Egypt has no time to lose

Unless economic reforms are introduced quickly, the country is liable to relapse into Islamic extremism.

The provisional government of Egypt, backed by the army, which replaced the Islamist regime of Mohammed Morsi, has moved towards political normalization by adopting a constitution and scheduling parliamentary elections for early next year. However, nothing has been done in the economic area, and Saudi Arabia and the Gulf States will not subsidize the Egyptian budget and trade deficits forever.

As outlined in previous columns, there are three areas which urgently need reform and restructuring:

1. Food and fuel subsidies should be eliminated and replaced by cash payments to the very poor. Such payments, which can be tied to family requirements, such as making sure children are vaccinated and stay in school, have proven to be much cheaper and more effective than subsidies in Brazil and elsewhere.

2. Egypt used to be the breadbasket of the Mediterranean. It can again feed itself and produce an export surplus of food and non-food agricultural products. The thousands of non-productive small-holdings must be consolidated into larger cooperatives or farmer-owned corporations which can have access to machinery and equipment of all kinds, as well as fertilizers, pesticides, herbicides and other inputs. There is no time to lose and funding should not be a problem, as a good program would get support from many regional and international funding sources.

3. There is also an urgent need to explore for traditional and non-traditional deposits of oil and natural gas, especially along the border with Libya, in a region where Libyan production of light, sweet crude is centered. It is, frankly, unlikely that commercially-viable deposits will not be found and their exploitations would address the other major source of the Egyptians twin deficits.

Delaying these measures will mean that as soon as the GCC funding ceases, Egypt will be plunged into a financial and economic crisis which will lead to political and social unrest, and in all likelihood the imposition again of an Islamist regime, likely even more extreme than Morsi's. Negative implications of such a development for Israel and beyond would be severe, and Israel is particularly well-placed to offer technical assistance in the reorganization of Egyptian agriculture, thereby extending the existing unprecedented security collaboration to the economic area.

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 December 12, 2013

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

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