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Dec 10 2008

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Is There a Policy Wonk in the House?

The three-day conference, held each year since 2003, played out under a variation of the now-traditional "New Thinking" banner, which this year declared "New Thought for Egypt's Future." Some 2,700 party members attended the November 1-3, 2008 gathering, where they steered clear of discussion of who would succeed President Hosni Mubarak.

The event came amid rising discontent on the street and in the business community over what some say is the current government's failure to provide strong leadership amid the looming economic crisis.

Gamal Mubarak, one of three party assistant secretaries-general and chairman of the NDP's influential Policies Committee, dominated talks at the conference, where he warded off accusations he has favored high-powered businessmen for top spots in the NDP. Gamal, the younger son of President Hosni Mubarak, is widely speculated to be his father's successor, a claim he has repeatedly denied.

Gamal Mubarak praised reforms the NDP began implementing in 2002-03, saying they have been directly responsible for the country's red-hot 7.2% growth in 2007-08, the third year in a row in which Egypt's GDP grew 7% or more. At the same time, he defended the notion that the benefits of the reforms have not yet "trickled down" to the lower middle class and the nation's poor.

"This trickle down may not have happened enough, or has not reached some areas, but this doesn't mean that it has not happened at all," said Mubarak, adding that Egyptian exports have doubled since 2005 and that investment in industry has risen to LE 42 billion in the past three years, part of the government's policy of export-led growth.

The World Bank named Egypt its top reformer in 2007, and the country netted more foreign direct investment than any other African nation that year, while finishing second to oil-rich Saudi Arabia in the race for investment in the Middle East. Although Egypt slipped to second place in the African FDI sweepstakes in 2008, the International Monetary Fund (IMF) has noted Egypt is high on the list of countries it expects will help the Middle East post a 5.3% growth rate in 2009. Minister of Finance Youssef Boutros-Ghali has said he expects Egypt could grow as much as 6% next year.

But IMF projections and Gamal Mubarak's predictions have done little to reassure critics. Abdel Aziz Ezz El Arab, associate professor of economics at the American University in Cairo (AUC) and director of the Egyptian Business History Research Center, alleges that the NDP's reforms have had no effect on the core of the Egyptian economy.

"Having a higher growth rate is different to having a sustainable structure for the economy," says Ezz El Arab, who claims the NDP's policies benefit the private sector, not the population at large.

It was a charge Gamal Mubarak tackled head-on at the November convention, telling delegates, "They say we are indulging the private sector. [] I say nobody is above the law," said Mubarak in what many took as a veiled reference to Talaat Moustafa Group chairman Hisham Talaat Moustafa, on trial for charges he ordered the murder of his lover. "They say the private sector is exploiting and harming people, but the private sector also provides 70 percent of all jobs."

Ezz El Arab differs, saying, "the extra revenue that is coming into Egypt is distributed among businessmen."

President Mubarak told delegates that the party's main goals are sustaining growth in the face of the financial crisis and working to eradicate poverty.

"I want to stress the party's and government's commitment to economic reform and our determination to continue that without hesitation," said President Mubarak in his opening speech. "But, at the same time, I want to stress that social development and combating poverty is part and parcel of this vision."

While pledging to stay the course on reforms, President Mubarak noted the government would spend some LE 3.7 billion on poverty alleviation measures over the coming three years. He also called on government and the private sector to protect top hard currency earners including tourism and exports amid the global slowdown.

In other developments at the convention, Ahmed Ezz, the controversial NDP parliament member and chairman of El-Ezz Steel Rebars (ESRS.CA, bt100 number 3), also announced that the party would move forward with legislation to construct "several cities" outside Cairo that would house more than a million people.

Meanwhile, Minister of Higher Education Hany Helal said he is pressing plans to improve the quality of post-secondary education and noted that a number of foreign universities are interested in establishing branches in Egypt in the near future.

Minister of Health and Population Hatem El-Gabali announced that a universal medical insurance program was one of the top priorities on the NDP's agenda this year.

"You can't do everything at the same time," counters Ezz El Arab, commenting on the NDP's plan to fight poverty and maintain development while weathering the global financial crisis.

According to Ezz El Arab, fighting poverty means new investments in education and health as well as reevaluating and improving policies. Moreover, authorities have to see these new policies through and make sure that they are being implemented correctly.

"There needs to be reconsideration of economic policy in Egypt as a whole," he added.

Noting that the convention came in the run-up to Election Day in the United States, Ezz El Arab says: "What was striking is that people were watching the US presidential elections and not the NDP conference. It all comes down to what really matters and what has credibility."

Mahmoud Khalil, an NDP party member and member of the Supreme Press Council, thought the convention was "highly successful," and says he hopes this translates into success in what the party says are its policies of eradicating poverty and promoting social justice in Egypt.

Ezz El Arab says the convention was successful from the party's point of view only because it "fulfilled their goal of proving their presence in Egypt," but adds it will have essentially no effect on the average Egyptian.

Opposition groups, meanwhile, marked the occasion by speaking out against NDP policies. Abd El-Hameed El-Ghazaly, an economic thinker with the banned Muslim Brotherhood -- the largest opposition block in the People's Assembly -- and a professor at Cairo University's Faculty of Economics and Political Science, says, "[The NDP's] plans are no more than words on papers, their program is redundant and it's the same old program that has been applied for 50 years and hasn't led to any development."

El-Ghazaly claims the 6% growth forecast for this year is far from achievable, saying, "At the beginning of the global economic crisis, the authority [from the NDP] said that they have a plan to protect Egypt and its banking system from the crisis, but we were severely affected."

The Brotherhood economist claims that "monopolies" in the steel and cement industry "invested in foreign banks and foreign shares" and thereby brought the financial crisis to Egypt, helping valuations on the Egyptian Stock Exchange (EGX) plunge.

Mainstream economists have said the EGX plunge came as a result of foreign institutional investors selling their Egyptian holdings to meet the demands of redemptions in their home markets. Institutional sales prompted momentum-driven Egyptian retail investors to follow suit.

Opposition groups came together to hold a parallel Conference of Alternative Policies. "[The NDP] mentioned in their conference that Egypt's opposition groups don't offer any alternatives, so we formed the conference," says Fouad Hetta, chairman of the Democratic Front Party (DFP). Other groups that participated were the Kifaya movement, April 6 youth movement, as well as individuals from different opposition groups.

The Conference of Alternative Policies took place on November 8-10, during which opposition groups presented alternative policy ideas for healthcare, education, investment and the development of industry.

For example, Hetta says, there is no need for the NDP to adopt a policy to encourage the building of 1,000 new factories. "This is not the solution. We need to open the job market and invest in the labor force," says Hetta. "We need to provide good job opportunities for the unemployed in the factories that we already have. In Egypt there are 8,500 factories; we don't need to open anymore."

While business leaders and economists at the IMF may take exception with that analysis, many would back his similar assertion on healthcare. Pointing to the NDP's promise to enhance healthcare by building more hospitals, the DFP leader says the problem is less one of access than it is of quality: "Do we really need to open new hospitals or do we need to improve the existing ones?" he asks.

Whatever the declared intentions of the NDP or the opposition, it is hard to look back on the events of last month and not wonder at the paucity of strong policy options presented on any side of the table. As politicians jockeyed for position and looked to score points at each other's expense, the real losers in November were average citizens wondering what the future holds for them in light of what likely appears to be a significant slowdown in domestic growth.

By Passant Rabie with reporting by Dina Basiony

© Business Today Egypt 2008