Egypt after COVID: Redesigning economic transformation in need

CAIRO - 14 November 2020: With the COVID-19 pandemic causing the most severe global health and economic crisis in at least seven decades, Egypt has been one of the countries whose approach to contain the pandemic and maintain a resilient economy has been singled out on a global level.

According to a recent report, issued by the World Bank, monitoring the country’s economic performance over the past years and until 2020, Egypt managed to maintain a solid macroeconomic performance thanks to bold reforms adopted the past few years.

On the other hand, there was a large decline in the ratio between the employment rate to working-age population in Egypt, requiring an economic transformation process using digital technologies in order for Egypt to reach its full potential, by improving human capital productivity in high value-added sectors. 

bt sat with World Bank Country Director for Egypt Marina Wes, in an exclusive interview, to have a close look at the key findings of the World Bank’s report “Egypt Economic Monitor,” and its proposed economic transformation process for Egypt.

How does the report see Egypt’s pre-COVID-19 reforms empowering its economic resilience amid the pandemic crisis?

Egypt has taken bold reform measures in recent years, on the fiscal, monetary and energy sides, along with the emergency measures undertaken by authorities in response to the COVID-19 crisis, which are believed to have helped the country weather the shock.

I also believe the reforms have contributed to a more stable macroeconomic environment, which has reflected positively on the country’s business powered by a comfortable level of foreign reserves and improved fiscal accounts.

The report outlines a decline in Egypt’s labor productivity in high-value added sectors. What are the type of jobs that Egypt needs to invest in to reach full potential?

We see around the world that labor productivity growth has not been as high in recent years even before COVID-19  pandemic as it was in the past.

In Egypt, this is a particular challenge, and the structure of the economy with a large share of population employed in agriculture, quite a few people working in construction, which are generally lower value-added jobs. This is not helping towards the creation of value added better jobs, in manufacturing and some of the services sectors, so this kind of transformation the report proposes if Egypt wants to reach its full potential.

Maintaining a stable macroeconomic framework despite the COVID-19 challenges would be one important pre-requisite for creating high-quality jobs in addition to having an enabling policy environment that supports the creation various types of businesses.

How can Egypt make the most use of its youthful and dynamic population to fast-track its economic transformation?

I think human capital is absolutely critical. The human capital index in Egypt is 0.49, which suggest that a child born in 2020 in Egypt is 49 percent as productive as she could be if she engaged in complete education, and if she has full health. So, I think really focusing heavily on improving human capital outcomes in both education and health beyond the pandemic would be a really huge opportunity.

I am from Holland, and in Europe, we face a big problem with aging demographics, and on the long-run it can be detrimental to growth. Egypt actually has youthful population, which means that if Egypt manages to create high quality jobs for this labor force, the economy and the country can have incredible potential.

What key resources do you think Egypt needs to allow private sector to access to grow and thrive?

On the physical capital side, I think that foreign direct investment (FDI) has gone up in recent years, but a lot of it was concentrated on oil and gas sectors, so really having an environment for both foreign and domestic investment to really come in. That’s really giving the private sector the oxygen to breathe, having a business-friendly environment, a level playing field, and clear laws and regulations. I think these are the main dimensions.

Egypt has been praised for adopting digital technologies in reforming education systems ahead of the COVID-19 pandemic. What do you think Egypt can do to enhance within-sector productivity and upgrade human capital?

On the human capital side, I think digital skills are key, and Minister of Education Tarek Shawqi has talked about that, and the reforms he is undertaking will go a very long way to enabling the next generations and having these types of skills. There are also trainings that can be done for older people in the workforce, this would be one point.

Also, connectivity is a pre-requisite on the infrastructure side, and then the other point, the overall enabling environment, which is having inductive business climate for the private sectors to operate.

I met with some really inspiring young entrepreneurs that have made use of digital technology one way or the other, so I think Egypt has a lot to build on in that regard.

The current crisis globally really merits a fresh look at the digital sector, and how can the digital be used to really leapfrog in a number of areas, and improve financial inclusion, help SMEs be productive.

Are we seeing projects between Egypt and the World Bank to develop connectivity and telecommunications?

This is something that we should continue to discuss, because we are finalizing a digital economy assessment at the World Bank, in collaboration with the counterparts to precisely look at some of this to see what more can be done going forward.

After COVID-19, many expect some jobs to vanish, do you think the pandemic has restructured our view of the jobs needed for the market?

You are saying that you think many jobs might disappear, I am not saying I disagree but I think it is too early to tell. We do not really know yet what the world of work will look like after the COVID-19 crisis, I mean right now, there are not many job opportunities in tourism sector in Egypt but I am sure that will change once we get beyond the crisis, because Egypt has a rich history and Ramsis??…so there are so many assets, and may be the COVID-19 crisis even provides an opportunity to redesign tourism sector model to go to more sustainable eco-tourism to have higher value tourism.

We have seen recently a big rise including in Egypt, in delivery businesses, in Zoom, in Netfilx, in creative use of all of these digital platforms, I think once the world opens up more, these companies will have to continue being creative to maintain what they achieved. We are hearing good news on the vaccine, maybe before too long things will normalize a little bit, but we do not know when that will be.

The World Bank’s portfolio in Egypt is multi-sectoral, would you please tell us more about it, and the new projects?

The World Bank has around 6 billion dollar-worth of projects across broad range of sectors in Egypt, in education, universal health insurance to fight COVID-19, health care, social safety net programs like: Takaful and Karama, in addition to being very active on the private sector side, job creation, supporting micro small and medium sized projects, rural sanitation, and housing.

Most recently, we are initiating a new project under the request of the Egyptian government to deal with the environmental issues, air pollution in Cairo, and I see this a great opportunity to support Egypt in rebuilding back better.

How does the report assess women role in Egypt’s economic reform program?  

The Ministry of International Cooperation and the World Economic Forum (WEF) launched the Closing the Gender Gap Accelerators, while the National Council for Women (NCW) started to conduct sector-specific research to support women empowerment, and there is also the gender policy tracker to help pro-actively devise the COVID-19 measures in response to the crisis specifically targeting women. 

Because of the pandemic, many women chose to leave the workforce either because kids are at home, or job pressure, so the first goal is to make sure that the female work force participation does not fall.

I think taking measures to enhance female labor force participation would be absolutely critical, and I think the National Council of Women has some really important and interesting ideas, and if they are taken forward, it would be an important step.