Under the microscope: Economic plans and decisions to be discussed in upcoming parliament

Mohamed Ayyad
14 Min Read

After more than three years of absence, Egypt’s parliament will officially take office with many issues and priorities on the table. Not only are new members of parliament preparing their plans, the current government is also revealing its programme that will be presented to the People’s Assembly.

A source in the cabinet said Prime Minister Sherif Ismail met with 80% of the state ministries to check in on their plans and that the government’s programme will be ready before the end of December.

Preparing to design a government economic programme to be discussed in the parliament, Ismail recently made visits to ministries to check on the detailed plans of their projects and programmes.

The programme aims to improve public services, achieve social justice, fight rising prices and moderate them, and expand social safety nets to protect the interests of the neediest categories in society and limited-income people.

The government also hopes to undertake “exceptional” measures to overcome economic challenges, reduce the budget deficit, decrease the deficit in the trade balance, support insolvent factories, and decrease unemployment rates by adopting national projects.

Moreover, the programme takes into consideration updating infrastructure networks such as water, sanitation, electricity, and public transport sectors that have long been neglected by the government.

Ismail said the programme will point out clear strategies to support local product and fight illegal production competition by increasing control on customs outlets to avoid smuggling.

Following texts will be published in boxes

Ashraf Salman, Minister of Investment (DNE Photo)
Ashraf Salman, Minister of Investment
(DNE Photo)

Ministry of Investment

During his visit to the Ministry of Investment, Ismail witnessed the application of a new smart system that allows investors to identify the investments map and the locations of projects. Through this digital system, investors can find detailed information regarding the status of each sector in Egypt.

It is researching launching a smartphone application that can easily be accessed and publicly downloaded.

Ministry of Social Solidarity

Minister of Social Solidarity Ghada Wali told Ismail that by the end of June 2016, beneficiaries of the ministry’s programmes for social solidarity, Takaful and Karama projects, will reach 500,000 families with a budget of EGP 1.3bn.

The number of beneficiaries will exceed 1 million families in FY 2016/2017, with the programme’s cost to reach approximately EGP 5bn by that time.

By 2016, it will launch a strategy on the protection, rehabilitation, and enabling of persons with disabilities of various kinds. The project will be implemented with cooperation of civil society organisations and experts including 150 associations in various governorates.

As for the laws that require discussion with the legislative body, the ministry revealed that the draft laws include the NGOs Law, the Unified Law for Social Insurance and Pensions, the Disability and Social Security Law, and a law to increase punishment for driving under the influence of drugs.

tarek el molla
Minister of Petroleum Tarek El Molla

Ministry of Petroleum

Minister of Petroleum Tarek El Molla said their strategic targets entail securing petroleum needs at economic prices, increasing petroleum reserves and production, turning Egypt into an energy hub, registering $30bn in exploration and development investments by 2018, and expanding in natural gas delivery to homes all over the country.

For the short term, the ministry’s plans for FY 2015/2016 include signing new agreements in explorations of crude oil and natural gas and issuing three international tenders to explore oil and gas and design a plan for the development of the Zohr 1 field, of which the initial reserves are estimated to be 30tr cubic feet of gas and 100m barrels of condensates.

The ministry aims to deliver natural gas to 1.2m residential units in FY 2015/2016, deliver gas to 1,100 industrial and commercial establishments, and increase the number of converted cars to operate with natural gas to 265,000 cars by June 2018.

Mohamed Shaker Electricity Minister
Mohamed Shaker Electricity Minister

Ministry of Electricity

Minister of Electricity Mohamed Shaker said his plan is based on introducing new stations to the national grid in preparation for the summer of 2016.

Al-Mahmoudeya station has a capacity of 160 MW, in addition to units in Sharm El-Sheikh and Port Said with a capacity of 420 MW, the West Assiut station with a capacity of 250 MW, El-Tebbin station with a capacity of 480 MW, North Cairo with a capacity of 250 MW, Attaka station with a capacity of 480 MW, and North Giza with a capacity of 750 MW.

Siemens’ new power station will also start production at 14,400MW starting from mid-2016 until mid-2018.

Ministry of Tourism

With the unstable situation for the tourism industry in Egypt, the Ministry of Tourism is facing a difficult mission. Minister of Tourism Hisham Zaazou said there were 8.9 million tourists in 2015, only 10% less than 2014, with tourism revenues of $6bn.

For FY 2015/2016, Zaazou expected there will be 9 million tourists, 13% less than FY 2014/2015, with revenues registering $6.2bn, a 15% decrease compared to the previous fiscal year.

Zaazou said they will launch campaigns to improve the image of Egypt abroad.

Minister of Trade and Industry Tarek Qabil Photo handout to dne
Minister of Trade and Industry Tarek Qabil
Photo handout to dne

Ministry of Industry

Minister of Industry Tarek Qabil promised to resolve investors’ and exporters’ issues and to improve the industrial climate by preparing the required legislations for industrial and investment reform. He will address the issue of decreasing exports by expanding industrial complexes that will also help address the unemployment issue.

Qabil said they are about to reach a solution for insolvent factories by forming a fund. There are 871 stalled factories and 27 insolvent ones.

The ministry is aiming to increase the industrial growth to reach 10% by 2020.

Ministry of Communication

Minister of Communication Yasser Al-Qadi said his plan will focus on improving the communications services offered to citizens, achieving economic and social development in Upper Egypt, and issuing new licenses for internet and mobile services that will benefit the state budget.

In cooperation with the private sector, the Ministry of Communication will digitise notary offices in Egypt at the cost of EGP 400m and will update and develop commercial record offices at the cost of EGP 350m.

Ministry of Military Production

Minister of Military Production General Mohamed El-Assar said he is planning to establish a recycling factory to convert waste into fertilisers. He said they are also considering helping the community by establishing water and sanitation stations and producing home appliances.

Ismail suggested that the ministry participate in car manufacturing and produce smart electricity and water counters. The ministry is also planning to increase its production of light bulbs.

Key economic decisions issued in the absence of parliament

With the president acting as the legislator in the absence of the parliament, several economic decisions and laws were accredited. On Thursday, a presidential decree was issued granting the armed forces the right to found companies in partnership with local or foreign investors.

In November, President Abdel Fattah Al-Sisi issued a decree to restructure the Coordinating Council that manages fiscal and monetary policies set out in Article 5 of the Central Bank of Egypt (CBE) Banking Sector and Money Law. According to the CBE Law, the Coordinating Council sets the objectives of the monetary policy to achieve price stability and soundness in the banking system.

The council will be headed by Ismail, and its members include the CBE governor, Minister of Investment, Minister of Finance, Minister of Trade and Industry, Vice-Governor of the CBE, and CBE Deputy Governor for the monetary policy sector.

During the absence of the parliament and under Al-Sisi’s rule, the Egyptian government had approved two fiscal year budgets for FY 2014/2015 and FY 2015/2016. Both witnessed major economic shifts, such as cutting energy subsidies.

The government reduced its petroleum product subsidies allocations to EGP 61bn in the budget of the new fiscal year (FY) 2015/2016. In the last fiscal year, the government’s spending on petroleum subsidies was set at EGP 100bn, EGP 30bn less than the preceding budget.

The government issued a new law in 2014 to ban a third party from challenging investment contracts signed between an investor and the government.

The New Investment Law was a key one that was issued, approved with the launch of the Egypt Economic Development Conference 2015. It gave incentives to businessmen, since under the new law there is a “one-stop shop” that the investor will deal with to complete all the needed procedures to launch a project.

The law also obliges the government to offer incentives for projects that are labour-intensive, or are in remote areas, as well as energy, logistics, and production projects. It also obliges the government to fully or partially repay the costs of providing lands with facilities to the investor after the project’s allocation and to bear the cost of training workers.

Crucial missions awaiting the parliament

The government considered replacing the existing general sales tax with the value-added tax (VAT). This form of consumption tax is applied in the EU and is placed on a product whenever value is added to a stage of production and at a final sale.

A coalition of non-governmental organisations (NGOs) voiced their opposition against the application of the VAT, noting that despite the fact it is widely-applied in over 130 countries, it is one of the taxes that are “prejudiced” against the rights of the citizens. They argued that it is applied on all products and services, with the consumer eventually bearing the effect of the tax.

Another controversial economic tax was the tax on capital gains, which took effect in July 2014 but then halted in May 2015 for two years following a cabinet decision to revive investment in the Egyptian stock market.

Moreover, the government decided in June 2014 to create a temporary additional yearly tax of 5% for three years, covering those whose net income exceeds EGP 1m. It would be applied to the income of the natural person or the profit of “legal bodies”, referring to companies, organisations, and institutions. This tax has yet to come into effect after facing obstacles, and the presidency also has yet to approve the law.

The parliament also must monitor the government targets. The Ministry of Finance estimated the targeted total deficit in the state budget for FY 2015/2016 at EGP 251bn. This represents 8.9% of gross domestic product (GDP) instead of EGP 281bn or 9.9%, in the first draft.

Public spending is expected to record at EGP 872.6bn in the current fiscal year. The budget also targets 22% increase in spending on health, surging by EGP 11.5bn to reach EGP 64bn. Spending on education will jump by 8.3%, increasing by EGP 9.2bn to reach EGP 120bn.

The general revenues of the current fiscal year’s budget are expected to grow by 28%, amounting to EGP 622.2bn, compared to EGP 486bn for the current fiscal year.

The total expenditures amounted to EGP 864bn, with an increase rate of 17.4%, while expenditure on employees’ wages and compensation and debt services, grants and social benefits amounted to 80.2% of expenses.

As for FY 2016/2017, the government set its economic targets for it, putting the budget deficit target at 9.5% of the gross domestic product (GDP), with expected economic growth of 5%-5.5%.

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