptic Christians. I have already blogged about how tragic this was for the zabaleen community, who are now facing incomes (which were already miniscule) at half their former levels and a mountain of trash building up with nowhere to go.
In my opinion this last statistic brought the whole report to an ironic conclusion. All indicators point to a country that is ripe for economic growth, with great potential in a number of sectors, including small and medium-sized businesses. But a largely corrupt and incompetent government continues to make self-serving, rash, and misguided policy decisions designed to curb political opposition and maintain stability. Hard to imagine what is currently holding Egypt back...
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