When it comes to Egypt's economy...Honesty is the best policy

Ziad Bahaa-Eldin
Tuesday 19 Jul 2016

A simple idea I would like to offer those responsible for implementing economic policy: uncertainty and opacity are the bane of investment, employment, and economic development.

What investors need above all is a clear understanding of the policies and programs the government intends to implement. Various economic actors will make their own calculations and assessments and will be able to deal with variables and adjust to changing conditions - including price fluctuations, tax hikes, or changes in supply and demand conditions—but only if the state allows them to understand its policies and apprises them of its intentions and directions.

Undoubtedly Egypt is experiencing tough economic times and the country needs major resources we don’t have. But even amid scarce resources and capacities, the state can present a clearly delineated economic vision and a realistic, pragmatic program. It can involve society in what it intends to do, accept revision, criticism, and correction. None of this requires resources, loans, or foreign grants. It just means honoring the Egyptian saying "honesty is the best policy".

This observation is occasioned by the ongoing contradictory, inconsistent stances and statements coming from economic officials. Taken together, they do not indicate a coherent, coordinated economic policy that can be monitored or engaged with, or constitute a foundation on which to build expectations.

I’ll give some examples. First, the Ministry of Investment announced its intention to offer some equity in some state-owned enterprises to the public. But meanwhile the Ministry of Public Sector Businesses, the body with core competence, stated that the sale of state assets is not currently on the table.

Second there is the uncertainty surrounding talks and a potential agreement between Egypt and the IMF.  Is a deal in the works, as some officials say, or is it not an option, as other state officials claim? If an agreement is imminent, shouldn’t its outlines be discussed in public, so the announcement doesn’t come as a happy surprise for some and a less happy one for others?

The third example is that of tax policy, specifically the value added tax, currently being discussed in parliament while the final rate continues to be a mystery, as are the items the VAT would cover.

The same ambiguity exists to varying degrees in numerous aspects of economic policy, from the foreign exchange policy, and the capital gains tax on listed securities, to the future of export subsidies, financing for megaprojects, and funding the growing public debt.

Perhaps the reason is concern at the reaction if the public is informed of coming price or tax increases or other costs. In that case, the state may need to reassess its opinion of the public and its capacity to bear hardship. Despite the extremely difficult economic and security conditions of recent years, Egyptians have been prepared for more sacrifice, understanding of the difficulties and forgiving of many mistakes. I think the public has the right to be a partner and enjoy the state’s trust, instead of being a bystander whose reactions the authorities fear.

Or maybe there really is something to hide. That would be a bigger problem. The government has a serious legal responsibility to disclose its policies and programs as required by the constitution. And the parliament has the responsibility not only to debate the budget and laws put before it, but also to monitor their implementation and the achievement of their goals.
And if the reason is neither lack of trust in the people or sensitive information, but that there is no economic policy or that it is disputed among state parties themselves, then that would be the biggest problem of all.

*The writer holds a PhD in financial law from the London School of Economics. He is former deputy prime minister, former chairman of the Egyptian Financial Supervisory Authority and former chairman of the General Authority for Investment. This article was published in Arabic in El-Shorouq newspaper on Monday, 18 July.


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