What Egypt should do

With the right policies, and international backing, Egypt can be transformed into a showcase of economic development.

My column of last week, "The West Must Back the New Egypt", has caused much comment and has been reprinted several times. This column attempts to put more meat on the bones of an economic plan for Egypt's future. A stable and prosperous Egypt has to be among the top two or three foreign policy goals for Israel and the West, perhaps exceeded only by the potential threat posed by a nuclear-armed Iran.

It would appear that Saudi Arabia, the UAE and Kuwait are going to chip in to cover Egypt's immediate foreign currency shortfalls, which will postpone potential collapse and provide time for the new Egyptian government to prepare a meaningful economic plan for the medium- and long-term, and for the Western countries and the international development agencies to realize what is at stake and offer generous support to the implementation of such a plan. It should include the following items, alluded to briefly in last week's column (this is not intended to be in any way exhaustive and omits such areas as transportation and communications):

1. Egyptian agriculture MUST be rationalized, reorganized and modernized, which means that the basic units involved must be large enough to efficiently use inputs of machinery and equipment, fertilizers and insecticides. This, in turn, means organizing thousands of small holdings into a limited number of large farms, but without expropriating the smallholders or creating massive migration to the urban centers with accompanying increases in unemployment. In order to avoid the likelihood of concentration of ownership of such large farms, the peasantry should become members of cooperatives, and sale of memberships should be prohibited in their charters. Memberships should only be inherited, or if there are no heirs, extinguished. There are many examples of highly successful and profitable cooperative agricultural enterprises in the world. One of the most famous is the citrus fruit empire of Sunkist, a billion-dollar cooperative in California and Arizona. There is no other brand of citrus fruit that comes close to market recognition of the Sunkist label.

The rich alluvial soil of the Nile Valley can sustain nearly all forms of agricultural activity, but a study of the most profitable product groups would likely lead to a concentration on fruits and vegetables, including tropical fruits which are in high demand in Europe. Fish-farming should also be examined for technical feasibility and profitability, and many of the cooperatives could create the appropriate facilities along with traditional agriculture. Large-scale livestock production, such as cattle, or grains, such as wheat or rice, are not likely to be favored. On a cost-benefit basis, they should probably be imported. But these are only indications--a careful study might reach different conclusions. Finally, plans to divert the waters of the Blue Nile by upstream counties should be actively discouraged.

2. A careful and thorough geological and geo-physical survey of energy and mineral resources, including such things as rare earths, should be undertaken as soon as possible. It is very unlikely that a country the size of Egypt should be as lacking in such resources as present exploitation would indicate. When found, international investment to exploit the deposits should be welcomed.

3. A thorough but expeditious review of laws and regulations affecting innovation, entrepreneurship and business formation should be undertaken and all legal and regulatory impediments to domestic and foreign investment should be revised or eliminated. Egypt should take the lead in reversing the multi-secular decline in Arab scientific and technological progress by investments in technical education, the formation of industrial and hi-tech zones and campuses and incentives to innovate and create. State enterprises should be privatized, including those enterprises owned or controlled by the armed forces, which can thus make an immediate contribution to economic development.

Again, however, as with agriculture, concentration of ownership should be avoided, especially since industrial development is increasingly capital- rather than labor-intensive. Anti-trust laws should be promulgated and strictly enforced and as much development as possible should be owned by employee ownership trusts or by community investment banks and similar structures, so that as large a percentage of the Egyptian population as possible would share in ownership of their own economy, in the countryside and in the urban areas.

In short, an opportunity has suddenly appeared to turn the largest Arab country in the world, in terms of population size, into a showcase of economic development that will surely eventually transform the political and social structure of the country as well. In this regard, note the post WWII development of South Korea and Taiwan, where political stability under benign military rule and an open economic system led eventually to a functioning and stable democracy.

None of this is Utopian. All of it is technically feasible and has worked all over the world to create prosperous societies. Will the people of Egypt and their new leadership take hold of the reins of their own future? Will the outside world support them generously if they do? What needs to be done is clear enough.

What will be done may, unfortunately, be another story.

Norman A. Bailey, Ph.D., is Adjunct Professor of Economic Statecraft at The Institute of World Politics, Washington, DC, and a researcher at the Center for National Security Studies, University of Haifa.

Published by Globes [online], Israel business news - www.globes-online.com - on July 10, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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