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Where does Egypt stand in Global Competition?

After dropping for several years in a row, Egypt drops another place to 119th position in the 2014-2015 Global Competitiveness Report.
Hussein Kamal Mehrem | 07.09.2014
The 2014-2015 Global Competitiveness Report is launched at a time when the world seems to be finally emerging from the worst financial and economic crisis of the past 80 years and returning to a pre-crisis situation: large interest rate spreads for public debt in hard-hit countries are falling; banking systems seem more robust, even if financial reform has not yet been completed; and access to credit, while still limited, is slowly recovering.

Large parts of the Middle East and North African region continue to be affected by geopolitical conflict and turbulence. Yet the emphasis has shifted. Some North African economies, such as Egypt and Tunisia, are slowly stabilizing and are starting to focus on economic reform. Structural reforms and improvements to business environments will help restore the still-shaken investor confidence in countries in transition in the region.

After dropping for several years in a row, Egypt moves down one place to 119th position in the 2014-2015 Global Competitiveness Report. This assessment points to a certain stabilization in the country following the recent elections. The fragile security situation is improving slightly, although tenacious political and policy instability are undermining the country’s competitiveness and its growth potential going forward. While regaining political stability and investor confidence need to remain the priority as this report goes to print, many of the underlying factors that will be decisive for the stability of the country and the cohesion of the society over the medium to longer term are economic in nature. Establishing confidence through a credible and far-reaching reform program is vital to Egypt’s future and to realizing the considerable potential of its large market size and proximity to key global markets.

For the basic requirements for competitiveness including institutions, infrastructure, macroeconomic environment, health and education Egypt was ranked 121 from a total of 144 countries. Political instability, access to financing, foreign currency regulations and corruption were identified as the main obstacles to doing business in Egypt. Egypt is also ranked 106 out of 144 in efficiency enhancers indicators, which include higher education and training, good market efficiency, financial development and labour market efficiency.

According to the Global Competitiveness Index, three areas are of particular importance for Egypt. First, the macroeconomic environment has deteriorated over recent years to reach 141st position mainly because of a widening fiscal deficit, rising public indebtedness, and persisting inflationary pressures. A credible fiscal consolidation plan, accompanied by structural reforms, will be needed in Egypt. This may prove difficult because of energy subsidies that account for a considerable share of public expenditure. Removing these subsidies may be difficult politically, but there is space for targeting subsidies better in a way that allows for fiscal consolidation while still protecting the most vulnerable. Second, measures to intensify domestic competition (118th) would result in efficiency gains and contribute to energizing the economy by providing access to new entrants. This, in turn, would make the country’s private sector more dynamic, thus fostering the creation of new jobs. And third, making labor markets more flexible (130th) and efficient (139th) would allow the country to increase employment in the medium term and provide new entrants to the labor market with enhanced opportunities.