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  • Can Egypt Do Better at Business?

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    Peter Orszag
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    On March 13, Egypt will open a big economic development conference in Sharm el-Sheikh intended to show the world that it is fixing its economy and to attract foreign investment. The conference is pitched as a “key milestone of the government’s medium term economic development plan.”

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    On March 13, Egypt will open a big economic development conference in Sharm el-Sheikh intended to show the world that it is fixing its economy and to attract foreign investment. The conference is pitched as a “key milestone of the government’s medium term economic development plan.”

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    5 views2 pages

    Can Egypt Do Better at Business?

    Uploaded by

    Peter Orszag
    On March 13, Egypt will open a big economic development conference in Sharm el-Sheikh intended to show the world that it is fixing its economy and to attract foreign investment. The conference is pitched as a “key milestone of the government’s medium term economic development plan.”

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 2

    6/10/2015

    Can Egypt Do Better at Business? - Bloomberg View

    MID D L E E A S T

    CanEgyptDoBetteratBusiness?

    MAR9,201511:03AMEDT

    ByPeterR.Orszag

    aA

    OnMarch13,EgyptwillopenabigeconomicdevelopmentconferenceinSharmelSheikh
    intendedtoshowtheworldthatitisfixingitseconomyandtoattractforeigninvestment.The
    conferenceispitchedasakeymilestoneofthegovernmentsmediumtermeconomic
    developmentplan.
    Withapopulationofmorethan80millionandthegeographicadvantageofbeingsituatedbetween
    AsiaandEurope,Egypthastheoreticallystrongmediumandlongtermeconomicprospects.In
    reality,though,economicperformancehasdisappointed.Forseveralyearsaftertherevolution,
    growthwasstuckatabout2percent.Today,theunemploymentrateisabove13percent,
    governmentdebthoversaround90percentofgrossdomesticproduct,andinflationisabout10
    percent.
    Intherunuptotheconference(atwhichIwillspeak),theInternationalMonetaryFundreleaseda
    majorreviewoftheEgyptianeconomy,whichprojectedgrowthofmorethan4percentfornext
    yearandalmost5percentby2018.IMFprojectionsarecertainlynoguaranteeofarosyfuturefor
    thepastseveralyears,they'vebeenconsistentlyoveroptimistic.InApril2012,theIMFprojected
    Egyptiangrowthin2014wouldreach5percentanditturnedouttobelessthanhalfthat.
    Egyptcanindeedrealizeitseconomicpotential,howeveraslongasthegovernmentcontinues
    withreforms,thebusinessenvironmentimproves,theexchangeratedepreciates,andmorewomen
    areencouragedtoentertheworkforce.Thatsalonglistofconditions,butnotunachievable.
    PresidentAbdelFattahElSisihasalreadycarriedoutsomeneededeconomicreforms.Hehas
    reducedthecountry'sexcessive,regressivefuelsubsidies,whichhavepulledresourcesinto
    http://www.bloombergview.com/articles/2015-03-09/can-egypt-do-better-at-business-than-democracy-

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    6/10/2015

    Can Egypt Do Better at Business? - Bloomberg View

    energyintensivesectors.Thishasmeantpriceincreasesof40percentto80percentonfuel
    productsajumpthat'sbeencushionedbytheglobaldeclineinoilprices.Theregimehasalso
    raisedtobaccoandalcoholtaxes,introducedataxondividendsandcapitalgains,andimposeda
    new5percenttaxonhighincomes.Thesechangesarealltothegood.Achieving5percentoreven
    6percentgrowth,however,willrequiremoreaction,inadditiontotheeffortsbeingplannedto
    phaseoutenergysubsidies.
    Oneimperativeistoimprovethebusinessenvironment.Egyptranked112thoutof189countries
    intheWorldBank's2015surveyonplacestodobusiness.Thedevelopmentconferenceismeant
    tosignalthatthegovernmentisworkinghardtoattractforeigninvestment,includingbycracking
    downoncorruption,passinganewinvestmentlawandstreamliningthebureaucracy.
    ThegovernmentalsoneedstoallowtheEgyptianpoundtoadjustfurther,bylooseningor
    eliminatingtheinformalpegtothedollar.Lastyear'scurrentaccountdeficit(excludinggrants
    fromothercountries)amountedto5percentofGDP.InflationisrunninghigherinEgyptthanin
    itstradingpartners,andthat'scausingarealappreciationoftheexchangerate.Theeconomist
    CarolineFreund,atthePetersonInstituteforInternationalEconomics,estimatesthatEgyptian
    exportsareonlyaboutathirdofwhattheyshouldbe.Freundalsosaysthecurrencyshould
    depreciateby20percentto30percenttohelpboostforeigninvestment,exportsandtourism.
    Athirdimperativeistoboostthenumberofwomenintheworkforce.Onlyabout25percentof
    Egypt'swomenareinitnow,placingthecountry136thoutof142onthismeasure,accordingto
    the2014GlobalGenderGapReport.It'shardtoboosteconomicgrowthwhenhalfthepotential
    workforceparticipatesatsuchalowrate.(Interestingly,inEgypt,thewomenwhodoworkearn
    almostasmuchasotherwisesimilarmenonthismeasure,Egyptranked12thintheworld.)
    ArosyfinancialfutureforEgyptisbynomeansguaranteed,butwithcontinuedboldreforms,the
    IMFsoptimismonEgyptmaythistimeprovewarranted.
    Tocontacttheauthoronthisstory:
    PeterOrszagatporszag3@bloomberg.net
    Tocontacttheeditoronthisstory:
    MaryDuenwaldatmduenwald@bloomberg.net

    http://www.bloombergview.com/articles/2015-03-09/can-egypt-do-better-at-business-than-democracy-

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