EGYPT should be a good market for Australian trade, but the failure to press ahead with economic reforms by the Egyptian Government is stalling economic development in the region.
EGYPT should be a good market for Australian trade, but the failure to press ahead with economic reforms by the Egyptian Government is stalling economic development in the region.
Australian Ambassador to Egypt Rob Newton said the road to economic reform in Egypt had progressed in the early to mid 1990s but has since been halted, to the detriment of foreign investment in Egypt.
“Investment in the last couple of years has dropped alarmingly. Last year it was around $700 million, but two or three years ago, it was up around $2 billion,” Mr Newton said.
“That is a very clear signal of international concern and dissatisfaction with the way that the economy is being managed.”
He said the large subsidies the government handed out, particularly for oil and wheat-based products, far exceeded the revenue collected.
And public service salaries had proved a major drain on government financial resources, contributing to a major fiscal deficit and slow economic growth.
“The fiscal deficit the government now faces is alarming … it is up around 6.4 per cent,” Mr Newton said.
“A couple of years ago it was up around 3.4 per cent. If the government does nothing about that, this year it will go beyond 7 per cent.”
The average rate of economic growth in Egypt has averaged 2 per cent in the last few years, but an economic growth rate of 6 per cent would be required to ensure there were enough jobs for Egypt’s growing workforce, the ambassador said.
Another area of concern, according to Mr Newton, is Egypt’s tariff policy. Egypt has 21 different tariff bans, compared with most countries’ two or three.
To combat these issues, Mr Newton suggested the Egyptian Government should address the issues of tariffs and undertake reform in the banking sector by privatising the country’s 22 joint venture banks, which are owned partly by government private entities.
However, Mr Newton remained upbeat about Egypt’s prospects, despite the current situation in regional and domestic affairs — particularly the Israel-Palestine Road Map, which he described as a “long shot” and the aftermath of the war in Iraq.
“I think it [economic reform] will come, but it’s not coming now,” he said.
“It’s not coming now because the government, in my view, is unhappy with the political and strategic, regional and domestic context in which it is working.”
However, Mr Newton said there were many positives in Egypt.
Foreign reserve levels were “quite healthy at about $14.2 billion dollars back in February this year”.
He said significant levels of foreign debt had been forgiven by countries, including Australia, following Egypt’s involvement in Desert Storm in 1991.
While opportunities in Egypt for Australia remain in the primary industries such as gas, resources and agribusiness, Mr Newton said other areas were emerging as major sources of opportunities.
Education was a key area in which Australia could promote itself as an alternative to destinations such as the US and Europe, which “are no longer as palatable as they once were”.
ICT was another area that Australia could promote itself as a provider of high tech goods and services, he said.
