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Egypt suffered severe economic problems during the 1950s to late 1980s. This
led the Government of Egypt (GOE) to conclude an agreement with the
International Monetary Fund (IMF) and World bank known as Economic Reform
and Structural Adjustment Program (ERSAP). Due to some bureaucratic
obstacles, the reforms were either distorted from their proper course or not
applied in due time. The ERSAP, therefore, has not yielded fruitful success
and has led to some social problems, namely increases in Egypt's rates of
poverty.
Egypt, as Sullivan argues, suffered from severe macro-economic imbalances,
the main of which were ballooning deficits in budget and balance of payments
during the period of 1950s until the late 1980s.[1] Most of these problems
resulted from the government's considerable reluctance in pursuing the
proper and required economic reforms for fear of repetition of 1977 riots
due to their social implications (Sullivan, 1999). The economy was mainly
dependent on rents such as Suez Canal fees, oil earnings, worker
remittances, tourism, foreign debts and grants (Bromley & Bush, 1994). This
provides a continual flow of funds that also delayed the urgency to adopt
such reform policies. In addition, the absence of a clear strategic vision
concerning the path the country should follow to pursue the reforms (whether
socialist, capitalist or Islamist) was evident (Sullivan, 1999). This gave
room to IFIs (particularly IMF and USAID) to impose their visions on the
reform policies adopted in Egypt from early 1990s (Mitchell, 1999).
As background, the GOE in May 1991 concluded agreements with the IMF and the
World Bank known as ERSAP, which aimed at rectifying the macroeconomic
imbalances. These agreements assumed that economic growth and development
were best secured by allowing the market to reveal the comparative advantage
that the country enjoyed. Once prices were free and institutional barriers
removed, Egypt, or rather its private sector agents, would discover their
comparative advantage through the market. Given this opportunity, the
supply-side of the economy would respond appropriately. The result of such
action would be minimized socio-economic inequalities (Bromley & Bush,
1994).[2]
The ERSAP undoubtedly yielded some initial success according to Richards and
Waterbury (P: 250), while Mitchell argues whether they are real and direct
(P: 456). Economic policy does not work in vacuum. The surrounding
bureaucratic environment plays a vital role in any reform process. As the
administrative apparatus is responsible for pursuance and application of the
proposed reforms, it maintains the capacity to facilitate or hinder them. As
for the Egyptian case, the administrative body exerted all its efforts to
delay the pace of reform process. As top-level bureaucratic officers had
their own self interests which might contradict with the objectives of ERSAP
and protect their positions, they fought for not applying the reform
policies, or even delay them (Sullivan, 1999). They also cannot take serious
decisions for fear of responsibility.
The other striking element is the absence of a clear vision for the reform
process among different ministries in Egypt, as short term policies were the
dominant factor in this regard. The absence of political will for reform
accompanied with the reluctance of the bureaucratic apparatus to act were
responsible for delaying the reform process or at the least making it on a
gradual basis. The inter-ministerial struggles illustrate how each ministry
tried not to render any of its powers or responsibilities to other
ministries (Sullivan, 1999).
The third element was the struggle between the IFIs administrative staff
(mainly USAID officials) and the Egyptian bureaucrats. The USAID officials
insisted on rapid and extensive changes that must be adopted by the Egyptian
government, while the Egyptian bureaucrats were convinced of the gradual
application of reforms due the so-called special nature of Egyptian society
(Sullivan, 1999). As IFIs have a certain prescription that is described for
all countries regardless of the surrounding circumstances of each specific
country, some experts[3] also question the real benefits of trade
liberalization and tariff cuts for developing countries. Were these measures
enough to guarantee distribution of benefits between advanced and developing
countries? This typically explains the reasons behind reluctance of the
Egyptian bureaucracy to pursue the reforms suggested by these institutions.
The other problems of the administrative body in Egypt greatly hampered the
reforms. The lack of transparency and spread of corruption among members of
this body (Richards & Waterbury, 2008) were evident and publicized. This led
to negative practices for and serious implications on the privatization
program.
Due to all these obstacles on applying the ERSAP program, the program has
only partially achieved its proposed goals. Although it was initially
designed to generate an export boom, the main achievement was only a real
estate explosion (Mitchell, 1999). The expected effect of any reform program
is to create new projects generating new job opportunities, which has not
happened in Egypt. Most investments flowed to infrastructure projects
(Richards & Waterbury, 2008), and Toshka also absorbed a great deal of such
funds. The government abandonment of full employment policy for university
graduates, coupled with cuts in public spending, led to spread of poverty
among the vulnerable groups in the society.
Despite the very high economic growth rate of 7.1 in 2007 according to IMF,
the people in Egypt do not feel the fruitful results of such growth. The
main reason is the inequality in distributing the resulted gains. Egypt
still faces the same problems of high inflation rate (19 per cent in the
monthly average in May 2008 according to CAPMAS data) and high gross
domestic public debt as percent of GDP (67.5 per cent in June 2007 on annual
basis)[4].
In conclusion, the main obstacle to reform in Egypt, therefore, may not be
economic but institutional. Human development is a key element in any reform
program (Sullivan, 1999), as high illiteracy rate leads to greatly lower the
skills of labor (Richards & Waterbury, 2008). The key overhaul of this
situation, thus, is to provide suitable training for bureaucrats. Moreover,
some suggest a political revolution that may lead to an administrative
reform in order to gain the desired results of economic reform (Sullivan,
1999). Without these two measures, Egypt will hardly gain any economic
success.
REFERNCES
Bromley, Simon & Bush, Ray. 1994. "Adjustment in Egypt? The Political
Economy of Reform". Review of African Political Economy 60 (June): 201-213.
Korayem, K. 1997. Egypt's Economic Reform and Structural Adjustment (ERSAP).
Cairo: ECES.
Lofgren, H. 1993. "Egypt's Program for Stabilization and Structural
Adjustment: An Assessment". Cairo Papers in Social Science, 16(3): 20-37.
Mitchell, Timothy. 1999. "No Factories, No Problems: The Logic of
Neo-Liberalism in Egypt". Review of African Political Economy 26/82
(December): 455-468.
Richards, A & J. Waterbury. 2008. "Re-mixing the Market and the State" in A
Political Economy of the Middle East: State, Class, and Economic
Development, 3rd edition. Boulder Colorado: Westview. (pp: 248-252)
Sullivan, Denis. 1990. "The Political Economy of Reform in Egypt".
International Middle East Studies 22/3 (August): 317-334.
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[1] For a complete picture for the bleak economic situation during this
period, see also:
- Richards, A & J. Waterbury, 2008. "Re-mixing the Market and the State" in
A Political Economy of the Middle East: State, Class, and Economic
Development, 3rd edition. Boulder Colorado: Westview. (pp: 248-252)
- Mitchell, Timothy. 1999. "No Factories, No Problems: The Logic of
Neo-Liberalism in Egypt". Review of African Political Economy 26/82
(December): 455-468. (pp: 457-459).
[2] For details of this program, see:
- Korayem, K. 1997. Egypt's Economic Reform and Structural Adjustment
(ERSAP). Cairo: ECES.
- Lofgren, H. 1993. "Egypt's Program for Stabilization and Structural
Adjustment: An Assessment". Cairo Papers in Social Science, 16(3): 20-37.
[3] Dr. Mustafa Kamil ElSaaid, an ex-Minister of Economics, Al-Masry
Al-Youm, a daily Egyptian newspaper, 30/6/2008.
[4] Ministry of Finance, The Financial Monthly, May 2008. Vol. 3, No. 7.
(P: 4).
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