The political economy of reform in Egypt: understanding the role of institutions

The political economy of reform in Egypt: understanding the role of institutions

Does the current institutional environment in Egypt have the capability to sustain the recent economic growth?

Recent economic growth and stabilisation in Egypt has been largely fuelled by external factors which may not be sustainable argues this paper from the Carnegie Endowment. During the same period, Egypt has failed to address pressing social and economic challenges.

The author finds that economic reform, considered a priority by the Egyptian government, has not been fully effective for three reasons:

  • it lacks public support
  • Egypt has failed to foster a competitive business environment
  • Egypt lacks dynamic and transparent institutions.

The author further argues that Egypt lacks the institutional capacity to implement better-coordinated reform programmes that address its socioeconomic realities, including widespread poverty and unemployment, high inflation, and a soaring public debt. Reform is needed to improve the efficiency of Egypt’s bureaucracy, increase the accountability and transparency of politicians, and widen political participation for Egyptian citizens.

Key Findings include:

  • Egypt has failed to create a healthy and competitive environment for business development. Despite the passage of many laws to organise the business environment, the government has not developed an effective enforcement process for these new laws, and little progress has been made in the fight against corruption
  • Economic reform lacks popular support in Egypt as reforms are perceived to cause more harm than good as previous reforms have consistently failed to address socioeconomic problems. Furthermore, future reforms are predicted to increase the gap between the Egyptian rich and poor before the masses can feel the positive effects
  • The majority of the private sector and civil society is excluded from the debate over Egypt’s economic reform strategy. Public participation is crucial for advancing civil society institutions and promoting an effective role in designing and implementing comprehensive economic reform.

The author contends that “given the nature of the Egyptian state and the main actors in the market and civil society, developing the necessary institutions and, most important, making them function properly within a short period of time seems unrealistic. Hence, Egypt should make the choice: Either start developing these institutions soon or lag behind. Building these institutions is the responsibility not only of the Egyptian state but also of the private sector and civil society.” (Adapted from author)

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