Without production, the new IMF loan to Egypt will be for nothing

The Central Bank of Egypt recently released balance of payments data for the last fiscal year 2021-2022, showing a deficit of 10.5 billion dollars, despite the use of external loans and deposits worth 36.8 billion dollars, and the main reason for this deficit is the difference between exports and merchandise imports, which is called the trade balance Which generated a deficit of 43.4 billion dollars.

In light of the balance of payments containing 5 sub-components, 3 of them achieved a deficit;

It includes the trade balance, the investment income balance related to investment benefits of 15.8 billion dollars, and the account of omissions and errors, which includes leakages of illegal funds abroad, with a value of 5.8 billion dollars. On the other hand, the balance of trade services achieved a surplus of 11.2 billion dollars, and the capital and financial account achieved a surplus of 11.8 billion dollars. Because of the huge external loans.

The total balance of payments resulted in a deficit of 10.5 billion dollars, the main reason for which was the huge deficit in the trade balance, which is a chronic trade deficit dating back to 1940, after it was achieving a surplus often before that, and for the 82 years from 1940 until now, it has not been The trade balance achieved a surplus except in 1969 and 1973, due to the equal deals with Eastern European countries and Arab aid to Egypt at that time.

Historically painful experiences of own production

The experiences of Egypt’s six agreements with the International Monetary Fund, extending from 1962 to 2016, proved that they did not succeed in stopping the increase in the value of imports, as promised with each agreement, because the nature of those imports is important for domestic consumption, local industry and export, where the relative distribution of the quality of those imports in half The first of this year, according to the data of the Statistics Authority, for the acquisition of intermediate goods - that is, those involved in the manufacture of other products - 35% of the total, and investment goods for machinery and equipment 13%, the same percentage for raw materials, and 12% for oil, gas and coal.

The share of investment goods was less than 28%, of which 9% were for durable consumer goods, and 18% for non-durable consumer goods.

Thus, the industry depends on 60% of its components from imports, other than fuel, which means that any targeted increase in exports needs more imports, which the Fund and local officials ignore.

Thus, the radical solution to the chronic trade deficit and the resulting need for more external borrowing, and the continued deterioration of the Egyptian pound’s exchange rate against foreign currencies;

It is more agricultural and industrial production to increase self-sufficiency rates and achieve export surpluses, including more employment, absorbing unemployment and improving the standard of living for citizens.

However, the issue of production faced many difficulties over the past decades, starting with setting a maximum limit for the ownership of agricultural lands in the fifties of the last century, and the nationalization of industrial projects in the sixties, and the public sector taking over the largest share of industrial and service activity.

Even after the declaration of economic openness in 1974, the factors of consumption prevailed over production, while allowing the import of any goods to satisfy the thirst for imported products after a long deprivation.

The abortion of the experience of money-recruitment companies in the eighties came after the banks complained about their inability to finance imports and supply some crops locally, despite the presence of industrial experiments among them, such as the Sharif Company, which left, unlike factories, a research center for the development of industry, which was bought by the Ministry of Scientific Research.

With the low prices of imported ready-made furniture, many skilled manufacturers turned to work as vegetable and fruit sellers and taxi drivers to escape unemployment, as happened in Damietta Governorate, which was historically famous for its furniture industry, and this was accompanied by the abolition of the Craft Industries Organization, which was affiliated with the Ministry of Local Development

Tax Incentives for Financial Investment

In 1992, the Capital Market Law was issued to decide to exempt the dividends listed in the stock exchange from income tax, which does not happen with production, and the implementation of the privatization program of some public business sector companies came through the stock exchange, to achieve gains for stock buyers at the beginning of the programs, which attracted many from the field Production for the field of trading in the stock exchange, which achieves daily gains, while the cultivation of any agricultural crop takes several months to obtain a return, and the work of a commercial or industrial project requires a longer period. The value of stock exchange transactions that do not add anything to the domestic product.

The media contributed to fueling these values. When the government offered 20% of Telecom Egypt’s shares for sale to the public in 2005, media promoters played on the chord of quick profit, which prompted some motorists to sell their cars and farmers to sell their cows to buy shares.

With the shares of Telecom Egypt not achieving that boom, and this was accompanied by a decline in the prices of the shares of privatization companies from their selling prices, the segment that was formed for speculation in the stock market turned to search for other markets to obtain these quick high profits, including the foreign exchange markets and brokerage in land and real estate, which inflamed prices in Those markets because of artificial demand is not real.

The torrent of imports from Southeast Asia and China has affected most of the handicraft industries, as the prices of their final products are cheaper than the value of raw materials locally before they are manufactured;

The imported school bag is cheaper than the value of the leather needed to manufacture it, which has caused the closure of many craft workshops.

With the low prices of imported ready-made furniture, many skilled manufacturers turned to work as sellers of vegetables and fruits and taxi drivers to escape unemployment, as happened in the Damietta Governorate, which was historically famous for its furniture industry, and this was accompanied by the abolition of the Craft Industries Organization, which was affiliated with the Ministry of Local Development.

A ministerial committee for production has been ineffective since 2015

Despite the issuance of a law for the development of small enterprises in 2004, many of its provisions were not implemented, especially the financing funds for these projects in the governorates, and a new law was issued for the development of medium, small and micro industries in 2020, but its impact is not yet clear, as it focused on integrating these projects into the economy Officially, by paying simplified tax fees, and for this they considered this as a trap for falling under multiple government fees, such as local fees and others related to industrial security, fire, health, social insurance, industrial registry, and others.

Some local production attempts did not find government support. When many went to fish farms in the Nile River, their production contributed to stabilizing fish prices for many years, and reduced its imports;

Those affected by their activities claimed that these farms pollute the Nile by feeding fish animal waste. The owners of the farms used a professor in faculties of science to prove that this was not true, but local officials did not listen to them.

One of the owners of those farms did a trick to prove the falseness of the accusation, when he accompanied local officials in one of the northern Delta governorates for a Nile picnic, and he bought a quantity of kebabs and kofta for guests to eat on a boat on the Nile, and when they arrived next to one of the fish farms, he threw pieces of kebabs in A cage for raising fish by mistake, the fish did not approach it to prove to them in practice that the fish do not eat animal waste, but feed on fodder from corn.

Despite this, the decision to remove all the farms in the Nile overcame them to lose their investment expenses, and fish production lost large quantities, resulting in high prices and the value of fish imports reaching $816 million last year. This is linked to the selection of local leaders from the retired officers from the army or the police;

This makes them far from the issue of local development, which is the same source for choosing the Minister of Local Development.

In this vein, the fate of the faltering factories that officials have been declaring over the years to confront, starting with Minister of Industry Mounir Fakhry Abdel Nour in 2013, who decided to allocate half a billion pounds to solve this problem, and those who came after him repeated those promises, but the stumbling or the failure was not resolved or Nothing is spent.

The same thing is happening with idle energies, whether in the factories of the public sector or the private sector, in which the official statistics authority issues a periodic statement, in addition to the confiscation operations that have taken place for many companies since the second half of 2013 until now, with the continued imprisonment of their owners.

Even the Ministerial Committee for Production, which Prime Minister Sherif Ismail formed under his leadership in 2015, and reconstituted it the following year from 7 ministers. We did not hear anything about the results of its work, despite its continued existence, until the current Prime Minister, Mostafa Madbouly, announced last month that it was re-formed under his leadership in an expanded way to include 23 members. , including 15 ministers, and we hope that it will pay government attention to the issue of production.