Country Analysis Project - Egypt - Research Paper Example

EGYPT General background information Officially, it is the Arabic Republic of Egypt; Egypt is a North African country with its English name having been borrowed from the middle French name “Egypte” (Stannard, p. 17). Earlier, the inhabitants of Egypt were farmers and practiced grain grinding and stone carvers. This is evident by the presence of rock carvings along the Nile terraces and other oases. By 10th millennium BC, another crop of people settled in the country, hunters and gatherers, and fishers. This led to massive climate changes over time because of overgrazing which desiccated the land and led to the encroachment of the Sahara desert. This led to massive migration and settlement along the fertile Nile valleys and formed a more centralized society. In the Nile valley, a Neolithic culture rooted by 6000BC. In this era, there was development of several dynastic cultures in the upper and the lower Nile. The lower Egyptian communities coexisted with the southern communities for over 2000 years, but remained distinct culturally and at the same time, retained close trade contact. According to the CIA World Fact Book, Egypt is one of the world’s earliest civilizations. This is because of the richness in the regular Nile river floods, plus the partial segregation that the desert provides to the east and west. In 341 BC, the last native dynasty ruled over Egypt but fell under the Persians, who were later toppled by the Greeks and Romans. From the seventh century BC, the Arabs ruled Egypt for six centuries. A local military social group, the Mamluks, took control and continued to rule after the invasion of Egypt in 1517 by the Ottoman Turks. The completion of the Suez Canal made Egypt an important global transportation hub, though it was also in massive debt. To protect its investments, Britain seized control of Egypt in1882, though nominal allegiance to the Ottoman Empire went on until 1914. By 1922, Egypt was partially independent from the United Kingdom. It got full sovereignty in 1952 after overthrowing a British backed monarchy (Stannard, p. 112). Egypt’s economic assessment The economy of this country relies mostly on agriculture, petroleum exports, media and tourism. Since 1979, the United States foreign aid has granted Egypt an average of 2.2 billion dollars per year, making it the third largest recipient of foreign funding. The government has invested heavily in physical structures and communications. However, the largest revenue source is tourist and partly traffic. Economic growth Before the 2011 uprising in Egypt, the country was enjoying a rising GDP acceleration, which reached a height of 7.1 % in 2006/2007. This was from rise in both public and private investment, with a continued, substantive economic investment. However, labor productivity continues to show sluggish growth, which presents a potential harm to the gross domestic growth. Poverty Though there are low incidences of extreme poverty, a whopping 43.9% of the total population leaves under ?2 per day. With this, it has an enormous challenge of transforming growth to poverty eradication. Reforms will aim at development of human capital, creation of jobs and productivity. Economic structure In Egypt, the largest economic sector of both labor force and output is in services. Industrial activities propel growth in revenue. At the second position is agriculture as a source of employment, though has the least output. For future growth, creation of jobs is imperative, especially in the industrial sector and increasing agricultural and services productivity for long term economic structural transformation (Rotberg, p. 79). Fiscal and monetary policy Between 2002/2003 and 2006/2007, Egypt’s budget deficit fell from 9.0% of their GDP to 7.7%. This is because the government lowered subsidies on fuel and held back wage growth. Interest payment and subsidy depress the government’s capital spending. Rapid supply and money growth continue to drive up inflation rates (Rotberg, p. 113). Financial sector The financial sector development comes from the growing monetization and rising stock market performance. Inefficiencies still remain in the system since the private sector has had shrinking credit share of the country’s GDP, plus the fact that the interest rates keep widening. By the year 2011, Egypt’s per capita income was an estimate of 6,500 dollars making it position 133 globally. The GDP real growth rate was 1.2% and the GDP purchasing power parity was 515.4 billion dollars. The country’s labor force by occupation comprises of 32% being in agriculture, 17% in industry and 51% in services. The general labor force is 27.74 million as at 2011 (Rotberg, 12). Political assessment of Egypt Since 1953, Egypt has been a republic, though under emergency law continually since 1967. Autocratic rule flourished since 1981 to 2011 under President Hosni Mubarak, who rose to power after the assassination of president. Ahmed Shafik came in to being the prime minister in January 2011 after the resignation of Ahmed Nasif. The 2011 revolution led to resignation of President Mubarak, leading to a de facto government under the supreme council of the armed forces. The chairman is Mohamed Hussein Tantawi. Nominally, power is under a multi party semi presidential system with executive power equally between the president and the prime minister. Practically, the power has rested on the president, who has traditionally been elected in single candidate elections for over fifteen years. The Egyptian military is the country’s most powerful institution and receives millions of dollars as aid from United States. With its numerous factories to manufacture weapons and consumer goods, it exempts itself from law that applies to other sectors (Thompson, p. 347). The legal system bases on civil and Islamic law. A supreme court carries out judicial review and accepts the jurisdiction of the international court of justice, only with reservations. Currently, Egypt has 27 governorates. In the legislative system, there is a bicameral system with the advisory council functioning in a consultative role and the people’s assembly. Notable trends and issues affecting the political/legal environment Human rights For a long time, Rotberg writes that Egypt has been under criticism by international and local human rights organizations for its poor human rights records. For instance, President Mubarak clamped down democratic activists who challenged his rule in 2005, triggering unprecedented public criticism. According to human rights watch, routine torture, military and state security courts tortures and arbitrary detentions are some of the most serious human rights infringements. Further, Egypt has had a long history of personal discriminatory status laws that govern marriage, inheritance and custody. According to critics, the laws are biased basing on gender and give men an upper hand. Other laws hinder building of churches and restriction of open worship, with continued sporadic attacks on churches and Christians. Further, female genital mutilation is also an issue affecting the legal environment in Egypt. The world health organization reported in 2008 that approximately 91.1% of women and girls between the age of 15 and 49 have undergone forced FGM. Summary of business development prospects The Egyptian popular uprising resulted to hopes in major political reforms. However, it led to a disruption on the economic sector of the country with a 55 day shutdown of the stock market, besides an under capacity production. This will have a negative impact on direct foreign investment, tourism and receipts at the Suez Canal. These are the major revenue earners for Egypt. This will lower the country’s GDP significantly from the 5.1% in 2009/2010 (Thompson, p. 341). However, the interim government has stepped up food subsidies and freezing the plans to phase out energy subsidies. It has also stepped up upgrading the status of government workers. Though the government is addressing social issues, it should also consider their long term and medium implications to the fiscal balances (Rotberg, 12). Recommendations The fact that Egypt is partnering up with emerging markets and allocating the Egyptian pound, with a target of addressing employment issues makes one believe in the fact that the country is on an economic rise after the previous uprisings. Besides, the country has partnerships with the European Union and the United states. Trade is improving and the economic prospects are high. The best prospects for industrial development in the country lie in the restoration of the country’s political stability. Fig 1: Egypt: major towns and resources Fig 2: Position of Egypt in Africa Source: CIA Fcat book Work cited Stannard, Dorothy. Egypt. 6th ed. Singapore: APA Publications; 2009. Print. Goldschmidt, Arthur. A brief history of Egypt. New York: Facts on File, 2008. Print. Thompson, Jason. "Mubarak and Beyond." A history of Egypt: from earliest times to the present. New York: Anchor Books, 2008. 341. Print. "CIA: World Fact Book." CIA: The Work of a Nation, the Center of Intelligence. World Leaders, 21 Feb. 2012. Web. 27 Feb. 2012. . Rotberg, Robert. "Egypt - African Economic Outlook." African Economic Outlook - Measuring the pulse of Africa. African Economic Outlook, 22 June 2011. Web. 28 Feb. 2012. . Read More