Economy / الاقتصاد

Day 1,160, 04:16 • Published in Egypt Egypt • by Franz Kafka
Egypt: Trade and Economic Development


Today I want to raise issues regarding how we can promote business, job creation and development of an internationally competitive economy.

First to say, we’re not in bad sorts – there is currently high availability of jobs on the market and for good salaries.

There are a number of issues which I would like to suggest that the government address urgently:

Exchange Rate and Money Supply

For businesses to invest they need cash to buy resources and to pay their employees. Right now cash is available on the monetary market, but not at a very fair rate – anyone who buys at this rate is sure to see themselves lose money later when the rate falls. Also without an established ideal rate, business owners don’t know what is a sensible offer to accept. It is therefore very important that the government do the following:

i) Publish an ideal exchange rate. This rate the government pledges to seek to maintain through intervening in the monetary markets. I would suggest that 0.019 = 1 Egyptian Pound/53 Egyptian Pounds = 1 gold) would be an ideal rate.
ii) When congress is elected, a national bank should be set up, and congress should vote the Egyptian pounds to this national bank. If money supply is short, then the National Bank can purchase gold for pounds from offers on the market (set at the published rate) and purchase in such a way that the available pounds are distributed evenly to business owners, and not bought up in bulk by unscrupulous money market speculators.
iii) If money supply is short then congress should propose a vote to issue more cash. Given our current population size, I think we should aim for at least 10,000 Egyptian pounds available for the government to spend to manage the market and undertake essential government business.

Import promotion

We should make a review of what raw materials we need to import. As mentioned in my earlier article, we should look to our neighbours first, and then further afield. We have no stone and no grain – so we should encourage import of these resources. The more importers, the more competition and thus the more pressure downwards on prices which will make our finished products more competitive internationally.

Tax

The primary function of taxation should be i) to generate income, and ii) to encourage sufficient supply of all goods to our markets at reasonable prices while affording some assistance to our domestic industries. We can also use taxation to discourage investment in uncompetitive industries.

Currently our taxation is at 10% for everything. I think we should seek to assist our domestic producers without incentivising exploitation of citizens and uncompetitive production practices amongst our businesses. I therefore suggest the following:

For raw materials we have in our country (Oil and Iron), we should have an import duty of 19%. For those raw materials we don’t possess – import duty should be at 5%. Income tax for raw materials should be at 10%.

For manufactured goods, we need low import tariffs for now until we can assess that we have sufficient domestic production. I therefore suggest that we cut import tax to 8%, and cut income tax on these industries to 8%. VAT for manufactured goods should stay at 10%.

What businesses to promote?

We are likely to be most competitive in food and weapons production. Although we have no own source of grain, we do have 3 fruit regions, 1 cattle region, which gives us a 10% production bonus. Likewise our 1 iron and 1 oil region give us a 10% production bonus for weapons.

If we wanted to be very clever, we could make a region exchange with Saudi Arabia – their several grain regions don’t offer them any bonus (as does us having several fruit regions) so why not swap a fruit region for one grain region? Alternatively we could swap a fruit region for an aluminium region and give us 5% better productivity for weapons.

A longer term answer might be to consider a strategic merger with Cyprus. This may help diffuse Greece-Turkey tensions, and would also give us access to grain and fish giving us an awesome advantage in food production. Something to float to our Greek and Turkish friends… maybe they’ll be positive to the idea!

Alternatively – why might think we have advantage in moving tickets. This is because whilst the larger countries benefit from large number of resources productivity bonus, there is no bonus for moving tickets and we have our own source of oil.


Well I think that’s enough food (and weapons?) for thought…

Until the next time!



Franz Kafka