Increasing exports is the key to fix Egypt’s trade deficit, and accordingly, improve the country’s economy, author of “Egypt’s Economic Crossing” and partner at Logic Consulting Aly Wally said during a talk at the American University in Cairo (AUC) on how the Egyptian economy can take steps forward.
A significant increase in investments is required in order to be able to generate taxes for the government to reduce the budget deficit, Wally explains. Additionally, there should be a focus on export-led investments because the Egyptian market cannot absorb all manufactured products, he adds.
Egypt’s trade deficit
In order to fix Egypt’s trade deficit, the country needs to grow its exports’ value from $25 billion to $150 billion. Additionally, Egypt should target to increase its exports to value $200 billion by 2030, and it can secure at least $150 billion from the industrial sector. This includes the textiles, ready-made garments, electronics, automotive, chemicals, furniture and agribusiness sectors.
How can Egypt improve its industrial sector?
Wally suggests that Egypt establishes VIP services for large investors, sets up promotion offices in the top 10 global industrial countries and develops a program to attract the top 1,000 companies to open manufacturing plants or regional headquarters in Egypt. Moreover, Egypt needs to implement a program to grow national champions, for example, companies that sell for LE20 million per year should get into a specific program to help them grow to LE200 million per year in a seven-year period.
Egypt’s government should also assess investments based on their generation of governmental revenues in order to spend on education, healthcare and public services. Additionally, it needs to strengthen the Egyptian pound and halt inflation that resulted from the devaluation of the local currency. Lastly, Egypt should create jobs for its youth.
If the solution is clear, why is it not implemented?
Wally believes that the decision makers are receiving distorted messages. Different countries had different incentives that led to economic growth. For instance, 90 percent of the gross domestic product (GDP) of the Unites States (US) and Europe is composed of services. Malaysia, on the other hand, succeeded through fixing its education system. Consequently, the decision makers cannot lay their hands upon which sector to focus on.
“In the past 200 years, countries have progressed through their industry,” Wally explains, adding that the problem does not lie in the people or manpower, but rather in management. “The government needs to act as a regulator.”