Egypt’s Gamal Mubarak Aims to Underpin Growth
|Tuesday, April 21,2009 07:19|
|By Yaroslav Trofimov|
Egypt won"t let the global downturn derail its economic liberalization, the ruling party"s top policy maker, Gamal Mubarak, said in an interview with The Wall Street Journal.
"There is no way we can achieve our objectives without an economic-reform program that generates high levels of growth," said Mr. Mubarak, who is widely seen as a likely successor to his 80-year-old father, President Hosni Mubarak.
Waking up after prolonged stagnation, Egypt -- the most populous Arab country -- posted economic growth of 7% or more for the past three years.
A key role in this transformation was played by Gamal Mubarak, a 45-year-old former banker with Bank of America. Now, as the global crisis threatens to snuff out Egypt"s nascent economic miracle, Gamal Mubarak"s own political future -- a controversial issue for many Egyptians opposed to succession -- is at stake, and so is the economic liberalization he champions.
The 4% growth that is expected this year represents a "critical minimum" needed to keep up with Egypt"s rapid population increase, said Minister of Investment Mahmoud Mohieldin.
Continuing growth is required to persuade Egypt"s public about the benefits of further liberalization, Mr. Mubarak acknowledged. "For a message void of results, it is very difficult to be convincing," he said.
Despite declines in some sectors, such as tourism and Suez Canal revenue, Egyptian officials say that, so far, their economy is holding up better than most. The construction sector, a crucial source of jobs, is booming, with new satellite cities mushrooming around Cairo, and steel and cement consumption rising by an annualized 20% or more. Defying protectionist sentiments, Egypt continues to cut import barriers, exposing once-sheltered industries to more competition.
"The crisis will be a reason to move faster on the reform, not to slow down," said Trade and Industry Minister Rachid Mohamed Rachid. This free-market spirit dates to 2002, when Gamal Mubarak became head of the policies committee of the ruling National Democratic Party. The tall, lanky graduate of the American University in Cairo quickly assembled a team of leading businesspeople and academics. They drafted an ambitious plan to lift Egypt"s numerous restrictions on business.
The preparatory work done in the NDP policies committee "gave us an opportunity to act almost from day one," Mr. Rachid said. "We have been talking about transformation in Egypt for 30 years. But never before was there a will and a capability to deliver it."
Since then, new legislation slashed import duties and cut the corporate tax rate from about 40% to 20% -- leading to a surge in overall tax revenues as the new tax code eliminated loopholes and opportunities for corruption. Large state companies, such as the Bank of Alexandria, were sold to private investors.
"What has changed is that we"re moving from an economy which by all measures has been very much centrally driven, government-dominated in a big way -- to an economy which, while still in transition, is much more business friendly and more competitive," Mr. Mubarak said in the interview.
These changes, however, come at a price. Runaway inflation has hit the middle classes and growing social disparity has spurred labor unrest. Opposition politicians complain that few Egyptians have gained from the changes. "You just have the rich who are allied with the power gaining more and more, while most of the population remains mired in poverty," said Mohamed Habib, deputy chairman of the Muslim Brotherhood, the country"s biggest opposition movement that which occupies one-fifth of Parliament seats.
Mr. Mubarak said he"s aware of this perception that Egypt"s economic policies benefit the "haves" at the expense of the "have-nots" -- and strongly disagreed with the assertion. "A lot of the fruits of those reforms have actually trickled down" to the poorest Egyptians, he said.
Part of the reason Egypt"s economic achievements haven"t translated into popularity for Gamal Mubarak is that economic opening up hasn"t been accompanied by political liberalization. President Hosni Mubarak has ruled Egypt in an authoritarian fashion since 1981. He has no vice president and his current term expires in 2011.
While President Mubarak remains silent about succession plans, many analysts here predict a handover of power to his son. Gamal Mubarak"s role in running the country is already increasingly prominent -- even as many Egyptians abhor the idea of dynastic succession.
When asked about talk of his presidential ambitions, Gamal Mubarak dismissed it as "good media stuff devoid from the real issues of the day." He added that, while Egypt"s democratic credentials are by no means yet "mature," democracy "is the best form of government available today."