Top Five Things Morsi has to Do if Egypt is to Succeed

For understandable reasons, analysis of the political changes in Egypt has focused on personalities (new president Muhammad Morsi is not charismatic); on ideology (how far can he depart from his sectarian commitments as a hard line Muslim fundamentalist truly to be president of all Egyptians?); and on military-civilian relations.

But those questions are not the big ones for the future of Egypt. Its politics has become unstable because it is stagnating socially and economically. Here are the most important steps Morsi, an engineer and scientist, could take to turn the place around. It can be done. Turkey has moved up to the world’s 16th largest economy, and is set to grow 9% this year. When I first visited Cairo and Istanbul in the early to mid 1970s, they seemed to me about on the same level economically. Now, Turkey is clearly an much more advanced economy. When I was in Ankara last December, I marveled at how clean the streets and sidewalks were, and how well-kept-up public infrastructure was. I was walking around downtown Cairo near the Ramsis Hilton a couple of years ago and actually found a street where most of the buildings had collapsed and the rubble was just left there. Wasn’t that property worth something in downtown Cairo? Why leave rubble near a five-star? Turkey did things in the past 40 years that Egypt did not, and Egypt fell further and further behind.

1. Morsi must make the attempt to root out corruption from the Egyptian system. People are not going to put up with having to pay bribes to government workers to have them do their jobs, and entrepreneurs will just stay home in their pajamas if they think they have to deal with a mafia bureaucracy. Moreover, you will never get big investments in Egypt from abroad as long as corporations are being asked to do something that is illegal in their home countries. Corruption in Tunisia and Egypt under the dictators probably took between 1 and 3 percent a year off economic growth by discouraging investment and discouraging local entrepreneurs. Over decades, that kind of venal economic policy has consequences. Lee Kwan Yew accomplished this vast reduction of corruption in Singapore, and it was one of the bases for that country’s economic efflorescence. (Paying public sector workers a living wage and paying it on time would help.)

2. Egypt has to grow economically faster than its population. Egypt began a demographic transition a couple of decades ago, but it hasn’t gone all the way and has stagnated. The big step is for people to prefer 2-children families. Young Egyptians still want at least 3 children on average (poor women want more, educated ones often want just one or two). Egypt is still growing at 1.9% a year demographically, which will cause its population to double in 37 years (i.e. from 82 million to 164 million). If its economy grows 2%, which is a good rate nowadays, that is zero per capita increase. There won’t be enough jobs or houses for all those new people (a whole other Egypt!) coming into the world during the next four decades. Demographer Fred Shorter once argued that Turkey’s population growth rate slowed much more than Egypt’s because Turkey had for-profit private condom companies that got the things into the hands of Anatolian farm wives, whereas Egypt had inefficient state provision of condoms. In any case, as long as the slowing of the birth rate in Egypt has halted, the country needs to grow 8% a year for a while to amount to something. That is easier said than done, but President Mursi should talk to his friend in Turkey, Tayyip Erdogan, about how.

3. Egypt has to attract foreign investment and get its tourism industry back to normal. Tourism brought in about $12 billion in 2010 but has fallen off substantially in the past 18 months (which is silly, since security is fine). Tourists won’t want to come to Egypt if puritan laws are passed forbidding alcohol, swimming suits, etc. etc. In general, foreign investors need to be reassured that the country is settling down (dissolving parliament won’t have helped with that) and that the Muslim Brotherhood is not going to make the country into another Iran. They also have to know that corruption will be tackled.

4. Egypt has to start making things the world wants, at a quality and price that is competitive. Egypt’s exports have typically been on the order of $25 billion a year in recent years. That is 61st in the world, not nearly good enough. Too many of the exports are primary commodities (grain, cotton, oil, gas, other minerals), which is not how a country gets rich. The real money is made by processing primary commodities into manufactured goods. The light textile sector could be vastly expanded with the right management and quality control.

5. Egypt has to do something about its [pdf] ramshackle education system, especially the universities. It is an embarrassment, and is interfering in economic growth. You can’t make high tech products like computer chips without an educated work force. A lot of people in Egypt don’t go to high school, and relatively few go to university. Egyptian 8th graders ranked in the bottom 4th on a 48-nation standardized test in mathematics. Those that do go to university often don’t get a proper eduction, with classes of 2,000, having to pay extra for the professor’s notes, and a system that depends on rote memorization rather than critical thinking. This crisis is a resource crisis; the corrupt Mubarak government wasn’t interested in investing in the universities. Morsi has to change this situation.

The one good thing about having the Brotherhood do well in Egyptian politics is that they have a reputation for not being as corrupt as the Mubarak crowd was. On the other hand, the Brotherhood has to avoid creating a fundamentalist atmosphere that scares off foreign investment (though that is mainly a matter of making favorable laws for investors; they have flocked to Saudi Arabia, so why not to Egypt even under the Brotherhood?)

It isn’t the issues of piety or irreligion or of civilian and military, that will be decisive for Egypt. It will be the hard economic and social realities.

10 Responses

  1. If you took out “Egypt” and substituted “Detroit” the article could be about the same (except for point 2, Detroit is steadily losing population). The parts about corrupt government and uncompetitive products (in Detroit’s case an economy overly dependent on one product) both fit. When it comes to education a recent study announced that standardized math scores in Detroit were the lowest in the test’s history. Students who had never attended school and picked answers at random would have done almost as well.

    Both have the typical brain drain pattern. About 2 million Egyptians have emigrated to the US, and these are professionals and skilled workers (others need not apply).
    In Detroit those who can usually move to the suburbs, or leave for jobs in another state, leaving behind the unemployed and those whose incomes are too low to sustain the city (real unemployment in Detroit is over 45%).

  2. Iran’s birth rate has plummeted more than Turkey’s due to rigorous state sponsored family planning:

    “Iran is believed to be the only country in the world where engaged couples cannot get a marriage licence unless they show that they have attended contraception classes.”

    link to news.bbc.co.uk

  3. All nice and dandy Dr. Cole,
    Morsi has outlined the suggested reforms in his debates and in first speech as president. Although Egypt faces many challenges and obstacles but I think Egypt’s greatest challenges is an external challenge. My hope has always been that the US would leave the Middle East and allow people to live without meddling in their affairs. Historically, that was not the case, the US and Israel favor corrupt Arab officials. Morsi might not be charismatic and flamboyant but he is clean. He represents a new breed of Arab leadership, a traditional you might say. He has all the characteristics needed to be transformational leader but mostly importantly he has the loyalty to his country and his fellow citizens. He did promise social justice to all Egyptians including Christians. Unfortunately and saddly the US and Israel simply are not going to let Morsi do his job.

  4. The economic issues are the really fundamental ones. Salafism can take many forms as Saudi Arabia has shown: it becomes a matter of style.

    Thing about Saudi Arabia is that they have bought US/Western support and acceptance. Not just by selling/safe-keeping oil, but by incredible amounts of arms and infrastructure purchases. What Egypt has is the canal, which they are also essentially safe-keeping for the West, but little else.

    Tourism? OK, there we have the value-added of a safe distraction for well-off Western tourists.

    Otherwise you have grants & aid for security purchases, to support the military, the mukhabarat, and Israel: pigs feeding at the same US trough with dung and crumbs trickling down to the people. Its a classic case of neo-colonialism.

    WTF….Expecting additional “help” from the IMF ???!!!

    So, what you’re left with is what’s “worked” before.

    No, what Egypt needs a real revolution. With persistence and flexibility Egyptians may yet pull this off over the course of years, but they’ll need to be paced for the long, long road ahead, keeping the Signposts in perspective.

  5. The Egyptian military transfers ownership of all of its business to private Egyptian people. This would be the biggest win for the people. Then they can start on your list.

  6. Who’s got cash to invest in Egyptian industry? Not the US. So it comes down to Saudi, which hates democracy in the Arab world, and China, which will tolerate democracy as long as it’s far from China and creates a more stable business climate for its aggressive corporations. Unfortunately, the US can still screw you over if you don’t do what it says, which in this case is likely to slavishly favor Saudi and Israel at China’s expense.

    These are terrible choices. Where did Turkey get its foreign capital from?

    • Both EU countries and the GCC (especially the United Arab Emirates) are major investors in Turkey.

    • Well it may not be easy, but it certainly can be done: South Korea, China, Turkey, now Brazil etc. It turns out that it doesn’t matter so much what went before; it is about setting the right rules,and you can take off.

  7. women will have fewer kids when they are empowered to make these family decisions AND are confronted with the economic benefit of doing so. Brazil and other countries have done it this way. In Egypt, I suspect that as goes the swimsuite/alcohol/etc debate so will go the attraction of international investment.

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