Ali Massoud — The Egyptian Economy: More Towards Free-Markets or Back to the Public Sector?

Ali Massoud — The Egyptian Economy: More Towards Free-Markets or Back to the Public Sector?

 
Ali Massoud 2013Transcript of Ali Massoud’s talk at the Bratislava Austrian Economic Summit, given on June 24th, 2013. Transcribed and edited by Kenli S.

You follow the news, you watch the news, and you often find news regarding the political transformation in Egypt. But regarding economic transformation in Egypt, you don’t hear anything. Do you know why?

Audience: … because there’s no economy in Egypt?

Because, simply, we don’t care about economic transformation! No, in Egypt we only talk about politics. Do you know why? Because politicians want to gain for themselves, not for their people. If they really worried and cared about working for their people as they say they are… economic transformation would be seen in the same way as political transformation.

So, today I’m going to answer a very specific question regarding the Egyptian economy: Are we going more toward a free-market economy in Egypt? Going back to the revolution of January 21st? Or we are getting back to the public sector and socialism?

Background on the Egyptian Economy
Before answering this question, let me first give you a sense of some features of the Egyptian economy. First, GDP per capita in Egypt is just around $1,600. So it is a low-middle income country. Minerals and oil make up 15% of GDP. Agriculture, 14% of GDP. There are other sums here, like the Suez Canal and other sectors. Did you know that 47% of Egypt’s exports are oil? This is sometimes news to people.

Then there is something actually that hurts me very much: that in the world competitiveness report, Egypt stands at number 94. Out of how many countries? 142 countries. So it is not a competitive economy.

The informal economy accounts for almost one-third of the Egyptian economy. What is even more problematic about this is that 70% of the food industry belongs to the informal sector. Moreover, you have 4 million street vendors. I see them as future entrepreneurs, very good guys, working hard to make do with their small businesses. Nonetheless, it is informal.

Now, I tell you what, regarding the role of the public sector in Egypt. The public sector also makes up about one-third of Egypt’s GDP. In the minerals and oil sector, 89% belongs to the public sector. Why? It is the government! They want to make money! We can’t leave the minerals and oils to the private sector! We are the government, we distribute everything, so let’s put our hands in the oil and mineral sector. So, 89% of the mineral and oil sector actually belongs to the public sector.

Periods in Egypt’s economic history
Let me give you a little bit of historical background regarding the public sector in Egypt. We have three main periods.

The first period was the Nasser Period, which came after the July revolution. Before the July revolution of 1952, the Egyptian economy was a free-market economy. After the revolution, it turned 180 degrees. All main creative businesses were now nationalized by the government, and the government started to put itself in every area of production, in all sectors.

So this is the main feature of the Nasser Period: the public sector dominating every single thing, even making movies and things like tomato sauce! No businessman can actually get you a nice grilled onion. The government was to do it best.

The second period was the Sadat period, when we had what we called “Open-Door Politics”. I believe that Sadat was one of the greatest politicians in Egypt’s history. He had a long-term strategy and he thought out of the box. He said ‘OK, the public sector is not giving incentives for people to work very hard, and we have lots of problems as a result of public sector, so we should be more open to the international economy. We should encourage the private sector and discourage the public sector. Let the private sector lead economic development.’ This started with the Sadat period.

Whereas the Nasser Period was completely public sector oriented, during the Sadat period he tried to hold the public sector and move it towards the free-market. But guess what, he couldn’t do it all at once, why? Because all Egyptians look at the government like it is their mom. They are like young boys, they really depend on their moms. See, you cannot say “I will take your mom from you”, “I will take the government from you”. Thus Sadat said, that we first move only towards open market economy. We understand that, as Cris said, politics sometimes forces government and politicians to adopt wrong policies, even when they know they are wrong.

The third period was the Mubarak Period. During the Mubarak period, when we look at the relationship between the public sector and the private sector, we look at privatization. They started to privatize their public sector, and so on.