Beyond Economic Growth in Egypt
Growth and Development
Over the past 3 years, Egypt has been undergoing rigorous infrastructural projects. Two of the largest are the National Roads Project (NRP), and the construction of 15-20 new cities and urban communities. Simultaneously, the Egyptian government reduced the size of subsidized bread by approximately 18% in 2020. To understand such disparities, this article attempts to identify some abstract misconceptions when it comes to assessing economic performance.
Gross Domestic Production (GDP) is the most commonly used indicator for assessing economic growth. Year on year, Egypt has been witnessing a consistent growth in GDP, currently fluctuating around an increase of 5% annually. A misconception arises here; if our GDP is rising, if we are indeed achieving economic growth, we are on the right path, right?
Not necessarily.
Economic development and economic growth are two terms often used interchangeably; however they reflect two very different approaches to economic improvement. From a purely linguistic perspective, growth is the observable increase in size, it doesn’t reflect how the increase in size is achieved, nor the impact of the increase on other systems and individual components.
Development on the other hand means achieving maturity and a general state of advancement. Linguistically, the word development gives us a deeper qualitative insight on how the growth is achieved, and how that growth impacts relative systems and components.
In the economic context, these components include – but are not exclusive to - living standards, quality of life, economic freedom, and innovation capabilities. Systems can be defined as the relationships between components that are synergetic and inter-dependent. These Inter-connected systems have a direct impact on economic performance, and constitute the pillars of economic development. Interconnected systems include biological ecosystems, governance structures, culture, and consumption patterns. Applied to the economic context, the word development indicates sustainable and stable macro-scale economic improvements. It also entails an improvement on the micro-level; individual components and systems that affect economic performance.
Using the correct terminology allows us to perceive more accurately. Economic growth indicates an observable growing GDP, an abstract, macro scale approach to assessing the size of the economy. Economic development on the other hand, reflects the progressiveness and general improvement of economic components as well as the level of maturity of political, socioeconomic and environmental systems that shape unique economies.
In short, economic development cannot occur without economic growth. But economic growth does not necessarily mean economic development.
A Widening Divide
The way we asses economic performance can reveal different results. Sustainable Development is defined as meeting the needs of today without affecting future generations. Concepts and theorems from the Sustainable Development domain provide the most integrated conceptualization of economic development. Within the sustainability context, economic development is inseparable from creating a positive social impact and mitigating the effects of environmental degradation. In this context, economic development is not just about increasing the national output or GDP.
Two of the longstanding, and interdependent problems in Egypt are inequality and inequity. Those two interdependent problems are not tackled by the current approach to economic development: focusing on achieving economic growth through state-sponsored, mega-infrastructural projects. Huge and rapid expenditure on infrastructural projects is essentially a fiscal policy tool, used to create an increase in the total national output, or GDP. The real impact of such projects on the social and environmental domains, and their economic return on investment (ROI) is yet to be revealed. Infrastructural investment is much needed in Egypt; however, the way infrastructural development in Egypt is approached either fails to address inequality and inequity at best, or further widens the divide at worst.
Some might argue that Egypt’s Gini coefficient (1) is not entirely terrible; at around 0.39, Egypt ranks within the most ‘equal countries’ across the globe. However, recent studies using data on urban household expenditure and listed real estate, have shown that inequality in Egypt is underestimated by around 33%. After correction, this should place the Gini coefficient in Egypt at around 0.52, completely shifting our understanding of inequality.
Severe inequity and inequality are evident when looking at poverty in Egypt. The Multidimensional Poverty Index (MPI) provides context when analyzing poverty. It does not just assess income levels, but it also gives an integrated overview on the dimensions of poverty and the levels of deprivation of basic services, amenities, and opportunities. MPI’s indicators are clustered into three main categories: Education, Living Standards, and Health. Education is by far the highest contributor to the value of poverty in Egypt, with 1 in 10 of children of underprivileged families having a chance at joining a university.
Although a small percentage of the population suffers from acute poverty (at around 3%), a large proportion of the population suffers from poverty (around 27.2%). Add to that, 22.7% of the Egyptian population is vulnerable to falling into poverty. Poverty is also 2.2 times higher in rural areas (57% of the Egyptian population resides in rural areas), this means that people in rural areas are much more likely to be poor than people in urban areas. The intensity of poverty itself - that is, the level of deprivation of basic services, amenities, and opportunities - is extremely high for people in acute poverty and poverty alike, coming at 38.6% and 42.6% respectively.
This means that huge gaps (sharp inequality and inequity) exist within the poor themselves. Notably, the level of deprivation is much higher in urban areas than rural areas. An example that manifests a high degree of deprivation in urban areas is access to public schools within walking distance for poor urban neighborhoods in Cairo (walking omits the cost of transportation). Recent data has found that Cairo’s poorest regions are hugely underserved when it comes the distribution of schools, with entire agglomerations (2) completely void of public schools, and others either over or under-represented. It has also been found that areas that are highly deprived of public schools are less likely to benefit from new school projects, compared to other more advantaged areas. This is a reflection of neglect in planning, and a failure to address the poverty trap under the predominant approach to economic development.
The Way Forward
As previously stated, economic growth is integral for economic development. To achieve development and maturity, growth has to be inclusive; happening simultaneously across different domains. Infrastructure is needed in Egypt, but it must provide social equity and integrate the most vulnerable on the strategic and physical planning levels. In Egypt, 78% of streets lack pedestrian footpaths, and 97%lack pedestrian crossings. Car-centric streets have been further aggravated by the NRP which is designed to facilitate the movement of privately-owned vehicles, not pedestrians and public transport users. New cities and urban communities are vital for economic development, but the residential area of the NAC’s first phase is comprised of villas, twin houses, and town houses. How does this address growing poverty Egypt?
Economic development will only be achieved when growth happens in the domains that touch upon the predominant deprivations within a national context. Indeed, there have been state-sponsored programs that aim to reduce the effects of poverty such as “Takafol-W-Karama”, but the proportionality of programs targeted to the poor compared to the rich (or less poor) is questionable. Tackling the domains of poverty can only be achieved through an integrated cross-cutting approach. In simple terms, every state sponsored mega project must have a component that aims to achieve a measurable improvement in the levels of deprivation for the most disadvantaged. This will also entail empoweringnational ministries and institutions that can create the highest, and most integrated impact across the domains of poverty (such as the Ministry of Environment, Ministry of Education and Technical Education, Ministry of Planning, Monitoring, and Administrative Reform, Ministry of Housing, Utilities, and Urban Communities, among others).
Resources for further understanding:
(1) The Gini coefficient is used to measure inequality. It places countries between values of 0-1, often interpreted as percent. At a value of 0, a country is perfectly equal in its distribution of income, meaning that every single person earns the same amount; a value of 1 indicates perfect inequality of income, meaning that people in the highest ten percent of the economy are earning all the income the country produces.
(2) Agglomeration is a more fluid term to describe a cluster of people living in a given area. An urban agglomeration can be bigger or smaller that a neighborhood, depending on the context.
Citations and sources for further reading:
Government of Egypt (2018). Egypt’s voluntary national review, Ch 4. Ministry of Planning, Monitoring, and Administrative Reform
Trading economics. Egypt’s GDP growth. https://tradingeconomics.com/egypt/gdp-growth-annual
Lundin Josephine (2015). Entrepreneurship and economic growth: Evidence from the GEM report. Lund University.
Urbano, et. al. (2019). New Technology Entrepreneurship initiatives: Which strategic orientations and environmental conditions matter in the new socioeconomic landscape? The Journal of Technology Transfer.
Boudreaux, Christopher (n.d). Entrepreneurship, institutions and economic growth : Does the level f development matter? Florida Atlantic University.
ACs. Z, Dessai, S, & Hessels, J (2008). Entrepreneurship, economic growth, and institutions. Small Business Economics.
EDID (2018). Multidimensional Poverty in Egypt. A paper for The Arab Multidimensional Poverty Report. UNESCWA
Tadamun (2018). Planning (In)Justice: A spatial analysis for urban Cairo. Takween ICD
Weide, Lakner, Ianchovichina (2018). Is inequality underestimated in Egypt? Evidence from house prices. VoxDEV
Roy van der Weide (2017). Is inequality underestimated in Egypt? Evidence from house prices. The review of income and wealth V64.
https://www.soas.ac.uk/cedep-demos/000_P516_EID_K3736-Demo/unit1/page_10.htm
ACUD (n.d) NAC brochure. Available at https://www.ecrg.de/images/Download_pdf/Brochure.pdf
World Bank (2019). Guide for road safety opportunities and challenges: low-and-middle income country profiles