One of the most serious mistakes of Egypt's pre-25 January Revolution regime was allowing Egypt to lag behind the industrial age. The reasons for aborting production opportunities was based on an economic and social system that combined the faults of a "guided economy" and a "free market," as well the adoption of anti-industry economic policies imposed by corrupt interests and the edicts of globalisation.
The continued absence of industry in the outlooks and agendas of all Egyptian political parties after the revolution will only reinforce the conditions that triggered the revolution. It will also continue to marginalise Egypt and lower its stature – instead of being a benefactor, it will be a beneficiary.
While exploring the opportunities and limitations of production in Egypt after the 25 January Revolution, we must heed the lessons of Egypt’s modern history that teach us that, despite pioneering successes in modern industrial projects, they failed to cement the pillars of production according to world standards and national aspirations at the time.
For starters, Egypt achieved historic industrial triumphs – well ahead of many of today’s advanced countries – during the reign of Mohamed Ali, based on an open-door policy imposed by European intervention and manipulated by British colonialism. This undermined the pioneering efforts of feudal government industry in Egypt, but more pertinent was favouritism of foreigners, who controlled commercial and interest-based capital and took advantage of higher profits, secure interest loans and foreign commerce.
Meanwhile, land owners who possessed great wealth preferred the production and export of cotton for wasteful consumerism instead of the risks and lower profits associated with investing in industry. This prevented skilled production from amassing capital because of government monopoly and free trade.
Second, Egypt experienced a pioneering industrial initiative thanks to the founding role of Banque Misr led by Talaat Harb, and partially independent economic and trade policies that Egypt clenched in the 1919 revolution – well ahead of most of today’s new and emerging industrial countries. A decisive factor that undermined this experiment in national capital industry was the pilfering of Egypt by the colonialists.
Banque Misr, which was jointly owned and managed by Egypt and Britain, stipulated that Harb be removed and placed a ban on establishing industries in return for helping the bank overcome the flight of deposits on the eve of World War II. Even worse was the complicity of the royal family and other big landowners in imposing the subsidies law, lack of funds and tightening the market in the face of industry by promoting wasteful consumerism, preferring imports and impoverishing Egyptians. Also, the clash with Egypt’s capital interests served to bolster the role of industrialists, landowners and foreign agents.
Third, during the rule of the July Revolution led by Abdel-Nasser, there was an ambitious industrial experiment that propelled Egypt to the top five industrial countries of the South. This feat was led by the public sector and in cooperation with the former Soviet Union. It also took advantage of trade and financial and investment opportunities with the West during the Cold War. The independent socialist industrial project was, however, dealt a crippling blow by the 1967 defeat.
More critically, industry was deprived of benefiting from the expertise of national capitalist industrial pioneers because of nationalisation policies, instead of building on new expanded investment by public sector industry. Egypt also regressed from production to imports under protectionist industrial policies in a competitive economy, putting the guided economy in crisis once it was no longer able to mobilise and develop its resources.
Fourth, industry was not a priority on the agenda of Egypt’s government, since open-door policies began under Sadat and it remained absent from the agenda of the former regime. The regime capitulated to the diktats of international economic organisations that were based on a free market, opposed the public sector and rejected incentives for industry. It wasted a unique and remarkable opportunity for industrial revival provided by a drop in foreign debt, financial and monetary reform, the economic rewards of peace, an infrastructure overhaul and the establishment of industrial cities.
Once the Egyptian economy was labelled "emerging" and promising, succession became the regime’s pet project and corruption became its cornerstone. The selfish pursuit of personal gain and pilfering of Egypt’s wealth supplanted efforts to boost the country’s wealth by investing in industry.
To understand the magnitude of Egypt’s industrial challenge after the 25 January Revolution, we need to compare the failures of Egyptian industry with the achievements of other new and emerging industrial states. For example, at the beginning of the 1970s, Egypt and South Korea were categorised by the UN Industrial Development Organisation (UNIDO) as among the top five developing industrial countries in the South. While Korea’s industry continued to grow and raise the country’s development rate, the retreat in Egyptian industry resulted in a development crisis that is apparent in disproportionate industrial and development indicators between the two countries.
First, while the added value of Egypt’s manufacturing industry rose in comparison to Korea's at the beginning of the 1960s, and was almost equal by the mid-1960s, it dropped but remained at 78 per cent of Korea’s in 1970. By 1990, it had sharply deteriorated to only 8 per cent in comparison to Korea. Between 1960 and 1993, Korean exports rose by an average of 35 per cent per annum and mostly consisted of manufactured goods – this is 11 times the growth rate of Egypt’s exports that were mostly primary commodities. Egypt’s revenue from manufactured goods was less than 6 per cent in comparison to Korea’s.
In 2009, Korean high-tech manufactured products leaped to 33 per cent of exports, while comparable Egyptian goods amounted to no more than 1 per cent. This gap in technology was a result of lower spending on research and development in Egypt by less than 8 per cent than in Korea between 2000 and 2005.
We must acknowledge that, despite the failures, industrial endeavours in Egypt confirm the country’s capability to become an industrial powerhouse. The bitter harvest of a bad marriage between power and wealth that pilfered, wasted and spoiled the nation's available wealth for industry resulted in reinforcing Egypt’s backwardness and marginalised status. It also impoverished, humiliated and forced many Egyptians to leave.
Through more comprehensive industrialisation, namely modernising and strengthening manufacturing and spreading the fruits of technological industrial modernisation across other economic sectors, Egypt will become an exporter of manufactured commodities that are more advanced and of higher added value. It will become an exporter of know-how, technology, services, foods and investment. This will enhance its national security by boosting its overall ability to protect its interests, values and recover its stature and leading role.
Through industry, Egyptians will feel safe, be free of need, want and fear of the future. It will also provide limitless and high-production job opportunities that will ensure decent jobs, a high income, and a better, healthier and longer life. Industry will ensure that Egyptians enjoy fair distribution of wealth in an advanced, rich nation, instead of equally sharing poverty in a backward country.
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