Egypt Economic Development Conference ignores underlying issues
The Egypt Economic Development Conference this past weekend drew 1,700 investors and government leaders from 90 countries to Egypt’s resort town of Sharm El-Sheikh. The conference brought Egypt’s struggling economy to the forefront, as President Abdel Fattah Al Sisi called upon world leaders to invest in new government-led business reforms. Though Egypt was able to secure billions in donations for grand real estate and energy plans, the conference did little to address the underlying socio-economic problems that plague average Egyptians.
The Egypt Economic Development Conference held in Sharm El-Sheikh from March 13th to 15th was hosted by the Egyptian government to showcase “medium term economic development plans” to boost its struggling economy. Top international leaders, investors, and consultants gathered for three days of discussions regarding steps to generate greater foreign capital into Egypt.
In the run-up to the event, the Egyptian parliament ratified a new law that cuts the rate at which it taxes income, including more efficient mechanisms to resolve commercial disputes.
While the government was able to secure more than $138 billion in investment from foreign donors within the first two days of the event, critics note that the investment plans do little to tackle long-term economic challenges that plague Egyptian society.
Foreign Investment Boost
One of the highlights from the event was the government’s unveiling of grand economic projects to “revitalize” the country. Officials announced plans to build a massive administrative and business center in east Cairo with the help of the United Arab Emirates.
This “city of the future” is projected to hold 7 million people including 2,000 schools and colleges, the Egyptian Parliament and all foreign embassies. The project seeks to create a completely sustainable and modern city, making the idea of doing business in Egypt more attractive to outsiders while also creating over 1.5 million jobs. It is expected to cost $45 billion.
The conference program also listed 31 energy and mining projects and 32 housing and utilities projects to improve the quality of living and doing business in the country. In his opening speech, Egypt President Abdel Fattah Al Sisi said Egypt needed at least $100 billion to jump-start these projects and encourage foreign investment.
He described the challenges of Egypt’s economic situation, saying “We are behind, and those who are late must either speed walk or run,” he said. “Even running will not be enough in our case.”
The conference did allow Egypt to generate billions in foreign donations.The large majority of investments secured over the weekend were from Gulf states and energy companies.
Saudi Arabia, the UAE, Kuwait, and Oman pledged a combined total of $9.5 billion and $3 billion in Central Bank deposits to reduce government deficit. Private sector investments totaled $33 billion, two-thirds of which came from energy companies such as British BP, the Italian ENI and the German Siemens International.
Underlying Troubles
Critics of the conference point to the government’s failure to address immediate socio-economic troubles that plague Egyptian society. While grand investment plans are likely to bring in foreign capital, the money is unlikely to have a large impact on longer-term unemployment, education, and health challenges.
Currently unemployment in the country stands at 12.9%. Among the many grievances associated with the Arab Spring revolt in 2011 was a lack of jobs for youths. Avoiding this employment challenge risks perpetuating discontent among the masses. Malnutrition is also afflicting a third of children across the country.
Large-scale construction projects outlined by the government are unlikely to effectively solve this issue.
Expert Omar Shenety, an analyst at the Multiples Group consultancy explains: “When you build a residential compound, you get to employ a few people for the period of time during the construction, you get to support the construction industry. But once the compound is released, it is done, and the billions of dollars that have been in the banking system are frozen in buildings and lavish villas.”
Government corruption and cited human rights abuses also hinders the kind of progressive development President Al Sisi calls for in the conference.
Security concerns pose additional political risk to future investors, as Cairo averages four bombings per day and security forces continue to battle Islamic militants in the Sinai.
The delay of parliamentary elections that were supposed to happen this March could also have a negative effect on external investment. Political stability is key for economic prosperity and international perception of a nation’s market credibility.
Positive Steps Forward
In the end, Egypt’s grand economic conference did much to project an image of a stable, forwarding thinking government hoping to make investment in Egyptian capital easier for outsiders.
The billions in contributions made over the weekend is a show of accomplishment for the government in its fundraising efforts. New energy and housing projects are likely to stimulate short-term growth which could create a more stable, less restless society.
However, if Egypt wishes to see longer term prosperity it must work hard to tackle domestic troubles to improve the lives of average citizens. This requires holding free and fair elections, and working hard to create a robust but transparent federal government to maintain economic legitimacy amongst the international community.
