Five Challenges facing the Economic Conference in Sharm El-Sheikh: Ziad Bahaa-Eldin

Expectations are running high, as Egyptians anticipate tangible improvements as soon as the economic conference is over.

And they are right. The official discourse and the local media have raised hopes tremendously and portrayed the conference as an end rather than a means.

In fact, the conference poses five challenges to the Government.

The first is to handle with these high expectations with honesty and to temper the enthusiasm by the media and various officials who have led the public to believe that simply filling up the conference hall and discussing billion-dollar projects is enough to improve citizens’ living conditions, as that high prices, unemployment, and the cooking gas crisis will all be resolved between Friday and Sunday. A realistic view is necessary to avoid popular frustration when these problems persist even after the guests go home.

The second challenge is identifying the purpose of the conference and a benchmark for its success. Some background may be useful here. In late 2013 when the idea of an international conference was first floated, to coincide with the completion of the constitutional roadmap, the objective was to mobilize the support of countries and international financial institutions for the rehabilitation and revamping of Egypt’s infrastructure and public services.

With time, however, the focus gradually shifted from financing infrastructure through grants and soft loans to attracting private investment and promoting commercial ventures. This change occurred in response to domestic media, which deemed a donor conference as unbefitting, as well as to the desire of Arab Gulf states that wanted the conference to address private-sector investment issues, not only government finance. Regardless of the reasons, the focus on investment may affect the state’s ability to finance infrastructure projects through loans and grants as was originally expected.

Thirdly, the conference should not only showcase investment and business opportunities. Instead, the government should seize the chance to outline its medium and long-term economic policy, especially in regard to the budget deficit, prices, the currency market, the tax regime, public spending priorities, the state’s role in economic activity, and the growing unemployment. This would inform investors and the Egyptian public of the course the state intends to pursue in its management of the country’s affairs, a message I believe to be much more important than highlighting investment opportunities.

Professional investors don’t expect the government of any country to lay out available business opportunities; they are usually well-informed in such matters. They come to such conferences seeking an understanding of the state’s economic orientation and public policies, in order to enable them to better assess potential risks and rewards.

The fourth challenge is to clarify the state’s social policy, even in a conference largely aimed at major, private-sector investors. Before the January revolution, Egypt successfully improved national economic indicators, increased growth, employment, and currency reserves, opened new fields to foreign investment, and raised the country’s credit rating. But in the absence of a clear social policy and instruments to fairly distribute the fruits of growth, the poverty rate increased, public services collapsed, and income, opportunities, and resources become more inequitably distributed.

That’s why immediately after the January revolution poverty and social justice became a dominant issue for all political parties and a major theme in all parliamentary and presidential elections. As this enthusiasm waned, the focus again turned to attracting large investments with the provision of tax breaks and benefits to spur the growth rate, with little regard for the social policies that must accompany such measures. Even the Ministry of Social Solidarity’s most recent welfare programs and the Ministry of Supply’s new moves to shore up food subsidies received little attention.

The priority seems once more to encourage investment while offering palliatives and aid to the poor, instead of a vision that frames social welfare as the right of every citizen to a share of national wealth, resources, services, and opportunities. And although the audience at Sharm al-Sheikh is large investors and global corporations, it is necessary to affirm the state’s adherence to a clearly defined social policy because all of Egypt is a party to the conference, even if few Egyptians are present.

The fifth and final challenge rests with the investment draft law, several versions of which have been penned over the past months by the Ministry of Investment and the Ministry of Transitional Justice. The final draft published in the press this week should be considered more closely before ratification: it includes articles that could open the door to favoritism by granting incentives without clear guidelines, allocating investment lands without regard for laws designed to protect public monies, and allowing the Investment Authority oversight of investment projects, which runs counter to the prerogatives of specialised government bodies. The law requires further study, and there’s no need to rush it just for the conference.

Wishing the conference success in realizing the hopes and aspirations of the Egyptian people.

About the Writer:

Ziad Bahaa-Eldin holds a PhD in financial law from the London School of Economics. He is a former deputy prime minister, former chairman of the Egyptian Financial Supervisory Authority and former chairman of the General Authority for Investments.

This article was published in Arabic in El-Shorouq newspaper on Tuesday 10 March.

Source: Ahram Online