Professor. Hala El Said. - AISRe · business community which negatively affect investment. Professor: Hala El Said ... Tourism 10 Communication 0 5 ... Net Foreign Direct Investment

El‐ Said.Professor. HalaDean of Faculty of Economics and Political Science

i i iCairo University

Presented to : “Italian Association of Regional Science”Presented to : Italian Association of Regional Science

International conference on

THE MEDITERRANEAN CITIES BETWEEN LOCAL DEVELOPMENT AND INTERNATIONAL COOPERATION

15 April 2013

.The Changes in the Arab word thatstarted in December 2010 arestarted in December 2010 areperhaps the most importantp p ptransitions of the early twenty first

tcentury.

Professor: Hala El SaidEgypt in the wake of the 25th of January Revolution

15 April 2013

ContentContent1 O i i f th i i A d l1-Origins of the uprising; A dual failure.

2-Impact of the January 25 Revolution2-Impact of the January 25 Revolutionon the Economy.

3-Moving Forward.g


15 April 2013

Origins of the uprising stem from a dual g p gfailure: Political & Economic. Too long authorization regimes relied on economic and ‐Too long authorization regimes relied on economic and political institutions to preserve the status quo.

‐There was Economic growth but it wasn't fairly shared.

‐The Economic discontent of the youth, the group that seriously suffered the most from unemployment and felt the great impact of poor public services and failure f d i of education system.


15 April 2013

The 25th of January Revolution

.On 25 January 2011 known as the "Day of Anger” Egypt witnessed many protests that took place in different cities. y p p

The purpose was to protest against abuses by the police.Th d d d d t i l d th i ti f thThese demands expanded to include the resignation of theMinister of Interior, the restoration of a fair minimumwage, the end of Egyptian emergency law.

The Slogan of the Revolution was: “Bread, Freedom, Social Justice & Human Dignity” Social Justice & Human Dignity .

h h f b k “ d f ”On the 11th of February, known as “Friday of Departure”which was the day where Mubarak is no longer in power.


15 April 2013

Impact Of The Revolution onImpact Of The Revolution on The Economy.The Economy.

.The Transition in Egypt and in the Arab World is The Transition in Egypt and in the Arab World is complicated‐Citizens are always protesting in Tahrir Square andC y p g q

everywhere to press for an advance of democracy.

‐Popular perception of rising corruption raised the pressure onfinancial demands (Wages, Bonuses,…etc).

‐Significant Resentment against some forces that supported theold regime specifically businessmen as some of thembenefited from their connections to the rulers. This public

t t t k th f f f thiresentment took the form of some revenge measure of thisbusiness community which negatively affect investment.


15 April 2013

All These led to deteriorating all the Economic indicators

1.Real GDP growth rate fell to an annual level of 1.8 % in .Rea G g o t ate e to a a ua eve o .8 %2011 and after two years of revolution it reached 2.20%.

7

8Real GDP Growth (At Constant Prices)

4

5

6

7

1

2

3

4

7,2

4,7 5,1

0

1

Year 07‐08 Year08‐09 Year 09‐10 Year 10‐11 Year 11‐12

1,8 2,2


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Year 07 08 Year08 09 Year 09 10 Year 10 11 Year 11 12

This reduction in the growth rate of Real GDP was gdue to the reduction in the Growth Rate of the key

sectorssectors.15

Tourism

10

Communication

0

5Construction & Building

Manfacturing Industrials

‐5

Year 09‐10 Year 10‐11 Year 11‐12g

Agriculture,forestry & fishing activities

‐10

Wholesale & Retail trade


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2 FDI fell by 68 percent to register an inflow of2.FDI fell by 68 percent to register an inflow of $ 2.2 billion in 2010/2011 compared to $ 13.2 billi i 2007/2008billion in 2007/2008.

Net Foreign Direct Investment ($)CBE Th thl B ll ti

13,21214

CBE, The monthly Bulletin 2012

8,16,8

6810

8 8 *

2,22,1

024

2007‐2008 2008‐2009 2009‐2010 2010‐2011 2011‐2012*Net Foreign Direct Investment ($) 13,2 8,1 6,8 2,2 2,1


15 April 2013

3. Although It seems that the Nominal GDP Per Capita is g pincreasing ; however, figure (B) elaborates that Real GDP Per Capita compared to other Low Middle income Countries

dseems to decrease.Nominal GDP Per Capita

(constant prices) 89

Real GDP per Capita Among Countries

2 4862,814

2,9663,126

3,27

3

3,5

(constant prices)

45678

B

2,1862,486

2

2,5

‐10123

Figu

re B

0,5

1

1,52008

2009 2010 2011 2012

Egypt 5 2,4 2,8 ‐0,6 ‐0,01

‐2

2007‐2008

2008‐2009

2009‐2010

2010‐2011

2011‐2012

August 2013 *

3.27 0GDP P C i

00

Philipine 2,4 ‐0,5 5,8 2,2India 2,4 6,7 8 5,4Maghrib 4,5 3,7 2,6 3,5


15 April 2013

GDP Per Capita 2,186 2,486 2,814 2,966 3,126 3,27

.4. Subsidies and wages accelerated significantly in 2010/2011 by 19.6percent and 12.8 percent, respectively due to the continuousdemonstration by workers to increase wagesdemonstration by workers to increase wages. .

R i f d fi i GDP i d f 8 % i / 5.Ratio of deficit to GDP increased from 8.2% in 2009/2010 to 10.7% (2001/2012).

6. Part of the planned revenues reform measure, like the introduction of the value added tax, were postponed due to the escalating social pressure following the revolutionthe escalating social pressure following the revolution.

7. Domestic Currency was under severe pressure and Egypt’s7 y p gypforeign reserves declined from $ 36 billion in 2010 to $ 13.3 billion in 2012.


15 April 2013

Ratio of total revenues to total expenditure tended to decline from 74% in 2009 to 64% in 2012

--decline from 74% in 2009 to 64% in 2012

RevenueExpenditureExpenditureStructural imbalances

Deficit-180 Billion (Dec. 2012)

-Total Deficit/GDP is 10.7% in 2012

Crowding out the private sector in bank borrowing

Debt service burden

Public Debt80% of the

GDPbank borrowing GDPProfessor: Hala El Said

Egypt in the wake of the 25th of January Revolution15 April 2013

Domestic Public DebtDomestic Public Debt / GDP

Source: Central Bank of Egypt, 2012.

8

8576,2

80,3

70

75

80

72,5 73,6

76,2

Domestic Public Debt / GDP65

End of June 2009

End of June 2010

End of June 2011

End of June 2012

Domestic Public Debt / GDP

2009 2010 2011 2012


15 April 2013

Total Subsidy Developmenty pSubsidies in Egypt are higher than the entire

Government wage bill including Health &Government wage bill including Health & Education.

‐The subsidy bill is characterized by inequality as the greaterportion goes to the medium & high income peopleportion goes to the medium & high income people.

‐Estimates state that 45% of the energy subsidy (which is equalEstimates state that 45% of the energy subsidy (which is equalto $115 bn) benefits the upper income by $53 bn the low

income benefits only by 10%.


15 April 2013

Petroleum Subsidies vs SupplyPetroleum Subsidies vs. Supply Goods Subsidy

Petroleum Subsidy Vs Supply Good SubsidySource: Ministry of Finance, 2012

95535100000

120000

66524 67680

60000

80000

16819

32743 30282

20000

40000

2009‐2010 2010‐2011 2011‐2012Petrolum Subsidies 66524 67680 95535Supply Good Subsidies 16819 32743 30282

0

Supp y Good Subs d es 16819 32743 30282


15 April 2013

Unemployment rate has reached 12.4 % in 2012, Ifp y ,we look into this figure we find that the highestrate of unemployment is among the ages (20-24) top y g g ( )

represent 25% of the population.Source: CAMAS, Labor Force Sample Survey


15 April 2013

1.Egypt will have to provide jobs for a large youth population, morethan 850 000 youth enter the workforce every yearthan 850,000 youth enter the workforce every year.

E t th h l d i l t % f th2.Egypt youth who are unemployed is almost 25% of thepopulation.

3.This problem is compounded by the fact that many of theseyoung people enter the Labor market unprepared due to themismatch between Education & Market needs.

4.People are accepting jobs in the Informal Sector as employment 4 p p g j p yopportunities become fewer.


15 April 2013

Government Investment Distributionby Some Selected Sectorsby Some Selected Sectors

The Government expenditure on both education and health sectorsis relatively low registering the average of 4 5 percent of GDP onis relatively low registering the average of 4.5 percent of GDP oneducation and doesn't even reach 2 percent of GDP in its maximumon the health sector during the period 2001/02‐2010/11g p / /

HealthEducationInfrastructure*Sector3.36.57.42002-2003

.3.54.910.92003-20043.23.69.92004-20052.33.27.82005-2006 338005 00623.17.42006-2007

2.43.311.52007-20082 8415 82008 2009 2.8415.82008-20092.22.714.42009-20102.43.212.12010-2011


15 April 2013

1.92.711.72011-2012

Government Investment Distribution by S S l t d S tSome Selected Sectors

‐While the investment on infrastructure has been fluctuatingfrom 7.4 percent in 2002/2003 to 15.8 percent in 2008/2009to 11 7 percent in 2011/2012to 11.7 percent in 2011/2012. .

‐According to the world Economic Forum (WEF) globalcompetitiveness report 2012‐13, Egypt’s ranks 83 instead of

i i t f lit f ll i f t t75 in 2011‐12 in terms of quality of overall infrastructurewhere the quality of roads come at the bottom as the worst(109) in 2012‐13 instead of 87 in 2011‐12, reflecting too much( 9) 3 7 gdeterioration and a great need of investment.


15 April 2013

Moving Forwardg

Moving ForwardMoving Forward1.The average investment in Egypt throughout the base. e ave age vest e t gypt t oug out t e baseyear 2011/2012 represent about 15% of the GDP and itdid not exceed 23% in the best conditions. The current3ten years plan aims at promoting the average to about32%.

‐The required saving rate should be 25%, at least, by theq g 5 , , yend of the plan compared to 9.4% in the base year, inorder to secure a stable source of local funding for theimplementation of investments.


15 April 2013

.2.Recomposition of public expenditures, by expanding programs tobenefit the poor and youth and apply a fair tax anddi t ib ti t i d ith ti i tredistribution system accompanied with rationing government

spending and a reform of subsidy system. .

3. Government has to gain confidence of the private sector andcreate an environment in which large medium small enterprisescreate an environment in which large, medium, small enterpriseswill be able to operate on a level playing field.

4.Buisness Community must also regain the Confidence of theirsocieties as Private Sector leaders must set aside Rent seekingactivities and direct their energy to production, innovation andactivities and direct their energy to production, innovation andemployment.


15 April 2013

.5.Reforms to reduce Information Asymmetries and enhanceTransparency and disclosure must be a priority. .

6.Egypt in the transition should open more space for civil societyorganizations that play an important role through advocacy andorganizations that play an important role through advocacy andpromoting accountability.

Y h E l h ld b i i d b j b7.Youth Employment should be an urgent priority supported by jobtraining and matching.

8.Capacity building should be targeted to increase the representationof young people in national policy dialogue. .

.


15 April 2013

.9. The International Monetary Fund and the Egyptianauthorities have reached a staff‐level agreement on a

h S d B A (SBA) i h22‐month Stand‐By Arrangement (SBA) in the amountof about US$4.8 billion.

‐The Egyptian authorities have developed a nationalprogram that seeks to promote economic recovery,address the country's fiscal and balance of paymentsd fi it d l th f d ti f id j b tideficits, and lay the foundation for rapid job creationand socially balanced growth in the medium term.


15 April 2013

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Professor. Hala El Said. - AISRe · business community which negatively affect investment. Professor: Hala El Said ... Tourism 10 Communication 0 5 ... Net Foreign Direct Investment