The Egyptian economy: Between growth and greediness

12 Jun 2018

Business people naturally do their utmost to milk the metaphorical cow for all it is worth, and government policies should work on prolonging the life of the cow and ensuring the quality of its milk. But, instead of better regulating the market, the Egyptian government wants to acquire a portion of the milk by competing with the farmers who milk the cows. This kind of public-private competition endangers the cow’s lifespan.

To summarize Egypt’s public-private interface, one can liken it to an old-fashioned investor trying to overpower a street-smart opportunist in a country known for its deep state bureaucracy and its high rate of corruption. The greedy opportunist knows how to maximize his profits by capitalizing on the government’s economic defects and corruption. The Egyptian government believes that it can milk the cow better and become wealthier than private owners, completely overlooking the fact that what truly matters is to advance the industry’s growth — not to dominate it.

Economic growth is the key objective of the Egyptian government. However, in the process of expanding the market, the government today is working on increasing its income by skimming the fat off many industries, threatening their growth. Our government believes that it can be the locomotive towing the economy; the regulator arranging train schedules; the conductor and the caterer, all in one. As for the private sector, if it wants to play a role in the transportation industry, it is welcome to sell newspapers on train station platforms.

Our government is doing its utmost to expand foreign direct investments in Egypt. However, it tends to offer tailor-made investment incentives for specific industries in need of foreign investors. Besides industry incentives, however, foreign investors are carefully assessing the larger picture in Egypt. In addition to numerous economic and political developments, this entails our interaction and dealings with investors, currently being conducted in an ambiguous environment that is discouraging to investors.

Until recently, three international mobile operators with roughly equal market shares had been running the market in Egypt for years, during which the government used to enjoy the status of regulator, imposing different kinds of taxes on these companies, some of which are currently operating at a loss. Then the government realized that, to save its public landline company, it needed to grant it a mobile operation license. Enabling a static, bureaucratic state entity to compete with dynamic international companies does not favor the newcomer.

Roughly 20 months after its inauguration, the government has not reported to us concerning the performance of the state-owned mobile company or its impact on the telecom industry (apart from the fact that it is operating a privileged license). Our government needs to learn that the private sector’s success stems from its skill in identifying and exploiting business opportunities in very little time, knowing how to minimize expenditures to sustain profitability and the ability to get rid of unproductive labor — only a few among many business talents that the government does not possess.

Whereas the governments of most nations have decided to stop “wearing the business hat,” we continue to insist that our bullying business attitude, combined with privileging public enterprises, will achieve profitability. In the process of expanding public businesses, our government either prints money (as per the governor of the Central Bank’s declaration) or substantially increases its external debt (from roughly $40 billion in 2015 to $82 billion in 2017). Unlike the undertakings of the private sector, the government’s business adventures and its greed come at the price of lowering citizens’ standard of living.

The Egyptian government is naturally a short-term business investor. It seeks to realize quick growth and tends to apply provisional policies that benefit public enterprises at the expense of other investors and to the detriment of overall industrial growth. Although the government does make a few good economic reform moves, it doesn’t heed many factors of decline; our economy thus ends up being less competitive than that of neighboring nations.

What the Egyptian government lacks is a clear awareness of “who can do what.” Any ordinary citizen can easily milk a cow, but creating and sustaining a modern dairy industry requires more than this simple talent. Growth will not be realized by taking over the private sector’s role; on the contrary, we need economic policies that send the opposite message. The Egyptian government’s ambitions should lie in drawing up policies that help our various industries to flourish — and then staying away.

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