x Abu Dhabi, UAESunday 23 July 2017

Economic woes at the core of Egypt's struggle

Egypt's GDP has quadrupled in the last three decades.Even at the height of the financial crisis, Egypt's economy grew by five per cent. Why then, have so many Egyptians taken to the streets?

Egypt shows that not all growth trickles down. The economic liberalisation the country has pursued for 30 years - aggressively so in the past five years - has created wealth but not an expansion of opportunity. Rather than address economic inequalities, many of Egypt's market reforms appear to have compounded them. Ending taxes on inheritance and on capital gains in property transactions, for instance, have made the government less involved in the economy but have created few gains for the majority of Egypt's people.

There are many new millionaires in Egypt but too few of them have become wealthy by creating jobs for their countrymen.What's worse, Egypt's poor have fallen behind their counterparts in other parts of the developing world. Literacy rates have risen in the past three decades but remain stubbornly low, limiting the contribution millions of Egyptians can make in a global economy.

It is telling that the two groups who report the highest levels of financial anxiety come from very different places in Egypt's economic spectrum, according to a recent survey by Credit Suisse. It is no surprise that the poorest Egyptians are frustrated by rising food prices; the average Egyptian now spends 40 per cent of his or her income on food. What's more revealing is that those squarely in Egypt's upper middle class are the most pessimistic about their economic future.

Corruption remains a daily burden, but also an impediment to better jobs and a better life. While many of the government's functions have been transferred to the private sector in the past five years, the culture of bribes and back-room deals has movedalong with them. In too many parts of Egypt's economy, personal connections are prized far more than talent and industry.

Corruption has corroded Egypt's capacity to make the most of its historic and geo-political advantages. The country earns $10 billion in revenues from tourism, $5 billion from duties on cargo passing through the Suez Canal, and close to $2 billion in aid from the United States per year. That revenue has meant little for most Egyptians, however, because their government has made such a feeble effortatpromoting opportunity.

Whatever course the Egyptian people choose, the road ahead will be painful. And as the country's millions of young people enter the labour market in the coming years, a massive economic re-think will be in order, no matter who leads the country.