Patrick Werr: Wishful thinking for brighter year ahead in Egypt

Our columnist argues that the Egyptian government continues liberalising the economy by loosening prices and encouraging free trade.

Subsidies on essentials such as gas and food persist in Egypt, many of them disconnected from reality, Patrick Werr writes. Amr Abdallah Dalsh / Reuters

Here’s my wish list for the Egyptian economy in 2017.

First off is further liberalisation of the economy. After almost six years of resistance, the government last month took the bold decision to free the currency up entirely, no longer tying it to the US dollar.

In other words, it allowed the price to be determined by supply and demand. My wish is that the government press the liberalisation forward on new fronts.

Far too many prices are still determined by government decree – at levels that all too often have lost any relationship to reality, among them bread, sugar, apartments, petrol, diesel, electricity and the wheat, rice and cotton the government buys from farmers.

The calculus should no longer be how to maintain these prices, rather how to loosen them as quickly as possible, but in a way that minimises the pain for the poor. The government should get out of the price-fixing business altogether.

Second is that the whole of Egypt might be made into a giant free trade zone. Already some areas have been set aside for free trade in the idea that this spurs economic growth and creates jobs. So instead of raising tariffs to protect a few fossilised industries that can’t handle international competition, why not reduce tariffs to a minimum throughout the country to create a dynamic free market open to the world?

Rather than send millions of its citizens to work in free-market countries around the world, Egypt could bring the free market home to its citizens. Enormous wealth would flow in, especially to the area around the Suez Canal, which lies literally a stone’s throw from a good chunk of world trade.

Third, I would like for the government to get out of the real estate business. State-owned Misr Real Estate Assets, for example, owns nearly 700 properties around the country, including scores of historic buildings in Cairo and Alexandria that are disintegrating for lack of maintenance.

The state Holding Company for Tourism, Hotels and Cinema (HOTAC) and its subsidiary Egyptian General Organisation for Tourism and Hotels own a host of hotels around the country, many of them also historic, along with stakes in a dozens of smaller tourism companies.

The two companies have been tasked with preserving the historic nature of their hotels but several are shuttered and falling apart, while others have been very poorly renovated. Other government entities, including ministries, the central bank and public enterprises, have their own giant real estate portfolios.

The government needs money and it has proved to be a horrible hotel and real estate manager. Time for it to get out of the business.

Another wish of mine is that the government concentrate on expanding its mass transit systems, especially metro and light rail. Here, I don’t mean fancy bullet trains and monorails but normal lines that help the average person get to work. Cairo’s metro system has been overwhelmingly successful at lightening traffic on the city’s impossibly gridlocked streets. Let’s have more.

The beauty of metro projects is that they create thousands of jobs during their construction phase, while the completed lines have an immediate positive effect on economic growth. The third phase of Cairo’s third metro line, which extends westward across the Nile from downtown Cairo, is said to be employing 5,000 people. When it is completed, some of the congestion above ground will be relieved, shortening everyone’s commute. The World Bank, in a note released in 2014, estimated that congestion in the greater Cairo alone shaved about 3.6 percentage points off Egypt’s GDP.

Light rail could also help to ease Cairo’s congestion. About 40 years after it was begun, the distant suburb of Sixth of October has yet to be connected to Cairo by rail. Scores of other developments on either side of the city remain unconnected. Construction of new metro and light rail lines should jump the queue among Egypt’s other planned mega-projects. As a matter of fact, it should be given emergency status.

Other wishes for the new year include fast-tracking new mining regulations to make the exploitation of Egypt’s abundant mineral resources more attractive to investors, improving Egypt’s property registration system and focusing a bit more on preserving and investing in Egypt’s historical monuments, not just the Pharaonic and Islamic ones but also those of the 19th and early 20th centuries. There was massive destruction during the turmoil of the past six years.

And, oh yes, wouldn’t it be wonderful if some new antiquity discoveries were made that put Egypt back firmly on tourist maps?

Patrick Werr has worked as a financial writer in Egypt for 26 years.

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