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Economic Program of the Government,

Economic Program of the Government, Contours of Legislation in Future
On 27 March 2016, the Prime Minister of Egypt delivered the government statement to the Egyptian Parliament under the title of ‘Yes We Can’. He also presented a 204-page document detailing the government program intended to be implemented over a duration of 27 months (until the end of financial year 2017/ 2018). As previously explained in detail in the ELU Issue of the fourth week of March and according to Article (146) of the 2014 Constitution, the Parliament has up to 30 days to study and assess the said program by the end of which it must vote – by majority – on whether to accept or reject the program/government.[1] The government program is built on seven main pillars. These are maintaining national security; establishing democratic grounds; an economic vision and program; social justice and services to citizens; sectoral development (industry, international trade, petroleum and mining, electricity and renewable energy, agriculture and animal, fish, and poultry wealth, water resources and irrigation, ICT, tourism, transport, and civil aviation); administrative reform and applying the mechanisms of transparency and integrity; and enhancing Egypt’s Arab, African, and international role. Embodied within the government program are a number of legislations the government intends to pass on to the Parliament; given that the said program is approved. Detailed below is a breakdown of those key legislations, succeeding a quick synopsis of the main features of the government program.
Main Features of the Government Program
The government program starts by identifying current challenges. They were specified as national security concerns; population increase; deterioration of the quality of public services; severe slowdown of economic growth due to increased rates of inflation, budget deficit, internal and external public debt, trade account deficit, and subsidy, wages, and debt service bills, accompanied by a decrease in tourism revenues, foreign currency reserves, exports, and international competitiveness besides a global economic slowdown. Subsequently, the main principles on which the said program is based have been identified as seriousness of the reform process; determination to follow a correct scientific approach, adopt new ideas, and take tough economic decisions; necessity of coupling economic measures with programs for social protection; zero tolerance to corruption; building on clear and specific objectives; working with the private sector and necessity to overcome bureaucracy and rebuild the administrative body; and giving priority to what serves the citizen best especially with respect to education, health, housing, and sanitation. By specifically reviewing the "economic vision and program" pillar, we realize that it has used the same definition for the Egyptian economy as stated in the Sustainable Development Strategy (Vision 2030). The Egyptian economy is "a balanced, knowledge- based, competitive, diversified, market economy characterized by a stable macroeconomic environment, capable of achieving sustainable inclusive growth. An active global player responding to international developments, maximizing value added, generating decent and productive jobs, and a real GDP per capita reaching high- middle income level by 2030". The government has set some economic targets over the 27-month program duration (until June 2018), namely a growth rate of 5-6%, an unemployment rate of 10-11%, an inflation rate of 8-9%. Furthermore, it targets to achieve public debt, budget deficit, investment, and domestic saving rates of 91-93%, 9-10%, 18-19%, and 9-10% consecutively of the gross domestic product. The government economic vision and program is based on four main pillars, as follows:
  1. Re-establishing macroeconomic balances, through regaining confidence in the Egyptian economy; enhancing efficiency of public finance management; curing imbalances in external transactions; and controlling inflation.
  2. Achieving income distribution equality and sustainable development, through implementing better targeted subsidy policies; implementing more just taxation polices by expanding the tax base and in/creasing levels of tax commitment; giving priority to enhancing and modernizing public services; increasing employment rate; and offering social protection schemes (comprehensive health insurance– training programs– developing technical education – improving food subsidy programs – school feeding programs – female breadwinners).
  3. Economic stimulus and increasing employment rates, through enhancing investments; supporting small and medium enterprises; incentivizing the informal sector to formalize; better management of state-owned assets; and developing programs to modernize and restructure state-owned enterprises.
  4. Giving a big push to ten specific mega projects, namely the Suez Canal Zone development project; establishing new cities on the axes of roads currently being established (new administrative capital – new Alamein city – new Toskha city - new Farafra city- East Portsaid – public private partnership projects in new cities – development of existing areas in 22 new cities); reclamation of 1.5 million feddans; the Sinai corporation for development and investment; Northwest Coast development project; the Golden triangle project for mineral resources in southern Egypt; main roads and new development axes (3258 km, and 1630 km); 30 June axis and new Galala city; developing gas fields and refineries; and the Dabaa nuclear station.
Legislations Expected to be Presented to Parliament
The program presented to Parliament does not include a "legislative agenda"; a plan that includes the main legislations the government intends to present over the upcoming two years. However, references have been made in different parts of the program to some laws pertaining to economic activities the government intends to present to Parliament. However, before discussing the said laws, it is worth referring to the discrepancy noted with respect to their levels seriousness. Some laws have been well stated and thus seem serious. Other laws have not been clearly stated and are not based on clear foundations; indicating a level of non-seriousness. The most important laws referred to in the government program are as follows: In the field of media and mass communication The program stated the intent of the government to present three laws for the establishment of three new general entities with the aim of organizing the media field. These are the Higher Council for Media Organization, the National Entity for Journalism, and the National Entity for Media. It is worth mentioning that those three entities are referred to in the new Constitution. In the field of public finance The government program stated that a comprehensive review of the "Bids and Tenders Law" will be presented, with the aim of facilitating procedures of undergoing government contracts without compromising public finance. This is an important amendment and could entail a positive impact on the investment climate. Moreover, the government program included the issuance of the value-added tax to replace the sales tax already applied; however, the new tax scope and rate have not been specified. It is worth noting that the value-added tax is one of the main triggers for receiving the first tranche of the World Bank loan signed since the end of last year. Finally, the government program included the issuance of a new customs law, however, its features have not been specified. In the field of investment The government program has included a new bankruptcy law and another law for commercial registrar to be presented Parliament; both are extremely crucial. The bankruptcy law needs comprehensive review to entail an efficient and fast mechanism for the exit of bankrupt companies from the market, their liquidation, or placing them under legal custody during restructuring. As for the commercial registrar law, it needs radical amendment to facilitate the entry of informal enterprises to the formal sector. Moreover, it has been referred to a unified food production law, and a PPP law in the field of education. However, it is not clear to why partnership in education is intended to be done through a specific PPP law in education, instead of the general and already existing PPP law. Finally, it has been stated that the government will undergo a review of housing and construction laws, but without clarifying the exact purpose for that. In the field of labor The program mentioned that the government will present a new labor law, another for syndicates, and a third one for doctors. Though it is unclear what the government intends to achieve from such laws, yet, it is certain that the passage of any laws concerning labor and syndicate activities through this Parliament won't be an easy matter, especially amid absence of a majority party or big parliamentary coalitions. In the social field The program included different referrals to several laws with social impact, however, without much detail. On top are a set of social inclusion laws (social security, civil society, social insurance, persons with disabilities, and public services). Furthermore, the program stated the government's intention to present two new laws that organize youth and sports, which could be considered a part of the social legislation. Other fields In addition to the above, the program included reference to an upcoming amendment to the local administration law, which could be preface to the preparation for local elections announced by government to take place in the first quarter of next year. Finally, there are references to other laws in the fields of agriculture and industry, yet, with unclear expressions that do not indicate clear intention for legislation.
Commentary
Overall, the government program is comprehensive and ambitious. It aims to achieve financial discipline through resolving structural imbalances in the overall budget, restructuring public spending, and stimulating public revenues. In addition, the program aims at fostering economic growth through funding mega-projects, supporting SMEs, integrating the informal sector into the formal sector, encouraging investments, and growing the real sectors. This is accompanied by the drive to create social protection schemes for citizens, reform administrative bodies, and fight corruption in order to strengthen Egypt’s competitiveness on a global scale. Nevertheless, the program does not provide an integrated economic vision or plan; it is a mere compilation of the projects and proposals provided by separate ministries. For many of the projects mentioned, there are no funding streams, ownership structures, or general frameworks provided. A similar issue is faced on the legislative side, where the program mentions several important legislations, but fails to compile them in a comprehensive manner in order to allow for a fundamental enhancement of Egypt’s investment climate. The ELU will continue to follow- up, and comment on those legislative changes.   [1] On 21 April 2016, the Egyptian Parliament approved the Government’s program.
On 27 March 2016, the Prime Minister of Egypt delivered the government statement to the Egyptian Parliament under the title of ‘Yes We Can’. He also presented a 204-page document detailing the government program intended to be implemented over a duration of 27 months (until the end of financial year 2017/ 2018). As previously explained in detail in the ELU Issue of the fourth week of March and according to Article (146) of the 2014 Constitution, the Parliament has up to 30 days to study and assess the said program by the end of which it must vote – by majority – on whether to accept or reject the program/government.[1] The government program is built on seven main pillars. These are maintaining national security; establishing democratic grounds; an economic vision and program; social justice and services to citizens; sectoral development (industry, international trade, petroleum and mining, electricity and renewable energy, agriculture and animal, fish, and poultry wealth, water resources and irrigation, ICT, tourism, transport, and civil aviation); administrative reform and applying the mechanisms of transparency and integrity; and enhancing Egypt’s Arab, African, and international role. Embodied within the government program are a number of legislations the government intends to pass on to the Parliament; given that the said program is approved. Detailed below is a breakdown of those key legislations, succeeding a quick synopsis of the main features of the government program.
Main Features of the Government Program
The government program starts by identifying current challenges. They were specified as national security concerns; population increase; deterioration of the quality of public services; severe slowdown of economic growth due to increased rates of inflation, budget deficit, internal and external public debt, trade account deficit, and subsidy, wages, and debt service bills, accompanied by a decrease in tourism revenues, foreign currency reserves, exports, and international competitiveness besides a global economic slowdown. Subsequently, the main principles on which the said program is based have been identified as seriousness of the reform process; determination to follow a correct scientific approach, adopt new ideas, and take tough economic decisions; necessity of coupling economic measures with programs for social protection; zero tolerance to corruption; building on clear and specific objectives; working with the private sector and necessity to overcome bureaucracy and rebuild the administrative body; and giving priority to what serves the citizen best especially with respect to education, health, housing, and sanitation. By specifically reviewing the "economic vision and program" pillar, we realize that it has used the same definition for the Egyptian economy as stated in the Sustainable Development Strategy (Vision 2030). The Egyptian economy is "a balanced, knowledge- based, competitive, diversified, market economy characterized by a stable macroeconomic environment, capable of achieving sustainable inclusive growth. An active global player responding to international developments, maximizing value added, generating decent and productive jobs, and a real GDP per capita reaching high- middle income level by 2030". The government has set some economic targets over the 27-month program duration (until June 2018), namely a growth rate of 5-6%, an unemployment rate of 10-11%, an inflation rate of 8-9%. Furthermore, it targets to achieve public debt, budget deficit, investment, and domestic saving rates of 91-93%, 9-10%, 18-19%, and 9-10% consecutively of the gross domestic product. The government economic vision and program is based on four main pillars, as follows:
  1. Re-establishing macroeconomic balances, through regaining confidence in the Egyptian economy; enhancing efficiency of public finance management; curing imbalances in external transactions; and controlling inflation.
  2. Achieving income distribution equality and sustainable development, through implementing better targeted subsidy policies; implementing more just taxation polices by expanding the tax base and in/creasing levels of tax commitment; giving priority to enhancing and modernizing public services; increasing employment rate; and offering social protection schemes (comprehensive health insurance– training programs– developing technical education – improving food subsidy programs – school feeding programs – female breadwinners).
  3. Economic stimulus and increasing employment rates, through enhancing investments; supporting small and medium enterprises; incentivizing the informal sector to formalize; better management of state-owned assets; and developing programs to modernize and restructure state-owned enterprises.
  4. Giving a big push to ten specific mega projects, namely the Suez Canal Zone development project; establishing new cities on the axes of roads currently being established (new administrative capital – new Alamein city – new Toskha city - new Farafra city- East Portsaid – public private partnership projects in new cities – development of existing areas in 22 new cities); reclamation of 1.5 million feddans; the Sinai corporation for development and investment; Northwest Coast development project; the Golden triangle project for mineral resources in southern Egypt; main roads and new development axes (3258 km, and 1630 km); 30 June axis and new Galala city; developing gas fields and refineries; and the Dabaa nuclear station.
Legislations Expected to be Presented to Parliament
The program presented to Parliament does not include a "legislative agenda"; a plan that includes the main legislations the government intends to present over the upcoming two years. However, references have been made in different parts of the program to some laws pertaining to economic activities the government intends to present to Parliament. However, before discussing the said laws, it is worth referring to the discrepancy noted with respect to their levels seriousness. Some laws have been well stated and thus seem serious. Other laws have not been clearly stated and are not based on clear foundations; indicating a level of non-seriousness. The most important laws referred to in the government program are as follows: In the field of media and mass communication The program stated the intent of the government to present three laws for the establishment of three new general entities with the aim of organizing the media field. These are the Higher Council for Media Organization, the National Entity for Journalism, and the National Entity for Media. It is worth mentioning that those three entities are referred to in the new Constitution. In the field of public finance The government program stated that a comprehensive review of the "Bids and Tenders Law" will be presented, with the aim of facilitating procedures of undergoing government contracts without compromising public finance. This is an important amendment and could entail a positive impact on the investment climate. Moreover, the government program included the issuance of the value-added tax to replace the sales tax already applied; however, the new tax scope and rate have not been specified. It is worth noting that the value-added tax is one of the main triggers for receiving the first tranche of the World Bank loan signed since the end of last year. Finally, the government program included the issuance of a new customs law, however, its features have not been specified. In the field of investment The government program has included a new bankruptcy law and another law for commercial registrar to be presented Parliament; both are extremely crucial. The bankruptcy law needs comprehensive review to entail an efficient and fast mechanism for the exit of bankrupt companies from the market, their liquidation, or placing them under legal custody during restructuring. As for the commercial registrar law, it needs radical amendment to facilitate the entry of informal enterprises to the formal sector. Moreover, it has been referred to a unified food production law, and a PPP law in the field of education. However, it is not clear to why partnership in education is intended to be done through a specific PPP law in education, instead of the general and already existing PPP law. Finally, it has been stated that the government will undergo a review of housing and construction laws, but without clarifying the exact purpose for that. In the field of labor The program mentioned that the government will present a new labor law, another for syndicates, and a third one for doctors. Though it is unclear what the government intends to achieve from such laws, yet, it is certain that the passage of any laws concerning labor and syndicate activities through this Parliament won't be an easy matter, especially amid absence of a majority party or big parliamentary coalitions. In the social field The program included different referrals to several laws with social impact, however, without much detail. On top are a set of social inclusion laws (social security, civil society, social insurance, persons with disabilities, and public services). Furthermore, the program stated the government's intention to present two new laws that organize youth and sports, which could be considered a part of the social legislation. Other fields In addition to the above, the program included reference to an upcoming amendment to the local administration law, which could be preface to the preparation for local elections announced by government to take place in the first quarter of next year. Finally, there are references to other laws in the fields of agriculture and industry, yet, with unclear expressions that do not indicate clear intention for legislation.
Commentary
Overall, the government program is comprehensive and ambitious. It aims to achieve financial discipline through resolving structural imbalances in the overall budget, restructuring public spending, and stimulating public revenues. In addition, the program aims at fostering economic growth through funding mega-projects, supporting SMEs, integrating the informal sector into the formal sector, encouraging investments, and growing the real sectors. This is accompanied by the drive to create social protection schemes for citizens, reform administrative bodies, and fight corruption in order to strengthen Egypt’s competitiveness on a global scale. Nevertheless, the program does not provide an integrated economic vision or plan; it is a mere compilation of the projects and proposals provided by separate ministries. For many of the projects mentioned, there are no funding streams, ownership structures, or general frameworks provided. A similar issue is faced on the legislative side, where the program mentions several important legislations, but fails to compile them in a comprehensive manner in order to allow for a fundamental enhancement of Egypt’s investment climate. The ELU will continue to follow- up, and comment on those legislative changes.   [1] On 21 April 2016, the Egyptian Parliament approved the Government’s program.