Salah El-Amrousi assesses the economic platforms presented by the Ghad, Wafd and NDP parties Given this country's record of unemployment and inflation, the economy seems to be just as important to the public as democracy and political reform. So what are the National Democratic Party (NDP), the Ghad Party, and the Wafd Party exactly promising us? These three political parties have a lot more in common than they would have us think. They are all liberal in their approach and committed to a free market, yet they do differ on some details. Let's take a look at where they stand in terms of the economy: THE GHAD PROGRAMME: Ghad is definitely becoming more liberal than when it was first founded. In the past, it used to speak of a third way and something it called the "liberal social economy". This is no longer the case. Throughout the recent campaign, the party was unabashedly liberal. Its programme speaks of "economic freedom and reliance on market forces" and the "non-ownership by the state of any of the tools of industrial production or services." Although the party addressed issues such as the privatisation of education head on, it avoided highly critical matters such as who will own the Suez Canal, or the Egyptian General Petroleum Organisation, or the water and electricity facilities. The campaign programme speaks of "encouraging the course of economic activity in all its aspects, including imports, industry, marketing, and distribution". The party makes little distinction between these activities, and views trade and industry as equally beneficial. Ghad makes no distinction, for example, between honest manufacturers and opportunistic importers. Equal importance is placed on the incentives given to both trade and industry. Yet incentives typically boost one activity at the expense of another. This is how one changes a country's industrial structure. Favourable incentives were used widely and successfully in Southeast Asia. Yet unless one is ready to discriminate in the matter of incentives, one should not be speaking of neutrality regarding all economic activities. In an economy suffering from excessive imports and deficient exports, exporting and industrial activity should be given first priority in terms of economic incentives such as tax exemptions, marketing services and cheap credit. The Ghad Party promises to boost the economy as well as the standard of living. It promises the unemployed a monthly payment of LE150 each. It promises "easy consumer loans" to the poor and ample credit to businesses following "serious feasibility studies". For businessmen who default on their loans, it pledges "to abolish the criminalisation of default so long as it is not perpetrated in ill-will". For small projects, the party envisages "a programme for funding integrated projects". To salaried employees, the party promises "salaries adequate for the household". Ghad goes into the usual litany about less red tape, taxes, competitiveness, and hi-tech industries. The party speaks of turning subsidies into individual monetary allowances. A clever move considering that once the poor settle for that, inflation will soon begin to nibble at their allowances. To jump-start the economy, the Ghad believes that its proposed programmes for unemployment subsidies, consumer credit, and higher salaries will increase domestic demand, thus generating growth in both supply and production. This would work if idle capacity were the result of inadequate domestic demand, rather than factories being short of spare parts due to a foreign currency shortage. Apparently, Ghad is clueless about Egypt's industrial structure. Idle capacity and excess inventory have dogged the economy since the mid-1960s, something that seems to have escaped Nour's notice. What we have is a complex economic problem, to which simplistic solutions are of no avail. The party believes in enhancing competitiveness. It promises to fight red tape, unify taxes, invest in research and technology, and link industry with scientific research. "Reduced taxes on imports of raw materials and capital goods would reduce the cost of Egyptian products, which would decrease their prices and increase competitiveness in local and foreign markets." Barely a novel idea, considering that recent tariff laws have done just that, and failed to boost competitiveness in any significant way. This country needs to create capital and intermediate industries. This would reduce the cost of final products and boost competitiveness. Yet to do this, customs need to be initially increased, not reduced. Also, we need the state to intervene in the creation and backing of such industries while they are being formed. Furthermore, research and development are hardly of any use until we have a developed capital goods sector (the sector that produces factories). Technology transfers make little sense unless we have a sector producing capital goods. To sum up, the Ghad programme stays within the same narrow mindset of Egyptian capitalism. Its claim that market forces can fix everything is unfounded. THE WAFD PROGRAMME: Wafd is a liberal party. But perhaps in an attempt to redeem its image, somewhat smeared by the 1952 Revolution, it is trying to position itself on the left of NDP and Ghad. Its programme notes that "economic liberalism is the way to achieve accelerated development in an open economy in which globalisation imposes its own laws on small entities. This makes regional integration, in the form of an Arab common market, necessary for development and progress." There is nothing here that the NDP would object to. It is odd, however, that an opposition party would try to win the election by recycling the failed policies of the ruling party. Wafd urges "equitable distribution that narrows the difference among incomes and mends the flaws in prices and living standards, through an effective tax system." The party speaks of workers rights and demands minimum wages and maximum working hours, things that already exist. It promises to link wages with prices, but does not tell us how it would do so in a free market with the supply of labour outstripping demand. The party supports the turning of subsidies into cash. Yet unless these cash payments were continually adjusted for inflation, the overall result would be the eventual elimination of subsidies. Wafd is against random privatisation. "Major projects of a national nature and strategic importance must remain in public hands." In banking, the party urges that at least two commercial banks must remain publicly owned. "Privatisation should begin with the government's share in mixed-capital banks, and must not involve more than two government-owned banks." Here, Wafd is challenging NDP policies, for Investment Minister Mahmoud Mohieddin believes that nothing in this country is immune to privatisation. In industry, Wafd suggests boosting small industries through reduced taxes and increased technical support. The party forgets to mention however, that the worst problem facing these industries is high interest rates. Wafd supports labour-intensive industries, demanding "less imports of automated instruments" in order to protect jobs. Whether right or wrong, this point is at least about economic policy. Then the party programme goes into things that are best left out of any political programme such as the development of alternative medicine. The party promises to boost the textiles industry without telling us anything about the problems facing this industry. It urges a re- evaluation of the petrochemical industry. It promises to rid us of ineffective national projects, such as the Abu Tartur phosphates project, Tushka, north coast development and Al-Azhar tunnel. And it has every intention of manufacturing a local car! Wafd supports the introduction of unemployment subsidies, an idea Ghad had already popularised. The party offers no other solution to that problem. Unlike the NDP and Ghad, Wafd does not bother to link unemployment with industrial policy, although one obvious reason for unemployment in this country is the fact that our industrial sector is dedicated mostly to consumer goods. THE NDP PROGRAMME: The NDP offers no economic policy, only a set of practical programmes and promises. Concerning unemployment, the NDP promises 4.5 million new jobs in the next five years, at the rate of 750,000 jobs per year. Of these, the party hopes to create 100,000 jobs annually through small loans of LE5,000-10,000; 150,000 jobs annually through the Business Market programme (involving loans of LE0.5 million to LE5 million); 250,000 jobs annually through the Thousand Factory programme (funded by LE100 billion through banks and foreign capital); 70,000 jobs annually through the New Village programme (involving the reclamation of a million feddans and their distribution among 70,000 families); and 200,000 jobs annually through the Tourism in Egypt programme (costing LE48 billion over six years). Some people have pointed out that the cost of job creation in the above programmes is less than what seems to have been the case in earlier programmes. This is a valid point, but I have other worries. For example, the NDP economic policy is one based on market forces, with the state confining its role to providing the right climate for investment. The state is doing that through reduced tariffs, taxes, and red tape. Investors, according to the NDP, will come flocking to the country once taxes and customs duties are reduced. However, what investors are actually concerned about are things the government has thus far failed to provide. In reality, Egypt is offering investors plenty of disincentives. Our reliance on market forces, coupled with capital scarcity, has led to high interest rates, currently 17 per cent or more. High interest rates are discouraging to industrial investors. Meanwhile, the current interest of 10 to 11 per cent on bank deposits has failed to boost savings. The local rate of savings, currently at 13-14 per cent, cannot sustain the level of credit investors need. Even if local credit were adequate, most new ventures create demand for imported capital goods; namely, foreign currency, which is problematic considering the country's massive trade deficit. The increased demand on foreign currency would push down the exchange rate of the local currency, as has often happened in the past. These are the kinds of things investors worry about. The NDP promises new thinking in industrial development. Its programme speaks of "a thinking that views the industrial sector in a modern way and turns it into a sector that attracts investors, creates jobs, and stimulates growth." Yet once you get into details, the picture becomes foggy. The NDP is thinking of expanding the economically-questionable Qualified Industrial Zones. It hopes to revolutionise the industrial sector through backing furniture- makers in Damietta and Assiut, marble shops in Cairo, molasses producers in the south, and leather-makers in Badr City. The NDP promises improvements in wages, pensions, and middle- class schooling, but does not tell us what it is going to do about the chronic deficit in the state budget. What this country needs is a competitive industry that creates jobs. Currently, Egyptian industry is geared towards the production of consumer goods, a pursuit that involves the importing of capital and intermediate goods, which in turn causes problems for the trade balance. If we were to expand industry without changing its structure, we would indeed be creating jobs -- but abroad rather than at home. If nothing is changed, local manufacturers are bound to falter sooner or later. The increasing cost of imported technology would drive down the competitiveness of local producers. To reiterate, the development of local technology is contingent on reshaping the industrial structure towards the production of intermediary and capital goods.
