Egypt's economic revival to be Morsi's big challenge
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E-mail Xinhua, June 29, 2012
For Egypt's newly elected president Mohamed Morsi with his Islamic renaissance project, finding feasible tools to revive the country's worsening economy stands as a pressing challenge.
Over last decades, former President Hosni Mubarak's government has adopted market economy policies, which enabled seven percent growth rate for years until the world economic crisis hit in 2008. While ordinary people gained little in the soaring ages, wealthy class close to Mubarak's family benefited dramatically, widening the gap between the rich and the poor.
Egypt's poor economic environment, featured with political clashes, security instability and lack of constitution, made it difficult to attract foreign investments, which were considered essential to tick economic balances.
According to economic consultants from the Muslim Brotherhood, deteriorating economy and heavy government debts, estimated at 189 billion U.S. dollars, left Egypt little choice but depending on the private sector and foreign investments.
"Fifteen international enterprises signed contracts with Freedom and Justice Party (FJP) to which Morsi was affiliated before winning the presidential election, to pump 200 billion dollars of direct investments into Egypt," Muslim Brotherhood website quoted Morsi as saying in his electoral campaign on April 30.
Once the executive authority led by Morsi approves those contracts, the investments will be pumped immediately.
Yasser Ali, the temporary spokesman of the president-elect, confirmed Morsi's promise. But concerning the huge amount and non- identified source of those investments, analysts had different opinions about the issue.
Mohamed Abdel Halim, economic professor and chief of the Islamic Economic Center in Al Azhar University, said in an interview with Xinhua that "it is impossible to pump this huge amount into the Egyptian markets, and it is also impossible for Egypt to consume such investments in five years."
With the direct investment gap in Egypt ranging only from 14 billion to 20 billion dollars currently, there wouldn't be giant projects or big exportation basis in Egypt to absorb 200 billion dollars of direct investment, said Halim.
Halim described Morsi's statement as playing on popular aspirations by "false promises."
With the parliament dissolved and constitution yet to be drafted, investors wouldn't risk their money in a country that couldn't issue a law to facilitate their activities, or might even null some law to cripple their projects, the professor added.
However, Ahmed Monir, professor at Suez Canal Faculty of Economic and Political science, believed that "it's normal for countries, especially the gulf states, to pump investments into Egypt," with investments most likely go to "fast profit" activities such as restaurants and real estate projects.
Monir stressed that foreign investors would value Egyptian administration's abilities to achieve stability, and would pump investment when they are sure of it.
The Brotherhood said they will seek to establish "an industry with Islamic funding" to collect capitals for their renaissance project. They affirmed that the traditional banking sector couldn' t fund this kind of big projects.
"The Brotherhood is considering Islamic funds for direct investments, infrastructure, agriculture and adventuring capitals, " said Amro Abou Zaid, economic consultant for the renaissance project.
Morsi's main agenda depends on applying Islamic laws, but Halim believed he couldn't apply the Islamic tendency immediately amid people's deep concern for Islamization, not to mention many voters simply chose Morsi as the alternative to his rival Ahmed Shafiq, former prime minister of the ousted corrupted regime.
"It is difficult to apply the Islamic economy, but a capital system with Islamic vision will be more applicable," he added.
However, Morsi can widen the scale of Islamic banking sector, which has gained stable profits during the world economic crisis.
Traditional banks comprise more than 70 percent in Egypt, while Islamic banks were hindered by some laws. There should be an apparent amendment for banking laws to give more space for this successful type of banking system.
Halim asserted that Islamic banks could make a real step to move Egypt from shrinking economy to organized economic growth with a stable structure.
When compared to stock market system which marked its fifth day of increasing rates, Halim said "to succeed in developing the economic sector, Egypt needs direct financial activities, but stock market, even a stable one, couldn't be marked as a basic pillar in this regard because it relies only on indirect investments."
Morsi could move Egypt to the safe side, if he succeeds in regaining security and not marginalizing successful economic practices simply because it was part of Mubarak's system, said Samir Tobar, professor at Cairo university for Economic and Political Science.
Choosing his presidential team will reflect how Morsi would deal with economic problems. During the presidential campaign, Morsi said his administration would employ a wide range of talents, no matter from women, Copts or the revolutionary youth.
Rumors were spreading over a possible flee of Coptic capitals from Egypt after an Islamic president took presidency, but Halim said there was no reason for Coptic businessmen to leave Egypt as long as there were laws governing the relations between all citizens, precluding the possibility for this to happen.
He advised the new president to be wise enough in choosing his retinues, applying Islamic laws gradually and softly, without sticking to Brotherhood's thoughts and characters.
As Egypt's first elected president over long decades, Morsi has to deal with unemployment, education issues, accumulated economic problems and poverty, Tobar said, adding that the new president also has to announce clear stance for banking sector, tourism and Suez Canal mortgage.
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