Egyptian plan to evacuate cities

The primary concern for Egyptian firms is ...

As regular readers know, that headline was a cheap trick to get you to read this. It actually refers to the 2010 laureate of the International Transport Forum’s Young Researcher of the Year Award.

Hossam Abdelgawad, a 27-year-old Egyptian PhD-candidate from the University of Toronto, won the prize for a novel approach to the mass evacuation of major cities in case of a catastrophe.  

Whether you think what’s happening in Egypt just now is a catastrophe, a festival of the oppressed, or something else, depends on your personal point of view. What’s clear is that what started as protest movement inspired by people from similar backgrounds to Hossam Abdelgawad now has major economic and geopolitical repercussions.

It’s striking how many of those first protesters were fluent in English or French, in stark contrast to the situation in the 1970s and 80s I described in this post. Even back then, though, everybody in Egypt knew at least two English expressions: import-export and fat cats. Sadat’s “open door” policy had opened the country up to foreign trade and investment, but very few people benefited.

The OECD’s Business Climate Development Strategy for Egypt shows that although the overall economic situation has improved, many of the frustrations summed up in those two bits of English persist. The report assesses 12 key policy areas, ranging from investment and trade policy to tax, anti-corruption, infrastructure and human capital development.  

Presented in Cairo in November 2010, it concludes that: “the promised ‘trickle-down’ effect of positive growth into the poorer strata of the population has failed to materialise. At present, 20% of Egypt’s population remains below the World Bank’s poverty level.”

The unrest goes far beyond the poorest and a disaffected elite though. The Egyptian people’s legendary patience has finally snapped, even if they’ve kept their equally famous sense of humour. One sign seen in Tahrir Square said “Please go soon, my arms are getting sore holding this thing”. Another said “My name is Ahmad. I’d like to get married”.

In fact, Egyptians would read a lot into Ahmad’s sign. He may well be looking for a sweetheart, but even if he found one, it’s not sure they could get married. For that he’d need a job and a flat. Both are hard to come by. Officially, just over 9% of the workforce is unemployed, but as the OECD  report says, “the official rate of unemployment is likely to conceal considerable hidden unemployment and under-employment”.

In April 2009, Property Wire enthused that “The real estate sector in Egypt continues to perform well as there is a large gap between supply and demand”. Not everybody would agree with their definition of the prospect of continuing homelessness as a “positive outlook”, but some people at Moody’s might.

The ratings agency has just downgraded Egypt’s debt (and others will surely follow), because of the political instability of course, but also because of “concern that the policy response could undermine Egypt’s already weak public finances.” What that means is they’re afraid that as part of a deal, whatever government is in place maintains subsidies on energy and basic foodstuffs (5% and 2% of GDP, respectively), thereby making the budget deficit worse.

The OECD recommends moving away from subsidies too, and replacing them with direct income support. The main reason is clear – subsidies help even those who don’t need them, at the expense of the poor and other social programmes. But, “this requires a better performing population registry, a way to means test households and a more sophisticated payments system” and these are costly to create.

I’ll finish with some self-congratulation, followed by some self-criticism (self here being the OECD).

Don’t say we didn’t warn you. Page 50 of the report couldn’t be clearer: “Despite rising macroeconomic stability, the primary concern for Egyptian firms is – by far – political instability”.

Stop now if you don’t want to hear me whingeing.

I wish we wouldn’t use “trickle down”. It gives the impression that it’s OK for those at the top to stuff their faces as long as the poor can lick whatever dribbles down their chins. And another thing while I’m at it: nobody has ever been “lifted out of poverty” . They work damn hard to earn a bit more money.

Useful links

OECD work on Egypt

Patrick Love

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