The Post-Revolutionary Economic Prospects of Egypt

Ahmed Galal, ERF Managing DirectorDespite reforms in the mid-1970s and early 1990s that helped liberalize its economy, Egypt is still considered as a relatively poor country. The deceptive 5.3% growth rate in 2010 have been made negligible by the unbalanced distribution of wealth and opportunity, poor public services, lack of education, as well as the fact that Egypt suffered from a brain drain due to the oppressive political system. .

According to the Managing Director of the Economic Research Forum Ahmed Galal, Egyptian modern history is very similar to that of countries in Latin America because of their use of the so-called import substitution strategy in the aftermath of WWII. While this strategy produced enormous benefits in most countries, it also had its limits; the inefficiency of bureaucracy and limits of social programs without enough economic growth resulted in the switch to liberalization.

Most of these countries liberalized on both the economic and political front. “Egypt has done exactly that, although we lagged behind a little bit” said Galal. In the mid-1970s, the partial ‘opening-up’ generated some of the disadvantages of capitalism (among which are inequality, irrational and monopoly behaviors and immobility) while the old disadvantages of socialism remained (lack of ambition and innovation due to the government regulation and intervention, eventual brain drain or eventual graft and malfeasance).

In 1991, a process of economic liberalization was launched and continued up until today. Yet the political front has not been liberalized. The economic reforms in Egypt focused on policies promoting private sector and economic growth without doing much on the social front or on the distribution of benefits, nor on the political liberalization side.  “Now we are completing a story that was inevitable. The only question was how it will happen.”

In his interview with Al-Masry Al-Youm, the mostly independent Egyptian daily, Galal presented what the ideal economic strategy would be in the coming period from his point of view. There is a need to continue the economic reform agenda to maximize the benefits from private initiatives, while improving the distribution and generation of wealth by equalizing opportunities for people of different socio-economic classes. Accountability and political liberalization are fundamental steps in achieving the objectives of growth. For Galal, political transition should remain the first priority. “Economic policies should be in the business of making sure we remain stable, much more than figuring out what to do in the long run. The next government will figure that out.”

Galal expressed his optimism regarding the road ahead for Egypt’s economy in the aftermath of the revolution. “Going forward, we need to do more, with equal forces on all three fronts (…) I think the political context, the policies made, the lack of attention to social cohesion, were responsible. Now you are unleashing that, I think Egypt has enormous potential for the future. That’s why I am very optimistic about what’s happening”.

A former World Bank economist, Galal is the Managing Director of the Economic Research Forum, the foremost economic think tank  covering the Arab countries, Iran and Turkey. Between 2000 and 2006, he was the Executive Director and Director of Research of the Egyptian Centre for Economic Studies (ECES).
His work combined research on different issues as well as policy advice to several countries in Latin America, the Middle East, Asia and Europe. Galal will moderate plenary session I on “Democracy (Open Society) and Economic Development: The Politics of Policymaking” at the ERF 17th Annual Conference  on Politics and Economic Development to be held in Antalya, Turkey.

Galal’s research interests include industrial organization, international trade and institutional economics. One of his latest publications, “Development Prospects for North Africa” provides an explanation of why the North African region has been successful in reducing poverty despite modest economic growth and explores the sustainability of past strategies in achieving this outcome in the future.

To find out more about Ahmed Galal‘s work, visit his profile on ERF website and to keep up to date with all the speakers appearing at the 17th Annual ERC Conference, see the latest agenda.

 

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