Egypt's plan of action centers on unemployment, development
Egypt, Economics, 2/17/2001

Egypt's Prime Minster Atef Ebeid said that the government's plan of action centers on three issues: the joblessness, the balance between the state's resources and spending and increasing the growth rate to 7.8 percent.

Ebeid said that several positive indications were emerging and affirming the beginning of a breakthrough in the economic crisis, promising Egyptians they would sense the recovery in the next six months.

"In the next six months, both the people and the market will sense this improvement, especially after the measures adopted to control the exchange market and halt speculations and fluctuations," he told the editors-in-chief of the Egyptian press in an interview.

"The government also attaches great importance to the issue of unemployment and the creation of job opportunities and had actually completed an overall plan that will provide 150,000 new government and private sector jobs, 200,000 jobs in the small industries domain financed by the Social Fund For Development (SFD) in addition to 200,000 jobs to the graduates of training centers," he said.

"Another 200,000 jobs will be provided by the annual investments of the private sector set at L.E. 20 billion," he added.

Turning to the importance of the SFD and its role, Ebeid said it finances the construction of 1,000 clinics in 1,000 villages, with each village serving three neighbouring villages.

"The government stands firmly behind the Social fund and supports it by all means," he said.

He vowed to treat problems and shortcomings that could obstruct the fund's performance, whether in the system of finance, the choice of projects or the settlement of finances.

"Special units will be set up in each bank dealing with the Social fund to oversee the fund's transactions and dealings with the public, apart from the operations of the bank itself," he said.

"The central administration department will supervise this new system and its mechanisms," he added.

"Modernizing the system of education, involving schools, students and teachers is of paramount importance," Ebeid said.

He stressed the importance of the setting up of special schools for distinguished and gifted students.

"The immediate and efficient modernization of all sectors and all their employees within the Egyptian society is also another imperative," he said.

"There is no choice but to work seriously to achieve high and sustained growth rates to face up to the challenges of constant population growth," he added.

"The government, as it seeks to achieve high growth rates, works on the equitable distribution of incomes on the largest possible scale, and new mechanisms will be formed for this particular purpose," he said.

"The government will abide by full transparency concerning all its activities and spending and will regularly announce the statistics of available job opportunities," he added.

"Should one find it difficult to say that the Egyptian economy has reached the phase of strength, one can safely attest that it has surely transcended the phase of weakness," Ebeid said.

The Egyptian economy is not at all a weak economy, "we are working on giving it a driving force that will push it to the levels of strong economies," he added.

Ebeid told the chief editors that President Hosni Mubarak asked him to draw a mechanism to ensure the accurate and genuine flow of information without any exaggeration, on a regular basis to be available to all nationals.

He added that he will hold periodical meetings with them at short intervals, to brief citizens on the full facts.

He then dealt with some of the problems which cause concern to both government and people, the main one being the feasibility of maintaining the positive rate of development.

He noted that the amelioration of the in per capita income and promotion of the state resources are in fact the result of the Gross Domestic Product (GDP) of every country.

"We have to seek an ambitious rate of development of 8.7 percent while taking into consideration the 2 percent rate of the population growth and the 3.5 percent rate of inflation," he noted.

"Therefore to achieve genuine and effective development, it should exceed those two figures and at the same time we should work for controlling the population growth," he added.

Ebeid said that the Egyptian economy has recovered from the phase of weakness which required taking it to the physician, namely the International Monetary Fund (IMF).

He referred to the state need of foreign currency to cover its foreign commitments and requirements of raw material and basic commodities.

He noted that as long as there is need of foreign currency, stability should prevail the exchange market. "Instability weakens our competitive capabilities and increases cost of production," he said.

"Every country should fill the gap between resources and required services," he pointed out. "Loans are one of the means of filling the gap provided the loan and its service be within reasonable limits that could be easily met, and therefore there should be control of foreign indebtedness," he added.

On the issue of production, export and attracting investments into Egypt, Ebeid pointed out that increase in any country's income is inextricably linked to production - sold production not the stagnant one.

"Good production achieves sufficiency in the market, particularly the one that contains competitive local products," said Ebeid, adding such a sufficiency must have a surplus for export and that is why we should constantly work to boost exports.

"Egypt has a good chance to offer its products, commodities, services, insurance, tourism and labour in foreign markets," said Ebeid.

He said that the volume of money traded worldwide for foreign investments is $ 600 billion annually, from which the United States gets $ 200 billion, Europe $ 100 billion and Asia $ 150 billion, including China that gets $ 50 billion, while Africa gets only $ 5.5 billion, with $ 1.5 billion for Egypt.

This fact must spur us into activating direct investment in order to achieve our objectives, said Ebeid, calling for avoiding exaggerations or belittling ourselves.

Asked to describe the Egyptian economic reality at present, the Prime Minister said that frankly our economic reality has no weaknesses but it also has no driving force yet.

"We have controlled the great gap between resources and consumption and we also managed to decrease foreign debts from $ 43 billion to $ 26 billion," said Ebeid.

The inflation rate slumped from 23 percent to 3.2 percent and the balance of payment deficit from $ 2.3 billion to $ 550 billion, said Ebeid, adding that the foreign exchange reserve climbed from $ 200 million to $ 14 billion at present, which is enough to cover our imports for 10 months, in addition to a remarkable increase in bank deposits.

"However, there are some points necessary for any sound and strong economy and these are enjoyed by Egypt now like the good condition of utilities, availability of water grids, whether drinking water or that of agriculture and industry," said Ebeid.

He elaborated that there is only one weakness and that is the continued overpopulation and the ensuing devouring of growth rates as well as joblessness.

"Growth, export and the rehabilitation of capable and technical staff, together aim at realizing high production rates for high quality products at competitive prices and actual presence in the foreign markets," Ebeid said. "For the past four consecutive years, Egyptian imports ranged between $ 16 and 16.5 billion," he added.

Ebeid said that he would like to make it clear that the value of these imports represents an important market for Egypt, although it is the importer.

"The Egyptian product is to take up a large share of this market by producing goods capable of competing against those Egypt imports from the outside markets," he added.

"Some may ask why Egypt does not ban these imports, and the answer is that the global economy and signed agreements do not allow any intervention or banning," he said.

"Curbing imports, as I said before, comes by providing a good substitute, which comes as a result of policies and not decisions," he added.

In this respect, he referred to the end for a capable and strong banking system. "Also, our political, economic and social conditions must be attractive to foreign investments," he added.

Listing the priorities of future government action towards the achievement of the country's goals, Ebeid said "we can start with the issue of unemployment and take swift and serious action to solve this issue by creating job opportunities for those seeking them."

"The next priorities are modernization of the employment market, attraction of outside investments, working on guaranteeing political, economic and social stability, improving services and the stability of the foreign currency exchange," he added.

He urged for the holding of a national dialogue to work on the establishment of a solid and modern Egyptian society. "It is the cause of the nation as a whole, not just the government, as it cannot do it alone," he said.

As regard to the statement which describe unemployment as a time bomb and that the government speaks about new job opportunities but the problem is still there in each and every house, Dr. Ebeid said that President Mubarak, the state and the government are giving priority to this problem.

"Egypt's population is 65 million and the number of people of 16-60 years of age hits 18.2 million (28 per cent), while the number of jobless people hits 1.5 million according to the Central Agency for Public Mobilization and Statistics (CAPMS)," he added.

"Every year there are 600,000 job seekers, 40 percent of whom are females and 60 percent are males; the issue here is subject to supply and demand as applicants have to be up to the conditions required by employers and that is why we embarked on a comprehensive rehabilitation and training plan for applicants," he said.

The Petroleum Ministry provided training courses for 25,000 people last year in the fields of oil, information, electricity, agriculture, industry, military production and communications, he said, noting the ministry gives L.E. 150 per month for trainees.

Ebeid spoke about new job opportunities to be provided by new projects like schools, hospitals, sanitary drainage networks, roads, railway and bridges, noting that the government was investing L.E. 14 billion in these fields, with its economic bodies channeling another L.E. 7 billion. The projects, he said, would provide 200,000 jobs, in addition to the previously announced 150,000 jobs.

Ebeid said that the social Fund for Development (SFD) is playing an important role in the area of creating fresh jobs and development of small-scale industries.

"The government is standing by the SFD to the interest of the citizens," he said.

On questions raised at the People's Assembly on the issue of unemployment, Ebeid gave his government credit for being the first government that clearly and directly floated the issue of unemployment and admitted the size and dimensions of the problem.

"One dare say that the government has taken the initiative by compiling figures and information on this issue and even considered the experiments of other countries," he added.

Answering a query on the reasons of the economic crisis, the Prime Minister said that the last two years saw a slowdown in the market movement, Ebeid described the slowdown as unavoidable and, even, healthy.

But he strongly denied any planned or governmental-made deceleration. It was impossible to maintain the size of economic activity seen in the past three years and during which liquidity flowed free after a considerable production and stockpile were released into a tied market.

"The result was piling up the stock, in addition to accumulation of burdens," he expounded. Ebeid added that the banks did not consider the situation carefully, easing the procedures for giving loans.

Ebeid told the chief editors that, as a consequence, we heard of 'burning' commodities, due cheques, and bankruptcies. "All of these were negative phenomena that occur all-over the world," he added.

"Now, the government is being careful enough about small scale projects and big companies that small businesses depend on," Ebeid said.

"The mega projects are represented in banks, chemicals, communications, and medicines," he said. Those are industries that need enormous sums of money, big permits to consume their products and honed skills to operate.

Ebeid thought there were indicators that the slowdown of the Egyptian economy began to dwindle. For instance, he said, power consumption in the last year rose from 56.5 billion kilowatts to 60.5 billion kilowatts, especially in industrial power consumption fields.

"The cement production was up to 23.3 million tons from 2.2 million tons, and the number of tourists coming to Egypt rose from 4.97 million in 1999 to 5.26 million tourists in 2000," Dr. Ebeid said.

"The consumption of natural gas saw an upward movement as well to 14.6 million tons instead of 11 million tons," Ebeid said.

As for bank-related indicators, bank deposits reached L.E. 220.2 billion last year up from L.E. 201.6 billion in 1999 while money exchanging hands on the market upped from L.E. 234.5 billion in 1999 to L.E. 552.2 billion in 2000, Ebeid admitted that some businessmen though that the market was not seeing a boom, but, according to him, this was natural because those businessmen were unable to fulfil their bank obligations.

Asked that the government was the reason behind the financial crisis in Egypt because it did not pay its arrears, especially to reconstruction companies, Ebeid said such talks was not accurate.

The government is re-arranging the situation. It paid L.E. 9 billion in 1999 and L.E. 8.5 billion companies and L.E. 3 billion, for its electricity bills.

"The state spends L.E. 50 billion a year on education, health, roads, bridges, subsidies, defense, national security, police, power and water," Ebeid elaborated.

Also, Ebeid said that the foreign and internal debt service hits L.E. 25 billion a year while another L.E. 25 billion is channelled towards wages and salaries of civil servants.

As a whole, the output is up to L.E. 100 billion while the input of the Suez Canal, oil, apex bank revenues, taxes, customs is only L.E. 75 billion. What is required, Ebeid said, is to cover the gap between the resources and expenses through finding new resources and increasing the growth rate.

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