maandag 23 mei 2011

Food for social-economic action & oil to grow up

What in the world …

One of the generals running the country presented a picture of his country's economy that make me think. He says foreign direct investment now is down to zero. Egypt's foreign reserves deplete fast. Tourism industry employs 2 million people but is sitting idle with the world continues waiving visits to the pyramids of Ghiza and cruises down the Nile, that is a billion dollars of lost revenue every month. Growth crawls to a standstill, meanwhile tens of thousand of workers emboldened with a new sense of freedom are staging strikes to demand better pay. Confronting them will mean work stoppages, appease them will cost money and the state is not exactly going to offer plenty.

Oil …

The revolutions of the middle east have sparked a cycle of pain in the crude markets. Look at three countries that have been hit hardest by people's power movements: Egypt tunisia and syria are all oil importers. Each of them growed in 2010 and will go to shrinking GDP's this year. Now look at the neighbours who managed to stave off the wave of protest, through a mix of bribery and appeasement: Kouwait qatar saoudy-arabia, they are all net oil exporters with vast cash reserves. That is why the economy is actually getting worse because oil importers need to spent more for the same amount of gaz.

To keep political support at home they need to increase subsidies for all things like food: potatoes carrots. Because everything costs more thanks to oil driven inflation in the region. Unlike previous years the Gulf countries -the oil rich countries- actually want higher oil prices because they need the cash to support their own spending plans. Such as more payouts and new cities, to suppress decent. For the first time in history average oil costs nearly a hundred dollars a barrel for more than a year, even the saudis need that cash.

Reform …

If egypt's economy not stabilizes soon, the IMF will soon come knocking on its door and will demand economic reform to promote growth, which can mean:

• devaluation of egypt's currency possibly …
• reduction of subsidies …
• privatization of industries …

.. everything to get the fiscal house in order and generate new economic growth.

Economic reform is now a tainted idea. In the peoples minds in Cairo, it is a phrase associated with Gamal Mubarak (Hosni's son) and his business men friends. The policy changes made by Gamal Mubarak onwards 2004 triggered strong growth though also unequal growth and encumbered regime friends have unduly profited.

Roadmap …

Over the last decades countries from china to brazil figured that if you want economic growth, the surest path is reforms to open your economy up to markets and trade. Today no egyptian politician says that, so once economy will address politics from behind. Nobody wins with silence and neglect. The future of Egypt's might depend on creative solutions to this problem, to discuss the requirements of productive social economy. We closely watch and follow yours … Y

Labels: MiddleEast