Since 25 Jan and former president Hosni Mubarak’s ouster, Egypt has been in a perpetual stage of transition. All dreams of a better future and rosier outlook have evaporated in the midst of unrest that has kept investors and tourists at bay, stifling economic growth. The economy has been battered ever since, with foreign debts reaching $45.8bn by the end of 2013.
In an attempt to prop up Egypt’s ailing economy, the current interim government unveiled its new stimulus package earlier this week. The plan will inject roughly EGP 33.9bn into the economy with most of the financing coming from aid promised by the United Arab Emirates. The majority of this funding will be spent on development projects, developing the Suez Canal corridor as well as financing social programs, including a rise in the minimum wage. While, the move sounds attractive as a bid to placate the public, the fundamentals of the economic situation in Egypt are not changing drastically enough to signal a recovery.
First, the prolonged transition did not allow for the deployment of meaningful reform policies. The successive governments since 25 Jan were more fire fighting governments than transitional governments. They were more concerned with dealing with tactical issues in response to public pressure, rather than securing structural long-term changes.
Second, attempting to secure an economic turnaround in the absence of political stability will not work. Foreign investment has been skeptical because the new political environment is creating tensions for business. Furthermore, the general public seems to be averse of a more liberal economic policy. This increases the probability of populist economic policies, as the rhetoric most policy makers and political hopefuls support increased government spending. This also increases the prospect of deepening government interventions, which is a great economic risk.
Third, the same populist mood gives rise to talks about mega projects. Despite the allure of such projects, Egypt’s recent history does not provide confidence that these types of projects are worth investing in. Take the New Valley Project (or Toshka project) as an example. The project was estimated, at the time, to be completed by 2020. The valley was expected to become a home to more than three million people and increase Egypt’s fertile land area by more than 10%. Seventeen years later, the mega dream simply remains a dream. Therefore, the notion of securing economic prosperity through hastily executed mega projects will need to be approached with a great deal of caution.
Finally, the scene is awash with commentaries on how to shore up the Egyptian economy. Everyone is lending their version of a groundbreaking solution that would solve all the problems. The fact that gets missed amidst the clamor is that the problem is not about thinking outside the box as much as it is with executing inside the box. Egypt needs a detailed long term plan for development; policy makers also need to stop pacifying the public through quick fixes and obtain the public’s buy in on such long term plan. Along this long term vision, a relentless execution needs to be carried out. Thomas Edison once said: “Vision without execution is hallucination.” I do believe that Egypt has had its fair share of hallucinations already.