There are two recurring economic problems in Egypt: the demands of the massive labour force and the energy subsidy issue. Both are old problems but have been propelled into the limelight post-revolution because budgetary constraints have intensified the situation. These are discussed below.
In just the latest bout of labour unrest, industrial action has significantly disrupted operations at an Egyptian port run by DP World, the world’s third largest port operator.
Angered at the dismissal of eight of their colleagues, the Ain al-Sokhna port workers started their action three days ago with a partial strike which turned into a full strike on Saturday, Ashraf Eissa, the union representative told Reuters.
The workers want their sacked colleagues reinstated.
In a statement, DP World in Dubai said: “Labour issues have caused a significant slowdown in operations, impacting both customers and the Egyptian economy. We are working to resolve the issues appropriately as soon as possible.”
But this problem is not just about asking for more money.
The quest for at least a minimum wage could threaten profitability for some foreign investors who may have looked to countries such as Egypt and Tunisia to open businesses and factories and to tap into a cheap labour force and favourable tax climate.
Arab economies that have been hit by labour unrest also have to cope with widening budget deficits and increasing financial constraints that do not allow for higher salaries. The same issue is present throughout countries in the Middle East but in different formats:
Newly elected governments in Tunisia and Egypt, for instance, have failed to implement updated labour laws leaving thousands of workers in legal limbo. Meanwhile, in the Gulf, dictatorial regimes have clamped down on calls for better employment rights in Saudi Arabia and Bahrain. Instead, labour unions and federations have been mobilized and continue to be largely ruled by governments or heads of political factions.
Subsidies, or “haki fadi” (the Arabic for “empty, or meaningless talk”)
Egypt’s governors’ council has set strict new closing times for shops and restaurants due to the country’s “current security and economic condition,“ the state-run MENA news agency reported on Thursday.
Under new laws to be enforced in November, Egypt’s shops will have to shut their doors by 10pm, while restaurants will have to close by midnight.
Though business owners who wish to keep their premises open later can apply for a licence from the Ministry of Tourism and establishments classed as catering to “tourists”, as well as pharmacies, will be allowed to operate as normal.
Apparently, it is estimated that closing shops early can save 17% of the cost of energy subsidies in Egypt, according to an Al Ahram Arabic story.
It comes a few days after the president’s office announced that Egypt would raise the price of 95 octane gas, used for luxury cars, though there is no evidence for this having been enforced.
This new “curfew” appears largely symbolic and does not rid the country of its problem – that the country is in debt and must either stop importing energy products and refine energy at home, and/or immediately raise prices on energy, particularly targeting the wealthiest and very heavy energy users (factories, industry etc).
The public is also wary of empty promises. Just last week, a cabinet minister said Egypt expects to start distributing coupons for subsidised cooking gas by the start of the winter season as the government tries to lower subsidy costs that consume up to quarter of its budget.
Winter starts in December in Egypt but no precise date has been set, according to the Reuters report.
Morsi’s administration is failing to act as a strong government and living up to the uncharismatic and unambitious government Rebel Economy had feared.
The reality is, Egypt needs to make changes soon to narrow its deficit. According to this report from the Rafik Hariri Centre for the Middle East:
It is estimated that Egypt will require some $22 billion in financing for fiscal year 2012-13. In the absence of a clear economic program.
Egypt’s economy may only grow as much as 1.5-2.0% in 2012, the report says, and so it will require a renewed emphasis on economic reforms to raise the growth rate to levels sufficient to absorb the large and growing labor force.
Behind the glowing reports of Qatar’s extraordinary economic growth, this report takes the shine out of this Gulf state showing how billions of dollars worth of spending is finally catching up on Doha.
“An extraordinary ten-year boom is petering out in Qatar with the state’s large-scale gas-exporting infrastructure having been completed, leaving business confidence at its lowest ebb in years,” Simeon Kerr writes in the Financial Times.
In an economy where the government drives two-thirds of GDP, officials in state-related entities say budgets have been delayed, causing a chain reaction of non-payment to contractors. This has sucked some life out of the economy with business activity having fallen by around 40 per cent in 2012, according to senior executives.
“Qatar has been far from sparkling this year,” says one Doha-based businessman.
Still, economic growth is still expected at 5% to 6% this year and next, miles ahead of what other countries in the region can expect. But it is a warning signal that serves to remind us how even one a rich economy can show signs of slowing down when it is run mostly by a bureaucracy.
Daily oil production in Iran, the most important component of its economy, fell in September to the weakest level in nearly a quarter-century, according to monthly data released on Friday by the International Energy Agency, the New York Times reported.
The agency’s report came as other signs of economic weakness were further revealed, notably severe drops in port calls and automotive production. Taken together, they depicted a stressed economy likely to exert new pressure on the rial, Iran’s currency.
The oil data from the International Energy Agency, a Paris-based group, showed that Iran produced 2.63 million barrels a day in September, down 220,000 barrels a day from August. That is the lowest since the average of 2.49 million barrels a day in 1988, said the Organization of Petroleum Exporting Countries, according to the NYT.