Egypt's controversial draft budget came under discussion at an initial meeting with business leaders and economists convened on Saturday by Minister of Finance, Samir Radwan.
The proposed budget for 2011-12 includes LE287 billion of social spending, provisions for a new 10 per cent capital gains tax and a 5 per cent increase on the income-tax rate for large corporations. Also suggested are a social security system and a LE700 monthly minimum wage for government employees.
The Wall Street Journal yesterday quoted senior Egyptian businessmen and economists -- including Magda Qandil at the Egyptian Center for Economic Studies and Wael Ziada at investment bank EFG Hermes -- who claimed the country's new 'populist' and 'socialist' policies could hurt the private sector and damage the economy.
Decorum held at Saturday's meeting in Cairo, however, where delegates found plenty in the budget to praise, but had a raft of suggestions for additional reforms.
Galal Zorba, president of the Federation of Egyptian Industries, and Muharram Hilal, chairman of the 10th of Ramadan Investors Association, both welcomed the income tax rise with the former saying the private sector would not stand against the interests of Egypt.
Hilal, however, called for a review of energy subsidies, and said support should be limited to those who financially deserve it, pointing to studies on the subject.
The capital gains tax was also questioned by delegates. Mona El-Baradei, economics professor at Cairo University, said it might have a negative impact on private investment and suggested an alternative tax on real estate transactions.
But Karima Korayem, professor of economics at the University of Al-Azhar, praised the move to introduce taxes on stock dividends, pointing out that such taxes are applied successfully elsewhere in the world, including in the west. He also hailed proposals to up spending in education and training for the unemployed.
The announced LE287 billion of social spending for 2011-12 is an increase of LE52 billion on the current fiscal year and will include a 14 per cent hike in education funding and 19 per cent in health.
The budget also proposes a social security network covering 1.5 million families to be put into effect in July. The government also claims the decision to raise the minimum wage to LE700 will benefit 1.9 million workers.
Some were keen to stress the budget wasn't just about economics. Lubna Abdel Latif, president of the Department of Economics at Cairo University, said the draft should be seen a political manifesto for the new Egypt and an invitation to debate every last detail.
That appears to be Radwan's view too. The finance minister has said that, in the absence of the People's Assembly, the Ministry of Finance will hold meetings with a range of Egyptian society to discuss the new budget and reach a popular consensus.
Future roundtables are likely to include representatives of the January 25th Youth, Egyptian political parties, trade unions, business organisations, economists and the media.