Egypt’s Economy: Before and After the Financial Recession, Research Paper Example

Introduction

Noted to be among the most comprehensive developing nations around the globe today, Egypt stands to be among the most successful nations to have faced adversities during the international financial recession between the years 2006 to 2009. Coupled with several national events that occurred in the country, the road towards economic freedom was not that easy for Egypt. The whole world was eyeing the developments that this particular country takes every step of the way especially considering that it is among the Arab countries that are known to be strongly dependent on the manner by which they utilize their rich resources to impose their position in the international economy.

Understanding the hard times and the procedures by which the country has recovered from the economic downfall of the nation provides a great source of confidence that all other developing countries could learn from. The example of Egypt’s economic recovery teaches a great lesson on how a nation could use its most competent resources to help save its economy from complete devastation.

Background Information on the Country’s Economy

Politics plays a great role on how Egypt’s economy performed through the years. The way the nation is governed created a strong influence on how the factors of the country’s economy actually developed and embraced their capacity of enjoining in the path towards national improvement. Investors intended to see beyond the hardships and created bridges to reach out to the Egyptian economy and support its needs for development amidst the civil wars happening within its neighboring countries. The most devastating part on the process by which the economic stability of the country was being managed was that of the involvement of the nation in the Gulf War (Nawar, 2008). However, before all the commotion and the distinctive problems that are affecting the country’s economy today, it pays to give attention to the overview of Egypt’s economy that basically marks its capacity to face international trade challenge.

As mentioned earlier, Egypt is noted for its rich resources. To note, the main economic factors that help the country define its path towards economic stability include the following sectors:

The agricultural sector:

Even the ancient economic status of Egypt depended on its agricultural sector and the capability of the said aspect of the nation’s resource to produce products that they primarily need for survival. However, at the entrance of the 1970s, the integrity of most of the agricultural lands of the country was lost due to particular environmental changes (Nawar, 2005). Even though the country spent so much of its budget in land reclamation, the situation remains uncanny as the reclaimed lands are not completely utilized for agricultural purposes.

To note, among the products produced through agricultural sectors of the country include cotton, wheat, corn, fruit, vegetables, sugar cane, rice and fodder. What remains to be a puzzling condition in relation to agricultural produce though is the fact that the country continuously imports wheat from US and Russia while also exporting the same product to other countries (Nawar, 2007). Perhaps aiming to balance the price of the product, this movement towards developing wheat production and utilization for trade becomes a source of saving factor that consistently imposes on the need of the farmer to rotate their crops for the sake of increasing higher and better quality produce from the said sector.

Industrial sector:

Manufacturing Automobiles- producing and manufacturing automobile models for Kia, Peugeot and Daimler AG, Egypt remains to be among the top creators of automobiles under the said brand that are presented for international trade (Nawar, 2005). Local automobile companies include the AAV or the Arab American Vehicles and The Ghabbour Group, which are both performing well in the field of international market. (Nawar, 2005)

Chemical mining-AFC or the Abu Qir Fertilizers Company produces the highest rate of nitrogen fertilizers in the country (Nawar, 2007). Ammonia is also among the substances found and purified in Egypt to make fertilizers to support the aim of developing and increasing agricultural produce.

Electronics and Appliances- The Olympic Group is currently the largest and the most notable group of industries in Egypt that produce appliances and electronic products (Nawar, 2007). Along with the said products, the said group also provides television and internet services hence improving the communication connection in the country as a whole.

Steel production-according to the World Steel Institute, Egypt is able to produce 4.5 million tons of steel per year making it one of the top producers of steel around the globe.

Textile and clothing-comprising at least a quarter of the non-oil export of the country, the textile and clothing industry employs at least 46% of the total workforce in the nation thus giving more opportunities of earning for the people.

Construction and Contracts- the desire for a more defined Arab region is a specific source of income for Egyptian contractors. Being good in the field of engineering and architecture, Egypt provides an annual profit of $ 21 million from contractual construction projects alone.

True, the diversity of the industries that is capable of bringing about a sense of development and improvement in Egypt’s economy accounts for so much. However, the mismanagement of these sectors often become the source of the problem. Not having the right skills nor the right condition of management in relation to the development of these sectors often hurt the overall performance of the country especially in relation to the manner by which they appreciate their most abundant resources on agriculture. Relatively, it is the government’s failure to support all these industries in the aim of improving their overall performance in the local and international market caused for Egypt’s failure to successfully face the turmoil brought about by the international financial crisis during the years 2007 to 2009. Along with political issues and the condescending points of disagreement between prominent parties in the country, the economy of Egypt became less aggressive that it was expected to be at the face of extensive challenge brought about by the emergence of the crisis. Lowered production rate from the different economic sectors, higher unemployment rate and higher population rate were among the ground reasons for the development of economic issues in the country during the said era.

Issues that Developed

In relation to the increasing pressure from the international market and the internal political affairs in the country, here are some of the issues that Egypt had to deal with alongside the need to surpass the ongoing financial crisis in the international market:

Corruption and injustice in the government was considered rampant at the time. Cross class and cross ideologies even contributed to the commotion of the society as the people lost sight of what they are supposed to consider especially in relation to the process of development that they are aiming to pursue. This resulted to the creation of diverse economic policies, which further confuses the society on which policy they should directly follow.

The continuation of the pro-market policy hurts most of the large business investors in the country, which makes it less attractive to huge foreign investors. Focused in providing more jobs for the people through the small-scale businesses that are usually informally settling in the country hurts the possible chance the country has to attract more foreign investors thus jeopardizing the country’s chance to earn from high-end taxes.

The lack of definition on the part of the role of the administration when it comes to directing the economy weakens the capacity of the nation to earn more from investors and local business owners as well. The lack of structure in defining the capacity of the administration to lead the people in becoming more concerned as to how they support the overall economic performance of the country creates a source of problem that lowers down the capacity of the Egyptian government to control its economic resources and sectors.

These problems have long been affecting the Egyptian economy’s status. However, at the turn of events when the occurrence of the international financial turmoil began to affect remote areas and developing countries, the situation worsened. The population living in Egypt began to succumb to the situation instead of facing it forward. This is the reason why at present, the administrators of the country under the rule of a new government begin to examine what particular elements in the society could be used to further save the nation from the devastating condition it has been subjected to during the past few years of financial and economic turmoil.

Resolving the Problems

To resolve the problems, the administrators of Egypt begin to explore the possibility of using the current resources of the country to be able to rise up to the challenge of getting up from the failures incurred in the past. Turning their problems into relative solutions to the current economic situation of the country was seen as the most effective approach to the emerging issues affecting the integrity of the country’s economy. Some of the said resolutions are as follows:

Population: as mentioned earlier, the rise of the population rate in the country affects the process by which the country faces the lowering rate of production that the agricultural sector is able to come up with. To make use of the growing population, the administrators find it possible to encourage the young demographics of the country to join in the workforce. Creating more jobs for them to appreciate is an important aspect of the process of resolving the issues at present.

Corruption and Injustice: Cleaning up the government is an essential part of the process, although it is also considered as the most crucial point that requires much attention from both local and international agencies that are able to support the campaign for cleaner government. This approach to the problem is expected to take time, however its success would bring about a great deal of development towards the country’s economic performance.

Lower performance of industrial sectors: enforcing development on the condition by which the huge investors are given attention to as well as the small-scale businesses in the country so as to strengthen the way they direct the economic sectors in producing better.

The country’s economists further planned these resolutions and were revealed during an interview with Egyptian Minister of Finance in the personification of Dr. Youssef Butros Ghali (Ministry of Investment). At this point, the country’s minister for finance reveled that the status of the country’s economy suggests that Egypt has already recovered from the past economic problems it had to deal with during the occurrence of the international financial downfall. According to him, there is now a newly boosted investment market in the country amounting to L.E. 3.3 billion (Ministry of Investment). According to the same report, the reassessment of the government’s attention placed upon the poor stricken areas of the country contributed so much in reestablishing a stronger definition of the country’s economic policy, which invited more investors into the nation’s business sector.

Conclusion

The capacity of any developing nation like Egypt to face the different challenges of economic turmoil creates a specific impact on how the international market performs in unity. Being able to come back from a specific downfall creates a form of achievement that identifies the capacity of a nation to become more endowed to assuming success in the near future. Turning matters around and utilizing their weaknesses as the primary source of their economic strength worked for the best results that the Egyptian economy is dependent upon at present.

Relatively, the desire of the Egyptian government to support its people better became evident and was then supported further by the neighboring allies such as the United States. The support that came from the said country allowed the Egyptian economy to recover faster. Getting relative financial assistance and program definition from more developed countries set a sample for the Egyptian administrators to find a way on exploring their most valuable assets.  It also allowed them to find extensive ways on utilizing the said resources for the sake of improving their status in the nation and creating a more refined pattern for development that they would be able to embrace not only for the time being but towards the future endeavors of the country as well. With the economy reestablished, Egypt is now ready to take on more challenges that would allow it to become one of the fastest growing nations in the field of international trade and local economic advancement. In the future, it is assumed that more investors would be attracted to do business in the country as well.

References

Central Bank of Egypt. Economic Bulletin and Annual Report Egypt 2007.

Nawar, Abdel-Hameed (2005). “The Emerging Landscape of the Natural Gas in Egypt“. Cairo University, manuscript.

Nawar, Abdel-Hameed (2007). “From Marina to Kom-Ombo: A Note on Poverty in Egypt”. Cairo University, manuscript August.

Nawar, Abdel-Hameed (2008). “PPI and Measuring Inflation in Business Transactions in Egypt“. Cairo University, manuscript March.

Ministry of Investment (2005). Quarterly report (Second Quarter) financial. pp. 21.

Nawar, Abdel-Hameed (2008) “Anti-Inflation Policy Array in Egypt.Ministry of Finance and Central Bank of Egypt