Bumpy road ahead for Egypt’s new ministers

Investments are vital issue for Egypt’s fragile economy, which has failed to generate enough jobs for university graduates.

Egyptians buy goods at a store in Cairo, on January 10th. (Reuters)

2017/02/26 Issue: 95 Page: 8

The Arab Weekly
Ahmed Megahid

Cairo - Attracting foreign invest­ments, reducing poverty, delivering subsidies to those who deserve them and reforming the edu­cational system will be major chal­lenges for the members of the Egyp­tian cabinet appointed in a recent leadership reshuffle, experts said.

“There is marked slowdown in the flow of foreign investments to our country,” said economist Ra­shad Abdo. “The government has an uphill task to convince foreign investors to pour their money here.”

Responding to public pressure for change and seeking to improve the performance of its economy, Egypt changed nine of its 33 ministers on February 17th, bringing in fresh fac­es and a figure of the era of ousted president Hosni Mubarak.

The reshuffle included the Invest­ment, Planning, Education, Supply, Local Development, Parliament Af­fairs, Agriculture and Transport portfolios. The new ministers are not expected to have an easy ride in decision-making circles, experts said.

In 2016, Egypt received invest­ments of $6.8 billion, most of which was from investors who already run businesses in the country. The new Investment Minister Sahar Nasr, who is also the International Co­operation minister, must work on seeking new investments.

Nasr will, however, be limited by what economists described as “un­welcoming” investment laws.

“Regulations that make new in­vestors fail to finalise investment procedures easily and the failure of state institutions to settle invest­ment disputes quickly scare inves­tors away,” Abdo said.

Investments are a vital issue for Egypt’s fragile economy, which has failed to generate enough jobs for university graduates. The unem­ployment rate is 12.4% and Egypt needs to create 600,000 jobs every year.

Nasr said she would introduce amendments to Egypt’s investment law to make it easier to do business.

Economists said, however, there are aspects Nasr cannot change to make Egypt’s investment climate more inviting, including uneven competition, especially when it comes to the role played by the mili­tary in the economy.

The army, which, economists said, enjoys preferential treatment, produces everything from rockets to refrigerators and cooking vessels.

Challenges facing job creation are also strongly linked with Egypt’s rampant poverty, experts said. To reduce the poverty rate — now 27.8% — Egypt must restructure its multibillion-dollar subsidy regime for a fairer and more effective distri­bution system.

“Delivering subsidies to those who deserve them only is an impor­tant step for reducing poverty,” said Anwar al-Naquib, a former Supply Ministry adviser. “The current sub­sidy system rewards the rich only.”

Egypt allocated $2.5 billion with­in the 2016-17 budget, which ends in July, to subsidise food. Around 70 million people are registered in Egypt’s ration stamp system, which offers citizens free food, including sugar, cooking oil, rice and bread, each month. The government said, however, that most ration stamp holders do not qualify for the sub­sidies.

One of the solutions to the prob­lem is to get those who do not de­serve subsidies out of the system and substitute the decades-old ra­tion stamp arrangement with cash aid to the poor.

One of the challenges facing the application of the cash aid system is that the government does not have precise data about the income of citizens, information that would be instrumental in determining who is poor — and deserving of the aid — and who is not.

Educational reform is also anoth­er challenge ahead of the govern­ment in its new formation, experts said.

Egypt’s run-down schools need tens of billions of dollars, educa­tional experts said. In the 2016-17 budget, the government has speci­fied $6.5 billion for education but this is a fraction of what is needed to improve the schools, while the salaries of the nation’s 1.4 million teachers account for the bulk of the budget.

Renewing schools to make them favourable places for the country’s 17 million pupils should take a back seat when it comes to other priori­ties, including the need to reform school curricula, experts said.

Egypt has started curricula refor­mation by introducing material that stresses tolerance but educational overall reform is a long process.

“The educational system needs to be changed altogether,” said Moheb al-Rafie, a former Education minis­ter. “Our schools need to put more stress on learning and less stress on exams and score. To do this, togeth­er with changing the educational system, we need to change the mindset governing the educational process as a whole.”

Ahmed Meghid is an Egyptian reporter based in Cairo.

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