So Zeinboia gives me the heads up about an invitation from the ministry of finance to discuss the new budget proposal with Dr. Samir Radwan and his advisers. Apparently invitation was made to some of the youth coalitions and some of the twitter economists. I had whined on twitter all morning about wanting to attend and has lost all hope, then an hour before the event the perpetually awesome TravellerW comes to the rescue and my name is at the door.
I race through Cairo traffic to the IDSC building downtown. Naturally, anything that can go wrong goes wrong, cabbie gets lost, doesn’t have change and to top it all off we get into an accident on El Kasr El3einy street and he can’t continue. I walk the remainder of the way and arrive 30 minutes late only to discover that his excellency has even worse timing than I and we end up waiting for him for another 30 minutes.
Meeting is attended by Dr. Radwan, his deputy for international relations, the deputy director for Al Ahram Center for Political & Strategic Studies (I’m not positive of his reason for being there, yet he acted like an advisor to the minister would), five IMF representatives, two of which were Egyptian, and us youth (word used VERY loosely).
While I must say, I LOVE the initiative, the format needs major tweaking, I don’t feel the group was representative of the nation at large at all, nor were most of those attending experts on the issues. Also the way the discussions were conducted lacked any sort of organisation. Why the IMF was privy to the discussions is also beyond me.
Dr. Samir opens by telling us that this draft is currently being discussed with all the different groups, that he’d met the business community earlier that day and that all views will be looked into and possibly incorporated and that the final budget should be issued by Monday. He goes on to say:
that in the absence of a people’s assembly the budget approval will be obtained from the SCAF.
He then takes us through the document outlining how he sees it, this goes on for 30 minutes. He stresses income & wages, converting fiscal policy into a tool to guarantee social justice and continuity as his three main pillars and focus areas. He then talked in depth about his plans to reform the public wage structure, his plans to centralise all SME support in a new entity which will also manage a 200 million US$ Saudi Arabia grant, and finally his plans for reforming the taxation structure in Egypt.
I will not bore you with the details cause it would serve you well to go through the document which they’ve been kind enough to share on the ministry website and which I’ve linked to in the previous paragraph. Instead I will highlight some areas some of the attendees and I found troubling. Worth noting, if you are expecting his responses you are in to for a disappointment. You see, he HEARD us, he took notes, he nodded and made jokes when appropriate, yet he then rushed off to another meeting thanking us for our time.
- TravellerW made a very valid point regarding the new tax bracket, an extra 5% will be charged to all those earning more than 10 million LE a year, sounds fair, no? Only it applies to both individuals and corporates, so basically a large group of medium sized corporates will be attached to another object by an inclined plane, wrapped helically around an axis (BBT reference).
- A renewable energy engineer pointed out that the budget is built on a very unrealistic assumption that a barrel of oil will cost $100.
- Budget has 2 billion LE allocated to training youth. When pushed for clarification Dr. Samir says that the plan is to have corporates agree to take them on for on-the-job training for 6 months during which the Ministry of Finance will pay their salaries from that 2 billion LE fund, with the hope that at the end of 6 months the corporates will hire them. Not only do I think this is a bad plan, I think it is naively optimistic and lacks long term vision. I actually asked him to kindly stop crowding out the NGOs and civil society and step up and do what only the government can do. Rather than train, leave the training to us and you instead focus on job creation, invest in projects and hire those individuals.
- Budget proposal has a very vague item regarding upping the investments in the field of R&D. I would have preferred to see some sort of incentive scheme to drive the private sector to innovate, I’m sceptic of the fact that pumping funds into government R&D will change much. I say this because I’ve seen brilliant ideas get completely shelved at the National Research Institute because those heading it don’t see the business viability of these ideas.
- Education and health spending grew at below the average growth of budget spending. Spending on education in the new budget is only 11% and the spending on health is only 5%.
- 13.5 billion LE have been earmarked to EGPC (Egyptian General Petroleum Corporation) (which for some reason suddenly has no web presence) for restructuring purposes to assist it in reform efforts. This is alarming to say the least. EGPC is a money making establishment and one of the government’s most prominent revenue centres. It is also an inefficient institution, so as attendees pointed out, wouldn’t it be better to reform it first rather than toss money at it. Especially that the opportunity cost of these funds is extremely high right now. Dr. Samir’s explanation was that these funds are going to ensure that no shortage in Solar and Butane gas occur, yet this contradicts with another item 2 pages down regarding increasing subsidies to oil products by 31.3 billion pounds.
- Attendees asked repeatedly about the 63 billion in special funds or private funds صناديق خاصة but we were given a roundabout answer and didn’t come out with much.
I also couldn’t resist the opportunity to complain about how difficult the government is making the lives of those working in the micro-finance field in Egypt. Some of those attending pitched in and even suggested dismantling the SFD
all together. Enough with the rosy plans and the technical assistance, SMEs need better access to finance, it is that simple, please do something about it.
Also made it a point to stress that if we stand any chance to attract any investment for those PPP projects
the Ministry of Finance is pitching, they’ll have to do a much better job of studying these projects and providing investors with real and tangible indicators to assist them in making the investment decision. It is hilarious really, projects have no declared return on investment nor payback periods for that matter.
All in all, while I appreciate the initiative, I really think he should have taken more time to answer the questions and more thought needs to be put into that budget.