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Egypt has been affected only slightly by the global financial crisis and now that it is coming to an end, things are going to start getting even better. At least that was the message that Minister of Investment Mahmoud Moheildeen shared with financial experts at the Euromoney conference held in Cairo this week.
Mohieldeen said that reforms in the financial sector had helped Egypt cushion the impact of the global downturn."Egypt's economic growth is not dependent on one sector alone but rather, is driven by several different sectors," he added.
This may be true, but analysts are quick to point out that Egypt may be doing well compared to other countries in the region simply because it is less integrated into the global economy than some of its neighbors, particularly the Gulf states.
"We've managed to reach a growth rate of 4.7 per cent despite the crisis and still have a comfortable target of 5 to 5.5 per cent to achieve next year," Modhieldeen told media representatives in a small press conference following the inaugural session.
However, the minister lamented that in the past year, Egypt has witnessed a drop in tourism and Suez Canal revenues, Egypt's main foreign currency earners.
Economic analysts attending the Euromoney Conference meanwhile advised Egypt to alter its economic strategy in light of the new global situation.
Samir Radwan, advisor to the General Authority for Investment noted that Egypt is an export driven economy. "With commodity exports hard hit for the time being because of the global economic downturn, the country should turn to export of services as an alternative," he advised.
He suggested that Egypt focus on service sectors such as tourism, leisure and medical treatment in the period ahead, as these are labor intensive and could create job opportunities for youths. Official government figures put the unemployment rate in Egypt at nine per cent, a two per cent drop from the 2004 rate of 11.2 per cent.
With 650,000 new applicants for work each year, Mohieldeen admits the government is faced with a daunting task in trying to provide enough jobs to absorb new entrants into the labor market.
Radwan, meanwhile, noted that infrastructure projects were part of the solution. "Let's open up the country for investments in infrastructure projects," he said.
To stimulate the economy, the government has had to "pump in LE13.5 billion, an amount that does not exceed 1.5 per cent of GDP," according to Mohieldeen. He noted that 90 per cent of that sum has already been spent or allocated to development projects, such as sewage and road networks, and water treatment plants.
What will happen now as the world enters the recovery period? Will Egypt move toward stronger regulatory oversight?
The government's role, according to Mohieldeen is as a protector of both the market and the consumer: "It is the government's responsiblity to create the environment for markets to work. No market can work without laws or regulators, nor can markets work without the discipline of competition policy, without consumer protection and without discipline of freedom of entry into the market. We also need to put standards for products and protection of property rights."
He defended the latest government regulations for the financial sector and the goods market saying that these are vital but that they do not mean the elimination of the power of markets—a sign, perhaps, that while the government plans to continue liberalizing the economy, it won't take a completely hands-off approach.