Egypt's Economic Picture Is Brightening
October 14, 1998
by Dennis T. Avery
CHURCHVILLE, Va.—For the past several years, Egypt has been conducting a quiet and remarkably successful revolution in its government and economy.
The Egyptian picture used to be all negatives: wars with Israel and too much money spent on weapons; an economy dominated by government planning, red tape and high inflation; a philosophical hostility to foreign capital; and severe shortages of land and water.
THE EGYPTIAN economic picture is not all rosy yet, but Prime Minister Kamal Ganzouri has sharply reduced the barriers to growth.
In the last three years, the government deficit has been slashed from 17 percent of the budget in 1990 to about 1 percent currently, and the currency has been remarkably stable.
Economic growth has jumped from 1 percent per year to 5 percent. However, the government says it needs at least 7 percent per year to avoid declining living standards for the population of 60 million.
Egypt's economics minister says progress toward a market-driven economy is now "past the point of reversal." Privatization of 300 big government-owned companies has begun. In addition, a major natural-gas find in the Western Desert is attracting foreign capital and powering Egyptian cities.
HOWEVER, Egypt still has little capital and lots of poverty. The bureaucracy and red tape are still massive, and one wing of the ruling elite is fiercely opposing change.
There are still too few jobs outside of tourism and low-tech agriculture. Infant mortality has been cut in half since 1980, but illiteracy is still high (at 49 percent).
Egypt has cut import tariffs, as required by the World Trade Organization, but has expanded its non-tariff barriers.
Egypt changed its copyright law in 1994 to meet international standards but has failed to enforce the new law against local computer software pirates.
EGYPT'S AGRICULTURE is focused almost entirely on the historic Nile Valley. (The much-ballyhooed "new lands" are little more than irrigated sand and may not be worth the water that is applied to them.)
Most of the people also live in the Nile Valley—displacing farms with more houses, offices, hotels and roads.
Egypt's potential increase in farm demand is huge. Egypt's births per woman have already come down from 6.4 in 1965 to 3.4 today, but the country's population may still double from the current 60 million to 120 million before stabilizing.
TODAY, Egyptians are eating less than 20 grams of animal protein per capita. First World countries consume more than three times that level of meat, milk and eggs.
Egyptians will increase their protein demand as soon as households can afford to do so. Per capita purchasing power is already $3,800, though the illiterate half of the population is not yet earning enough to improve its diet.
Egypt already imports more than $1 billion per year in wheat and flour, $400 million in feedstuffs, $350 million in vegetable oils, $150 million each of meat and dairy products and $70 million worth of beans and lentils.
More than half of the 13 million tons of wheat it consumes annually is imported, and it is already using high-yield seeds on more than 70 percent of its 900,000 hectares of irrigated wheat (roughly 3,500 square miles).
EGYPT'S BEST land use may be its fine, long-stable cotton, which is already planted on more than 700,000 hectares. The government would like to have 1 million hectares of cotton.
But in some years, the government has failed to pay farmers for all the cotton they delivered, so farmers are reluctant to grow more.
Egypt has about 6 million cattle and water buffalo, most of them kept for milk production. Most of the animals suffer along on small farms with poor-quality feed and severe disease problems. (Brucellosis causes a very high rate of abortions.)
There's no cattle pasture, and nearly 2 million hectares are already devoted to irrigated feed corn and clover. Egypt is importing 3 million tons of corn per year and 50,000 tons of soymeal for livestock feed, and both totals are likely to rise substantially as per capita incomes grow.
EGYPT IS STILL on the edge of the Arab-Israeli conflict zone, with fractious Muslim fundamentalists who like neither Israel nor modern materialism.
But Egypt is generating real economic growth for the first time. In the long run, it is likely to succeed at growth and peace.
As Egypt gains affluence, most of Egypt's additional food will be imported, especially meat and feedstuffs, because of severe land and water constraints.
Egypt's quiet revolution underscores the breadth of the world's recent trend toward higher incomes and better diets—and argues the trend will continue to produce new farm export opportunities.
Dennis T. Avery is based in Churchville, VA, and is director of the Hudson Institute's Center for Global Food Issues.