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Now it's the Egyptian economy that needs a revolution

Posted: April 30, 2011 - 8:32pm

The Egyptian uprising was sparked to a large extent by the bad economic situation. Daily life in Egypt had become very difficult, especially for young people who had become frustrated and desperate, with no hope for the future.

And it was those young, intelligent, educated people who saw the corruption of the former regime who were the ones who ended up leading the revolution.

The Egyptian economy has long been state-dominated, despite that fact that a process of privatization had been under way over the last two decades. Price controls were relaxed; subsidies, inflation and taxes reduced; the nation’s gross domestic product grew. None of that, however, led to more equitable distribution of wealth.

Nor did privatization lead to a change in outlook within the business sector, which was still dominated by a public sector mentality. The major business leaders did not allow young middle managers to innovate or lead. This led to widespread frustration among the working and middle classes _ again, especially among young people.

A combination of high unemployment, rising inflation and the government’s attempt to reduce subsidies intended to keep the price of basic goods low all conspired against average citizens. Meat, for example, became so expensive that many could only afford to buy it once or twice a month.

Now, in this post-revolution period, there has been little attempt by any political party to provide a coherent program to address these issues. Politicians have rushed to present unrealistic solutions, such as promising to unilaterally lower the price of basic foods, without explaining exactly how they will do this.

Egypt cannot continue down this route. We have changed the regime but failed to address the system. Anti-corruption measures must be a priority. The entire banking system needs to be reformed, particularly lending and investment, to try to encourage middle-sized enterprises which will also have the added benefit of creating employment.

The middle-class needs to have full access to the credit system, which until now has been largely restricted to big business. Private investment in tourism and manufacturing is needed, and the role of the army as an employer reduced. Having the army as a major employer is not a situation that helps the country either economically or in its transition to democracy.

The international community has provided emergency aid which will be very useful in the short term. But looking further down the road, we need widespread technical assistance.

Without action, Egypt’s economic problems will only grow. Between January and March this year, because of the uprising, our economy shrank by around 7 percent. The International Monetary Fund had predicted annual growth of 5 percent; that has now been downgraded this to 1 percent.

• Kotb writes for The Institute for War & Peace Reporting

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