Transcript Radwan TD3

Responding to the Financial and
Economic Crisis:
The Case of Egypt
BY
Samir Radwan
Thematic Dialogue 3 of the Committee of the Whole
International Labor Conference (ILC) 4 June 2009
1
Egypt: Impact on the Real Economy
Sectoral Impact of the Crisis
2

Suez Canal proceeds registered a
negative rate of growth of -22%
compared to a positive growth rate
of 12.7%

Tourism registered a negative rate
of -6% compared to a positive rate
of 23% during the same period.

Manufacturing, which grew at 8.3%
in the Third Quarter of 2007/08
went down to only 3.5% during the
same period of 2008/09.

Two sectors go against the current,
vis, communications and
construction which grew at 13.6 %
and 16% respectively. Agriculture
continued its unchanged pattern
with the growth rate hovering
around 3%.
Egypt: Social and Labor Consequences
Unemployment on the rise
Unemployment Rates (%)
3

Official estimates point to an
increase in the employment rate
during the Third Quarter of
2008/09 to 9.4% compared to
8.8% in the previous quarter.

A recent survey of the
unemployed has shown that 15.3%
of the presently unemployed
people was due to the economic
crisis, while 41.3% was due to a
reduction wages.

The Center for Trade Union and
Workers Service (an activist
NGO) has reported that some
88,000 people lost their jobs
between January and March this
year. According to this report,
most job losses are in the textile
and tourism sectors.

Unemployment Rates in MENA (%)
Unemployment
rates in MENA
are the highest in
the world, and
rising
Region
2007
2009
World
5.7
7.1
Developed Economies
and EU
5.7
7.9
Central and South
Eastern Europe and
CIS
8.5
9.8
East Asia
3.5
5.5
South East Asia and
Pacific
5.5
6.4
South Asia
5.3
6.2
Latin America and
Caribbean
7.2
8.3
Middle East
9.4
11.0
North Africa
10.4
11.2
Sub-Saharan Africa
7.9
8.5
Source: ILO, Global Employment Trends, January 2009, p34
4
Unemployment Rates in MENA
In 2009, unemployment in MENA is roughly in line with earlier estimates of
ILO, with an upper estimate of 1.6 million additional unemployed in the
Middle East which would represent an increase of approximately 25%, and
in North Africa, representing an increase of approximately 13%.
Middle East
Source: ILO, Global Employment Trends Update , May 09,p44
North Africa
5
School to Work Transition

Unemployment in the Arab world is dominated by firsttime job seekers
First-time-job seekers as a % of total unemployed
Source: based on data from Arab Labor Organization, First Arab Report on Employment and Unemployment in the Arab Countries: Towards
Effective Policies and Mechanisms, Table 3 p65
6
Prevalence of Informal Employment

Almost half the non-agricultural labor force find
employment in low-productivity, low-income occupations.
Latin
America
Asia
Sub-Saharan
Africa
North Africa
Algeria
Morocco
Tunisia
Egypt
Syria
Informal employment as a % of nonagricultural employment
Total
Female
Male
51
58
48
65
72
65
84
65
63
48
43
45
50
55
42
43
41
47
39
46
35
49
43
44
53
57
43
Source: Arab Labor Organization, First Arab Report on Employment and Unemployment in the Arab Countries: Towards Effective Policies and
Mechanisms, Cairo 2008, p245
7
Egypt: Social and Labor Consequences
Increased Incidence of Poverty

A total of 6.7 million people have come into poverty
during the period 2005-2008
Poverty Dynamics 2005 – 2008 (All Population=100).
Percentage
Chronic Poor – Poor in 2005 10
and 2008
Into Poverty - Non Poor in 9
2005 and poor in 2008
Out of Poverty – Poor in 2005 12
and Non Poor in 2008
Never Poor – Non Poor in 2005 69
and 2008
Population, millions
7.4
6.7
8.9
51.0
Source: World Bank, Economic Growth, Inequality and Poverty: Social Mobility in Egypt between 2005 and
8
2008, December 2008, p.6
Working Poor in MENA
In addition, working poor is expected to increase with the global
crisis.
Middle East
Source: ILO, Global Employment Trends Update , May 09,p44
North Africa
9
Source: Energy Information Administration, release date: 5/28/2009
Jan 06, 2009
Jan 06, 2008
Jan 06, 2007
Jan 06, 2006
Jan 06, 2005
Jan 06, 2004
Jan 06, 2003
Jan 06, 2002
Jan 06, 2001
Jan 06, 2000
Jan 06, 1999
Jan 06, 1998
Jan 06, 1997
Jan 06, 1996
Jan 06, 1995
Jan 06, 1994
Jan 06, 1993
Jan 06, 1992
Jan 06, 1991
Jan 06, 1990
Jan 06, 1989
Jan 06, 1988
Jan 06, 1987
Jan 06, 1986
Jan 06, 1985
Jan 06, 1984
Jan 06, 1983
Jan 06, 1982
Jan 06, 1981
Jan 06, 1980
Jan 06, 1979
Jan 06, 1978
Impact on the Oil Market
Oil Prices
Weekly All Countries Spot Price FOB Weighted by Estimated
Export Volume (Dollars per Barrel)
160
140
120
100
80
60
40
20
0
10
Impact on the Oil Market
Oil Revenues
OPEC Net Oil Export Revenues
(Billion Dollars)
1200
1000
800
600
400
200
Nominal
Source: Energy Information Administration, release date: 5/28/2009
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
0
Real
11
Working out of the Crisis
A decent Work Agenda: The Egyptian Government’s Stimulus Package
1.
Stimulating demand through an expenditure package of
LE 13.3 billion(mainly allocated to infrastructure
projects, export promotion and social benefits).
2.
A total of LE 1.7 billion reduction in customs on
imports of intermediate and capital goods.
3.
Reducing interest rate over two successive stages by 1%
and 0.5% as inflation goes down.
4.
Providing the private sector with other incentives
especially to stimulate new investment
12
Dealing with the Crisis
Decomposition of Rescue Packages
Source: ILO, the Financial and Economic Crisis: A Decent Work Response, Geneva 2009, p48
13
Looking into the Future
Laying the Foundation for the Post-Crisis Economy and Society

The regeneration of employment-intensive-growth
Projections of annual increase in the Labour Force, 2004-2013
Labour Force (m)
Annual increase (m)
% increase
2004
20.9
2005
21.8
0.9
4.3%
2006
22.9
1.1
5.0%
2007
23.9
1
4.4%
2008
24.6
0.7
2.9%
2009
25.9
1.3
5.3%
2010
26.8
0.9
3.5%
2011
27.6
0.8
3.0%
2012
28.5
0.9
3.3%
2013
29.6
1.1
3.9%
Source: EIU, Egypt Country Forecast, March 2009, p 12

In specific terms, the post-crisis recovery should take as its
objective the creation of 950 thousand to a million jobs every
year in the medium term as suggested by the labour force
projections.
14
Looking into the Future
Laying the Foundation for the Post-Crisis Economy and Society
Restructuring the Egyptian Economy
Manufacturing
• Deepening of manufacturing
activities
• Expanding the process of
industrialization through joining
Global Production Chains
Education and
Training
• Urgent need of massive investment
in education and training in order
to increase the future pool of
medium-and-high skilled workers.
• A crash national training program
15
Looking into the Future
Laying the Foundation for the Post-Crisis Economy and Society:
Elements of a JOBS PACT
Improving Labour Market Policies and institutions
Amending the
legal framework
Update Wage
Policy
Improve
effectiveness of
institutes for
settling labor
disputes
16
• Mainly by Labor Law No. 12 of 2003 contains articles that amount to
an impediment to attracting investors.
• Workable training facilities (the Training Fund) and sanctions an
inadequate provision for social protection (the Emergency Fund).
• Outdated wage policy makes it difficult to use wages as an instrument
of economic and social policy.
• Current institutes do not provide for proper social dialogue.
• Representative organizations for workers and for the private sector
should find an appropriate platform for negotiations .
Egypt: Seeing the Opportunity presented in a Crisis
A Full-Fledged Vision : The Goals
Current Situation
Economic Goal to be
achieved by 2011
GDP grows at 3.8% (2009
estimate)
GDP grows at 7%
Gross Fixed Investment
accounts for 19% of GDP
Gross Fixed Investment
reaches 25% of GDP
The incidence of poverty
currently represents 19%
of the total population
Poverty incidence not to
exceed 20%
17
Egypt: Seeing the Opportunity presented in a Crisis
A Full-Fledged Vision : The Means
1.
Inject at least LE 25 billion annually from 2009 to 2011
in order to stimulate demand.
2.
Use monetary policy to determine interest rates while
ensuring a reasonable balance between economic
growth and inflation.
3.
Execute a multi-faceted plan aimed at creating the ideal
investment climate for investors.
4.
Enhance domestic credit growth
18
What role ILO?
Initiation of interagency missions at the country
level to work out the details of employmentintensive growth in the post-crisis period
19