الفهرس 
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Abstract
Part three discussed how Egypt can benefit from the Malaysian
experience in economic development. To do so, we needed to analyze the
performance of the Egyptian economy during 2004-2010, and then
address the challenges that face economic development in Egypt, and
finally see how Egypt can benefit from that experience.
Chapter one studied the performance of the Egyptian economy and the
challenges that face economic development in Egypt during 2004-2010.
The researcher did this from three perspectives, the macroeconomic
perspective discussing GDP growth, investments, trade, inflation, and
unemployment; the sectoral perspective discussing agriculture,
manufacturing, and services sectors; lastly the socioeconomic perspective
discussing poverty and income inequality.
from the macroeconomic perspective, real growth in GDP reached 7.3
percent in FY 2007/08 up from an average 4.1 percent during FY2003/04
underpinned by the broad array of structural reforms that included
liberalization of foreign trade and investments, privatization of public
entities and measures to strengthen the domestic banking sector. After the
second half of 2008, the negative consequences of the financial crisis
began to bite the Egyptian economy in many fields causing the real
growth rate to reach 4.5 percent in FY 2008/09. Egypt weathered the
global financial crisis relatively well as real GDP growth increased to 5.1
percent in FY 2009/10. The Youth revolution of 25th Jan 2011 led the
national economy to go through a critical stage because of emergency
circumstances that accompanied this revolution, and the changes that led
to huge losses which may lead the economy to slow down for a while.
By all measures, Egypt’s investment performance is on a positive path.
Investments, especially private investments have grown significantly
from 2003/04 - 2007/08 while DROPping due to the global financial crisis
in 2008/09 then rebounded in 2009/10. Egypt encouraged FDI during the
same period leading to a significant growth in FDI.
Egypt’s trade was booming during the period 2003/04 - 2007/08. Egypt’s
trade in services is in a good path as the balance of services always
records a surplus especially because of tourism and Suez Canal receipts.
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However merchandise trade balance always shows a deficit which is
considered a big challenge that faces the Egyptian economy.
According to The CAPMAS, the annual inflation rate reached its peak in
2007/08 to reach 20.2 percent because of the successive increases in food
prices, the supply shocks related to oil subsidy cuts and avian flu, the
decline in food self- sufficiency and the consequent rise in imports
thereof. Then the slowdown in domestic economy lead to a reduction in
the annual inflation rate to 9.9 percent in 2008/09 and increased to 10.7
percent in 2009/10.
The unemployment is a major challenge facing the Egyptian economy.
Unemployment rate is high in Egypt ranges between 9 to 11 percent
during the study period. This is because the Egyptian labor does not fulfill
the market requirements and it is a critical impediment to private sector’s
growth and competitiveness in what has become an open and liberal
economy. High illiteracy, low education quality, and low spending on
education and R&D are the major reasons of this problem.
from the sectoral perspective, firstly agriculture sector remains an
important component of Egypt’s economy. The challenge for Egypt is to
maintain and expand agricultural production for domestic and export
markets while at the same time adding value and employment through the
development of more agriculture-based processing activities. This sector
grew at an average rate of 3.4 percent annually and accounting for 14.8
percent of GDP on average as compared to an average share in
employment of 28.3 percent during the period 2003/04 - 2008/09.
Secondly, manufacturing sector grew impressively during the same period
by an average rate of 5.2 percent, accounting on average for 17.6 percent
of GDP, 12.6 percent of total employment, and 16.7 percent of total
investments. Challenges that face this sector include improving skills in
management, raising productivity and improving the quality and cost of
Egyptian-made inputs….etc. Lastly, services sector have always been an
important contributor to the Egyptian economy in terms of share of GDP,
trade and employment. This sector accounted for 57 percent of GDP on
average, 51.3 percent of total employment and 47.8 percent of total
investments during 2003/04 - 2008/09. Examples of inefficient services
that can hinder the competitiveness of the Egyptian economy include lack
of storage capacity, poor stock management, unreliable transportation,
expensive communications, poor product design, insufficient and costly
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financing, inadequate legal advice, or even outdated software products
and processes.
from the socioeconomic perspective, Poverty presents a major hurdle to
sustainable development and to economic growth. Egypt has already
fulfilled its international commitment toward reducing extreme poverty
(at the rate of $1 per day) by half. Although the incidence of extreme
poverty is fairly low, much of Egypt’s population is still poor.
Accelerated growth juxtaposed with persistent poverty can generate social
tension and instability as people become frustrated by insufficient
opportunity for upward mobility. While Egypt has experienced reductions
in the levels of poverty, the risk of poverty did not fall at the same rate for
all Egyptians. The impacts of higher food prices on welfare are strongly
influenced by the patterns of household incomes and expenditures.
Increasing food prices at a higher rate compared to other expenditure
items has its adverse impact on poorer groups, as they will allocate larger
shares of their budgets to be spent on food items or they will consume
cheaper and nutritionally unbalanced diets. Government subsidies are
another reason of worsening poor people’s welfare because it has been
estimated that the richest quintile in Egypt accounts for a
disproportionately large share of the energy subsidy. Income inequality is
another major challenge that hinders economic development in Egypt.
Despite widespread poverty, however, uneven development has led to the
emergence of an affluent class that controls most of the country’s wealth
and enjoys an elevated standard of living that includes shopping at centers
that feature the best imported goods. And this was one of the reasons that
led to the Egyptian youth revolution of 25th of Jan, 2011. Inequality is
particularly pronounced between Upper (southern) and Lower (northern)
Egypt, and between agricultural and nonagricultural workers.
In Chapter two we discussed how Egypt can benefit from the Malaysian
experience in economic development. We found that there are important
lessons that one can extract from the Malaysian experience. However, it
will be dangerous to make generalizations based on observations that are
specific in terms of both space and time because every country is unique
and each country will have to construct its own development model
according to its own changing circumstances. We can take some lessons
in investments and trade, agriculture, manufacturing, poverty and income
distribution, and education.
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Firstly, lessons in investments could be that export-oriented
industrialization drive could not taken place without FDI as it provides
access to not only foreign capital but also foreign technology, foreign
markets and foreign management know-how, and demonstration effect of
FDI on the domestic enterprises. Another policy message for Egypt is that
regional trade (intra-Arab trade and intra-African trade) cannot grow
unless regional investments increase (intra-Arab investments and intra-
African investments). Also, While FDI can bring about rapid economic
development and generate much trade; it is certainly no substitute for
local investment. Another policy message for Egypt to encourage
investments whether domestic or foreign is to provide incentives for
activities of high priority for the country and that bring benefit to the
economy, as well as providing special incentives to promoted areas.
In agriculture, the first and important lesson that Egypt can learn from
Malaysia is formulating a National Agricultural Policy that draws the
guidelines needed for developing the agricultural sector, in addition to a
mid-term review to follow up the implementation of the policy. The
second lesson is improving agricultural productivity through the use of
biotechnology and R&D to generate high yielding varieties, clones,
endogenous breeds, easy-to-use planting and harvesting equipment, as
well as effective extension programs to ensure successful adoption of
labour-augmenting technology by farmers. Another aspect is modernizing
the agricultural sector through the provision of support services including
marketing, extension services, training, and credit facilities.
In manufacturing, Egypt can benefit from the Malaysian experience in
industrial zones as it is characterized by providing advanced services such
as technology centers and shipping companies and many of the logistics
services. Another aspect could be in upgrading and promoting small and
medium enterprises in a way that makes them an important and viable
vehicle for industrial expansion and the creation of inter-industry linkages
and support. Export promotion is another area by considering the
experience of MATRADE that promotes, assists, and develops
Malaysia’s external trade with particular emphasis on the export of
manufactured and semi-manufactured products and, on a selective basis,
imports. Finally, overcoming the challenge of low manufacturing valueadded
per capita and labor productivity in manufacturing through
encouraging strategic alliances in high value-added and hi-tech industries,
encouraging the adoption of information-intensive and knowledge-driven
processes in manufacturing and related activities, and upgrading labor
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skills through training and retraining with the focus on knowledge to meet
industry demands, is another area where Egypt can benefit from
Malaysia.
As for poverty and income inequality problems, solving regional
disparities should be the first lesson Egypt can learn. This can be done
through enhancing the quality of life for the poor by providing this region
with better social services and basic infrastructure. Another aspect is
intensifying efforts to ensure that the poor and low-income groups benefit
from various measures implemented in the education system to improve
students’ skills which would help them find work easily and earn higher
income. Also, reducing poverty in rural and agriculture sectors by
introducing more income-generating activities to increase the household
income of the poor and low-income groups is another lesson. Egypt can
benefit from Malaysia in reducing urban poverty and improving the
quality of urban living, creating a larger middle-income group and
increasing income and improving the quality of life of the lowest 30% of
the population by giving them financial assistance based on household
income and upgrading the skills of workers from the lower occupational
category through education and training.
As for the subsidies system, both the Malaysian & the Egyptian
governments subsidize and control prices on a lot of essential items to
keep the prices low. However, the current system of subsidies in Malaysia
& Egypt has become ineffective in helping those who need it the most.
Therefore an important policy lesson for Egypt is to apply a subsidy
reform (like the Malaysian one) via gradual reduction of subsidies and at
the same time vulnerable groups and those in low income brackets who
require support will continue to be provided with assistance, as a portion
of the savings from subsidy rationalization will be directed towards them.
The assistance should take the form of income support for the bottom
40% of the population. A central database should be made to identify and
coordinate the delivery of income support. The database allows for
continuous monitoring and evaluation of the effectiveness of these
programs, and will enable auditing of program beneficiaries. It should
include more comprehensive information on the target groups to prevent
duplication while ensuring better targeting. This strategy will not be new
in Egypt, as Dr Ali Lotfy, professor of Economics and former Prime
Minister was the first economist in Egypt who calls for applying this
system but it was not implemented. Another way to help those vulnerable
groups that Malaysia undertook and could benefit Egypt is making
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available information through the central database to registered nongovernmental
organizations (NGOs), charities and corporations to enable
better targeting and disbursement of non-governmental aid programmes
as well as to encourage more companies to be involved in corporate social
responsibility CSR programs.
Malaysia has made important strides in reforming its education system
making it useful to learn from this experience. One lesson is improving
quality of education through improving curricula taking into account the
curricula of more developed nations, and making the curricula more
relevant to current and emerging needs of the country. The second lesson
is increasing the participation of students in the science section to increase
its pool of scientists. A third lesson is improving technical and vocational
education through schools and improving the outdated curricula and
equipment used in the learning process. Egypt must also learn from
Malaysia that any authentic, sustained, and nation-wide initiative in the
educational sector calls for a holistic vision and requires responses form
all participants in the education process in addition to enhancing the use
of ICT in education and improving the quality of smart schools.
We ended up with the conclusion that by overcoming the challenges that
face investments, agriculture, manufacturing, and education, Egypt would
be able to solve the problems of high unemployment and inflation. Also
Egypt should achieve social justice by eradicating poverty and enhance
income distribution to be more equitable as well as fighting corruption
that hinders economic development and leads to social tension in the
Egyptian society.