The Performance of the Egyptian Economy after the January
Revolution 2011
Urgent Tasks and Alternative Strategies
Dr. Salwa Alantary *
Nowadays, The Egyptian economy suffers from a range of critical problems
addressing directly each citizen in his/her daily life, as the high rates of
unemployment, low income levels, high level of prices in general, problems of power
outages, gasoline and solar crises, shortage of oil and rice subsidies which are paved
by the provision card, and shortage of some types of medicines especially the
imported are all hard life experience faced by the overwhelming majority of the
Egyptian families. Despite confessing the enormity of the current problems of the
Egyptian economy, it should be emphasized that these problems are a result of the
economic policies nature, which was more exacerbated by the poor management of
the transitional period by the Supreme Council of the Armed Forces (SCAF),
especially concerning the security chaos, and the tourism and financial policy file, to
make the situation worse under the rule of the Muslims brotherhood, which represents
one effective factor for the second stream of the Egyptian Revolution on 30th of
June,2013.
First: The Applied Economic Policies before January Revolution:
Over the past decades, the capitalism management approach for the Egyptian
economy proved its inability to achieve the comprehensible development, and its
ability to respond to the broad ambitious of the Egyptians for a transmit move
includes all aspects of economic, social, and political life, and suits the real material
and human resources of Egypt.
Over the past three decades, the applied economic policies proved that the Egyptian
society depends on the outside world in the provisions of the basic needs of food,
industrial products, and capital goods. The weakness of the economic situation
appeared in the inability of the Egyptian exports of goods and services outcome,
including the Suez Canal revenues, tourism, and remittances from the Egyptians
working abroad, to cover the total payments of goods and services imports.
* Ex-General manger of the Economic research and strategic plan in the National Bank of Egypt.
Since the mid-nineties, the Economic policy depends on stopping the shortage of the
foreign capital flows, whether for purchasing the offered projects for privatization,
Or to takeover a governor share in the projects list ( included as direct investments),
or dealing in the stock market, and lending the Egyptian government through the IPO
in bills and treasury bonds.(Which is called indirect investments or filed investments).
In a system, where the state withdraw from the economic activity, On one hand, the
privatization policy and the power-wealth matching on the other hand, create monopolies in
local and foreign- controlled sectors of production and distribution, chasing to dominate
sectors of education, health, and services of public utilities, as well as imposing the prices for
goods and services toppling the purchasing power of the Egyptian pound, and the standard
living of the majority Egyptian citizens. In fact, the Egyptian model of growth crisis was
reflected in the monopolies allied with the state's power creates a main obstacle for the private
sector growth , and expanding the broad base of small and medium projects.
The crises of the Egyptian capitalist system was reflected in focusing on projects with capitalintensive and energy-intensive, contrasting with the main Egyptian society characteristics, as
man power availability, high rates of unemployment which is considered as wasting the
natural and useful resources, and the infringement of the future generations right in those
resources. The investments mainly concentrated in Cairo, Alexandria, and major cities in
Lower Egypt, in clear bias of rural areas on one hand, and Delta and Upper Egypt and other
borders governments on the other hand. It was not only regarding the private sector, but also
general pattern of the government investments in the fields of education, health, transport,
water, sanitation, and other public services and utilities. Beside the low rate of the government
investments, the vast majority of these investments were concentrated in Cairo, Alexandria,
and the major cities too. It was normal for such type of investment pattern proving its
disability for creating equal job opportunities, and providing a decent life for all the Egyptians
in rural and urban areas.
Under an economic policies promoted by the new liberal principles known as Washington
Acceptance, under the leadership of the International Monetary Fund (I.M.F.), National Bank,
and U.S.A Treasury minister, The Egyptian economic growth reflects the deteriorating of the
working class conditions as a result of the privatization policies, closing the industries, a lot of
workers have been under the penalty of early retirement almost compulsively, forcing others
to temporary work, depriving them of social insurance, and labor rights, and absence of a
minimum wage ensure a decent life for the worker.
The peasants conditions as well has deteriorated, as a result of the rental relationship and its
raising to more than fifty times, the termination of stable period leases, the land looting of the
agricultural reform farmers with advance between the official institutions and powerful
landowners, reducing the role of cooperatives in providing the production requirements and
marketing the agricultural crops, and cancelling the role of these cooperatives in agricultural
finance. Suffering was not only on workers and peasants but also it has spread to large
segments of professionals, craftsmen, and owners of the small and medium projects, who
could not stand unemployment, local monopolies, foreign competition, corruption, imposing
tax, government markets' chaos, and the high prices.
Before the Revolution outbreak, the overall picture of the income distribution in Egypt was
confirming this suffering, and to indicate clearly that whatever the high growth rates under the
Mubarak regime, the vast population majority did not feel the its affects, or enjoy a fair share
of the achieved result. The applied economic policies showed the continuous decrease in the
wages' share of G.D.P. to be limited to 26% versus 74% for ownership returns, and the
extreme inequality in the share of the different population segments of the income and the
total expenditure to made the percentage of the poor people living on less than $2/ day to 43%
of the total population, according to official rates, in spite that all those numbers reflects the
keen of covering the defects.
Second: The Economic Situation after the Revolution:
The mismanagement of the transitional period revealed the weakness of the economic
situations. Under the imposing of any restrictions on the movement of foreign capital, and
during the first months of the revolution showed that about 9 billion dollars of the country's
money forms the country's foreign sales including their treasury bills and their financial
papers in the stock market. The security chaos and the irresponsible statements of the Islamic
political extremist figures resulted in a sharp decline of the tourist income, and the direct
investment flows. With the continuous need of importing the basic commodities and the
absence of any attempt to ban the import of luxury goods or goods with alternative local one,
or to reduce the travel for Hajj and minor hajj, It was normal that the decline in the foreign
exchange resources resulted in a deficit in the balance of payments, translating immediately
the Official international reserves of Egypt's withdraw that have been used to settle the deficit.
It is known to any society that the international reserves are considered as "savings" in foreign
exchange which is kept out of precaution to be used in coping with any emergency
circumstances, where the foreign resources are insufficient to meet the necessary
commitments represented in the basic commodities imports, and external debts payments.
Thus, the situation showed the decline of Egypt's international reserves balance of foreign
exchange of 35 billion dollars to 1.18 billion dollars between January and December 2011.
On the other hand, the insecurity chaos impact negatively on the movement of goods and
production inputs, and prevent the work regularity in many factories that closed down, or
reduced operating rates. Beside, the continuation of protests among the working class and
low-income segments of the society, under the lack of response of the successive
governments to the demands for a decent minimum wages, and inability to control the market
and prices, or even ensure the supply of the major goods as bread and butane pipe for the
broad population segments. All this has led to the decline of the Egyptian economic growth
rate during the financial year ended on June 2011 to be around 9.1 % versus 5.1% during the
compared financial year.
The expectations (or hopes) were for the Egyptian economy restores its ability to recover
within short period, especially since it is the contrary to what is usually associated with
revolutions of demolition and destruction. The Egyptian revolution was characterized by the
maintain of the full productive structure and infrastructure, with the exception of the gas line
in Sinai, none of the factors, or water or electricity stations were exposed to demolition or
destruction. However, the continuous insecurity, political instability, and mismanagement –
particularly in relation to tourism file and state budget- have led to the continuation of the low
growth rates, rising unemployment, continuous exodus of the foreign capitals, and the decline
of the tourism resources, and thus continuing the decline in Egypt international reserves.
A lot of Egyptian economics- having different attitudes- presented their vision for urgent
procedures to counter the economic crises, and the alternative economic policies to be
followed in the medium and long term, to restructure the Egyptian economy to achieve
control over the terms of sustainable development, raising the standard living of a broad
category of citizens achieving their hopes for a decent living, and a fair share of income and
wealth. However, with the Muslim brotherhood's power given, the stated declared policy to
face the problems of the Egyptian economy was simply by borrowing from abroad, like
borrowing from the I.M.F. became a vital goal looking forward to achieve, to be the way or
beginning of the expanding borrowing from the international market. Moreover, the resorting
to Qatar, Turkey, Saudi Arabia, and Libya for urgent loans totaling more than 10 billion
dollars, increasing Egypt's external debt by more than 30 % in less than a year.
Although the electoral program of the Muslim Brotherhood President focused on the
Economic Renaissance project, new investments of 200 billion dollars, and the reclamation of
a million acres "ready for panting immediately", the practical reality proved the inexistence of
the renaissance project, and the absence of any alternative economic vision, Where the
brotherhood's government proceeded to apply the same economic policies of Mubarak's
regime, by the same social partiality. In fact, the worst thing is that they applied those policies
with much less efficient than Mubarak's regime, represented particularly in the policies to
reduce the deficit of the state budget, the new tax law, and the position of the external debts.
1- Policies to Reduce the Deficit of the State Budget:
It is known that the state budget is the list, which includes on one hand the Governmental
expenditure and the revenue sources to cover that expenditure on the other hand. Since the
late nineties, the state budget in Egypt suffers a growing deficit which is covered by
borrowing money through various debt instruments, headed by bills and treasury bonds. The
successive governments have relied on the existence of this deficit in the State budget to
justify the reduction in the public expenditure on health, education, transport, public utilities,
and low-income housing, as well as the failure to establish a minimum wage ensuring a
decent life for the State administration workers. The usually common say quoted by the
government officials is "where are the necessary resources to achieve all of this? The eyes can
see but the hands are short ".
It should be noted that the main items of the expenditure in the State budget in Egypt are
presented in the workers' wages item in the government body (about 6.5 million workers), and
the benefits of the huge public debt, which grows year after year because of the budget deficit.
Each item of those items takes about 25% of the total public expenditure and the biggest item
of the public expenditure items in support which takes on average about 30% of the total
expenditure. While the share of the government investments in constructing the major utilities
like drinking water, sanitation, electricity, roads, and bridges….etc, is on average of 7%- 9%
of the total public expenditure.
The declared policy of the Muslims brotherhood government in reducing the budget deficit,
especially the support expenditure, as well as energy support which currently covers various
types of diesel, all types of fuel oil, diesel, solar, and natural gas. Thus, the frequent speech
about the financially capable groups that they are the most benefited group from the energy
support, and the suggestion of reducing this type of support is to achieve justice. There is no
doubt that the low-income groups are the least benefited from the support of petroleum
products, but certainly, they are mainly affected by the canceling of this support. Reducing
energy subsidies mean higher electricity bill, food prices, transportation costs, and all
consumer products and services which use the petroleum products as inputs in its production,
transmission, and distribution stages. Some estimates suggest that if the support of petroleum
products has been cancelled completely, the overall level of consumer would increased by
about 37% which means the overthrow of more than one-third of the purchasing power of the
already limited access to low-income groups.
The actual steps taken to reduce the energy subsidies in raising the prices of the electricity
bills by 15% during the period of November 2012 – January 2013, the government as well
began to raise the prices of natural gas, and fuel oil of energy-intensive industries especially
the steel rebar and cement, fertilizers which are controlled by the foreign and local
monopolies, which sell their products in local market with higher prices than selling their
exports in the international market, despite that they get the petroleum products at subsidized
prices winning huge monopoly profits. The reduction of the energy subsidies of these
monopolies, was supposed to be accompanied by a serious measures without the transfer of
the load to the local buyer, by determining the profit margin for those industries and the
availability for importing of similar products. On the contrary, the government responded to
the pressures of the iron and steel monopolies for dumping fees on the steel importer,
allowing those exclusive monopolies, the local market and the vast raise of prices. The
cement monopolies followed the same path resulting in a high prices rate of the construction
materials in a country suffers from a severe problem in housing costs for low and middle
income citizens.
On the other hand, in the budget of year 2013-2014, the Brotherhood Government reduced
the support of the cooking oil on the ration cards by about one billion pounds, and reduced
also the support of low-income housing from 700 million pounds to 300 million pounds only
(in comparing with the energy support of 100 billion pounds), as well as reducing the
subsidies of the students in public transport.!!
2- Income Tax Law:
Complementing the attempts in reducing the state budget deficit, and in response to the terms
of the initial agreement with the I.M.F in November 2012 for a loan of 8.4 billion dollars, the
government has sought to increase the public revenues by expanding the sales tax base, which
is a tax added to the prices of goods and services resulted in high living costs and thus,
damaging the low-income groups. Meanwhile, in May 2013, the government issued a new
law on income tax, where the idea was promoted on the basis of raising in the income levels,
and thus achieving social justice. While the provisions of this law confirm that the tax burdens
are in the first place for the middle class segment and choosing entirely partial to the rich and
businessmen. Confirming the above notes, the new law provided an exemption entry of less
than 5,000 pounds/ year for private sectors workers, and 12,000 pounds/year for the
government sector workers, but what exceeds these limits imposed to a progressive tax rates
ranging from 10%.
Although it is difficult to understand the cause of this distinction between "ordinary" citizens
and citizens who are working in the governmental sector, the decided exemption extend
means that any citizen's salary exceeds 6.416 £/month or governmental employee's salary
exceeds 1000 £/ month have to pay taxes by 10% as a minimum.
According to this law, tax rates are ranging up to 20% on the income segment of 45 thousand
pounds to 250 thousand pounds, while 25 % to those who exceeds this. This means that the
law equates the tax rate of a monthly income of 3750 pounds of the lower-middle class and
those with monthly income is about 21 thousand pounds!!!. Moreover, it not only means that
the maximum tax will not exceeds 25% regardless the high of the income level, but also put
this rate as a minimum tax rate on the companies.
Although "Billionaire" became one of the familiar words to describe the wealthy segment in
Egypt, applying such access to tax not exceeding 25% maximum, is in contrast with most tax
systems around the world following the principle of escalation, as in England, France, and
Switzerland the tax rate of the highest segment of income is 40%, while in Australia and
Germany is 45%, in Japan is 50%, in Sweden is 57%, and 62% in Denmark.
Undoubtedly, this law represents explicit favor of income from rewards of ownership
compared to the labor income, as instance the equality between the maximum tax range on all
wages and salaries, and tax profits on real estate developers, which gain enormous profits
from the difference between the allocated subsidized price of the State lands and the price of
the square meter of the buildings posed for sale.
Confirming this favoritism, the new law continues its exemption of distributions on the capital
stock companies and recommendation by shares. This means that businessmen pay taxes only
on their salaries and bonuses for their management positions in the companies they own,
while their entrance which they received as a result of their ownership to the capital of these
companies, they don't pay them any taxes as it is exempt by the law!.
On the other hand, the maximum taxes range stipulated in the law on profits of the projects in
Egypt is considered one of the lowest rates in the world. Whereas those rates are 35% in most
tax systems, in the USA is 40%, and in Japan is 41%. We can't rely on the famous quote that
higher rate of tax on corporate profits affects negatively on the investment, and can't suit
Egypt as a developing country. The tax rates on corporate profits in both Indonesia and
Mexico are 28%, and in India and Brazil are 34%, which are all considered as countries
achieve high rates in investment and growth.
3- Seeking to Borrow from the I.M.F:
Egypt is a member of the International Monetary Fund (I.M.F) and contributes a share in
its capital, and as a result, like all other States members, Egypt has the right to obtain from the
Fund's concessional financing (the value is determined by according to its share in the fund's
capital) to deal with any urgent circumstances lead to the inability of the state's resources in
terms of both its public balancing and the balance of payments with the outside world.
I.M.F. always keen on its loan program description to any state that it is "The economic
reform program", and to reform the state finance and to reduce the budget deficit require not
only the reduction of the public budget but also increasing the revenue, without imposing any
conditions in this regard. Various governments decide on what kind of expenses are reduced,
and the additional revenue sources will be packaged.
However, the Fund reports always emphasizes the priority of reducing public spending as a
way to reduce the budget deficit and the public debt, warning also of an attempt to increase
the public resources by raising tax rates on high incomes, on the base that it harms the
investment rates. The preferred way to increase the public revenues from the Fund's viewpoint
is by the privatization projects and public utilities, while the preferred type of taxes that could
be increased is some forms of indirect taxes and fees (as the value-added tax and fees of the
governmental services, which are charged by the low-income groups).
All this means that it all depends on the ability of the State to develop an economic program
confirms its ability on one hand to pay, imposing no austerity policies charged by the lowincome groups or to force it to dismantle and sell the public facilities on the other hand.
We can say that Egypt has a strong negotiating position after the 2011 revolution, where it
continues having a reasonable level of the international reserves and expectations quickly
restore rates of tourism, and the investments flows, and work and production regularity. The
negotiation after the reserves' erosion and widening budget deficit, means increasing the
doubts about the ability of Egypt to pay, (i.e. withdraw of the credit rating of Egypt) and
consequently, to undergo more stringed borrowing.
The most important conditions for Egypt can be identified through the initial agreement, which was
announced by the Egyptian government and the I.M.F. in November 2012, within the framework of
the ongoing negotiations at the time (currently suspended) on Egypt's request for a loan by $ 4.8
billion. The Fund issued statement stated that, the agreement supports a funding package for Egypt
amounted to $14.5 billion in the form of loans, and deposits on easily conditions whether from other
states "bilateral partners", or regional and international institutions "multilateral partners" including
the I.M.F itself. Beside, the statement stated the objectives of the program in reducing the budget
deficit and the State's balance of payments, with the construction required to raise employment rates
rapidly, which means that the objective is to improve the internal and external financial position.
Regarding the real economy, the objective does not exceed the " constructing basis" that can achieve
higher rates of growth and employment rates later.
On the other hand, the government's statement represented the objectives of the program, which are
payment rates of economic growth, development, and social justice through reprioritizing of the
budget for the poor, achieving financial and economic stability, and improving the investment
atmosphere.
In fact, while reading the terms of the agreement and its policies emphasize that they are further from
increasing the growth rates or achieving social justice, as well as reducing the support especially the
energy subsidies which covers LPG, various types of gasoline, fuel oil, solar and natural gas to
achieve internal financial balance and to reduce the budget deficit, which increased the prices and
topples the purchasing power of the low-income groups, in the absence of any serious policies to face
the monopoly, price control, and raising the minimum wages and pensions.
Moreover, the statement refers to working to increase the public revenues by expanding the sales taxa tax added to the prices of goods and services, resulting in the raising of the living cost and thus,
damaging the low-income groups- as well as the application of progressive taxes on the income
starting with the truncation from the poor and low-income levels, which was apparently in the
income tax Law issued by the Brotherhood system.
In terms of external financial balance, the agreement focuses on "enhancing the competitiveness of
Egypt" which usually means Currency devaluation, the cause is the devaluation of the pound would
lead to cheaper prices of the Egyptian products and services to the outside world, thus increasing the
exports and tourism, and encouraging the flow of the foreign capital. On the other hand, the
devaluation means higher import prices of food, and various commodities, the high cost of fuel and
the local industrial production, resulting in increasing the inflation rates which is actually happened
in Egypt after the implementation of this condition and the devaluation of the Egyptian pound at the
end of December 2012.
As for investment and job opportunities, the agreement focuses on ensuring equal competition
opportunities for all investors, and the partnership between the public and private sectors in the areas
of drinking, reads, health, and recycling of the solid waste, which is the updating the version of the
privatization public utilities with the availability of foreign investment in that area under the banner
of equal opportunity.
Here, the Islamic law instruments is highlighted issued by the Brotherhood, to represent the primary
mechanism for the privatization of the public utilities, and access of foreign capital, or the
international organization of the Muslim Brotherhood to this vital sector.
4- Instruments as a Tool for Borrowing and Privatization of Public Services:
In the framework of the expansion of external borrowing, a Law No.10 of year 2013 was issued on
the 7th of May 2013 about the instruments. It is the same Law that had already received a strong
opposition from the various national forces, and heavily debated over several months.
Islamic instruments are financial instruments used in various economic activities, characterized by
two main things: First, the funded activity is consistent with the Islamic Law. Second, the source of
the obtained revenue is the financiers is the incomes or profits of a real economic activity should be
compatible with the Sharia ( the sales of goods, fixed assets or movable, or services, rental asset, and
sharing for specific industrial or agricultural projects…). Having these instruments, a one would
share in the total assets of sale, purchase, lease, or investment where its ownership, or the benefit, or
advantage using it is transferred to the creditor guaranteeing fulfillment of the debt and its revenue.
Otherwise, if the debtor was unable to repay on time the debt, the creditor having these instruments
has the right to take over the assets of the guarantor for the debt, in other words the instruments are a
debt way with mortgage.
On the other hand, till the time of the instrument maturity, the owner has all property rights and can
sale, mortgage, donation, or bequest, either through the stock market - Unless the instrument was not
registered on the stock- or directly outside it. The instrument is not only used as a mechanism to the
business sector (corporate instruments) but also can be used by the governments known as
"Sovereign" instruments which can be applied at both local and international level.
Initially noting, that criticisms and objections faced the Instruments Law in Egypt revolved mainly
around the nature of the public assets, which will be mortgaged to secure instruments. Will they
include utilities and public services? , Who are mortgaged – Egyptians or foreigners- ? Whether the
instruments' outcome will be used in new productive projects or in paying off the budget deficit? If
the outcome will be used in paying the budget deficit and not in establishing new projects, From
Where would the resources ensuring the payment of the debt obtained on the exact time?
Indeed, the Law did not succeed in dispelling any of those fears, where it did not excluded the
possibility of issuing instruments in exchange for the right to use State-owned fixed assets for public
bodies, legislators, and local administration units. Beside, the Law approved the issuance of
instruments for property in new projects.
On the other hand, the Law permits the issuance of rental services instruments. This mechanism
allows the use of the outcome instruments in buying health insurance services, rail transportation
services, metro services, ports and airports services, and other services for a certain number of years
in order to let the creditor re-provides these services to the public and determine its prices. This
mechanism in summary can be used to achieve a real privatization of the public services, especially
the health insurance sector.
The Law did not dispel the Egyptians' fears of foreign control on the public utilities, where it did not
limit the subscription of the government instruments for the Egyptians, and did not set a maximum
subscription per person or per entity in those instruments. That Law, in fact, permitted the issuance of
the government instruments abroad, and its ability of trading in the stock market. It is known that if a
bond was registrated in the Egyptian stock market for exchange, any "investor" of any worldwide
nationality could buy the paper, aside from buying any amounts with no limit as long as the Law
allowed. At the end, this means that the nature and the nationality of the instrument holder of the
credit for Egypt, who enjoys the right of use or ownership of the assets, are subjected to tweak
throughout the instrument date.
As for the outcome of the instrument, despite the Law's confirmation to be used in the construction of
new projects, it opens the door to be used also to pay off the budget deficit through "Peace
Instruments", taking into account the sale of this instrument is the sale that pledges the seller to
deliver specific goods on time for its full price. This mechanism threatens to drain the mining
resources of Egypt and the encroachment on the rights of the future generations, repaying the State's
general budget deficit.
Besides, the Law did not put any limits on the Government borrowing and its various organs for
using the instruments. The question is what occurs if the government and its various organs expanded
in debt and became unable to repay the debt and restore the original guarantor?
In fact, the law leaves us here in front of one of the two choices: first, vested assets to the instrument
holder, second, to be devolved to "the recovery contractor." Where the law permits the possibility of
a guarantor for the borrower undertakes to fulfill the debt and the recovery of the instruments on its
time. The Law did not required that the guarantor is a public institution or an Egyptian Foundation,
that opens the door to the possibility of local or foreign private capital's controlling funded public
service projects, either through instruments holding or through a guarantor.
Third: The Outcome of the Economic Performance after the Revolution and its Impact on the
Status of Women:
The current indicators of the Egyptian economy performance show the increased pace of
deterioration in the economy under the Brotherhood's Government. Where the indicators of the last
nine months ended in March 2013, show the continues low economic growth rates of around 2.2% ,
and the declining rates of investment (i.e., establishing new ventures and expansions of existing
projects) during that period to be limited to 8.13% compared with 15.2% in the corresponding period
of the previous year. These continues investments were concentrated in Cairo, Giza, and Alexandria
accounted for about 80% of the total, compared with less than 4% for the Upper Egypt region and 2%
for the border provinces. While, the unemployment rate rose to 13.3 % of 3.6 million unemployed
workers, about 60% of them are youth aging between 20-30 years. On the other hand, Egypt's foreign
debt rose during the nine months ending in March 2013 to $ 38.4 billion (increased more after that
date, after receiving the loans of Turkey, Libya, and Saudi Arabia), to made its percentage in the
GDP approximately 14.7% versus 13.5% at the end of June 2012. The most serious point is that the
new loans were short-term loans, which present a burden to be repaid within a short period, may not
be sufficient to give a chance to the Egyptian economy restoring its recovery and its ability to repay
with no pressure on its international reserves. Thus, the proportion of short-term debt rose to total
Egypt's external debts from 8.4% at the end of June 2012 to 17.7% at the end of March 2013.
At the daily life level, the lack of gasoline and diesel fuel crises exploded as a reflection not only for
the smuggling operations and insecurity, but also for the lack of sufficient resources from the foreign
currency to import petroleum products needed either to generate electricity or provide fuel for
transportation and industry. We note here that although Egypt is an exporter of ore oil, Egypt is an
importer of oil products, headed by gasoline, diesel and LPG.
Despite the poor economic conditions impacted negative on the lives of the broad base of the
Egyptians in general, but those conditions were more severe for women. It leads to the deterioration
of the investment and growth rates, and high rates of unemployment among women to 25% vs. 10%
for men. On the other hand, if a woman found a work, the opportunity is to work with a lower
average wages and high average hours of work. The Central Agency for Public Mobilization and the
public sector data indicate statistics to poor employment opportunities for women in the
governmental and public sector, which accommodate about 65% of the female workers. These data
also indicate that the average weekly wage for workers in the private sector in 2010 did not exceed
299£/month for 542£/month for working in the public sector, while the average weekly work hours
on the same date, is 58 hours/week in the private sector for 52 hours/week in the public sector. Thus,
if 65% of the actual employment opportunities were in the private sector with the most severe
conditions, this means that the majority of women working in Egypt received lower wages and work
more hours than men.
Indeed, the unfair working conditions faced by women working in the private sector are not limited
to a low pay and long working hours. The available data on the Egyptian private sector working
conditions showed that 60% of workers in this sector are working without contracts, 58% without
social insurance, 72% without health insurance, and 88% are not affiliated to a professional or trade
union.
On the other hand, the Central Agency for Public Mobilization and Statistics data indicate an
important phenomenon which is presented in the low unemployment rates of women and men in the
educational classes without qualification, where the women's unemployment rates in the category of
"illiterate" are 1.9% vs. 9.5% for men, in the category of "literate" are 0.5% vs. 6.8% for men, and in
the category of "below-average" qualifier are 2.7% vs. 11.1% for men. In our perception that this
phenomenon is attributable mainly the huge demand for women's work in domestic service and other
support services that do not require education, and which are associated in the community with "the
traditional role of women in domestic work and child care".
1- Ministry of planning and international cooperation, early indicators of economic and social development
plan, the third quarter and the first nine months of the financial year 2012/2013
2- The Central Bank of Egypt, monthly statistical bulletin, July 2013.
3- The Central Agency for Public Mobilization and Statistics, the Statistical Yearbook of the Arab Republic of
Egypt 2012, part 4 "work".
What is important here is that this kind of work completely lacks any kind of social security, whether
in the form of pensions or health insurance, and is not subjected to the labor laws or any trade union
protection, but the common labor law No. 12 of 2003 expressly excluded women working in
agriculture and domestic from the legal protection (article 4). These areas are part of the informal
sector or the unorganized employment, which generally includes all forms of unregulated labor laws
on employment, wages, insurance, taxes, and organize.
Despite the absence of any official figures determining the size of the informal sector in Egypt, there
are many studies that estimated the contribution of the informal sector by around 35% of GDP and
40% of employment. According to those studies, this sector covers the productive activities in small
industries (such as footwear, garments, and food products), whether it could be paid for others or
family, as well as the production services activities (such as sales in a shop or in the market) owning
it or with the family, and the personal or social services (such as domestic service, garbage collection,
baby sitters ...Etc).
Although the informal sector represents one side of job creation, its cycle differs for males than
females. According to the results of a field study, the informal sector employment representing for
qualified males a transitional step to employment in the formal sector, while for females (and
uneducated males) working in the informal sector represents the end, while its departure means the
exit out from the labor market as a whole. The study estimates that the opportunity of males
transmission to an official business outside the Agriculture field is 20% while the females'
opportunity did not exceeds 10%.
Regarding the nature of women in the informal sector, a field study confirmed that while the largest
percentage of women working in that sector are illiterate, but there is a significant percentage of
women with medium qualifications by 18% in urban areas and 42% in rural areas. The study also
describes the actual working hours of 50% of these workers ranging between 10-16 hours/ day.
The Central Agency for public mobilization and statistics data confirms –as expected- the lack of
any kind of legal protection to the female workers in the informal sector, as 98.5% of that sector
workers are employed without legal contracts, 88% without social insurance, 99% without health
insurance, and 94% without the protection of professional or Trade Union.
Under such conditions, the setting of the minimum hourly wage for the public and private sectors and
amendment of labor laws and social security, social insurance, health insurance and the law on trade
union freedoms, becomes an urgent need to improve the status of the Egyptian working women,
4- Jacqueline Wahba, Informality in Egypt: A Stepping Stone or a Dead End? Economic Research Forum, Working
Paper Series, 2009.
Mohamed A. Abdel Fattah, A Survey-Based Exploration of Satisfaction and Profitability in Egypt's Informal
Sector, ECES, Working Paper 169, May 1212.
Dr. Hussanein Koshk and Dr. Azza Khalil, Economic and Social Effects of Women's work in the informal
sector: problems and intervention mechanism, a field study, presented to the UNICEF, 2001.
5- Jacqueline Wahba, mentioned reference, p.7.
6- Dr. Hussanein Koshk and Professor Azza Khalil, mentioned reference.
especially since that some studies indicate that 30% of Egyptian families are headed by women, and
that ratio of a women-headed families (widows, divorced, abandoned wives, second wife, disabled or
chronically ill wife, wife of an unemployed husband, working daily's wife, the wife that contribute
the largest share in the income of the family, In addition to the unmarried females) rises to at least
75% in the slums.7
Fourth: The Urgent Tasks and Alternative Solutions to Treat the Egyptian Economy Problems:
The Mission of the new Government is in the management of the transition period that would – as we
hope- not exceeds few months. I think that the current Government has a dual function, on one hand,
the Egyptian people expects that it would be "Rescue Government" achieving a quick solve for the
problems of everyday life and improving the Egyptians' living standard which had deteriorated
sharply during the past year. On the other hand, the historical circumstance that forces the
Government to establish the foundations of the elected Government work under a new Constitution
that meets the Egyptian people's aspirations and the revolution goals.
In our perception, there are a number of urgent procedures should be taken by the new
Government on the economic level; perhaps the following are the most important:
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7
Restore security and discipline of the Egyptian Street, and serious confrontation for all
operations of terrorism, bullying, road cuttings and obstacles, and the smuggling of goods
and fuel.
Re-open and re-run the inactive factories (many of them stops before the Revolution),
which requires quick solutions to the problems that led to that stop, whether related to
production requirements, energy, or finance.
Restructuring the total wages immediate in the State budget, by setting a minimum wage
sufficient to meet the basic requirements for a decent life for the worker and his family,
and a maximum of not more than 15-20 times to a minimum. Bearing in mind that the
dispense of the advisors armies in the Government body and the application of the
maximum wage on the entry of the senior management, then Re-distributing these
amounts to the masses of employees below the senior management will leads to an
increase in the average of the monthly income by about £ 700/ month, which is the
minimum wage of the demanded level by the national forces, which ranges from 1200 –
1500 pounds, and is consistent with the data of the family budgets and estimates of the
poverty line in Egypt.
Activate and expand the role of supermarkets and governmental stalls, in the sale of fruit
and vegetables, food for citizens of a low profit margins, ensuring control over the general
price level, facing the monopolies of import and distribution of food, and to limit the
profit margin on imported products, with the possibility of imposing compulsory tariff for
the basic food items if necessary.
Report on economic, social and cultural rights in Egypt, edit by Elhamy Migraine, 2012, p. 9.
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Issuing an order of delivering the fertilizers and agricultural pesticides based on
possession, not ownership, so that farmers could get the fertilizer and pesticides in official
rates directly from cooperatives societies and the Development and Agricultural Credit
Bank. Instead of the current situation where such products were received by the
landowner who sold it on the black market.
Amendment of the agricultural rents Law states that the minimum rate for leases is for at
least 5 years, ensuring the stability of contracts, the level of rents, and to protect farmers
from eviction.
Amendment of the new housing rents Law text, to oblige the owner to edit a lease, texting
the contract on the basis of annual growth rate required in the rent.
Efficient Tourism management based on the restoration of security, on one hand, and
effective promotion and marketing of Egyptian tourist destinations externally and
internally on the other hand, to ensure the return of the gradual recovery of the sector that
provides employment opportunities for millions of Egyptians, and is considered a major
source of foreign exchange to cover the import of basic commodities, especially food and
fuel.
Finally, although we are talking about urgent tasks, and an interim Government, the Nile
water file and the Renaissance dam considered life or death issue for the Egyptian society,
which should be of utmost importance and deal effectively with it immediately, without
waiting until after the transition period and the elected Government.
As for the general budget deficit, in our perception, there is a set of policies to reduce the deficit
without loading the burden of the poor, perhaps the following are the most important:
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Abolition of support for natural gas, fuel oil, diesel fuel and electricity monopoly
industries that sell their products in the local market with higher world prices,
accompanied by serious measures without transferring the burden to the local buyer, by
determining the profit margin for those industries.
Removal of the subsidies on gasoline 95 and 92, and directing part of the price of diesel
microbuses and transporting vehicles of goods and agricultural machinery.
Regarding electricity which started already raising its prices since November 2012, the
prices should be kept on the lower level for consumption without modification and
expansion of that slide to the level that covers the average basic human needs, and
loading the burden on the high slides consumption, that are usually associated with higher
levels of income.
Raise the customs taxes on luxury and local alternative goods.
Restructuring the income tax by applying the system of reforms led by expansion the
slice of minimum income to 18 thousand pounds/year, and adding the dividends on the
shares of incorporation of the companies to tax, as it is inconceivable that the worker will
burden the income tax while exempting the businessman share in dividends, as well as
imposing tax on the capital gains of short-term capital flows in the stock market.
Imposition of a one tax on wealth, ratios between 5% and 10% on wealth that exceeds 20
million pounds, which sometimes reach into a hundreds of millions, but in a number of
cases to billions, either because the owners of these resources are the most capable of
contributing the crisis, or because they are, in fact, the most benefited from the policies
applied under the former regime.
In fact, raising the minimum wage and expanding a tax exemption slice, can help at a next stage to
reduce spending on food subsidies.
These are the urgent action expecting the focus of the current Government on them, paving the
way for a Constitution and an elected Government adopts a new strategy for economic and social
development, based on the building of the productive capacities for the Egyptian community in
the agricultural and industrial sectors. while maximizing the benefit from the country's
competitive advantages in the area of services, which are controlled by the Egyptian economy on
terms of renewal of production and free itself from the dependence on the outside world, by
setting plans for investment, production, export and import from the basic of satisfying the needs
of the Egyptian people, and the fair distribution of work opportunities and income, and public
services, especially education, health, water, electricity, sanitation, housing and social security
system as fundamental rights for all Egyptians without discrimination.
14th December, 2013.