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AfricaApril 3 2005

Optimistic engineer of Egypt’s fate

Egypt’s Prime Minister Ahmed Nazif explains how reforms are shaking up the country, from customs and tax to the public sector.The problem with technocrats in government is that they often lack the ability to communicate with the people. That is certainly not true of Egyptian prime minister Ahmed Nazif.
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Not only does he have a frank, open demeanour, but his surname means “clean” in Arabic, a useful addition in a country where corruption is an issue. His proactive, reformist government has managed to avoid the sort of riots and disturbances that marred earlier attempts at change.

Autumn test

The test, though, of how far this 53-year old, with a handsome moustache reminiscent of actor Omar Sharif’s, has carried Egypt’s 72 million people with him will come in the autumn, when presidential elections will be followed by parliamentary ones. He is aware that he has to deliver results by then. “Before even sitting in this chair, here, we were hearing this: ‘what are you going to do, you only have 13 months?’ The answer to that is: I think we have done a good job in nine months. Most of it is still on the macro level and has to filter down, but Egyptian people are smart enough to see there is a change of mood and direction and there are some results,” he says, during an interview in the cabinet building, a 100-year-old palace that belonged to a cousin of a former king.

The thesis that Mr Nazif will be the scapegoat if President Hosni Mubarak does not do as well as expected in the elections (the expectation is that he will run, although he has not yet declared his hand) does not daunt the prime minister. “You will have to ask the president about that. I don’t know. We have done the best we can in this period and it is up to the people to judge us. I cannot be the judge myself,” he says.

In fact, little seems to faze the tall engineer, with a PhD for his research in the field of computer vision from Canada’s McGill University. Except, that is, for the allegation that political liberalisation in Egypt is flip-flopping, with, for example, Mr Mubarak calling for constitutional reform to allow multi-candidate presidential elections on the one hand, yet the arrest and imprisonment of opposition candidate Ayman Nour on the other.

“I think Ayman Nour’s case was overblown. He is the leader of one of the opposition parties who has been arrested on a criminal charge. If this happened in the UK, would you say this is political flip-flopping? If there was any political motivation, it would have been the smart thing not to try the guy [because of the publicity value for him]. I would not put this in front of a major decision like constitutional reform that would allow multi-candidate political elections. It is a much bigger step,” he says heatedly.

A query on how much of Egypt’s political liberalisation is the result of US pressure, due to the Bush administration’s campaign for democracy in the Arab world and a couple of billion dollars in aid, leads to a suppressed sigh and the remark that he has often been asked this question. “[Political liberalisation] is in many ways home grown. It has been an evolving process in Egypt. We have taken steps since the 1970s [when] we introduced the multiparty system. At the time we had three parties, today we have 20,” he says, noting that in the last parliamentary elections in 2000 only 38% of the seats were taken by the governing National Democratic Party, proving electoral fairness.

Although the constitution bans parties based on religion, the Islamic Brotherhood, a powerful opposition, has 18 representatives in parliament who are classified as independents.

Privatisation plan reactivated

In many ways, liberalisation of the economy has also been an evolving process. The public sector may be one third of gross domestic product (GDP), a big number, but it was two thirds of GDP just 15 years ago. To cut it back, the government has reactivated a stalled privatisation programme. This includes a stake in Suez Cement, the largest such company in Egypt (sold on the morning of the interview), while Bank of Alexandria, the fourth largest bank by assets, is to be sold by the end of 2005 and shares in oil firms will soon be up for grabs.

The other measure to trim the public sector is to make cuts in the 5.6 million government workforce. Speaking at an earlier meeting at the World Economic Forum in Davos in January, Mr Nazif admitted fewer than half of those were needed. However, adding to Egypt’s unemployment rate – unofficial estimates put it at up to 20% – and creating social unrest in an increasingly vocal public, is not acceptable. In addition, about 650,000 new jobs are needed annually just to keep up with population growth.

As a result, a peculiar partial-solution has been found, whereby bureaucrats’ jobs are made redundant but they are not sacked. “Although we cannot fire them, at least they are not in the way. In the recent reform of customs, we made about 6000 people redundant but without firing them. Now you [a businessman] just don’t go to these people any more, you don’t need to. They are just sitting there,” Mr Nazif says. In this way, the customs procedures are simplified and quickened. The government is looking at how to give the jobless workers training so they can fill gaps in areas such as teaching. It is also encouraging early retirement.

Ongoing reforms

Customs has been one of Egypt’s most problematic areas. It was reformed in September and that was followed by tax reform, which the government hopes to implement in July in time for the next fiscal year, and a multi-faceted financial sector reform (including the banks), which began with the creation of the Ministry of Investment. That ministry, along with a couple of others, is led by reformers. But many other ministers are dinosaurs, say commentators.

“I would not say dinosaurs,” argues Mr Nazif, with a hint of a smile. “But I think this mix of people with experience, with the new blood coming in, is an important one. It is important to have this sort of balance in a country like Egypt because we still have a lot of sceptics, a lot of people see this government taking too many steps. [They say] it might be better to move slower.”

The cabinet appears to be moving in a measured way in dealing with one of the major problems: the overarching, inefficient, piecemeal and unjust subsidies system, which affects food, gasoline and transport. “I think attacking it does not mean removing it. That is a very important distinction. We believe the poor in Egypt need support and will continue to need support for some time,” says Mr Nazif. “What we question is whether the current subsidy system is the best way.”

A pilot project in which families are provided with smart cards, allowing them to buy specific merchandise and be reimbursed on the card, is due to be operational in July. Depending on the results, this could be rolled out throughout Egypt.

Short-term pain

The reforms, including recapitalisation of the banking system, will have a detrimental effect on the deficit and the government debt burden in the short term, with rating agency Standard & Poor’s forecasting a deficit of as much as 9% of GDP by 2008/9. But by that fiscal year, the deficit is expected to narrow as growth and investment increases. Growth is already on the up, notes Mr Nazif: “You can see very clearly that growth has increased in the past six months. We are now looking at 4.8% GDP growth in December [2004] as opposed to 4.2% in June, [a month before the government took office].”

Investors are taking note. Net foreign reserves rose to $17.32bn at the end of February, a five-year record. The Egyptian pound has strengthened by more than 7% against the dollar since the opening of the foreign exchange interbank market on December 23. The stock market is up about 120% from July to February.

When asked how his engineering background affected his premiership, Mr Nazif demonstrated his optimistic nature: “In Egypt’s recent history, engineers only held the position three times and they were all successful. I am the fourth and I hope I will be as well.”

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