Egyptian President Abdel Fattah al-Sisi’s government is counting on a new multi-billion dollar Suez Canal project to help overcome what has been described as Egypt’s worst economic crisis since the 1930s, with high unemployment — 13.4 percent — and 45 percent of the population living below the international poverty line of $2 per day. Yet, what’s more important than the new Suez Canal’s objective to stimulate the economy and create jobs is who made it financially possible to carry out such an ambitious project and what that could mean for Egypt.
In eight days, Egyptians invested 64 billion EGP (about $9 billion) in the new Suez Canal project — and 82 percent of that investment came from individuals versus just 18 percent from institutions. The influx of investments introduced 27 billion EGP (about $3.8 billion) into the banking system, which is especially notable given that only one in ten Egyptians has a bank account. The overwhelming turnout of individual, cash-heavy investors from an underbanked population points to Egypt’s strong cash economy, which in turn begs the questions: how much more money is hiding under mattresses and why have these assets remained unused?
Members of Tunisia’s business community share their concerns at a March 2014 policy roundtable.
We know that North African economies urgently need economic reforms, opportunities for youth, and greater economic inclusion. But what do we know about where the opportunities lie and – just as important – what are the greatest barriers that obstruct the growth of businesses?
A few salient insights emerged from a recent survey of 131 Egyptian and 100 Tunisian entrepreneurs and business owners, which was conducted by the Center on Development, Democracy, and the Rule of Law at Stanford in cooperation with CIPE. Many of the findings will come as no surprise — the business environment and entrepreneurial ecosystems have room to improve in both countries, and political uncertainty puts a drag on business. One major, policy-relevant finding is the need to address disparities in access to opportunity.
In 2011, both Tunisia and Egypt were rocked by popular protests against economic and political repression that ended in the ouster of their authoritarian governments. Three years later, how much progress have these states made in reforming their economies? And what has happened to the entrepreneurs whose grievances helped fuel these revolutions?
Reforming the Entrepreneurship Ecosystem in Post-Revolutionary Egypt and Tunisia, a report from CIPE and Stanford University’s Center for Democracy, Development, and the Rule of Law (CDDRL), attempts to answer these key questions. With this report, CIPE staff and IACE will engage policymakers and stakeholders in roundtable discussions to formulate policy recommendations in the coming weeks.
Working with CIPE Cairo staff and CIPE partner L’Institut Arabe des Chefs d’Entreprises (IACE) in Tunisia, lead researcher Amr Adly conducted an extensive study of existing literature and over 100 detailed interviews with entrepreneurs in each country to shed light on the obstacles and opportunities that comprise the entrepreneurial ecosystems in these post-revolutionary states.
The survey results paint a small yet detailed portrait of what life is like for the Egyptians and Tunisians trying to make ends meet in countries with increasing unemployment rates, among other worries. Dysfunctional and inaccessible regulatory structures, crony networks solidified by corrupt past regimes, and a lack of access to information for the private sector and policymakers are only a few of the areas for which Adly’s research provides nuance.
Who are the entrepreneurs that can withstand such an unstable environment? The majority of respondents in both countries affirmed that they do not trust formal contract enforcement, managed to start their business largely through self-financing due to a lack of access to loans, and endure high transaction costs as a result of inadequate institutions. They are men and women, younger and older, more or less educated, formally registered or informally operating, risking bankruptcy and/or jail time for a failed venture, running joint or solo endeavors—and they are all citizens for whom their government is not working.
Health care professionals in Egypt conduct a stakeholder analysis to help spell out governance principles for Egyptian hospitals.
A hip replacement in the United States, paid for out-of-pocket (i.e., without health insurance), would cost anywhere from $11,000 to $125,000, depending on what hospital you go to, according to a 2013 survey of 100 hospitals featured on National Public Radio. And that was among the hospitals that, when asked, could actually produce a quote – 40 of the 100 hospitals surveyed couldn’t quote a price at all.
Those fortunate enough to have insurance don’t need to worry about price-shopping. When I go to my primary care physician, I pay a $20 co-pay. (Under our previous insurance, provided by my wife’s former employer, it was $10. Why the difference? Who knows?) I have no idea how much my insurance company pays the doctor. I suppose I could find out, but… honestly? There’s really no compelling reason for me to do so. It’s $20 no matter who I see.
And it turns out that, even if there were more incentive for me to price-shop, more expensive hospitals aren’t necessarily better hospitals, according to a 2014 study.
Entrepreneurship is increasingly touted as a key ingredient to economic growth, job creation, and expanding opportunity, particularly for youth and women, in the Middle East and North Africa region. As a result, the number of initiatives supporting entrepreneurship in the region has increased exponentially, particularly following the Arab Spring.
Sally Roshdy was a CIPE-Atlas Corps Think Tank LINKS Fellow at the Project on Middle East Democracy (POMED).
It was a great pleasure participating in the Think Tank LINKS Fellowship in Washington DC and serving at the Project on Middle East Democracy (POMED). Once I learned that the accepted applicants would serve at an American think tank, I was very interested in applying to this prestigious fellowship. The first time I heard the term “think tank” was in my second year at the Faculty of Economics and Political Science at Cairo University when one of my professors emphasized the significance of think tanks and their role in helping decision-makers in all fields of public policy.
“Here’s why you have my undying support and friendship: you are doing what I take for granted all the time and forget sometimes. You are carving out the space for people to breathe and express themselves in a way that I think is incredibly admirable…”
— American Satirist Jon Stewart to Egyptian Satirist Bassem Youssef, April 24, 2013
Egypt has once again captured the world stage these past few weeks as millions of revolutionaries charged Cairo to demand President Morsi’s ouster and were supported by military intervention. As we continue to watch the events in Egypt unfold, many are resting their hopes on this revolution as a grand solution to the disappointments that lingered after January 25, 2011. In fact, in these past two years Egypt has focused primarily on fresh leadership to revive hope—a new father figure for Egypt who could keep the passions for democracy and unity burning after the streets cleared and the face paint washed away.
As Egyptians again search for a new authority, they must also address the deeper cooperative issues hindering democracy and prioritize stronger institutions to determine and stabilize the transition they seek. With strong civic and private sectors, the future of Egypt will no longer be determined by one Egyptian, but by all Egyptians.