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The Digital Divide is a problem that is facing theworld today and is ever growing due to the great rise inthe social gaps all over the world.The solution to such a problem is based on the government’sability to invest a large percentage of its GNPin the development of Information Technology infrastructure,as well as the people’s ability to understandnew technologies and how to deal with them.The government of Egypt has adopted a national programto close the digital gap between Egypt and the restof the world between different Governorates internally.

EGYPTHUMAN DEVELOPMENTREPORT 2000/2001inpInstitute of National Planning

This report is the major output of the HumanDevelopment Project, executed by the Institute ofNational Planning (INP) under the projectdocument EGYØ96Ø012 of technical co-operationwith the United Nations Development Programme(UNDP)Copyright © 2001by The Institute of National PlanningNasr City, Cairo, EgyptAll rights reserved. No part of this publication may be reproduced, stored in a retrieval system ortransmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise,without prior permission of The Institute of National Planning.Printed in the Arab Republic of EgyptCommercial press-Kalyop-EGYPT

PrefaceAt this sensitive time in our history, wherethe last few months have been witnessing sodramatic international events, one needsonly to refer to the 11th of September andthe events in Palestine to underline thedifferent faces globalization may take.While some would restrict globalization tothe economic aspects, and more specificallyto the liberalization of investment and tradeand the worldwide impact of rapid andincessant change in information andtechnology, globalization, in fact, goesbeyond these aspects to encompass alsosocial, political, and cultural aspects.The allure of globalization, especiallyduring the last decade, has tempted some toargue that the role of the national state isregressing. This is true if we limit this roleto direct involvement in investment andproduction, but seeing this role in acomprehensive way suggests that it changesfrom direct to indirect management of thenational economy. Moreover, this role willcontinue to be of prime importance so longas human development objectives are notintegrally achieved and whereas regionaland international conflicts are threateningpeoples of the world.The main justification for supporting themove towards globalization lies in the gainsthat it offers to the world through benefitingfrom trade liberalization, specialization andinternal division of labor. On the other hand,some people think that these gains willaccrue only to the developed industrialcountries at a cost incurred by developingcountries; so that the rich will become richerand the poor will become poorer. There arealso those who oppose globalization withinthe industrial countries, especially amongthe environment guardians and the labortrade unions. In the developing countries,some people fear the negative impact ofglobalization on culture and the nationalidentity, among other threats.All this indicates that we are living in acontinuously changing world. People areusually afraid of what is new, magnifying itsnegative effects without perhapsinvestigating its positive impact. I think thatthe best approach is to tame the newglobalization wave and use it for the benefitof humanity.It is possible for Egypt, and otherdeveloping countries, to achieve gains fromglobalization; derived essentially fromwidening the scope of the market within theframework of economic liberalization, gainsfrom the ongoing technological revolutionin information, communication, andproduction techniques; gains from capitalmovement and foreign direct investment.These gains would, hopefully, translate intohigher economic growth and improve jobopportunities and favorably impacts on thecountries’ balance of payments.Moreover, we must all work to ensure thatglobalization achieves two main objectives:equitable income distribution at theinternational level between developed anddeveloping countries while preserving thevariety of cultures leading, thus, to thedevelopment of the whole mankind; andinternal equitable income distributionespecially in developing countries.This Report, which is the sixth EHDR, isdevoted to tackling the issue of howglobalization interacts with humandevelopment in Egypt. The 1999 HDR of theUNDP has also focussed on the same issue butwith reference to the international community.Both reports might be seen as a response to theglobalization tide. This response highlights theopportunities and the threats that globalizationinvolves from the viewpoint of humandevelopment. Needless to say that theobjective is to help people and policy makerstake advantage of the opportunities and takeguard against the threats.Targeting this objective, the present Reportmoves from the conceptualization ofglobalization and the opportunities andthreats it involves to a sort of assessment ofthe Egyptians’ economic well-being in aglobalized world. Then, the Report examinesthe challenges to which Egypt’s sectors ofproduction are exposed through globalization.To what extent globalization impacts uponenvironment and potentialities of sustainabledevelopment in Egypt is a major question theReport addresses, besides its concern withshowing where Egypt stands in a technologyand information led globalization. The Reportalso deals with the status and potentialities ofEgypt’s human capital under globalization.Finally, it assesses the stock of Egypt’s socialcapital and tries to establish a link between itsdevelopment and the Arab EconomicIntegration.Indeed, globalization calls for theparticipation of all actors including theinternational, regional, and nationalinstitutions, private as well as public,governmental or non-governmental. Withglobalization, we all need to recruit anddevelop the available resources to meet thechallenges it imposes to all of us.Prof. Dr. Osman Mohamed OsmanMinister of PlanningandChairman of Board of DirectorsInstitute of National Planning

AcknowledgementsThe Team of the Report acknowledge theirdebt and gratefulness to the confidence,support and encouragement given to themby the competent national and internationalcommunities, the dedicated national/international groups / individuals, whosespecialized distinguished capacities highcompetence and dedication made it possibleto produce this Egypt Human DevelopmentReport (EHDR), which is the sixth in itsconsecutive series. Indeed, it is an output offruitful collaborative efforts .Special gratitudes is due to all UN ResidentRepresentatives in Cairo, to each and everyindividual, organization and agency whomtheir intellectual advice, professionalguidance, sound co-operation and fruitfulsupport had encouraged the continuouspreparation of the Report. In particular, theTeam would like to express their sincerethanks to UNDP Cairo Office, in particularMr. Edmund Cain, UNDP former ResidentRepresentative, Mr. Antonio Vigilante,UNDP current Resident Representative, Mr.Nadir Hadj Hammou, former DeputyResident Representative, Ms. Sophie deCaen, current Deputy Resident Representative,Dr. Hamed Mubarak, Asst. ResidentRepresentative and Head of Policy Section,Ms. Soheir Kansouh Habib, former Asst.Resident Representative and as well thededicated program officers Ms. ZeinabWeng and Ms. Nazli El Sirgani.All international/ national agencies withmissions in Egypt , have provided specializedsupport. The Team would like to expressspecial thanks to UNICEF Representative,UNFPA Representative, WFP CountryDirector, Managing Director, SFD, GeneralIhab Elwi, Chairman, CAPMAS, and Mr.Mostafa Gaafar, CAPMAS, for theirunfailing cooperation and support inproviding the Report team with timelyinformation and statistics which helped inidentifying human development trends.Special thanks go also to the Informationand Decision Support Center (IDSC) , TheMinistry of Foreign Affairs (MOFA), andThe United States Agency for InternationalDevelopment. in particular Ms. AzizaHelmy, Women and Development Advisor.And, as in previous reports, comprehensivestudying and analyzing the theme of thisreport required a lot of detailed data whichhas been provided and facilitated throughsound and close co-operation withcompetent ministries. In particular, specialthanks go to our dedicated colleagues in theMinistry of Planning, Education and Health.Special thanks go to Dr. Sultan Abou Ali,Chairman of the Industries and EconomicConsultants (IEC), and his dedicated staffand as well to for reviewing the backgroundpapers and editing of the Report. Sincerethanks also goes to Dr. Mahmoud AbdelHai for his peer review and efforts on thedraft. Thanks also goes to Dr. Sherine ElShawarby for her witnessed effort.The Team highly appreciate and recognizethe profound participation of those whoparticipated in the various relevantbrainstorming sessions, workshops andseminars, Dr. Abdallah Ahmed Marzaban,Dr. Abdel Aziz Higazy, Dr. Ahmed ElDarsh, Dr. Ismail Sabry Abdallah, Mr. AlyMohammed Negm, Dr. Farkhanda Hassan,Dr. Gouda Abdel Khalek, Dr. HafezShaltout, Dr. Hoda Mohammed Sobhi, Dr.Ibrahim Abdel Gelil, Dr. Ibrahim ElEssawy, Dr. Karima Korayem, Dr. LailaGad, Dr. Mona El Baradei, Mr. NabilHashad, Dr. Saad Allam, Ms. Sahar Nasr,Ms. Samiha Fawzy, Dr. Zeinab Selim, Dr.Zeinab Safar.The Team express their gratitude for theoutspoken deep co-operation theycontinuously received from the EconomicReform Forum for the Arab countries, Iranand Turkey (ERF) whether for the literaturereview at the preliminary stages of report orfor the final proof reading. In particular,sincere thanks and gratitude go to Dr. HebaHandoussa, Director of the ERF for hersound advice and continuous motivation,and to Ms. Gillian Potter Deputy Directorfor her fruitful proof reading and profoundremarks.The Team feel critic to submit thanks to thegroup of eminent research colleagues eitherfrom the INP or from the Egyptianuniversities who have prepared the

comprehensive and profound backgroundpapers, which the report used a considerableamount of their data as well as relevantanalytical material. In fact, these eminentresearchers are masters of this report. TheTeam, albeit wishing to express their thanksand gratitude to their distinguishedexperience and far-reaching knowledge, yet,liberate them from any views, opinions orconclusions mentioned in this report thatwould be of inconvenience to themThanks are also due to the InformationCenter, the Documentation and PublishingCenter and the Foreign Relations Center atthe Institute of National Planning, for theirsecretarial, administrative and technicalsupport. . Special thanks are also due to theDr. Farid Abdel Aal and Mr. Sayed AbdelHamid for their witnessed statistical efforts.Thanks are due to the research assistants aswell as Mr. Hamdy Rihan and Mr. AhmedMoussa for administrative support.The Team submit their thanks to allindividuals of Al Ahram commercialpresses who were involved in the design,layout and printing of the report.Egypt Human Development Report 2000/2001Director and Lead AuthorOsman M. OsmanEditorSultan Abou AliContributors of Background PapersAbdel Fattah El GebaliAhmad El KholiAhmad GalalAhmad GoweiliAli SolimanGalal AminHanaa Kheir El DinMahmoud Mohy El DinMohamed Abdel ShafeiRaafat RadwanHeba El LeithyKhalid Abdel AzizLaila El KhawagaLobna Abdel LatifMagdi KhalifaMahmoud Abul EyounMamdouh El SharkawyMostafa Kamel El SaidSultan Abou Ali

Table of ContentsExecutive Summary 11. Globalization and Human Development 1- Opportunities and Threats 1- Extent of Globalization 1- Nature of Recent Globalization 1- Effects on Human Development 1II. Globalization and the Economic Well-being of Egyptians 2- Income Growth and Human Development 2III. The Challenges of Globalization for Egypt’s Sectors of Production 2- Agriculture 2- Industry 3- Financial Sector 3IV. The Environment and Sustainable Development 4- Environment Degradation and Per Capita Income 4- Effect of Growth on Environment Sustainability 4- Policy Recommendations and Planning Implications 5V. Technology and Information Led Globalization 5- The Digital Divide 5- The National Program for the Digital Gap 5- Globalization and Technology 6VI. Globalization and Human Capital 6- Globalization and the Egyptian Labour Market 6- Globalization and the Egyptian Labour Market 6- Features of the Labour Market in Egypt 6VII. Egypt’s Social Capital and Arab Economic Integration 7- Measuring Social Capital 7- Social Capital and Development 8- Globalization and Social Capital 8- The Effects of Globalization on Egyptian Social Capital 8- Regional Integration and Social Capital 8Chapter One: Globalization and Human Development 9Introduction 9Globalization: Origin and Definition 9Globalization: Opportunities and Threats 11Opportunities 11Threats 12The Net Outcome 14The Extent of Globalization 14Trade in Goods and Services 14Factor Mobility 15The Nature of Recent Globalization 16Globalization and Human Development 16Globalization and Poverty 16Globalization and Inequality 18Globalization and the Quality of Life 18

Chapter Two: The Economic Well Being of Egyptians in a Globalized World 25Determinants of Overall Income 26Impact of Economic Growth and Openness on Income of the Poor 26Trade Openness and Equality of Income 28Combining Growth and Redistribution Effects on Income of the Poor 28Income Growth and Human Development 28Interaction Between Economic Growth and Human Development 30Is There a Causal Relationship Between Human Development and Economic Growth 31The Link from Economic Growth to Human Development 31The Link fromHuman Development to Economic Growth 32The Quality of Life 32Typology of Human development in the Governorates of Egypt 33Tackling the Challenge 35Chapter Three: Globalization Challenges to Egypt’s Production Sectors 42Modernizing Agriculture 42Agricultural Sector Reform 42The Impact on Crop Mix 43Impact on Employment 43Impact on Rural Income 44Impact on Technology Transfer 45Impact on Human Nutrition 47Probable Effects on Globalization 48Agricultural Foreign Trade 48Farm Price Variability 49Germ Plasm (Genetic Resources) 49The Egyptian Manufacturing Sector in a Global Setting 50The Industrial Base 50The Structure of Manufactured Exports 51Competitiveness of Egyptian Industry 52Wages and Productivity 52Revealed Comparative Advantages 53Domestic Competitioners 53Globalization and the Appropriate Export Strategy 55Globalization and Prospects of Egypt’s Industrial Sector 56Strengthening the Financial Sector 57Global Financial Architecture : What to do? 58External Pressures on the Egyptian Economy Since 1997/98 59Mitigating Financial Vulnerability 60Chapter Four: The Environment and Sustainable Development 64Impact of Global Environmental Issues on Egypt 64Climate Change 64Ozone Layer 65Biodiversity 65Marine Environment 67Environmental Degradation and Per Capita Income 67Effect of Growth and Environmental Sustainability 68The Pattern of Industrialization 68

Energy Consumption 68Agriculture 69Tourism 69The Impact of Environmental Pollution on Health 70Water Resources 70Water Quality 70Irrigation Wastewater 71Industrial Wastewater 71Drinking Water 71Air Pollution 71Waste Management 73Municipal Solid Waste 73Health Care Waste 73Radioactive Waste 73Agricultural Waste 73Construction and Demolition Waste 73Respects for Human Resource Development 74Policy Recommendations and Planning Implications 74The Depreciations Approach 76The User-Cost Approach 76Chapter Five: Egypt’s Position in Technology and Information Led Globalization 78The Digital Divide 79The Digital Divide in Egypt 79Is the Digital Gap Narrowing in Egypt? 80Telephone Density 80Mobile Phones 80The E-Government Program 82Threats 82Opportunities 83Characteristics of the Digital Divide in Egypt 83Urban/Rural Divide 84High Income/Low Income Divide 84Literate/Illiterate Divide 85Bilingual/Single Language Divide 86The National Program for Closing the Digital Gap 86Strategies and Policies 86Programs and Projects 86Infrastructure 87Human Resource Development 87Mass Access Centers (MAC) 88Globalization and Technology 88Restrictive Globalization in Pharmaceuticals 89The Technological Factor 89The Economic Factor 89Integrations and Acquisitions 89Strategic Alliances 90The Legal Factor 91Transfer of Foreign Technology to the Egyptian Pharmaceutical Industry 92How to Deal with the Globalization of Restricted Technology in Pharmaceutical Sector 92

Chapter Six: Globalization and Human Capital 94Globalization and the Labour Market 94The Features of the Labour Market in Egypt 95The Demand for Labour 95The Real Wage Level 98Market Segmentation 99Labour Force Mobility 100The Spread of Poverty and Social Exclusion 101Social Policies Supporting the Labour Market 101Shotrt-Term Policies 101Medium-Term Policies 102Long-Term Policies 102Chapter Seven: Egypt’s Social Capital and Arab Economic Integration 104Measuring Social Capital 104Social Capital and Development 107Globalization and Social Capital 108Globalization and Egyptian Social Capital 109Regional Integration and Social Capital 110Economic Cooperation: Egypt and the Arab Countries 110Forms of Arab Economic Cooperation 111Means of Economic Aid 111Aspects of Arab Aid to Egypt 111Arab Funds and Egypt 111Arab Direct Investment to Egypt 112Arab Countries Investing in Egypt 112Sectoral Distribution of Arab Investments in Egypt 112Trade with Arab Countries 112Egyptian-Arab Trade during the 1990s 113The Arab Free Trade Area 114Bilateral Free Trade Areas 114Labour Mobility 114Technical Notes and Sources of Data 116Bibliography 124Human Development Indicators 133National Indicators 134Governorate Indicators 143Boxes1.1: Globalization and Cultural Encounter in Egypt 131.2: Women and Globalization 202.1: Savings and Investment 272.2 Does Economic Growth Stimulate Human Development? 292.3 Does Human Development Impact Economic Growth? 30

2.4 Health and Education 332.5 Policies of Short-Term Recovery 363.1 Privatization Program of Agricultural Companies 453.2 Irrigation and Water Availability 463.3 The Agricultural Research System in Egypt 473.4 Egypt’s Industrial Development: A Suggested Pattern 553.5 Financial Crises of Late 1990s 573.6 Lessons Derived from Asian Crisis 584.1 Earth Layers and Ozone 654.2 The Global Biodiversity Strategy 664.3 The Desert Environment: Resource for the Future 674.4 The Cement Inustry and Pollution 684.5 Globalization, Disparities and Women, A Dependecny Point of View 725.1 The Hi-Tech Revolution 785.2 Digital Divide versus Digital Opportunity 825.3 Structure of IT Enterprises in Egypt 856.1 The National Program for Employment 1027.1 Cohesiveness of Social Capital Organization in Egypt 106Tables2.1 Relation Between Human Development and Economic Growth Across Governorates (1986-1990) and (1990-96) 312.2 Egypt Quality of Life 332.3 Change in Classification of Governortes (1986-1990) and (1990-96) 353.1 Growth in Agricultural and Food Production in Egypt 433.2 Agricultural Labour Force (1982-1998) 433.3 ADP Share in GDP (1982-1998) 443.5 Sources of Income in Rural Egypt Ranked by Quintile on the Basis of Total Per Capita Household Income (1997) 453.6 Per Cpita Nutritional Status in Egypt for 1983 and 1996 483.7 Egyptian Agricultural Foreign Trade (1983 and 1996) 483.8 Changing Structure of the “Plant Genetics” Industry 493.9 Sectoral Average Annual Growth Rates in Egypt (%) 503.10 Relative Development of Industrial Base 513.11 Manufacturing Ouputs Structure (1995) 513.12 Relative Development of Industrial Base 513.13 Manufactored Exports’ Structure (1995) 523.14 Manufacturing Outputs’ Structure (1995) 533.15 Domestic Competitiveness of Textiles 543.16 Major External Sector Indicators 603.17 Selected Indicators of Vulnerabilities 613.A.1 The Plan of Agricultural Horizontal Land Expansion up to the Year 2017 623.A.2 Water Requirment and Water Resources Available in 2017 625.1 Egypt: Number of PCs sold in Thousands 815.2 Egypt: Distribution of Internet Users by Region 825.3 Egypt: The Per Capita Income by Region (1997) 845.4 Average Cost of Home Internet Access Per Year 845.5 Egypt: Illiteracy Rate by Governorate 1998 855.6 Egypt: Distribution of IT Enterprises by Capital 85

6.1 Distribution of Employed Persons by Sectors (15 Years and More) 976.2 Distribution of Employed Persons by Skills (15 Years and More) 976.3 Trends in Average Nominal and Real Wages by Sectors and Economic Activity1990-1996 986.4 Trends in Average Nominal and Real Wages by Economic Activity, 1990-96 997.1 Formal Infrastructure of Social Capital in Egypt 1057.2 Sectoral Distribution of Arab Aid in Egypt 1117.3 Contributions of Arabs in Subscribed Capital to Established Companies tillDecember 2000 1137.4 Egypt’s Trade with Selected Arab Countries during the Nineties 113Figures1.1: Trade in Goods and Services as Share of GDP 151.2: Share of World Exports by Developing Region,1980-1999. 151.3: Net Long-Term Flows to Developing Countries, 1970-99. 151.4: Net FDI by Developing Region, 1970-1999. 151.5 : Global per Capita Real GDP Growth 171.6 : Relation between Poverty Reduction and Growth, 1989-98(%) 171.7 : Per Capita GDP 191.8 : The Relation Beteen Inequality and Growth 192.1 : Distribution of Governorates According to Shortfall of BHDI and Growth (1986-1990) 342.2 : Distribution of Governorates According to Shortfall of BHDI and Growth (1990-1995) 342.3 : Changes in the Relative Position of Various Governorates (1986-1990 and 1990-1995) 343.1 : Average Manufacturing Unit Labor Cost 523.2 : Relation Between Wage and Productivity 523.3 : Effective Rates of Protection on the Textile Sector 553.4 Relation Between Wage And Produetivity 564.1: An Environmental Kuznets Curve for Sulfur Dioxide 684.2: Pattern of Energy Consumption in Egypt 1997/98 694.3: Major Agricultural Products, 1992-97 695.1 : Number of Telephone Lines in Egypt (1982-2000) 805.2 : Egypt: Telephone Density by Governorate (2000) 805.3 : Number of Mobile Users (1997-2000) 815.4 : Egypt: Distribution of the ISPs By Region (July 2000) 815.5 : Number of Internet Users in Thousands 815.6 : Egypt: Telephone Mainlines Density in 1999 846.1 The Analytical Framework of Economic Reform Program 947.1 Arab Direct Investment in Egypt 2000 1127.2 Estimates of Egyptians Working in Some Arab Countries 115Annexes2.1 Constructing a Broader Human Development Index 404.1 Incorporating the Depletion of Non-Renewable Resources as a Cost of Production 76

AbbreviationsADNAADPAIAPRARCB2CBABCMBHDIBOPCAIPCAPMASCBECDWCMEEAAE-EUPAEGEIMPERSAPEUFAOFDIFSUGATSGHGGOEGSMHDHDIIDSCIMFINPISPITITIMACMEAMENAMFMFNMNCMOAAgriculturally-Driven Non-Agricultural ActivitiesAgricultural Domestic ProductsAgricultural IncomeAgricultural Policy ReformAgricultural Research CenterBusiness to CustomerBar AssociationBillion Cubic MetersBroader Human Development IndexBalance of PaymentCairo Air Improvement ProjectCentral Agency for Public Mobilization and StatisticsCentral bank of EgyptConstruction and Demolition WasteCubic MetersEgyptian Environmental Affairs AgencyEgypt- European Union Partnership AgreementEconomic GrowthEnvironment Information and Monitoring ProgramEconomic Reform and Structural Adjustment ProgramEuropean UnionFood and Agriculture OrganizationForeign Direct InvestmentFormer Soviet UnionGeneral Agreement on Trade in ServicesGreenhouse GasesGovernment of EgyptGlobal System for MobilesHuman DevelopmentHuman Development IndexInformation and Decision Support CenterInternational Monetary FundInstitute of National PlanningInternet Service ProvidersInformation TechnologyInformation Technology InstituteMass Access CentersMinistry of Environmental AffairsMiddleEast and North AfricaMillion FeddansMost Favoured NationMultinational CorporationMinistry of Agriculture

MPRMSWNAFTANCARNDPNFANIRNTPAQOLR&DRCASCUSEAMSFDSMESNASSNTNCTOETRIPSTRIPSTSPUNCTADUNDPUNEPUNIDOUSEWBWCUWDRWHOWRIWTOMarket Penetration RatioMunicipal Solid WasteAmerican Free Trade AreaNational Council for Agricultural ResearchNational Democratic PartyNet Foreign AssetsNet International ReservesNational TreatmentPeople’s AssemblyQuality of LifeResearch and DevelopmentRevealed Comparative AdvantagesSupreme Council of UniversitiesSupport for Environmental Assessment and ManagementSocial Fund for DevelopmentSmall and Medium EntreprisesSystem of National AccountsSocial Safety NetTrans-National CorporationTons of Oil EquivalentTrade Intellectual Properties AgreementTrade Related Aspects of Intellectual Property RighrsTotal Suspended ParticlesUnited Nations Conference for Trade and DevelopmentUnited Nations Development ProgramUnited Nations Environment ProgramUnited Nations Industrial Development OrganizationUnified Custom Tariffs of EgyptWorld BankWorld Conversation UnionWorld Development ReportWorld Health OrganizationWorld Resource InstituteWorld Trade Organization

Executive SummaryI - Globalization and HumanDevelopmentThe main justification for supporting themove towards globalization lies in the gainsthat it offers to the world through benefitingfrom trade liberalization, specialization andinternational division of labor.Opportunities and ThreatsGlobalization, like any other process,combines both opportunities and threats.The most significant potential gains areproduction efficiency, consumer welfare,increased competition, innovation, gainsfrom free capital movements, and enhancedlabor mobility. The most serious threats areinequitable income distribution, greatereconomic fluctuation (recently exemplifiedby the 11 September, 2001 events), thecollapse of national industries, loss ofcultural identity, and threats to nationalsecurity. The final outcome will depend onthe actions of both the country in questionand the international community.Extent of GlobalizationThe combination of falling trade barriersand advances in the technologies ofcommunication and transportation havebrought the world much closer. Aggregatedata show that the ratio of exports andimports to GDP has increased sharply,especially in the period following 1972.Developing countries are now exportingmore manufactured goods and less primarycommodities (like food and raw materials)than before.Trade expansion has been accompanied byunprecedented capital mobility, especiallysince the 1980s. The bulk of the increase incapital flows came from the private sector(in the form of FDI and portfolioinvestment). The importance of capitalinflow to developing countries lies, in part,in that it supplements domestic savings tolevels that enable the recipient economies togrow more rapidly. Further, it enables theseeconomies to access advanced knowledgeabout production techniques, managementpractices, and sometimes export markets. Atthe same time, capital inflows can be costly.They can complicate macroeconomicmanagement and expose countries to therisk of sudden capital flight. Data are hardto come by on labor mobility.Nature of Recent GlobalizationThe current wave of globalization in trade ischaracterized by: (1) a rise of intra-industrytrade, (2) an increased break of productiongeographically, (3) new countries with hightrade-GDP ratios, and (4) large exports ofmanufactured goods from low-to high-wagecountries. As for the potential for reversal ofthe current wave of globalization, there arethose who argue that political pressure willeventually increase to erect higher tradebarriers, slow down immigration, andrestrict capital flows. To others, theprobability of a reversal of the current waveof globalization seems low based on thesteady expansion and cyclical stabilityexperienced by developed countries in thepost-war period, supportive of open traderegimes, while social insurance schemes andescape clauses in world trade agreementsease the negative effects.Effects on Human DevelopmentThe most basic argument in favor of apositive association between globalizationand poverty reduction contends that greateropenness increases competition and accessto capital, technology, cheaper imports, andlarger export markets. Greater competitionleads to more efficient allocation ofresources and a division of labor thatenables countries to focus on doing whatthey can do best. Greater access to capital,technology, cheaper imports and marketsallow countries to do more than they wouldhave been able to do on their own. As aresult, per capita income, including percapita income of the poor, increases fasterthan would otherwise be the case.This argument may not hold in practicehowever. First, there is no guarantee thatopenness will increase per capita income.Similarly, even if openness is associatedwith faster growth in per capita income,there is no guarantee that poverty willdecline.Globalization, likeany other process,combines bothopportunities andthreats.Egypt Human Development Report 2000/2001 - 1

Executive SummaryOpening tointernational tradeshould rather be partof a broaderdevelopment strategytargeting growth andpoverty alleviation.In short, not all developing countries arebenefiting from the nexus of globalization,growth and poverty reduction. Muchdepends on what these countries can doalongside globalization. In principle,openness should reduce inequality betweendeveloped and developing countries. Thesepredictions may not hold in practice.There has been a significant increase in theaverage per capita income of the rich andpoor countries during the twentieth century.However, progress has been uneven, withthe richest countries doing relatively betterthan the poorest. Data from the World Bankshows that the average per capita income inthe richest twenty countries was fifteentimes that of the poorest twenty in 1960.This gap has since doubled to reach thirtytimes, with per capita incomes in the pooresttwenty countries hardly changing, if notfalling in some cases. It can be concludedthat globalization is associated with greaterinequality across countries.As for inequality within countries, theevidence suggests that there is no simpleassociation between changes in tradeopenness and changes in inequality.Changes in inequality will very muchdepend on the initial conditions (such as thedistribution of human capital, land andmaterial capital) at the time of globalization,and on government actions to enable thepoor and the unskilled to benefit fromincreased openness.Measuring changes in the quality of lifeover time is not easy. Nor are attempts torelate this change to globalization.II- Globalization and the EconomicWell Being of EgyptiansEgypt’s development over the last fourdecades of the twentieth century(1960-1999) has been marked by aneconomic struggle towards raising livingstandards and a social struggle towardsenhancing human development andproviding equal opportunity to all. Egypttoday is more prosperous than forty yearsago.Based on Egypt’s data, opening tointernational trade has not necessarily beengrowth enhancing in itself. It should ratherbe part of a broader development strategytargeting growth and poverty alleviation.However, the impact of external capitalflows has persistently been positive.Increased GNP has been helpful inalleviating poverty in the sense of enhancingthe share of income of the poor. But thisdoes not ensure improvement of the socialconditions of the deprived, such aseducation, health care, access to credit, legalprotection and other means ofempowerment.Income Growth and Human DevelopmentA broader human development index(BHDI) using disaggregated data at thegovernorate level for Egypt is useful.Regression analysis showed a significantlypositive effect of both economic growth(EG) on human development (HD) and ofHD on EG. It seems that for Egypt tobenefit from globalization it should achieverapid sustainable growth with equity.At the governorate level in Egypt, over thefirst sub-period (1986-90), the four urbangovernorates showed mixed interrelationsbetween growth and human developmentindicators, while during the second subperiod(1990-96), all moved to balancedlinkages, with economic growth and humandevelopment moving together in a mutuallyreinforcing way. The nine governorates inLower Egypt showed mixed performances,while five of the eight governorates ofUpper Egypt remained trapped in a viciouscircle of low EG and low HD. Furtherresearch on the pattern of distribution ofeconomic and human development benefitsamong social groups and/or incomebrackets is warranted.III - The Challenges of Globalizationfor Egypt’s Sectors ofProductionGlobalization is likely to have variousimpacts on Egyptian sectors of productionespecially agriculture, industry and thefinancial sector.AgricultureAgriculture is an important sector thatcontributes nineteen per cent of GNP, and is2 -Egypt Human Development Report 2000/2001

Executive Summarythe main source of food and employment.However, due to government interventionand implicit taxation, in the seventies andeighties, and to other internal factors,agricultural production growth was slowand dependence on food imports increasedto limits threatening national food security.This forced Egypt to change its policies andto launch Agricultural Policy Reform(APR), even before the commencement ofthe ERSAP.APR had several effects on agriculturalproductivity and other important areas oflife in rural Egypt. This included an increasein the cropped area from 11.2 millionfeddans to about 12.5 million feddans, onlya slight increase in the agricultural laborforce due to the higher growth rateswitnessed by other economic sectors, anincrease in agricultural income of 10.5 percent, and an improvement of nutritionalstatus in terms of both calories and totalprotein intake. Finally, under the globalizationprocess, privatization is assumed to beconducive to technology transfer and theupgrading of management, and consequentlyto the strengthening of the researchcapabilities of the sector.The possible effects of globalization onEgyptian agriculture are assessed throughthree main variables: agricultural foreigntrade, farm price variability and germplasm(genetic resources).IndustryEgypt’s manufacturing sector hadexperienced some improvements by the endof the 1990s. Its growth rate was the highestamong all economic sectors; it rose to 7 percent on average in the years 1996-98, whichmore than doubled the industrial basebetween 1990 and 1998. Also, the contributionof Egypt's manufacturing sector to valueadded at the national level had reached itshighest level over the 1990s amounting to19 per cent in 1998/99. This level ofperformance is close to most of thecountries in the MENA region. Yet, it islower than the average for developingcountries.Egypt’s industry is heavily natural resourcebased.This reflects itself in the bias of thestructure of manufacturing output towardschemicals, food and textiles. The share ofhigh-tech products in Egypt's manufacturedexports is lower than the share of theseproducts in manufactured output, due to aninability to channel the output structure intothe export structure. It is argued thatproductive capacities and knowledge levelsare closely linked to the ability of theeconomy to export and competeinternationally.With the growing tendency to establish freetrade areas, the globalization process in themanufacturing sector would affect not onlythe international position of the sector, butwould also have an impact on its domesticpresence. In this case, local competitivenessof the sector is an important issue that has tobe explored.Evidence shows that lower wages do notconstitute any comparative advantage toEgypt's manufacturing sector because of therelatively low levels of productivity ofmanufacturing workers. Most of thecommodities in which Egypt has revealedcomparative advantages (RCA) are naturalresource-intensive or labor-based industries.Moreover, the increase in the degree andspeed of globalization through theintroduction of regional free trade areas willendanger the domestic competitiveness ofthis sector. International competition willextend to the domestic market through thephasing out of tariffs. The high tariff wallthat the sector enjoyed for long decadescould collapse and open the economy tocompetition from strong advanced countries.This critical situation raises the question ofthe appropriate export strategy, and whetherthe Egyptian economy should specialize inproducing and exporting labor-intensiveproducts. However, given the very low laborproductivity of manufacturing employees inEgypt, this strategy would suppress wagesand exacerbate the poverty problem, unlesspreceded by a modernization plan.Financial SectorThe global financial architecture, externalpressures facing the Egyptian economysince 1997/98, and suggested measures tomitigate financial vulnerability are analyzed.The relatively strong economicIt is argued thatproductive capacitiesand knowledge levelsare closely linked tothe ability of theeconomy to exportand competeinternationally.Under theglobalization process,privatization isassumed to beconducive totechnology transferand the upgrading ofmanagement, andconsequently to thestrengthening of theresearch capabilitiesof the sector.Egypt Human Development Report 2000/2001 - 3

Executive SummaryEnvironmentalresources andecological servicesare essential forhuman welfare, andare not easilysubstituted by humanand physical capital.fundamentals resulting from the ERSAPhelped Egypt lessen the impact of thefinancial crises faced by other emergingmarkets in 1997-1998. Nevertheless, by theend of the decade, the Egyptian economyfaced unfavorable conditions, partly due tothe accumulation of external pressures, andthe internal economic policies that wereapplied to overcome their impact. Theoutcome of these pressures resulted in adeterioration of Egypt’s external positionwhich reflected in a slower pace of realGDP growth rates.Being exposed to, and affected by, externalshocks does not necessarily imply vulnerability.There is a set of selected macro andfinancial sector indicators that caninvestigate the vulnerability of an economy.Nonetheless, it is within the realm ofeconomic management and governance thatcontrolling for the degree of exposurematters most. This could be achievedthrough strengthening the external position,controlling monetary aggregates, carefullyselecting fiscal policy options, inflationavoidance, and strengthening the financialsector.IV- The Environment AndSustainable DevelopmentIt is believed that globalization will affectthe environment worldwide. Climate changeis one of the most serious environmentalthreats to human survival. Egypt’s currentemission rates are considered moderate(about one metric ton per capita in 1996)compared to the USA and Australia (15metric tons per capita for the same year).Most carbon dioxide emissions originate inthe developed countries, although theconsequences of climate change wouldaffect all countries. Unfortunately theeffects would hit poor countries harder thanrich ones. The Nile Delta is threatened withrising sea levels due to the melting of polarice caps.The ozone layer is vital for life on planetEarth. The depletion of this layer is viewedas a main threat of the globalization process.Protection of this layer entails costs that willburden the developing economies. Egypt iscommitted to the objective of decreasingozone depletion. This commitment has beenmanifested in the various internationalagreements that Egypt has signed tocontribute to the protection of the ozonelayer, such as the Vienna Convention andMontreal Protocol in 1998.Environment Degradation and PerCapita IncomeSustainable development is achieved whenan economy is on a path where futuregenerations have economic opportunitiesthat are at least as large as earliergenerations. There is a fear that economicdevelopment today is leading to theaccumulation of physical and humancapital, but is also depleting the stock ofnatural capital of the world. Environmentalresources and ecological services areessential for human welfare, and are noteasily substituted by human and physicalcapital.Effect of Growth on EnvironmentSustainabilityDeveloping countries, including Egypt, fearthat open markets and competition maydestroy national industries due to theirinability to compete with the highproductivity of industries in developedcountries. Global demand for certainindustrial products may give a comparativeedge for some developing countries, leadingto the profit motive being prioritized overthe environment and preservation ofresources.Global energy use has increased by over 70per cent in the past twenty-five years, and isexpected to grow by another 50 per cent by2010. This will contribute to climate changesince the industrial countries have adopted a"business as usual" scenario at the lastmeeting on climate change held in theHague, November 2000. Egypt has beenexperiencing some improvements in energyutilization and efficiency, and is alsopursuing cleaner production measuresthrough the implementation of environmentalprojects.Scarcity of fresh water and fertile soil foragricultural production are two of the majorproblems that face the Egyptian economy.Government policies for a better environmentin the field of agriculture includecontrolling and reducing the amount of4 -Egypt Human Development Report 2000/2001

Executive Summaryfertilizers, pesticides, and other addedchemicals used in agriculture.A boom in the tourism industry willundoubtedly incorporate a positive as wellas a negative impact on the biodiversity ofthe Egyptian environment. Regulatingtourism, educating patrons, and controllinginfrastructure expansion will protect theenvironment and guarantee a continuousand prolonged flow of tourists. Sustainabletourism development is a far-sightedconcept that should be adopted.Policy Recommendations And PlanningImplicationsThe environment is threatened underglobalization. Enacting and enforcinglegislation to avoid environmental degradationand exploitation in Egypt can mitigate suchproblems. Governmental efforts toovercome these problems include thedevelopment of an environmental policywhich includes long-term solutions toenvironmental problems, sound economicand financial principles, enhanced communityparticipation and the introduction ofenvironment - friendly industries.V- Technology and InformationLed GlobalizationThe world has had a series of industrialrevolutions. The third industrial revolutioncan be mainly attributed to the discovery ofelectronics. During the 1970s, thedevelopment of electronics and integratedcircuits enabled their use to progress inalmost every domain, especially in aviationand aerospace. Since the early 1990s, thehi-tech revolution has been extending tocover essential and basic activities andfunctions all over the world. This revolutionmanifests itself in the domains ofinformation technology, communication,and biotechnology. Successive industrialrevolutions highlight the fact thatglobalization is inseparable from theelements of control and organizationinherent in the hi-tech revolution, especiallyin the field of electronics and theirapplications, and in the exponential growthof information and communicationtechnology. Information and communicationtools are becoming increasingly critical foreconomic progress and the growth of humancapabilities. They are transforming the waywe live, learn, and work.The Digital DivideThe ‘digital divide’ refers to the gapbetween those who have access to, and caneffectively use, new information andcommunication tools and those who cannot.It has been widening as the information‘haves’ outpace the ‘have-nots’ in gainingaccess to electronic resources. Dependenceon information technology is quite limitedwithin the Egyptian economy but Egypt hasbeen implementing several projects in orderto improve its IT status. These projects aimat helping children, as well as adults, tofamiliarize themselves with the newtechnological transformation. The increasein the number of telephone lines is a clearindication that the digital divide is narrowingin Egypt. Other telecommunication serviceshave been introduced over the last fouryears. The Global System for Mobiles(GSM) was introduced in 1996. The PCindustry is controlled by the private sectorand data on PC density is hard to collect atthe national level. The Internet wasintroduced in Egypt by the IDSC and theSupreme Council of Universities (SCU) in1993, but its use is dependent on access toPCs. Although E-Commerce in Egyptstarted in 1998, it is still very difficult tomeasure its volume.The most important characteristicscontributing to the digital divide in Egyptcan be summarized under the following fourcategories: rural / urban, high income / lowincome, literate / illiterate, and bilingual /single language.The National Program for Closing theDigital GapThe Egyptian government has appliedseveral programs to close the digital gap. In1999 a new Ministry for Communicationand Information Technology wasestablished to implement a broad "NationalProgram" of strategies, policies, programsand projects. The main strategies andpolicies of this program are: governmentcommitment to expanding information andcommunication technology, building humancapacity in education and training,Sustainable tourismdevelopment is afar-sighted conceptthat should beadopted.The ‘digital divide’refers to the gapbetween those whohave access to, andcan effectively use,new information andcommunication toolsand those whocannot.Egypt Human Development Report 2000/2001 - 5

Executive SummaryBuilding up humancapabilities is a coreoperational step toachieve humandevelopment.Available indicatorsshow that theemployment andunderemploymentlevels have beendeclining in line withthe implementation ofERSAP policies.expanding basic connectivity to peopleeverywhere, creating more affordable accessto information tools, and creating newopportunities for SMEs through e-commerceand e-business. The major projects of thenational program include infrastructure(telephone mainlines, mobile lines, etc),human resource development and theestablishment of mass access centers(MAC).Globalization and TechnologyUnder globalization the supply oftechnology is subject to an imperfect marketranging from monopolistic competition tothe oligopoly and monopoly practiced byhuge actors at the international level. Onemight therefore argue that the free transferof technology, or of innovation in particular,is far from being the reality. In recent yearseconomic, technological and legal factorshave contributed to restricting technologicalmobility at the international level.These restrictive factors have been investigated,using the field of pharmaceuticalmanufacturing and trading as a case study.Developing a pharmaceutical product goesthrough research and development (R&D),manufacturing and post - manufacturingsupervision, and the introduction of a newmedicine takes about ten years and requiresan expenditure ranging from US$ 40 millionto US$ 250 million.The pharmaceutical market structure ischaracterized by the dominance of a fewenormous firms over the whole process ofmedicine manufacturing. The oligopolisticmarket increases the ability of firms toinfluence the pricing system, endangeringconsumer choice and welfare, and resultingin distorted prices that are inefficient inallocating resources or distributing incomes.The increasing power of large firms allowsthem to exploit the fruits of small firms’efforts in R&D, integrate them into theirmacro invention circuit, and thereby get thelarger share in the rent of technologicalscarcity. Pharmaceutical industry actors areable to influence the organs of state throughintervention in public policies.The rules of the Trade Related IntellectualProperties Agreement (TRIPS) mightnegatively affect the Egyptianpharmaceutical industry and the health ofthe poor through higher medicine prices. Inorder for Egypt to face the threats ofglobalization to this industry it mustformulate a national program to include adisease prevention policy, a treatmentpolicy which targets particularly vulnerablesocial groups (the poor and women withdifficult social conditions), and a medicinepolicy. The latter should aim at encouragingR&D, inventions and industrial deepening.VI- Globalization and HumanCapitalBuilding up human capabilities is a coreoperational step to achieve human development.Employment opportunities are the means bywhich this capital is recycled to generate, ona larger scale, the different economic,social, political, scientific, technological,and cultural aspects of development. Giventhis, what is the impact of globalization onthe Egyptian labor market?Globalization and the Egyptian LaborMarketGlobalization could impact on a number ofdimensions of the Egyptian labor market, ofwhich the most important are theemployment level, the demand for labor, thewage level, labor market segmentation, andlabor force mobility. However, since theoverall condition of the labor marketdepends on national, regional andinternational factors, it becomes difficult toattribute all observed changes solely toglobalization.Features of the Labor Market in EgyptAvailable indicators show that theemployment and underemployment levelshave been declining in line with theimplementation of ERSAP policies. Thefemale unemployment rate, especiallyamong educated females, is much higherthan the male, and the education level of theEgyptian labor force implies that aroundhalf of the labor force cannot deal with thenew techniques and rapid technologicaladvances characterizing globalization. Inaddition, there is evidence for a generalpattern of deterioration in real wage rates in6 -Egypt Human Development Report 2000/2001

Executive Summarythe Egyptian labor market up to the late1990s, with different patterns according tothe type of activity (public/private) and thetype of labor (male/female).The Egyptian labor market suffers fromseveral types of segmentation, namelypublic/private, male / female, andformal/informal. The informal labor marketappears to be the last resort for all those notabsorbed by the formal market. This sectoris increasingly becoming a reservoir ofunskilled and low-wage labor, increasingthe severity of poverty and socialmarginalization, especially in urban areas,with dangerous economic and socialimplications.Empirical evidence does not support thenotion that under globalization there will bea higher degree of mobility for individuals.This is due to at least two reasons: a) anemerging distinction between three differentcategories of labor force, based on the levelof skill, leading to bias against the many inthe unskilled labor category who will beable to find only temporary and unstableemployment, and b) the GATS is likely tofoster inequality in labor mobility acrosscountries. Recent empirical evidence on theEgyptian labor market shows a tendencytowards using foreign labor, especially thosewho are highly skilled and capable ofdealing with new advanced productionmethods.In Egypt, globalization is likely to helpintegrate a small elite into the process ofproduction and capital accumulation of theglobal economy. Meanwhile, the number ofthose marginalized and excluded from theproduction and income cycles is on theincrease, to the extent that poverty isassociated with economic and socialexclusion.The GOE has proposed a set of short,medium, and long-term social policies thataim to mitigate the adverse effects ofglobalization. Among these are theestablishment of an appropriate socialsecurity net; the development ofemployment offices, to be effective inmatching unemployed job seekers withavailable job vacancies; the developmentand upgrading of the capabilities ofunemployed workers; sustainable andequitable economic growth; support forhuman development; and political,institutional and legislative reform.VII- Egypt’s Social Capital andArab Economic IntegrationSocial capital is one of the most importantassets of nations. It is inseparable from thesocietal mechanisms that deal with thedifferent aspects of life, and which havebeen subject to continuous, generallygradual, change worldwide over the pastcenturies. Starting in the 1990s, theaccelerated process of globalization hasbeen fostering these changes in a disruptiveway. Egypt has largely escaped this threat,but there is no guarantee that this willremain the case, given ever more rapidglobalization. Moreover, different forms ofregional integration also have an impact onthe social capital of the countries, and/orsocieties, involved. The question arises as tohow the stock of social capital in Egypt maybe influenced by the process of globalization,and the ways to protect it against futureshocks.Measuring Social CapitalThe concept of social capital includes bothgovernment institutions and formal andinformal civic groupings. The presence ofsocial capital in a society is manifest whenteamwork becomes customary, andindividualistic behavior does not present asignificant obstacle to collective action. InEgypt, both the rural and urban poor and themiddle classes form mutual aid societies,known as Jam’eyyat. Another indication ofa strong stock of social capital, althoughvery difficult to measure, are the apparentlylarge sums of money devoted to charitablework in Egypt.Several methods can be used to measuresocial capital in Egypt. These are: numberof formal organizations (political parties,business groups, cooperatives, trade unions,professional associations and Jam’eyyat),membership of these organizations,cohesiveness, level of cooperation and thesocial values of society.The informal labormarket appears to bethe last resort for allthose not absorbed bythe formal market.Social capital is oneof the most importantassets of nations.Egypt Human Development Report 2000/2001 - 7

Executive SummaryGlobalization has hadmixed effects on theaccumulation ofsocial capital inEgypt.Regional cooperationcan increase theopportunities forbenefiting sociallyand economicallyfrom globalization.Social Capital and DevelopmentSocial capital, is conducive to development.It reduces the cost of transactions due to thereduced need for regulation or control toensure good faith in all types of business. Italso fosters strong norms of generalizedreciprocity which is more efficient thanmistrust as an organizing principal, andenhances the formation of physical andfinancial capital.Globalization and Social CapitalThe impact of globalization on social capitaldepends on many variables. One of these isthe type of ties that constitutes the basis ofsocial capital. It could be argued that therapid movement of people, ideas, news andimages could weaken solidarity ties amongmembers of groups that previously livedtogether. Another important variable isexposure to the international mass media,which may pose a serious threat ofgenerating a socio-cultural dichotomy inEgyptian society, and may dampencommitment, especially among the youth, tothe values that previously cemented societalgroupings at different levels. On the otherhand, the process of globalization mightgive rise to new forms of social capital. Thedemonstration effect could lead to theestablishment of human rights, environmentaland women groups. Globalization could alsoempower some groups in countries of theSouth, which have been marginalized oreven persecuted within these countries.The Effects of Globalization on EgyptianSocial CapitalThe process of globalization has had severaleffects on social capital formation in Egypt.It created favorable conditions for theaccumulation of new social capital andintroduced novel ideas about human rights,calls for the protection of the environmentand appeals to encourage the private sector.The process of globalization has empoweredsome organizations of the emerging civilsociety, thus strengthening the kind ofsocial capital they embody. It has alsoempowered collective action by Egyptiancitizens through various forms of assistancerendered to Egyptian organizationsoperating in these new areas of publicinvolvement. On the negative side, foreignaid to organizations that express views thatare critical of government action has raisedthe specter of “foreign interference” innational affairs, and has provided theopportunity to bring their activities undergovernment control, or to ban themaltogether. On balance, globalization hashad mixed effects on the accumulation ofsocial capital in Egypt.Regional Integration and Social CapitalEffective economic cooperation, whensupported by the socio-political will tomove towards total economic integration,can help in the accumulation of socialcapital and to enlarge its scope of action.Arab economic cooperation in its differentforms (trade, investment, aid, and labormovements) could be a way to achievemore balanced relations with the strongeconomic blocks and to alleviate thenegative impact of globalization. However,this is not a substitute to globalization. Onthe contrary, it is believed that regionalcooperation can increase the opportunitiesfor benefiting socially and economicallyfrom globalization.8 -Egypt Human Development Report 2000/2001

Chapter OneGlobalization and Human Development“While globalization has positive, innovative, dynamic aspects - italso has negative, disruptive, marginalizing aspects”(UNDP, Human Development Report, 1999)IntroductionGlobalization is an old phenomenon in newattire. There is no general agreement on thedefinition of recent globalization or on thefields that it covers. Some authors restrictglobalization to the economic fields andmore specifically define it to include theliberalization of investment and trade andthe similarity of production techniques.Others enlarge its scope so as to encompasssuch domains as social issues, politics, andculture, besides economics.Moreover, there is controversy over who arethe main actors in this process. Someauthors suggest that the role of the state hasreceded or has even been phased out,whereas others see that the role of the stateis still primordial, although it has developedand changed from direct involvement inproduction and investment to guidance andsupervision. If this is a correct view, thenthere are evidently new roles for many otheractors, including multinationals, internationalinstitutions, and governmental andnon-governmental organizations (NGOs).The main justification for supporting themove towards globalization lies in the gainsthat it offers to the world through benefitingfrom trade liberalization, specialization andinternational division of labor. On the otherhand, some people think that these gainswill accrue only to the developed industrialcountries, at a cost incurred by developingcountries, so that the rich will become richerand the poor will become poorer. There arealso those who oppose globalization withinthe industrial countries, especially amongthe environment protectionists and labortrade unions. In the developing countries,some people fear the negative impact ofglobalization on culture and the nationalidentity, among other threats.All this indicates that we are living in acontinuously changing world. People areusually afraid of what is new, magnifying itsnegative effects without perhapsinvestigating its positive impact. Thisreminds us of the opposition to usingmachines at the beginning of the industrialrevolution. However, soon enough, man wasable to subject machines to his service. Willthe world be able to tame the newglobalization wave and use it for the benefitof humanity? Such taming would endeavorto achieve two main objectives: equitableincome distribution at the international levelbetween advanced and developing countries,while preserving the variety of cultures,leading to the development of the whole ofhumanity; and internal equitable incomedistribution, especially in developingcountries.In all cases, globalization has multifacetedimpacts on both developing and developedcountries, in the economic, social andpolitical domains, as well as on men andwomen and their inter-relationships, and onthe role of the state. The study of theseimpacts would warrant numerous detailedinvestigations.Globalization: Origins and DefinitionThe last two decades witnessed severaldevelopments, which resulted in the phenomenoncurrently known as ‘globalization’. The mostimportant of these developments are:1- The emphasis of the USA, underPresident Reagan, on the importance ofthe private sector in leading the economyWill the world be ableto tame the newglobalization waveand use it for thebenefit of humanity?Egypt Human Development Report 2000/2001 - 9

Globalization and Human DevelopmentThe impact ofglobalization will notbe limited to theeconomic sphere only,but will extend to thepolitical, social andcultural spheres aswell.in almost all its activities in whatbecame known as Reaganomics. Thismade liberalization and opening up ofthe markets a prerequisite for receivingaid. This trend was later reinforced bythe disintegration of the former SovietUnion (FSU).2- The revolution in information technology(IT) and the means of communication,which turned the world into a smallvillage. The emergence of the Internetand its expanding use in economicactivities has resulted in further changesin the international economy andrelations among people and nations.3- The movements towards regionalism andintegration in large economic blockssuch as the European Union (EU), NorthAmerican Free Trade Area (NAFTA),ASEAN and others.4- The growth of multinational corporations(MNCs) to unprecedented size and theirincreased share in world production andinternational trade. Their continuedprogress would warrant more liberalpolicies and further opening up of theworld markets.5- The poor performance of manydeveloping economies especially thosedominated by public sector enterprises.The 1980s are considered to be the ‘lostdecade’ from an economic developmentperspective, especially for Africa, wherecountries faced severe problems,namely: low or even negative growthrates; high rates of unemployment;relatively high rates of inflation; chronicbalance of payments deficits; and heavyforeign indebtedness. Many developingcountries were not able to service theirforeign debt. To alleviate the burden ofthese debts, the rules of the game requirean agreement with the IMF. One of theguiding principles of the reformprograms to be agreed upon with theIMF is reforming economic policiestowards liberalization, dependence onthe private sector, the adoption of marketfriendly policies and privatization ofpublic enterprises.6- Breakthroughs in production technologiesin various sectors based on geneticengineering, new materials and moreefficient techniques of production.7- The rapid growth of financial assets(portfolio investment, derivatives,securitization, etc.) to the extent thattheir value has exceeded the value ofphysical assets. The instantaneousmovement of these financial assets fromone country to the rest of the worldrequires the removal of currency andforeign exchange controls.These are the most important factorsunderlying the phenomenon of globalization.It is believed, however, that the impact ofglobalization will not be limited to theeconomic sphere only, but will extend to thepolitical, social and cultural spheres as well.On the political front, there has been agrowing emphasis on the importance ofsuch notions as democracy, respect forhuman rights, transparency, good governance,and other political concepts widely usedtoday.On the social side, there is greater stress onthe importance of education and the need toallocate sufficient funds to provide adequateand broad-based education services toachieve what is called ‘the democracy ofeducation’. There is also a growing concernfor spending on health care and providingsocial security networks. Moreover, there isincreased awareness of the need to eradicatepoverty, or at least alleviate its impact onthe poorest in society.With regard the influence of globalizationon culture, opinions differ considerably.Some suggest that “culture cloning” willoccur, to the extent that Americanizationwill become synonymous with globalization,as represented by the worldwideconsumption of such products as the BigBurger, Coca Cola, Disney, and Nike etc.Some have even labeled the worldcivilization of today as ‘McWorld’. On theother hand, there is growing resistanceagainst this trend and an insistence on theneed to preserve national culture and thedistinctive civilization of various nations.The argument is that culture cloning wouldreduce diversity, and that humanity couldlose the variety and multiplicity required to10 -Egypt Human Development Report 2000/2001

Globalization and Human Developmentachieve further progress and refinement.However, change and evolution are the only‘constants’ of life. Civilizations that do notbenefit from change deteriorate and possiblyvanish. However, introducing change todifferent cultures and civilizations shouldnot mean giving up their distinctive identity.Indeed, achieving the right balance betweenevolution and authenticity is considered oneof the great challenges confronting statesfacing the new wave of globalization.From the economic perspective, there seemsto be a general agreement that globalizationrefers mainly to trade liberalization, dependenceon market forces, predominance of theprivate sector and the privatization of publicenterprises. This should lead to the freemovement of goods, individuals and capitalflows; and hence to a greater mutualinterdependence between the economies ofdifferent states, within the framework ofreduced barriers to financial and commodityflows.Globalization: Opportunities andThreatsAs mentioned earlier, the proponents ofglobalization herald the economic gains andbenefits that will accrue from this new trendto developing countries and to the industrialworld alike. However, its opponentsanticipate great harm for developingcountries in particular, threatening themwith the closing down of factories,widespread unemployment, and the inabilityto compete with other countries’ goods andservices in their own local markets,notwithstanding fierce competition inexternal markets. It is difficult to side witheither group. A balanced viewpoint wouldsuggest that globalization, like any otherprocess, combines both opportunities andthreats, as shown below.OpportunitiesIt is possible for Egypt and other developingcountries to achieve gains from globalization,derived essentially from widening the scopeof the market within the framework ofeconomic liberalization. The most importantpotential gains are:● Production Efficiency: Developingcountries can establish larger scaleproduction units in order to benefit fromthe enlarged market opportunities, thusbenefiting from comparative andcompetitive advantages. This could leadto the re-organization of the internationaldivision of labor and specialization;thereby increasing world economicprosperity through trade creation, as theeconomic theory predicted.● Consumer Welfare: It is expected that,due to globalization, and the resultingeffects of the reduction of customs dutiesand other trade barriers on the flow ofinternational trade, the prices ofconsumerable commodities will bereduced, thus increasing consumer welfare.● Increased Competition: There is nodoubt that globalization would increasethe degree of beneficial competition, orinnovative arrangements, among differentproducers. This would lead to thesurvival of the fittest, thus achievingefficiency in the field of exchange.● The Importance of Innovation: Asemphasized by Schumpeter, innovation isimportant in bringing about evolution andprogress. With the current speed ofinformation technology, it is expectedthat developing countries would benefitfrom these innovations. However, sincebound by intellectual property rights,these countries have to bear certaincharges in order to be able to use suchinnovations.● Gains from Free Capital Movements: Itis now widely accepted that foreign directinvestment is considered one of theessential driving forces of acceleratedeconomic growth, as attested from theexperience of the South-East Asiancountries. Globalization allows otherdeveloping countries the opportunity tobenefit from free capital movements,provided they offer an attractive localenvironment conducive for this kind ofinvestment. Furthermore, the rapidmovement of portfolio investments mayenable developing countries to mobilizeinternational savings. They furtherstimulate the development of emergingcapital markets.Civilizations that donot benefit fromchange deteriorate andpossibly vanish.Introducing change todifferent cultures andcivilizations shouldnot mean giving uptheir distinctiveidentity.Egypt Human Development Report 2000/2001 - 11

Globalization and Human DevelopmentIf free movement oflabor were to occurit would open upmarkets for the laborforces of developingcountries.● Enhanced Labor Mobility: Despite theresistance of some countries to the freemovement of labor, this is consideredpart of the economic liberalizationpackage accompanying globalization. Iffree movement of labor were to occur -and it has not, so far - it would open upmarkets for the labor forces of developingcountries, especially those that sufferfrom overpopulation and tight labormarket conditions. This would improvejob opportunities and favorably impacton the Balance of Payment (BOP)through remittances.ThreatsDespite these potential benefits, globalizationinvolves threats to some countries andsome population groups that are unable tobenefit from available opportunities andadopt competitiveness enhancingpolicies. The most important threats are:◗ Inequitable Income Distribution: Theevolution of the free market systemwithin capitalist countries has led to aninequitable pattern of income distributionamong different population groupswithin the same country, thus requiringpublic intervention to redistributeincome to the advantage of the poor. Ifthe same system is applied at the globallevel, it is expected to yield similarresults between rich and poorcountries: the rich would get richer andthe poor would get poorer. In theabsence of a universal financialmechanism to correct this imbalance,inequity may be permanent, and maythreaten world stability.◗ Greater Economic Fluctuations:Removal of currency controls and freecapital movements due to theliberalization of capital transactions inthe balance of payments, could lead togreater fluctuations in the worldeconomy. Perhaps the experiences ofMexico (1994), the former SovietUnion (1995) and South East Asia(1997) are the most salient examples ofthis. Moreover, as the contagionrapidly spreads, the whole world,especially developing economies, couldbe exposed to destructive economicfluctuations.◗ Collapse of National Industries:Developing countries, such as Egypt,fear that the open markets andenhanced competition resulting fromglobalization would destroy localindustries due to an inability tocompete with high productivity industriesin the industrial countries. Should thishappen, it would lead to reduced jobopportunities, increased unemploymentand increasing poverty.◗ Cultural Identity: Countries that havecultures different from the West areconcerned that globalization woulderase the main features of theirdistinctive cultures. This is a real threatthat can only be stopped througheducation and a belief in the authenticityof different civilizations and differentsocieties. This does not mean that newand positive aspects of globalizationshould not be adopted. Rather,societies should demonstrate therelevance and benefits of theircivilizations, many of which carry aneeded spiritual dimension. Culturalinterdependence could become mutual,instead of being unidirectional (SeeBox 1.1).12 -Egypt Human Development Report 2000/2001

Globalization and Human DevelopmentBox (1.1)Globalization and Cultural Encounter in EgyptThe positive impacts of globalization in Egypt may beexpected to generate a big rise in life expectancy, asignificant increase in the literacy rate, and the sustainablegrowth of per capita income. Nonetheless, perhaps theworst long-term effect of globalization on Egyptian societyhas been the growth of social and cultural dualism. Thishas been the result of the availability of a much greatervariety of foreign goods, and of the exposure of a muchhigher proportion of the population to these goods and to apowerful mass media greatly influenced by foreign tastes.It is difficult to think of a period in Egypt’s modern historyduring which local culture has been subjected to greaterexternal influences than it has been during the last two orthree decades.One important example of the impact of globalization onEgyptian culture is its influence on the national language.The Arabic language is being progressively mixed withEuropean languages in aspects of every-day life.Multinational firms, for example, require foreignlanguage-speakers, and are attractive employers. The highvalue placed on the "foreign" impacts on the nationallanguage, which gradually becomes subsidiary to thelanguage of business, and by association, impacts onaspects of culture such as indigenous music, national dress,national styles in architecture, food preferences, choice ofrecreation, and even on choice of consumer product. Andas in other countries, it is the younger generations who aredisproportionately influenced by western culture. Theimpact should not be underestimated. One could claim thatdamage to local cultures is of a similar nature to damage tothe physical environment, and could be considered a formof ‘unsustainable’ development.While virtually all of society may be exposed to theinfluence of alien cultures and patterns of consumption, notall sections of the population succumb. Those withinsufficient purchasing power, or who are more deeplyimmersed in local traditions, or both, often feel a sense ofbetrayal by those who are more westernized, given theirgreater income or their longer exposure to western culturalinfluences. In turn, this contributes towards an increasingsocial gap, creates income and cultural enclaves, andweakens national cohesion, adding to the possibility ofsocial and political turmoil. This aspect of globalizationcould by itself go a long way towards explaining thegrowth of the phenomenon commonly known as ‘religiousfanaticism’.Coping with the ChallengesBecome exposed to new and often severe forms ofcompetition from which one had hitherto been protected, isa basic outcome of globalization. The weaker party -whether in trade, industry, or otherwise, must learn to copeif it is to survive. Communities of all types, whether basedon race, belief systems or national loyalties, which haveattempted to isolate themselves from the process ofglobalization have, sooner or later, been constrained toopen up to the world, if not through choice then throughcircumstance. Although many nations have passed throughsome period of relative and beneficial isolation,contemporary history demonstrates that the advance ofglobalization is hard, if not impossible to check. A countrylike Egypt cannot hope to stem the tide, but there are waysto ensure that the impact of globalization will be lessdamaging to social relations and cultural identity.The main issue is how to pursue the process of culturalinteraction with the outside world at our own appropriatepace. In the sphere of culture, it is not a question of how toincrease ‘efficiency’ and enhance ‘competitiveness’. In theprocess of raising economic efficiency and enhancingcompetitiveness, it is clear that the old ways of life and thetraditional system of values will need to be reappraised.The greatest challenge to national culture comes from thecommunications revolution, associated with recentdevelopments in the mass media. In this respect, just as ineconomics, a developing country such as Egypt may feelthe need to provide some kind of ‘protection’. Butprotection may prove difficult or futile, since ideas, lifestyles and belief systems are no less seductive than goodsand services, especially when supported by a powerfulmass media. As the power of the state diminishes in anincreasingly market-oriented society, and with theincreasing influence of multinational corporations andinternational institutions, civil society must developsufficiently to fill the gap. Greater internationalcooperation, whether among states or among civil societyassociations, may help identify and provide for the servicesthat the state is no longer able to deliver on its own. InEgypt, there has been a rapid growth in the activity andinfluence of civil society, and a greater participation inregional and international action to face problems createdor aggravated by globalization.Egypt Human Development Report 2000/2001 - 13

Globalization and Human DevelopmentThe question for acountry like Egypt iswhat the net effect ofglobalization is likelyto be.Countries mustfollow a strategy thatwould maximizebenefits fromglobalizationopportunities andminimize thenegative threats ofglobalization.● Maintaining National Security:Globalization is meant to reduce theprobabilities of warfare and enhance theopportunities for peace. The confidentialityrequired for national security purposes islikely to dwindle, and this process will befurther affected by advanced technology,sophisticated communication devices andthe Internet.. This could createvulnerabilities in the case of conflict;particularly since confrontation andconflict appear to be permanentcharacteristics of our world. For Egyptand the Arab region, as long as no justand permanent peace settlement withIsrael has been reached, conflict willremain a reality, and will require preventativemeasures for national security.The Net OutcomeGiven the opportunities and threats to whichcountries are exposed under globalization,the question arises as to whether countriesshould choose to become isolated fromglobal trends and close their doors in orderto preserve their interests.Given that there is neither a free ride nor afree lunch, the question for a country likeEgypt is what the net effect of globalizationis likely to be. The answer depends on boththe actions of the country in question andthe international community. Countriesmust follow a strategy that would maximizebenefits from globalization opportunitiesand minimize the negative threats ofglobalization. This would require policiescapable of redressing distortions in thenational economy, raising productionefficiency and deepening specialization inthe fields where each country enjoyscomparative and competitive advantages.Improved education, higher productivity,efficient administration and goodgovernance are the main guarantees for anet positive effect from globalization.The influence of globalization depends alsoon the actions of the internationalcommunity, with its various actors: thesuperpowers, international organizations,and the arrangements and agreementsbetween various states, as well as their realcommitment to development goals. Theworld system is not likely to create in thenear future an international body able toredress inequitable income distributionworldwide resulting from globalization, aswould be the case within a nationaleconomy. Further, no state is ready torelinquish part of its sovereignty to such aninternational authority. Given theserealities, can the international communitymake arrangements to coordinate internationaland national interest within the frameworkof a global society? This remains to be seen.Finally, insulation from the world marketdeprives countries of much needed capital,technology, low cost and better qualitygoods and services, as well as theopportunity to create jobs in the exportsectors. However, the unqualifiedintegration of developing countries intoworld markets can be equally costly, as therecent crises in East Asia, Russia and Brazildemonstrate. Capital can fly suddenly,leading to the collapse of nationalcurrencies and a rise in unemployment.Industries may fail to compete in a morecompetitive environment due to excessiveprotection in the past. Wage disparitybetween skilled and unskilled labor mayescalate and developing countries may onlybe able to attract polluting industries.The Extent of GlobalizationHow well connected is the world economy?Is globalization today different fromprevious episodes? These questions areassessed below.Trade in Goods and ServicesFalling trade barriers and advances in thetechnologies of communication andtransportation have brought the world muchcloser. Aggregate data show that the ratio ofexports and imports to GDP has increasedsharply, especially in the period following1972 (Figure1.1). Further, the data tends tounderestimate the extent of worldintegration, in view of the increasing shareof non-traded goods and services (e.g.education, health, finance, insurance, realestate and domestic trade) in the GDP ofmost economies. While developed countriesare trading more with the rest of the world,so are developing countries. Developingcountries are, in addition, now exporting14 -Egypt Human Development Report 2000/2001

Globalization and Human Developmentmore manufactured goods and less primarycommodities (like food and raw materials)than before.But these developments do not apply acrossthe board (Figure 1.2). The bulk of exportsin the developing world are mostly concentratedin East Asia. At the other extreme areSub-Saharan Africa and South Asia whoexport a much lower proportion to the restof the world. In between lie Latin America,Europe and Central Asia, and MENA. Overthe past two decades, MENA and Europehave been loosing ground, while East Asiahas become increasingly integrated into theworld economy.Factor MobilityTrade expansion has been accompanied byunprecedented capital mobility, especiallysince the 1980s (Figure 1.3). The bulk of theincrease in capital flows came from theprivate sector (in the form of FDI andportfolio investment). Net official flows ofaid have fallen, but foreign direct investmentbecame a much more important channel forcapital mobility than portfolio investment.In addition, FDI is increasing steadily, whileportfolio investment and credit have fallenin the wake of the financial crises of the late1990s.Like trade, the flow of capital to differentdeveloping regions has become increasinglynon-uniform. (Figure 1.4) illustrates this forFDI flows to developing countries. WhileLatin America and East Asia attractedaround 78 percent of FDI flows todeveloping countries in the late 1990s,Sub-Saharan Africa, MENA and South Asiacollectively attracted only 8 percent.The importance of capital inflow todeveloping countries lies in part in that itsupplements domestic savings to levels thatenable the recipient economies to growmore rapidly. Furthermore, it enables theseeconomies to access advanced knowledgeabout production techniques, managementpractices, and sometimes export markets.These benefits are as important for developmentas the physical capital itself. At the sametime, however, capital inflows can be costly.Indeed, they complicate macroeconomicmanagement and expose countries to therisk of sudden capital flight. These costs canbe high in terms of economic activity andemployment.%181614121086Figure 1.1: Trade in Goods and Services as Share of GDP222018161412108DevelopedcountriesDevelopingcountries1970 74 78 82 86 90 94Figure 1.2: Share of World Exports by Developing Region,1980-1999.400350300250200150100500East Asia andPacificLatin America&Carib.4 Sub-Saharan2 Africa0South Asia1980 1985 1990 1994 1995 1996 1997 1998 1999Figure 1.3: Net Long-Term Flows to DevelopingCountries, 1970-99.TotalOfficialflows**Europe &Central AsiaMENAFDICapital marketflow*1970 80 90 91 92 93 94 95 96 97 98 9910080604020-20* Capital market flows includeportfolio investment and debtflows in the form of banklending and bond financing.** Concessional andnon-concessional official flows.Source: World Bank, GlobalDevelopment Finance 2000.Figure 1.4: Net FDI by Developing Region, 1970-1999Latin America & Carib.Europe & Central AsiaMENAEast Asia & Pacific01970 1980 1990 1998 1999Sub-Saharan AfricaSouth AsiaEgypt Human Development Report 2000/2001 - 15

Globalization and Human DevelopmentRemittances frommigration in countrieslike Egypt constitutean important sourceof foreign exchangeearnings.As for labor mobility, data is hard to comeby. However, the IMF reports that the sizeof the labor force born in other countries hasincreased by one-half during the period1965-90. The same report further notes thatmost migration is between developing countries.Remittances from migration in countrieslike Egypt constitute an important source offoreign exchange earnings.The Nature of Recent GlobalizationThe current episode of world integration isnot new. Historically, the ratio of trade toGDP grew from 1820 to 1913, followed bya period of low integration between 1913and 1950 due to the two world wars andprotectionism during the Great Depression.After 1950, however, industrial economiesled the integration process to reach, by the1970s, the levels of integration previouslywitnessed at the turn of the century. Sincethen, the trade liberalization policiesadopted by several developing countrieshave intensified the level of worldintegration to levels not seen before.While the recent wave of globalization isnot new, trade is now much deeper andcapital flows are more far-reaching thanbefore. According to Krugman, the currentwave of globalization in trade ischaracterized by: (1) a rise in intra-industrytrade, (2) an increased break in productiongeographically, (3) new countries with hightrade-GDP ratios, and (4) large exports ofmanufactured goods from low- tohigh-wage countries. Similarly, although thelevel of capital inflow to GDP is not highernow than it used to be a hundred years ago,it is different in character. Fishlow notesthat earlier capital inflows were received bygovernments in colonized countries, andwere devoted to a narrow range ofinfrastructure projects. Today, both thenature of the borrowers and the allocationsof capital are more diverse.What is equally interesting is that thepotential for reversal of the current wave ofglobalization is considered much lower thanbefore. There are those who argue thatpolitical pressure will eventually mount toerect higher trade barriers, slow downimmigration, and restrict capital flows. Toothers, however, the probability of areversal of the current wave of globalizationseems low based on the rationale that thesteady expansion and cyclical stabilityexperienced by developed countries in thepost-war period supports open traderegimes. Most countries now have socialinsurance schemes (e.g. for unemployment)and escape clauses in world tradeagreements, both of which ease the negativeeffects of competition from imports. Inaddition, the new wave of globalization iscreating its own supporters at home,especially those engaged in exports.Accordingly, globalization seems to be hereto stay.Globalization and Human DevelopmentIf globalization is here to stay, at least forthe foreseeable future, it is important to askseveral questions. Does it reduce or increasepoverty? Does it equalize income acrossand within nations, or does it worsenincome distribution? More broadly, does itimprove the quality of life or not? We willdiscuss these questions in turn.Globalization and PovertyThe most basic argument in favor of apositive association between globalizationand poverty reduction contends that greateropenness increases competition and accessto capital, technology, cheaper imports, andlarger export markets. Greater competitionleads to a more efficient allocation ofresources and a division of labor thatenables countries to focus on doing whatthey can do best. Greater access to capital,technology, cheaper imports and marketsallows countries to do more than theywould have been able to do on their own.As a result, per capita income, including percapita income of the poor, increases fasterthan would otherwise be the case.This argument may not hold in practicehowever. First, there is no guarantee thatopenness will increase per capita income.The main reason for this is that openness isbut one of the preconditions for fastereconomic growth. Indeed, standard growthregressions often include on the right handside a number of initial conditions (e.g.initial per capita income, human capitalstock, a measure of inequality) and anumber of policy variables (includingopenness, rule of law, size of government).Where countries do not possess other progrowth conditions, openness may notnecessarily lead to higher per capita income.Similarly, even if openness is associatedwith faster growth in per capita income,there is no guarantee that poverty will16 -Egypt Human Development Report 2000/2001

Globalization and Human Developmentdecline. Poverty is influenced by a host offactors in addition to growth. These factorsinclude the pattern of public expenditures,the nature of existing safety nets, and theinstitutional arrangements for sharing thebenefits of growth. Moreover, opennesscould affect employment adversely, at leastin the short run, as it takes time for laborand capital to shift from import-competingindustries to expanding, newly competitiveexport industries.Given the theoretical ambiguity about therelationship between openness, growth, andpoverty, there is, however, some evidence tosupport three broad conclusions. First,openness is associated with faster economicgrowth. Second, economic growth isassociated with a reduction in poverty.Third, these positive results hold onaverage, leaving some countries, regions,and groups adversely affected byglobalization.On the link between openness and growth,an IMF study (2000) shows that global percapita growth increased five-fold during thetwentieth century. Most of the increase tookplace in the second half of the century,when trade and later financial liberalizationincreased rapidly (Figure 1.5). In contrast,per capita income declined to less than 1 percent in the period 1913-1950, when theworld became less integrated because ofexcessive protection and pervasive capitalcontrols.Other studies reach similar conclusions. Forexample, Sachs and Warner (1995) find apositive association between growth andopenness. Frankel and Romer (1999) showthat an increase of one percent in the ratio oftrade to GDP increases per capita income by1.5-2 per cent. Edwards (1998) findssupporting evidence to the notion thatopenness improves total factor productivityand faster economic growth.On the link between globalization andpoverty, Figure 1.6 shows that countries,which achieve rapid economic growth, alsomanage to reduce poverty (East Asia).Similarly, it shows that countries that growthe least fail to eradicate poverty(Sub-Saharan Africa). MENA and LatinAmerican countries fall somewhere inbetween, where both regions grow modestlyand reduce poverty also modestly. Themagnitude of the impact of growth in percapita income on the poor, for a largesample, shows that growth in the income ofthe poor (defined as the bottom fifth of thepopulation) rises about one-for-one with thegrowth rate of overall per capita income.This is not to say that poverty has beeneliminated. On the contrary, despite anoverall reduction in the number of the poorworldwide (those living on less than $1 aday), the variation across regions is striking.Most importantly, the absolute number ofthe poor has declined appreciably only inEast Asia, but has increased almosteverywhere else. The incidence of poverty,defined as the share of the population livingon less than $1 a day, has also declined inEast Asia, and to a lesser degree in the restof the developing world. However, it hasincreased in Europe and Central Asia,following the dramatic change in theireconomic systems. In short, not alldeveloping countries are benefiting from thenexus of globalization, growth and povertyreduction. Much depends on what thesecountries do along with globalization.%Charge in Poverty Rate4.03.02.01.00.0Figure 1.5 : Global per Capita Real GDP Growth(Average annual percentage change)1900-13 1913-50 1950-73 1973-2000Europe & CentralAsiaSub-Saharn-8-12MENA0-4 -2 0 2 4 6 8Latin America-4-16Per Capita GDP GrowthOn the link betweenglobalization andpoverty, countries,which achieve rapideconomic growth,also manage to reducepovertyFigure 1.6 : Relation between Poverty Reduction andGrowth, 1989-98(%)4South AsiaEast AsiaEgypt Human Development Report 2000/2001 - 17

Globalization and Human DevelopmentGlobalization is notthe only factor thataffects the demand forand incomes ofdifferent factors ofproduction.Globalization and InequalityIn principle, openness should reduce inequalitybetween developed and developingcountries. The rapid economic growth ofthose developing countries which openedtheir markets to free trade during the lastthree decades of the twentieth century hasstimulated a large empirical and theoreticalliterature on the impact of trade on growth.There seems to be much evidence of a linkbetween openness and growth during thelast part of the century. In fact, internationaltrade seems not only to have a positiveimpact on growth, but also seems tofacilitate convergence between economiesas predicted by neoclassical growth models(Williamson, 1996). This is becauseopenness increases the demand for thefactor of production that is relativelyabundant in the liberalizing country (laborin developing countries), but relativelyscarce in the rest of the world. Higherdemand for labor in developing countriesshould bring about pressure for price (wage)equalization across countries (according tothe Stolper-Samuelson theorem), therebyraising the standard of living in the poorercountries. Within rich countries, openness isexpected to increase income disparitybetween skilled and unskilled labor ascapital migrates to developing countries forcheaper unskilled labor.These predictions may not hold in practicefor several reasons. Because labor is lessmobile than capital, it is more vulnerable totaxation. Put differently, while capital canescape taxation, labor cannot. The relativemobility of capital and the relative fixity oflabor also tend to weaken the bargainingposition of trade unions for higher wages incountries where trade unions are strong.Finally, and perhaps more importantly,globalization is not the only factor thataffects the demand for and incomes ofdifferent factors of production. The patternof production, investment and technologyhas important effects on the demand forlabor with different skills, withunpredictable effects on income distributionwithin countries.In view of this ambiguity, it is important tolook at the evidence to see whether there isany association between globalization andequality across and within countries. As forinequality across countries, the data show asignificant increase in the average per capitaincome of the rich and poor countriesduring the twentieth century. However,progress has been uneven, with the richestcountries doing relatively better than thepoorest. According to the IMF (2000), therichest quarter of the population saw asix-fold increase in their per capita income,while the poorest quarter saw only anincrease of less than three-fold (Figure 1.7).In recent decades, which coincided withincreased globalization, data from theWorld Bank shows that the average percapita income in the richest twentycountries was fifteen times that of thepoorest twenty in 1960. This gap has sincedoubled to reach thirty times, with percapita incomes in the poorest twentycountries hardly changing, if not falling insome cases. It can therefore be concludedthat globalization is associated with greaterinequality across countries.As for inequality within countries, theevidence suggests that there is no simpleassociation between the changes in tradeopenness and the changes in inequality(Figure 1.7). There are, of course, countriesthat experienced increased inequality asthey integrated globally. In the developingworld, such countries include Argentina,Chile, Colombia, Costa Rica, Uruguay andChina. Similarly, trade liberalization inMexico in the mid-to-late 1980s led to arelatively higher increase in the wages ofhigh-skilled workers relative to unskilled.And in the US, the evidence shows thatwages of high school educated males fell 20per cent between the mid 1970s and mid1990s. But, as Figure 1.8 suggests, there arealso many countries where inequality fellwith more trade openness. Accordingly, itcan be concluded that changes in inequalitywill largely depend on the initial conditions(such as the distribution of human capital,land and capital) at the time ofglobalization, as well as government actionsto enable the poor and the unskilled tobenefit from more openness.Globalization and the Quality ofLifeIncomes do not tell the whole story, and it isindeed possible to find countries that did18 -Egypt Human Development Report 2000/2001

Globalization and Human Developmentnot make a lot of progress in terms of percapita income but succeeded in improvingthe quality of life for its citizens (e.g. SriLanka). The question is whetherglobalization is necessarily associated withsuch improvements.In principle, the answer to this question isunclear. On the one hand, it could be arguedthat globalization improves the quality oflife because it exposes the population of theworld to living conditions across nations.As a result, it increases the pressure ongovernments to allocate public investmentto improve health, education and theenvironment. At the same time, globalizationfacilitates the process of acquiring the latestinnovations that have bearing on the qualityof life. On the other hand, thecounter-argument is that globalizationencourages conspicuous consumption ofgoods and services that cannot be affordedby the poorer consumers in developingcountries. It also leads to greatercompetition from imports, which causesdislocation and unemployment, at least inthe short run. Furthermore, it encouragesthe migration of polluting industries fromdeveloped to developing countries, tobenefit from less restrictive environmentalregulations and weak enforcement.20000150001000050000Figure 1.7 : Per Capita GDP(1990 purchasing-power-parity dollars)Low income quartileMiddle incomeMiddle high incomeHigh income1900 2000Figure 1.8 : The Relation Beteen Inequality and GrowthGiven these divergent arguments, the issuebecomes once again an inquiry into theresults of empirical investigations regardingthe link between globalization and qualityof life. But this is a difficult task. Measuringchanges in quality of life over time is noteasy. Nor are attempts to relate this changeto globalization.Data show that the human development gapbetween poor and rich nations has declinedover time. But the data also reveal thatprogress has been uneven across regions. Inthe developed world, North America andWestern Europe, as expected, enjoy a HDIabove the cut off point of 0.8 for thecategory of high human development. In thedeveloping world, only Latin America andEast Asia (excluding China) fit thiscategory. At the other end of the scale,South Asia and Africa lag behind, with aHDI below the low development cut offpoint of 0.5.Egypt Human Development Report 2000/2001 - 19

Globalization and Human DevelopmentBox (1.2)Women and globalizationByThe National Council for WomenIn general, globalization has strengthenedwomen’s position. Their participation inmarket economy has also been fostered bythe tide of globalization. However, thisdevelopment has been uneven whetherbetween countries or among differentsocioeconomic groups within the samecountry. Indeed, globalization has also led tomore deepening of gender inequality onthese two levels.The issue of women and globalization is onethat concerns all mankind, men or women.The subject of globalization and its impacton women has been of considerable interestin most countries. The main objective of thefollowing paragraphs is to carry this subjectto the core of Egypt's interest in the genderissues.Tackling this question in different worksallover the world reveals that there are twoviews. The first considers that globalizationhas been a source of more pressures andresponsibilities on women, while the secondviews globalization as a source of severaladvantages for women. In fact, both trendsare bearing non-negligible traits of reality.On the one hand, globalization isincontestably a source of more pressures andresponsibilities on women due, among otherreasons, to:● Its negative impacts on the distribution ofincome among developed and developingcountries, socioeconomic strata within thesame country,● Its destructive impact on many traditionalemployment opportunities,● Its demonstration effect on consumptionespecially in the developing countries andamong the low-income and poor peopleall over the world,● Its concomitant socio-politicaldisturbances resulting from excessiveindividualism, regressive moral andspiritual values, and increasing marketaggressiveness especially towardsvulnerable countries and socioeconomicgroups within the same country, and● The proliferation of violence andcounter-violence resulting from its failure,till now at least, to attenuate the aggressive,and excessive, use of power at the differentsocietal levels, including the internationalcommunity.On the other hand, globalization is likely tobe advantageous for women given that:● It helps disseminate the gender cultureallover the world,● It fosters the development of nongovernmentalorganizations and actions thatcould help defend the cause of womenwherever gender inequalities work againstthem for whatever reason,● It provides a world-wide exchange of genderdata, information, and experiences,● It involves transformation in employmentqualifications and skills in such a way thatincreases women's opportunities in the labormarket, and● It calls forth the empowerment of women tomobilize all human resources to meet thechallenges of competition in openinternational markets; this empowerment isnothing but a comprehensive developmentof women through education, health care,access to assets, access to employmentopportunities, access to information anddata techniques and sources … etc.Women and Major Economic Trends inGlobalizationFocusing on its economic aspects,globalization manifests itself in some majortrends among which are the following:1. Increasing role of international economicblocs,2. Application of GATT agreements, and3. Increasing role of transnational corporations.International Economic BlocsSo far, the most important economic blocs inthe world are the EU, NAFTA and theASEAN. The main problem with such blocs is20 -Egypt Human Development Report 2000/2001

Globalization and Human Developmentthat they are committed to serve theinterests of their members in the first place.It is true that almost all agreements of suchblocs express good intentions towardsinternational development and cooperationwith the non-member countries, butpractically speaking their negotiating poweras well as the strength of their economicposition in the world markets enable them toachieve their interests at the expense of thenon-member countries, especially thedeveloping ones. This is apparent in thevolume of intra-bloc trade and between thebloc and other countries, and in globalinvestments. Arab economic integration isbadly needed to strike a balance of interestsin the economic relations between theseblocs and the Arab countries, includingEgypt. Arab women can play a constructiverole in encouraging this integration byseveral means; for example:● Readjusting the household consumptionpatterns in favor of Arab integration,● Laying down concerted bases forenhancing social capital in the Arabnation,● Implementing joint projects for health,education, and other social developmentareas,● Undertaking joint ventures at least in theproduction areas that heavily depend onwomen as workers and as consumers, and● Strengthening Arab women’s associationsto participate more vigorously in thedecision making process.GATT AgreementsGATT agreements could be seen as theeconomic facet of globalization. The impactof these agreements, including theestablishment of World Trade Organization(WTO), on women has been oscillatingbetween positive and negative aspects. Forexample, agricultural foodstuffs, which willno longer be subsidized, will become moreexpensive for importing countries likeEgypt. This will increase the burden womenare bearing in managing the householdbudget and securing enough and balancednutrition to their families. Moreover, mostnegative impacts of economic globalization(like the destruction of many traditionalopportunities of employment, theinequitable income distribution, and thehigh socioeconomic costs of adjustmentsimposed by severe international competition)fall mainly on vulnerable groups including themajority of women. However, GATTagreements could have some positive impactson women if Egypt, or any other country,succeeded in considerably increasing itsexports especially of the agro-industries andthe small and medium firms in which womenare the major workforce (like garments,lingerie, and hand-made products).Furthermore, the TRIPS agreement seems toprovide new opportunities for educated andhighly skilled women in the field ofcommunications. This has been evidenced inthe project set up by a group of women inAmerica, called “The Last Minute”, which hasachieved tremendous profits and is anexample of the opportunities available towomen in the field of communications.Access to such opportunities is still obstructedfor the overwhelming majority of Egyptianwomen who lack education, training, andskills in this area.Transnational CorporationsTransnational corporations are mostly giganticfirms enjoying huge economic power as wellas a considerable influence over the decisionmaking processes in the different countries ofthe world. To what extent these corporationsprovide job opportunities to women and men?And since they require tremendous skills andgreat working capacities, what are theirimpacts on the marginalization ofsocioeconomic groups and on genderdisparities?In this context, we can perceive capitalism,which has not changed its basiccharacteristics. It pays women a third of thewages paid to men. This happens even in theUSA, which come at the top of capitalistcountries; whereas Egypt has been grantingequal opportunities and wages to men andwomen. This was considered a significantprogress, but unfortunately it was not carriedout within a real participatory framework,therefore this equality did not yield all theexpected benefits in eliminating the gendergap in the labor market.The Private Sector: Center of GlobalizationInternational commerce, foreign investmentand interstate migration are not newphenomena. What’s new is the incrediblespeed and wide range of movement of capital,Egypt Human Development Report 2000/2001 - 21

Globalization and Human Developmentwhich is attributed to the removal ofrestrictions on commerce, investment, andmodern information and communicationstechnology.This is what led the private business sectorto consider the whole world as its operatingfield, which means that it is on its way tobecome integrated into the internationalprivate sector. At the same time, the familysector and the NGO sector remain confinedwithin the national economies, which meansthat their chance of achieving globalizationis both weak and partial.Information and communications technologyhas led to a globalization parallel to thesocial movements. Civil communityorganizations of all kinds joined ininternational networks to oppose theinequalities inherent in globalization.It is necessary to identify the features ofgender inequality in traditional communities.Women may experience no discriminationin the work place, but excluding womenfrom participating in international markets -as an employee, working for herself, or asowner of a small project - leads todeepening gender inequality and does nothelp narrowing the gender gap. Moreover,intra-women disparities are wideningbetween women in the developed countriesand women in the developing ones, andbetween a minority of women and theremaining majority within the same country.In both cases, free market and private sectorbased globalization acts in favor of theadvantaged, and at the detriment of thedisadvantaged, groups among women.Relatively speaking, in both types of countriesa minority of women are advantaged byrichness, access to assets, access toinformation and communication technologies,and competitive levels of qualifications andskills.Manifestations of globalizationGlobalization is a multifaceted process thatmanifests itself in the various aspects of life.None of these aspects does not bear traits ofwomen’s influence either directly throughdifferent forms of participation or indirectlythrough cordial relations with men ashusbands, sons, fathers, brothers, or evenfriends. However, manifestations ofglobalization suggest more direct and activeroles for women.Political ManifestationsHuman rights, democracy, equalopportunities, social integration, tolerance andthe liberty of conviction are major axioms inthe political manifestations of globalization.Women, as the first tutors of new generations,have a strategic role in implanting thesevalues and translating them into individualand collective comportment within eachsociety and among nations. Education, accessto the sources of different cultures, access toinformation and mass media, and activewomen’s associations are all necessaryprerequisites to enable women to play thisrole.Economic manifestationsSince women are responsible for managingthe family budget, they can play an importantrole in rationalizing the consumption patternsand behaviors to cope with the householdresources and the national productivecapacity. This meets the challengeglobalization imposes on the developingcountries, including Egypt, through twointerrelated economic manifestations; namelyfree trade and the demonstration effect.Playing this role successfully can helpavoiding complications that result from thebalance of payments deficit; something ofspecial importance to Egypt that sufferschronic deficit in its trade balance and acritical situation of the balance of payments ingeneral.Cultural ManifestationsIt is necessary to differentiate between twoconcepts, the culture of globalization andcultural globalization. So far, the culture ofglobalization has been largely based on amajority of principles reflecting thepredominance of western civilization withoutdistinction between what is positive and whatis negative in this civilization. Women all overthe world should participate actively infostering the positive aspects while fightingagainst the negative ones. Moreover, theculture of globalization need to be enriched bydiversity and openness vis-à-vis the othercultures especially in Africa, the Middle East,and Asia.22 -Egypt Human Development Report 2000/2001

Globalization and Human DevelopmentThere is also the problem of culturalglobalization through the media. Theabsence of Arab countries from this globalarena and from the dialogue amongcivilizations may impose certain moralvalues conflicting with our own values. Thatis why participation in the dialogue ofcivilizations has become a necessity.In Egypt, women have been grantedimportant rights. Previously, these issueswere discussed through feministmovements, but actually they have becomenational issues. Despite this progress, a gapstill exists between what we seek and whathas been accomplished. Some customs,traditions, and cultural heritage areresponsible for this gap and need to bereconsidered.This could be achieved through reshapingthe Egyptian personality and encouragingchildren and adolescents to be acquaintedwith different cultures through reading andparticipating in discussions based on theirreadings; which is a main objective of the“Reading for All” project sponsored by herexcellency Suzan Mubarak, the First Ladyof Egypt.Modern Technology and CommunicationMediaModern technology is widely accessible andrapid communications in this age representan important dimension of globalization.With increasing deregulation, moderninformation and communicationstechnology, especially the Internet, canremold the modus operendi of markets,which would benefit those who areprivileged with the possession of knowledgeand skills. Increasing trans-continental workopportunities have opened a number ofopportunities to women in the south interms of access to data collection,reproduction, etc. However, most womenwho can benefit from these privileges arewell educated and belong to the highincome groups, while women with little orno education usually the elderly, aremarinated.Consequently, women must have a powerfulvoice in dialogues concerning the policies tobe drawn for improving trainingopportunities for women and providingsocial protection for those who areadversely affected.The InternetThere is inequality and discrepancy betweenmen and women in countries using theInternet, as men have higher opportunity touse technological equipment. Internet hashelped women gain knowledge andinformation; especially in countries in whichcustoms and traditions impose on them acertain form of isolation. It has also increasedwomen’s ability to gain information.Increasing the ability to use the Internet is buta part of a more general discussion, whichfocuses on the obstacles impeding the humandevelopment of women as compared to men.The Internet can be transformed from atechnical to a political tool to gain support andbacking in various regions according to thecultural perspective of various women’sgroups throughout the world.One of the advantages of informationtechnology for women is the formation of awomen’s rights network, which is a nongovernmental network linking organizationsconcerned with gender issues and defenders ofwomen’s rights throughout the world.E-CommerceE-commerce is the purchase of, and paymentfor, goods and services throughout theInternet. This helps open the field for womento enter wider and faster markets whilereducing the costs of transactions. Therefore,training on the use of e.commerce helpswomen develop and widen their relations withothers who share the same intereststhroughout the world.Courses like these help women recognizemarketing opportunities and discover methodsto combine local resources with manufacturedproducts and thus market their productsdirectly without intermediaries.Moreover, since the mobility of womenamong different market places is usuallyconstrained by their multiple roles in indoorand outdoor activities, e.commerce seems tobe of particular importance to marketing theirproducts. This has been evidenced by the factthat women’s participation in e.commerce hasreached 78 - 80% of this trade.E.Conferences and ConsultanciesE.conferences and consultancies figure amongthe most important outcomes of the revolutionEgypt Human Development Report 2000/2001 - 23

Globalization and Human Developmentin communications technology. Conferencesand consultancies through the Internet opennew era in providing many services ineducation, health, technical assistance, andexchange of expertise, as well as wideningthe scope of participation. This has beenillustrated in the preparation for the BeijingConference to ensure the participation of thelargest number of women.The rapid advance and spread of thistechnology means that a large number ofwomen in developing countries are exposedto marginalization due to their inability toafford the necessary skills and money toaccess the Internet services. To alleviate thisrisk, UNIFEM, in cooperation with allnetworks that support women, haveemphasized the gender concept and focusedon the support of women and theirparticipation in the information andcommunications sector.The above mentioned remarks do not exhaustall the implications of globalization towomen’s status and the development ofgender gaps as well as the efforts needed tobridge these gaps. Exhaustive deduction andanalysis of these implications are, certainly,beyond the scope of this short notice onwomen and globalization; however, such ananalysis merits being a subject of highlyelaborated study.24 -Egypt Human Development Report 2000/2001

Chapter TwoThe Economic Well Being of Egyptiansin a Globalized World“No country can follow a course of lopsided development for such along time –where economic growth is not matched by advances inhuman development, or vice versa.”(Human Development Report 1996)Egypt’s development over the last fourdecades of the twentieth century(1960-1999) has featured an economicstruggle towards raising living standardsand a social struggle towards enhancinghuman development and providing equalopportunity to all. Egypt today is moreprosperous than forty years ago. Per capitaGDP has doubled, in real terms, between1965 and the end of the1990s. Egypt’s GDPmore than quadrupled during this period.But these trends mask great unevenness.Deprivation and inequality leave largedisparities between regions within thecountry and between groups of people insociety.The early part of this period (1960-1973)was dominated by a socialist ideology,reflected in public sector dominance in alleconomic activities; an import-substitutingproduction and growth strategy; a socialcommitment to provide employment to theeducated labor force, and free socialservices (particularly education and health)to all; as well as open ended food subsidiesand a heavily centralized public administration.A significant expansion of education andhealth services, and guaranteed jobs in thepublic sector, were achieved.By the mid-seventies, these costly policieshad been revised under the Open DoorPolicy. Increased participation of the privatesector in investment and in variouseconomic activities was encouraged,opening up to foreign direct investmentachieved, and a rationalization ofgovernment intervention in productionactivities observed. Nevertheless, theinherited social commitment of thegovernment of Egypt (GOE) to providesocial services and subsidies wasmaintained. Over the decade (1974-1985),although the GOE encouraged privateinitiatives and attempted to withdraw fromvarious activities previously monopolizedby the public sector, it continued to providewidespread subsidies to both consumers andproducers. Furthermore, the social safetynet was enlarged to cover segments of thepopulation that had not been covered underthe national insurance schemes. Thisgenerous social spending was sustained byan unprecedented flow of external resourcesfrom increased petroleum exports andprices, remittances from Egyptians workingin the Gulf countries, flourishing tourismreceipts and Suez Canal tolls.However, economic difficulties on theexternal front exposed the fragility of thedomestic economy and revealed that thesepolicies were unsustainable. The vast publicspending on subsidies was untenable.Overstaffing in government administrationand the public sector was responsible fordepressing real wages and productivity. Theobserved growth of the preceding periodslowed down. Mounting external indebtednessput increasing pressure on the externalbalance. This period (1986-1990) wascharacterized by repeated and fragmentedattempts to restore both the external andinternal balances, and to redress theeconomic situation, but with no significantsuccess.By mid-1991 the GOE had adopted acomprehensive stabilization and structuraladjustment program, which gained thesupport of the IMF and the World Bank.Fiscal, monetary and foreign exchangepolicies were revised and rationalized, andmacroeconomic balances restored. Thesemeasures included the control of inflation,restoration of fiscal balance and of thecurrent account balance, the stabilization ofthe exchange rate after a marked devaluationOverstaffing ingovernmentadministration and thepublic sector wasresponsible fordepressing real wagesand productivity.Egypt Human Development Report 2000/2001 - 25

The Economic Well Being of Egyptians in a Globalized WorldOpening up to globaltrade is not simply amatter of reducingtariff rates andremoving barriers tocommodity flows.in 1991 and the liberalization of the traderegime. The former import-substitutingstrategy has been discarded in favor of anexport promotion drive. Opening up toforeign trade is increasingly beingattempted. Successive reductions in tariffrates and the elimination of non-tariffbarriers to trade have been implemented.Generous fiscal incentives for privatedomestic and foreign investments have beencreated.In spite of this successful overallstabilization, little has been achieved in thearea of structural adjustment, such asbureaucratic and institutional reform,legislative simplification and modernization,consistent productivity growth andprivatization. However, the infrastructurehas been mostly expanded and upgraded,population growth has slowed down sincethe beginning of the nineties and attemptsmade to reduce overcrowding in the oldvalley and in major urban centers. Largeinvestment projects in regional developmentare being implemented and industrialpollution combated. Nevertheless, thecontinuous concern of the GOE to maintainfiscal balance, and at the same time toensure provision of social services to anever-increasing population, in particularuniversal enrollment in basic education andincreased access to health services, hasresulted in a marked deterioration in thequality of such services.Determinants of Overall IncomeGlobalization, as mentioned in the previouschapter, involves openness to trade flows,labor movements and capital flows. Egypt,since the mid-seventies, has strived to openup its economy to such flows. Labormigration, particularly to neighboring Gulfcountries, generated massive remittances,which have been pivotal in raising thematerial welfare of Egyptians. The impactof such remittances is implicit in theindicator used for the level of overallincome, namely real gross national product.But a question is raised on the effect of theother two globalization-related factors, tradeopenness and foreign investment. These aresaid to be good for growth, but there is aneed to test this assumption for the Egyptianeconomy.The objective then is to examine the impactof the different explanatory variables oneconomic growth. These explanatoryvariables are government consumptionexpenditure, gross fixed capital formation,trade openness measured as the ratio ofexports plus imports to GNP, foreigninvestment, and the consumer price index,as a proxy for inflation.It appears that overall: governmentconsumption expenditures had a negativeimpact on gross national product, with theexception of the sub-period 1986-1990;gross fixed capital formation did not show asignificant impact on the level of grossnational product; trade openness has notshown any significant impact over thewhole period, with the exception of thesub-period 1986-1990; foreign investmentshave contributed to enhancing GNP; and theexpectation of higher prices has stimulatedreal national product. This supports theconclusion that openness, and moregenerally, global integration, did notrespond to Egypt’s developmental needsand had no significant impact on thedetermination of the level of gross nationalincome.In fact, opening up to global trade is notsimply a matter of reducing tariff rates andremoving barriers to commodity flows. Itrequires deep institutional reform, whichrequires financial and bureaucratic resourcesas well as managerial capabilities andpolitical will. While these reforms may beconsistent with development needs, they arenot directly targeted at such needs asreflected in higher GNP, improvedindustrial and technological capability andpoverty alleviation. There may even becompetition over scarce available resources,thus confronting decision makers with aproblematic trade-off. Looking at Egypt’sdata, opening to international trade has notnecessarily been growth enhancing in itself.It should rather be part of a broaderdevelopment strategy targeting growth andpoverty alleviation. However, the impact ofexternal capital flows has persistently beenpositive.Impact of Economic Growth andOpenness on Income of the PoorThe relationship between income of the26 -Egypt Human Development Report 2000/2001

The Economic Well Being of Egyptians in a Globalized WorldBox (2.1)Savings and InvestmentRapid growth requires high domesticsavings and investment rates. Egypt isknown to suffer from a very lowsavings/income ratio. Savings to GDPaveraged 17.9 per cent per annum in the1980s and declined to 15.1 per cent duringthe 1990s. These saving levels aresignificantly lower than those of the rapidlygrowing countries of East Asia, whichexceed 30 per cent. Similarly, the annualaverage of Egypt’s investments to GDPdeclined from about 30 per cent for 1981-90to approximately 20 per cent for 1991-2000.This decline in investments was partly causedby the effort towards redressing themacroeconomic imbalances during the reformperiod. It is now necessary to raise these ratiosand ensure the efficient allocation ofinvestments as an important requirement tostimulate competitiveness of the economy andto enhance the ability to capture theopportunities offered by globalization.poor and the level of overall income inEgypt has been investigated. The dependentvariable, namely income of the poor, isproxied by the percentage ratio of income ofthe poorest quintile (poorest 20 per cent) tototal income. The explanatory variableswere gross national product, trade openness,foreign investment, governmentconsumption expenditure, gross fixedcapital formation and the consumer priceindex.This relation suggests that a 1 per centincrease in gross national product raises thepercentage of income of the poorest 20 percent of the population to total income byaround 0.14 per cent, which supports thehypothesis that income growth over the lastthird of the twentieth century has tended toincrease the share of the poor in nationalincome. However, the sub-period 1986-1990points to a tendency towards a downwardshift in the share of total national incomegoing to the poor during these years.An alternative model used was to directlyregress the share of income of the poorestquintile on various explanatory variables,including real gross national product, tradeopenness, foreign investment, governmentconsumption expenditure, gross fixedcapital formation and the consumer priceindex as a proxy for expected inflation.It is worth noting that the level of grossnational product has been positivelyassociated with an increased share of thepoorest percentile in GNP. The period1974-1985 has been particularly favorableto the poor, which have also been shelteredfrom inflation by the subsidization programsof the GOE.Gross fixed capital formation andgovernment consumption expenditures havetended to depress the share of incomeaccruing to the poorest quintile over almostall sub-periods under consideration. Tradeopenness has tended to depress this shareduring the last sub-period 1991-1997, whileforeign investment has had a positivelysignificant impact during the period1986-1990.Thus, the evidence revealed by the Egyptianexperience is that the share of income goingto the poor has tended to rise with grossnational product. However, integration inthe global economy, as reflected in tradeopenness, has shown negative impact on thepoor, unlike foreign investments, whichhave tended, in some episodes of Egypt’srecent development, to positively affect thepoor’s share of income. We may, thus,conclude that increased GNP has beenhelpful in alleviating poverty, in the sense ofenhancing the share of income of the poor.But this does not ensure improvement of thesocial conditions of the deprived, such aseducation, health care, access to credit, legalprotection and other means of empowerment.Improving such conditions involves apolitical process by which the requiredarrangements are prioritized. Enhancedincome does not necessarily ensureimprovement of human development andadequate provision of social services to thedeprived.Evidence revealed bythe Egyptianexperience is that theshare of income goingto the poor has tendedto rise with grossnational product.Egypt Human Development Report 2000/2001 - 27

The Economic Well Being of Egyptians in a Globalized WorldHuman developmenthas been defined asenlarging people'schoices in a way thatenables them to leadlonger, healthier andfuller lives.Trade Openness and Equality ofIncomeIn order to analyze the impact of opennessto international trade and to foreigninvestment on inequality of incomedistribution, other variables, such as GNP,inflation, government consumptionexpenditure and gross capital formation aretaken into account.Income inequality has been measured bythe Gini index. Five points in time wereavailable from Family Budget Surveys.They were successively 27.7 per cent in1964/65, and 31.2 per cent in 1974/75,indicating deterioration in the pattern ofincome distribution. The index declined to29.6 per cent in 1981/82, pointing to areduction in income inequality. It thenrose again to 35.1 per cent in 1990/91,attesting to an increase in inequalityfollowed by a decline to 29.9 per cent in1995/96, indicating an improvement in thepattern of income distribution. It appearsthat trade openness has had a positiveeffect on the Gini index, indicating anegative impact on income distribution.Foreign direct investment and the pastlevel of GNP however both showed abeneficial impact on the pattern of incomedistribution (a negative effect on the Giniindex).Surprisingly, the consumer price index, as aproxy for inflation, has also shown anegative association with the Gini index,pointing to a beneficial effect on the patternof income distribution. This may beexplained by the continuous consumersubsidization policy that the GOE adoptedthroughout the period until the beginning ofthe nineties. This has sheltered consumersfrom the distributional effects of inflation.In addition, gross capital formation hasshown a negative impact on incomedistribution, showing that investment policyhas not been explicitly aimed at achievingequity. On the contrary, it has shown anegative effect on the pattern of incomedistribution. Finally, it appears that theconsumer subsidization policy during thesub-period 1974-1985 has been particularlyfavorable to the poor, and has improvedequity in distributionCombining Growth andRedistribution Effects on Incomeof the PoorIt is worth noting that the scarcity of data onincome distribution limits what canconfidently be said about the ultra poor inthe country, for example the bottom 10 or 5per cent of income distribution. Changes inthe distribution of income within the lowestquintile have probably occurred over time,but what the available data allows us toidentify is average income in the lowerincome bracket, regardless of redistributionwithin this bracket. The analysis is thusrestricted to the impact of redistribution onthe share of income of the bottom 20 percent of the population, disregardingredistribution of income within this bracket.As expected, the results rightly indicate thatany improvement in the pattern ofdistribution (associated with a decline in thevalue of the Gini coefficient) leads to ahigher share of income accruing to thepoorest quintile in the population.Conversely, a deterioration of the pattern ofdistribution (higher Gini) is reflected in adecline of the share of the poorest quintilein income. It also appears that themagnitude of this response varies betweensub-periods. The results also show thathigher GNP has had a positive impact onthe poor during the first (1965-73) and last(1991-97) sub-periods, thus dampening theredistribution effect. However, increasedlevels of GNP during the periods 1974-85and 1986-90 have not favored the poorersections of the population and have thusreinforced the negative impact of incomeredistribution.Income Growth and HumanDevelopmentHuman development has been defined asenlarging people's choices in a way thatenables them to lead longer, healthier andfuller lives. This definition of HD is verybroad. It involves not only economicelements but also social, political, cultural,28 -Egypt Human Development Report 2000/2001

The Economic Well Being of Egyptians in a Globalized WorldBox (2.2)Does Economic Growth Stimulate Human Development?It is clear from the literature, that we canexpect important causal connections to existbetween economic growth (EG) and humandevelopment (HD) achievements, but thatthese connections are not automatic. Thestrength of the links by which EG istranslated to HD varies according to a widerange of factors.GDP per capita growth contributes to HDmainly through household and governmentactivities and policies. The effect of afamily’s income on human developmentdepends not just on the size of the incomebut also on how the family chooses to spendit. Households' propensity to spend theirdisposable income on items whichcontribute most directly to the promotion ofHD in poor countries, such as food, potablewater, education and health, varies,depending on such factors as the level anddistribution of income across households, aswell as on who controls the allocation ofexpenditure within households. El-Laithy etal. (1999) point to the positive effects ofhigher family income on school enrollment.Higher incomes also help improve health.Several studies show that an increase inhousehold income is associated withimprovements in such health indicators asheight-for-age ratios and survival rates.These indicators also correlate strongly withthe mother’s education level. Moreover,other studies suggest that income is morelikely to be spent on human developmentwhen women control the cash. Therefore,female literacy and participation in the laborforce play a crucial role in strengthening thelink between EG and HD.Expenditure on HD-related items is stronglyaffected by the rate of poverty reduction. Notsurprisingly, if poor households receive extraincome, they significantly increase their foodexpenditure and caloric intake. When womencontrol cash income it appears thatexpenditure patterns are geared relativelymore towards HD inputs, such as food andeducation. Additionally, the way in whichgrowth translates into income distribution andpoverty reduction depends on the nature of thegrowth process itself, particularly on theextent to which it is based on the generation ofemployment and on increasing rural incomes.Government policies can encourage patternsof growth that create jobs, increase real wagesand raise market demand for human capital,and thus demand for health care and educationthat enhance this capital. The allocation ofresources to improve HD is a function of totalpublic expenditures, of how much of thisflows to the HD sectors, and of the way inwhich it is allocated within these sectors.In summary, it is legitimate to hypothesizefrom this review of the links betweeneconomic growth and human development,that the connection between EG and HD islikely to be stronger:● The lower the proportion of the populationbelow the poverty line; for a given level ofGDP per capita, that is, the more equitablyincome is distributed;● The more income households allocate to HDat a given income level; this will beevaluated by the level of female educationand by female participation in the laborforce.and most importantly, security dimensions.Therefore, when measuring and monitoringhuman development, it is desirable toinclude many variables, to obtain ascomprehensive a picture as possible of thisphenomenon. The UNDP human developmentindex (HDI) has focused only on threeessential elements of human welfare: lifelongevity, knowledge and decent livingstandards. Because of the scarcity of data onmany indicators, HDI uses only oneindicator for each element, namely lifeexpectancy at birth, educational attainmentand GDP per capita. Many indicators andelements of human well-being are omittedsimply because there are too few countrieswith comparable reliable data.However, an assessment of progress in HDand its relationship to economic growth,using HDI only, can be misleading. HDIcannot reflect the short-term impact ofpolicies, since it is based on someindicators that are slow to change, such asadult literacy and life expectancy.Although the combined measure of schoolAn assessment ofprogress in HD and itsrelationship toeconomic growth,using HDI only, canbe misleading.Egypt Human Development Report 2000/2001 - 29

The Economic Well Being of Egyptians in a Globalized WorldBox (2.3)Does Human Development Impact Economic Growth?The connectionbetween HD and EG,is likely to be strongerthe more equitable thedistribution ofincome, the moreeducated women are,and the lower theunemployment rate.The many ways in which humandevelopment contributes to economicgrowth have often been emphasized. Inrecent years an increasing number of studieshave documented the strength and diversityof the links between the two.The strength of the links between humandevelopment and economic growth depends,firstly, on the accumulation of human capitalthrough investments in health and nutrition,education and skills training, and R&D.Secondly, it depends on accessibleopportunities for people to contribute toeconomic development through social,political, and economic participation.Evidence suggests that as people becomehealthier, better nourished, and moreeducated, they contribute effectively toeconomic growth. A higher levels of HD, inaddition to being an end in itself, affects theeconomy by enhancing people's capabilitiesand consequently their creativity andproductivity. Clearly, the health andeducation of a population are among themain determinants of the composition andgrowth of output.Numerous studies indicate that increases inearnings are associated with additional yearsof education. Education is also an importantcontributor to technological capability andtechnical change in industry. The higher thelevel of education attained by the workforce,enrollments and average income is moreresponsive to annual changes, whenaggregated to the national level, it still failsto give credit to policies that raiseenrollment among marginalizedcommunities, or that tackle income povertyamong the most deprived. Thus, beforeexamining the interaction betweeneconomic growth and HD, three questionsshould be answered. First, should we use abroader HD concept to include more socialand economic indicators than those used inHDI? Second, what are the HD dimensionsthat are most relevant to economic growth?And, finally, how can these dimensions bemeasured and combined into one singlemeasure?the higher overall productivity is, because themore educated are more likely to innovate,and thus affect everyone's productivity.Furthermore, education may affect per capitaincome growth through reducing populationgrowth. Income distribution also appears to beimportant to this link. Recent empiricalevidence suggests that the distribution ofassets and income has an effect on economicgrowth, with a more equitable distributionfavoring higher rates of growth. Oneexplanation is that a more equitabledistribution of assets and income impliesbetter nutrition and a stronger demand foreducation and hence higher labor productivity.The strength of these various links variesconsiderably and there is no automaticconnection between an improved level of HDand increases in per capita GDP. Creating alarger pool of educated people is not sufficientto stimulate growth; there must also beopportunities for them to be productivelyemployed. Besides, human development alonecannot transform an economy. Even skilledand vigorous people need machinery,buildings and infrastructure to complementtheir efforts to enhance growth.In summary, the connection between HD andEG, is likely to be stronger the more equitablethe distribution of income, the more educatedwomen are, and the lower the unemploymentrate.Variations in the currently used HDI mainlyreflect long term indicators that are slow tochange. It is thus useful to introduce moredimensions and indicators into the analysisto account for short and medium termchanges. Accordingly, a broader humandevelopment index (BHDI) has been constructedfor Egypt, using disaggregated data at thegovernorate level (See Annex 2.1).Interaction Between EconomicGrowth and Human DevelopmentThe relationship between HD and EGacross Egypt’s governorates over twosuccessive periods, 1986 - 1990 and1990-1996, is shown in Table (2.1). Human30 -Egypt Human Development Report 2000/2001

The Economic Well Being of Egyptians in a Globalized Worlddevelopment in each period is expressed asthe percentage change in shortfall of BHDI,by governorate, with respect to itsmaximum value of 100; while economicgrowth is reflected by the annual per capitaGDP growth over each period. It appearsfrom the table that HD and EG do notnecessarily move in the same direction overtime or across governorates. To take a fewexamples, with over 4 per cent annualgrowth in real GDP per capita in 1986-90,Port-Said achieved nearly a three to fourtimes reduction in the shortfall of BHDIcompared to Damietta, Gharbia andIsmailia, while Dakahlia achieved about halfof this reduction (24.2 per cent compared to45.8 per cent in Port-Said) with 5.4 per centGDP growth. At the national level, areduction in shortfall of BHDI by 17.4 percent has been achieved with a per capitaGDP annual growth rate of 3.6 per cent overthe period 1986-1990, while a similarreduction (17.8 per cent) has been achievedwith a decline in GDP per capita growth of1.5 per cent over the period 1990-1996.Is There a Causal RelationshipBetween HD and EG?The causal link between HD and EG hasbeen quantitatively examined on its twowaydirection, i.e. from EG to HD and fromHD to EG, using disaggregated data at thegovernorate level and over two periods ofanalysis, 1986-1991 and 1991-1996.The Link from EG to HDFor this link, the dependent variable chosenas a proxy for achievement in humandevelopment was the shortfall reduction inBHDI.The selected explanatory variables were:● GDP per capita growth rate as a measureof overall EG● Social expenditure, defined as averagepublic expenditure on education andhealth for the period 1993-1996HD and EG do notnecessarily move inthe same directionover time.Table (2-1)Relation Between HD and EG Across Governorates 1986-1990 and 1990-1996Urban GovernoratesCairoAlexandriaPort SaidSuezLower EgyptDamiettaDakahliaSharkiaQaliubiaKafr-El-SheikhGharbiaMenufiaBeheraIsmailiaUpper EgyptGizaBeni-SuefFayoumMeniaAssiutSohagQenaAswanBorder GovernoratesNational AverageBHDI reductionin shortfall23.6616.6345.7715.4513.8624.1712.0711.5414.2411.879.951.7214.7512.917.016.732.841.374.575.1919.5620.1317.351986 - 1990Annual GDP percapita growth2.202.674.373.944.095.433.601.816.244.240.431.624.181.181.44-1.972.703.343.024.062.991.923.61BHDI reductionin shortfall50.2923.9596.6573.2318.8316.4722.2919.4515.3126.4119.7215.1023.5930.9712.728.4113.342.697.348.0413.6321.2017.801990 - 1996Annual GDP percapita growth3.40.81.712.4-8.9-9.6-2.8-0.1-8.9-1.51-2.3-0.21.34.1-1.9-1.8-1.7-2.8-4.2-1.23.04.3-1.49Egypt Human Development Report 2000/2001 - 31

The Economic Well Being of Egyptians in a Globalized WorldFemale indicators arelikely to be associatedwith improvements innutrition, health andeducation indicatorsand hence increaseproductivity.● Several measures of income distribution,i.e. Gini coefficient and income share ofthe bottom 40 per cent● Change in the female unemployment rate.A decline of this indicator is likely to beassociated with greater female controlover household spending, thus tending toimprove HD● Change in the overall unemployment rateExamining the relationship betweeneconomic growth and human developmentshows that the impact of GDP per capitagrowth proved to be significant, with highergrowth of per capita income leading tobetter HD performance. According to themodel, one percentage point increase in theaverage growth rate of GDP per capita isestimated to reduce BHDI shortfall byaround four percentage points over theperiod. Social expenditure on education alsoproved significantly positive. For everypercentage point increase in average socialspending on health and education, BHDIshortfall decreases by 0.13 percentagepoints. An interesting finding is that theunemployment rate for males does not seemto affect human development, while onepercentage increase in female unemploymentrate increases BHDI shortfall by 0.41 percent. As expected, income maldistributionproved to affect HD negatively. This meansthat a more equitable distribution seems topromote human development. Onepercentage decrease in the Gini coefficientreduces BHDI shortfall by 4.9 per cent.The Link from HD to EGFor the link from HD to EG, the dependentvariable chosen was GDP per capita growthrate. The explanatory variables selectedwere:● GDP per capita.● HDI shortfall reduction using BHDI.● Income distribution, using two alternativemeasures: the income share of the bottom40 percent of the population, and the Ginicoefficient.● Female enrollment rate and femaleunemployment rate. Female indicatorsare likely to be associated withimprovements in nutrition, health andeducation indicators and hence increaseproductivity.● Unemployment rate.The results show that if the change in BHDIshortfall reduction were increased by onepercent, GDP would increase by 0.81 percent. Female enrollment rate and femaleunemployment rate are also significant. Theincome distribution changes run counter toexpectations, that is, equity in incomedistribution has no effect on economicgrowth.In summary, the two relations, taken as awhole, showed a significantly positiveeffect of economic growth on HD and asignificantly positive effect of HD oneconomic growth. With respect to specificlinks in each of the relations, findingsbroadly confirmed the tested hypotheses,except for income distribution in the secondlink. For the first link, improvement in HDwas larger with higher social expenditure,higher increase in GDP per capita, higherpublic spending on health and educationand less change in the femaleunemployment rate and in the Ginicoefficient. On the other hand, therelationship between HD and economicgrowth was stronger with higher femaleenrollment rate, higher improvement in HDlevels and lower female unemployment rate.Equity in income distribution was notsignificant in enhancing economic growth.The Quality of LifeThe main indicators of Quality of Life(QOL) in Egypt in the 1980s compared tothe 1990s are shown in Table (2.2).It appears that there is some improvement inthe quality of life as reflected in thedecrease in the under-5 mortality rate from175 per thousand in 1980 to only 59 in1998. This trend is also observed in lifeexpectancy at birth, which is estimated at 68years for females and 65 for males in 1998against 63.3 and 62.1 respectively in 1989.There is still a wide scope for QOLimprovement through decreasing the level32 -Egypt Human Development Report 2000/2001

The Economic Well Being of Egyptians in a Globalized WorldTable (2-2)Egypt Quality of LifeIndex1980Under-5 mortality rate (per 1000)Urban population (% of total)Life expectancy at birth FMCarbon dioxide emission(metric tons per capita)Access to sanitation in urbanAreas (% of urban pop. 1995-95)175441.41998594568651.7of carbon dioxide emission and increasingthe percentage of urban population withaccess to sanitation.This sketchy evidence shows that thegeneral indicators of human developmentand QOL, although slightly improving, didnot significantly change in the 1990scompared to the 1980s. This reflects the factthat while Egypt did not capture theopportunities for growth, it did not sufferfrom the volatilities and insecuritiesexperienced in other countries. It seems thatfor Egypt to benefit from globalization itshould achieve rapid sustainable growthwith equity.Typology of HD in the Governoratesof EgyptIt is clear from the above analysis thathigh levels of human developmentpromote economic growth, which in turncan promote human development.20Conversely, weak human development islikely to result in low growth, furtherundermining the prospect of future humandevelopmentThis means that an economy may be on amutually reinforcing upward, or downward,spiral resulting from the links between HDand economic growth. The strength of theselinks influences the extent of mutualreinforcement between HD and EG.Community performance can therefore beusefully classified into four categories:virtuous; vicious; and two types oflopsidedness, strong HD/weak growth(called HD-lopsided); and weak HD/ strongEG (called EG-lopsided). In the virtuouscycle case, good HD enhances growth,which in turn promotes HD, and so on. Inthe vicious cycle case, poor performance onHD tends to lead to poor growthperformance which in turn depresses HDachievements, and so on. The stronger thelinkages in the two relations describedabove the more pronounced is theinterdependence between economic growthand HD, either in a mutually reinforcing orin a dampening direction. Where linkagesare weak, cases of lopsided developmentmay occur. On the one hand, high economicgrowth may not bring about good HD, if, forexample, there are such weak linkages as alow social expenditure ratio; on the otherhand, good HD performance may notgenerate good EG if increases in educationlevel are not translated into increases inproductivity and opportunities foremployment. Such cases of lopsideddevelopment are unlikely to persist. EitherAn economy may beon a mutuallyreinforcing upward,or downward, spiralresulting from thelinks between HD andeconomic growth.Box (2.4)Health and EducationIt is generally recognized that increasedspending on education and healthcontributes towards higher GDP growthrates. Government average annual spendingon education as a percentage of GDP rosefrom 3.8 per cent for 1987-90 to 4.34 percent for 91/92-93/94 and 5.37 per cent for1994-1997. Similarly, government averagespending on health for the same periods wassuccessively 1.54 per cent, 1.69 per cent and1.64 per cent. The rise in spending on healthand education was unfortunately associatedwith a lower GDP rate of growth. Theexplanation might reside in the government’sconcern for the number of beneficiaries ratherthan the quality of these social services.Greater attention should be given in thesesectors to the allocation of investment toproductive endeavors focusing directly onimproving services rather than to buildings,which do not benefit these services in theshort-term.Egypt Human Development Report 2000/2001 - 33

The Economic Well Being of Egyptians in a Globalized WorldFALL86 -90FALL90-95Figure 2.1 : Distribution of Governorates According toShortfall of BHDI and Growth (1986-1990)50403020100-10GDP86 -9010080604020GizaMenufia0Dakahlia0-60 -40GDP90-95-20BeheraCairo10GizaIsmailiaMenufiaBehera0PortSaidCairo20Suez20PortSaid40DakahliaFigure 2.2 : Distribution of Governorates According toShortfall of BHDI and Growth (1990-1995)GizaCairoMenufia Ismailia DakahliaSuezDakahliaBehera IsmailiaMenufiaBeheraCairoPortSaid3060SuezFigure 2.3 : Changes in the Relative Position of VariousGovernorates (1986-1990 and 1990-1995)100806040200-60-40-200PortSaid204060Suez8011008040100FALL86-90GDP 86-90FALL90-95GDP90-95the weak partner in the cycle eventually actsas a brake on the other partner, leading to avicious cycle case, or, if the linkages arestrengthened, possibly by policy change, avirtuous cycle case results.Estimations show strong and weak linksbetween changes in economic growth andimprovements in HD across governoratesand the movement of governorates from onecategory to another through the periods1986-1990 and 1990-1996. One way ofclassifying governorates into the fourcategories is to compare their performanceon HD and EG with the averageperformance of all Egypt. Figures (2.1) and(2.2) present this classification successivelyfor 1986-1990 and for 1990-1996 for allgovernorates in Egypt. The vertical andhorizontal axes represent the averageperformance for the period. In 1990-1996,for example, most governorates in UpperEgypt appear as experiencing a viciouscircle (SW quadrant), except Giza, Qenaand Aswan. A strong regional patternemerges, with Urban Governorates and theBorders featuring in the virtuous cyclecategory. Four of the Lower Egyptgovernorates (Damietta, Sharkia, Gharbiaand Menufia) are represented in the HDlopsidedquadrant. In the EG-lopsidedcategory there is one governorate in LowerEgypt (Behera) and two in Upper Egypt(Qena and Aswan). The remaining sevengovernorates are trapped in a vicious circleof low economic growth and lagging humandevelopment. Five of the eight governoratesin Upper Egypt fall into this disadvantagedcategory.Taking the movements of governorates overthe two periods, 1986-1990 and 1990-1996(see Table (2-3) and Figure (2.3)). Itappears that out of the governorates in thevicious cycle category in 1986-1990, fiveremained in that category throughout theperiod 1990-95. All of them are in UpperEgypt, which started with very low levels ofHD, handicapping their growth potential.Their low growth rates prevented them fromgenerating the resources necessary forimprovements in HD. One governorate(Behera) moved from vicious cycle toEG-lopsided. Two governorates (Sharkiaand Menufia) moved from vicious toHD-lopsided. Three governorates (Alexandria,Qaliubia and Giza) moved from vicious tovirtuous. Two governorates (Cairo andBorder) moved from HD-lopsided into thevirtuous category. It should be noted thatthe 1996 Human Development Reportargued that: “Lopsided development can34 -Egypt Human Development Report 2000/2001

The Economic Well Being of Egyptians in a Globalized WorldUrban GovernoratesCairoAlexandriaPort SaidSuezLower EgyptDamiettaDakahliaSharkiaQaliubiaKafr-El-SheikhGharbiaMenufiaBeheraIsmailiaTable (2-3)Changes in Classification of Governorates(1986-1990 and 1990-1996)1986-1990 1990-19961986-1990HDVCVREGEGVRVCVCEGEGVCVCEGVRVRVRVRHDVCHDVRVCHDHDEGVRUpper EgyptGizaBeni-SuefFayoumMeniaAssiutSohagQenaAswanBorder GovernoratesVCVCVCVCVCVCEGHDHD1990-1996VRVCVCVCVCVCEGEGVREmpirical evidencefrom Egypt hasshown that, ingeneral, the share ofincome accruing tothe poor has tended torise with grossnational income.VR = virtuous; VC = vicious; HD= HD- lopsided, EG = EG- lopsidedlast for a decade or so, but it then shifts torapid rises in both incomes and humandevelopment, or falls into slowimprovements in both human developmentand incomes.”Tackling the ChallengeEmpirical evidence from Egypt has shownthat, in general, the share of incomeaccruing to the poor has tended to rise withgross national income. Furthermore, it hastended to rise with improvements in thepattern of income distribution as reflected indeclining Gini coefficients. The impact ofglobalization-related variables appears to bemixed. Trade openness has not shown anysignificant impact on the level of GNPalthough it affected negatively incomedistribution and increased incomeinequality. Foreign investment has positivelycontributed to enhancing the level ofnational income and improving the patternof distribution. These mixed results may beattributed to the fact that global integrationis not just a matter of opening up theeconomy to trade flows and to financialflows. It requires further deep institutional,managerial and political reforms, whichhave not taken place. Revision of prioritiesis also warranted. Higher income per capitais just one dimension of human welfare.Other major elements of human developmentinclude the social, political and securitydimensionsInvestigation of the interaction betweeneconomic growth and human developmentfirstly required the construction of a broadhuman development index (BHDI), whichreflects various dimensions of humandevelopment. More specifically, it embodiessixteen indicators, which represent health,education, housing conditions, employment,income inequality, gender gap and percapita GDP. Then various links betweeneconomic and human development wereidentified and analyzed.Applying these relations, at thegovernorate level in Egypt, revealed thatover the past sub-periods 1986-90 and1990-96, important changes in therelations between economic growth andhuman development have occurred. Thefour urban governorates which showedmixed interrelations between economicgrowth and human development indicators,during the first sub- period, all moved inthe nineties to balanced linkages witheconomic growth and human developmentmoving together in a mutually reinforcingway. The nine governorates in LowerEgypt showed mixed performances. Theyended up in the nineties with two reachingbalanced favorable linkages (Qaliubia andEgypt Human Development Report 2000/2001 - 35

The Economic Well Being of Egyptians in a Globalized WorldIsmailia), four showing a bias towardsadvances on the human development frontand lagging economic development(Damietta, Sharkia, Gharbia andMenufia), one showing a bias towardsadvances in economic growth unmatchedby human development (Behera) andfinally two, trapped in a vicious circle oflow economic growth and low humandevelopment (Dakahlia and Kafr -El-Sheikh). The eight governorates ofUpper Egypt remained mostly trapped in avicious circle of low improvements inboth human development and incomes(five governorates: Beni Suef, Fayoum,Menia, Assiut and Sohag), with onemoving forward on both economic growthand human development fronts (Giza) andtwo enjoying high economic growth butbackward human development indicators(Qena and Aswan, due to the flow oftourism revenues to these governorates).These results confirm that overall incomegrowth conceals wide variations in thedistribution of its benefits in terms ofeconomic returns and of humandevelopment advances among regions aswell as among social groups. The regionalpattern of distribution has been investigated.Further research on the pattern ofdistribution of economic and humandevelopment benefits among social groupsand/or income brackets is warranted. In anenvironment of globalization of marketsand withdrawal of governments fromprofitable economic endeavors andactivities, mitigating the distributiveimpacts of the expected benefits isessential.Currently, the Egyptian economy issuffering from recessionary pressures. Thisis reflected in higher rates ofunemployment, lack of liquidity and lessoptimism. These conditions have negativeeffects on human development and thequality of life. The economy has also beennegatively affected by a sharp devaluationin the last few months (about 18 per cent),which fostered expectation of instability inthe exchange rate regime. It is necessary tosolve these problems before embarking on along-term program that aims at achievingrapid growth with equity and improvedquality of life to enhance conditions ofhuman development under globalization.The suggested immediate measures include:● Confidence and OptimismIt is recognized that the psychologicalattitude of people is one of the causes ofeconomic cycles. There is a general feelingof loss of confidence and lack of optimismabout the short-term prospects of theeconomy. Reinstituting confidence in thefuture and regaining optimism is a necessaryprerequisite for a turnaround.● Appropriate Short-term PoliciesEconomic policy could introduce severalmeasures to deal with recession. InstrumentsBox (2.5)Policies for Short-Term Recoveryof monetary and fiscal policies could beactively used to overcome the recession. Thepayment of arrears accumulated bygovernment agencies to the business sectorcould have a positive multiplier effect on theeconomy. A reduction across the board of taxrates might also lead to increased publicrevenues through reduced incentive for taxevasion, which is believed to be high. Egyptranked among the top eight out of eighty ninecountries with the highest marginal corporatetax rate in 1999.● Exchange Rate RegimeUnder ERSAP, the exchange rate regime wasliberalized. Thanks to the surplus in BOPduring 1991/92-1996/97, the exchange rate ofthe pound vis-à-vis the US dollar remainedalmost constant. However, starting in 1997/98,the Egyptian BOP has been suffering from adeficit. In an attempt to maintain the stabilityof the exchange rate the Central Bank ofEgypt (CBE) drew on its internationalreserves which declined by almost 30 per cent(from about US$21bn to about US$14bn)without great success in stabilizing the valueof the Egyptian pound. Policies and measuresaiming at fixing the exchange rate at a levelwhich does not correctly reflect supply anddemand conditions lead to distortions, andmore seriously, to excess capacities, lowerrates of growth and higher rates of36 -Egypt Human Development Report 2000/2001

The Economic Well Being of Egyptians in a Globalized Worldunemployment. Furthermore, these policiesconflict with the main thrust ofliberalization. The recommended action is tofollow a more dynamic free exchange policywith more efficient open-market operationsby the CBE.● Financial Sector ReformThe financial sector plays an important rolein achieving growth and stability of theeconomy. It can also be a source of shocksand instability, as shown in the East Asiancrisis of the late 1990s. The main source ofvulnerability is the asymmetry ofinformation that might cause adverseselection and moral hazard problems[meaning?]. The Egyptian banking system ispresently suffering as a result of the rapidexpansion of credit to the private sector inthe nineties. Its effective participation ingrowth is hampered by the rise of the valueof non-performing loans and the low qualityof its loan portfolios. The Central Bank ofEgypt has taken several measures to ensurethe proper liberalization of the bankingsystem and to enforce appropriate andprudent controls. Close monitoring andfollow-up of this sector will help avoidfinancial volatility and economic insecurity.This would enable the banking system toresume its developmental role.Prerequisites for Long-RunGrowth with EquityThe required long run policies for Egypt toachieve sustainable rapid growth withequity and better quality of life couldinclude the following:Demographic PolicyThe demographic situation in Egypt hasthree main characteristics that negativelyaffect its growth and human developmentprospects. These are the size of thepopulation, its rate of growth, and its agestructure. The current population of 65million exceeds the support capacity of thecurrently utilized area and resources of thecountry. This results in a very highpopulation density in the inhabited land(about 1300 person/km2 compared to 46 forthe world). In 1999, this density rankedthird in the world after Hong Kong (6946)and Singapore (5283). The resultingcongestion and increased pollutionnegatively affect the quality of life. All thispoints to the need for intensified effortstowards further reducing the rate of populationgrowth.Implementing Structural ReformEgypt embarked on an active ERSAP in May1991. It succeeded, between 1991 and 1994,in implementing the needed monetary andfiscal reforms. This resulted in a reduction inthe rate of inflation, a safe level of externalindebtedness, stability of the exchange rateand accumulation of sizable internationalreserves. Structural reforms, however, werevery slow. Since 1995, the favorable results ofthe stabilization have been eroded. Therefore,it is necessary to urgently implement therequired structural reforms in order to raisethe rate of GDP growth, increase exports,stimulate employment and reduce the degreeof vulnerability of the economy. For Egypt tobecome a ‘Tiger on the Nile’, it needs to growat a rate of about 10 per cent for a continuousperiod of two decades. The principal factorswhich might lead to this are:(a) Bureaucratic reform. Governmentbureaucracy hinders production and addsto the high cost of doing business.Government employees, who exceed 5million, receive the largest proportion ofgovernment expenditure, thus divertinglimited government resources away fromsocial spending, especially education,health and housing for low incomepeople. Under globalization, administrativereform is required to turn this bureaucracyinto a driving force for increasedproduction instead of being an obstacle togrowth.(b) Fiscal reform. Business in Egypt issubject to a high rate of taxation and tomultiple levies. This reducescompetitiveness. Furthermore, taxadministration is inefficient and confidenceis missing between taxpayers and taxadministration. All this requires substantialreforms of both the tax system and taxadministration.(c) Customs reform. Similarly, customsduties are fairly high even after thesuccessive reductions introduced in thelast few years. Customs administrationlacks efficiency, which, in turn,negatively affects customs revenues.There is wide scope to reduce tariffs oninputs and capital goods. Further,Egypt Human Development Report 2000/2001 - 37

The Economic Well Being of Egyptians in a Globalized Worldconsumer welfare requires the reductionof customs tariffs imposed on manycommodities. This reduced protectionwould force local producers to increasetheir efficiency, which would be anadded benefit to the economy. Raisingthe efficiency of customs administrationis also required for realizing higherrevenues at a lower cost, both in termsof time and money, for the businesssector.(d) Labor laws and relations. Rapidgrowth requires new labor laws thatwould strike a balance between theinterests of both the labor force and thebusiness community. The present lawsare biased towards workers. They raisethe cost of labor and promoteinefficiency, which reduces thecompetitiveness of Egyptian products.The government is committed topresenting law reform to parliament,but has not done so yet. Thepromulgation of this law should beexpedited.(e) Privatization. Privatization is one of thecomponents of ERSAP. Its implementationhas been very slow. This has negativeimplications for efficiency, growth andthe development of the capital market.It also impedes the growth of foreigndirect investment (FDI) flows. It isbelieved that the already privatizedfirms have shown higher efficiency.Consequently a faster pace ofprivatization is expected to contributeto more rapid growth.Legislative ReformSince development in Egypt relies mainlyon the private sector, the current legalframework has to be amended. It should besimple and clear, and should ensure theappropriate environment for rapid growth.The judicial system should be prompt inrestoring rights and settling disputes. Atpresent, there is wide scope for reform inthis area.Appropriate Macroeconomic PoliciesMacroeconomic policies should be marketfriendly, flexible and suitable for dealingwith the prevailing economic and socialconditions. Fiscal and monetary policiesshould be coordinated with trade liberalization.Imbalances should be removed and theremaining distortions redressed.Education ReformA good education system is one of the maindeterminants of rapid growth in developingcountries. The education system in Egyptsuffers from several weaknesses. First, theilliteracy rate (about 50 per cent) is very highespecially among women (60 per cent).Second, available primary schools fail toabsorb all pupils within this age group. Third,classes are overcrowded. Fourth, learning ismainly based on memorizing rather than oncreative thinking. Fifth, technical educationfacilities are very limited and need substantialmodernization. Sixth, universities and institutesof higher education are characterized by largenumber of students with poor budgets andcapabilities. Seventh, private lessons arecommon at all stages of education includinguniversities; they became one of the necessaryconditions for getting higher grades andmerits. The result of all these characteristics iswasted resources and unqualified manpower.Given the conditions of globalization, a laborforce must match the needs of fast sustainabledevelopment. Furthermore, the system fostersincome inequality since it favors those whocan pay to acquire better education servicesover the deprived. Deep reform of theeducation system is urgently needed toeradicate illiteracy, promote creative thinking,and empower the labor force with the skillsrequired in a fast changing world.BehaviorThe rate of GDP growth in any country isaffected by the general behavior of the variousactors in the society. Behavioral variables thatrequire reinforcing in Egypt includediscipline, the adoption of a precision culture,an emphasis on quality, and modesty inconsumption patterns to raise the savingsratio.Policies for Equity and Social JusticeA reform of social policies to achieve moreequitable income distribution is needed in thefollowing areas:a) Social insurance and pensions;b) Social spending priorities; These need toalter the primary distribution of income infavor of the poor; (especially in education,38 -Egypt Human Development Report 2000/2001

The Economic Well Being of Egyptians in a Globalized Worldhealth and housing for low incomegroups)c) Taxation; by raising the share of directtaxes in total tax revenue;d) Labor; by following morelabor-intensive techniques of production- wherever this does not affect the costand quality of the products - has theadvantage of creating more jobopportunities.Accountability and Good GovernanceUnder centrally planned regimes errors anddistortions accumulate due to the neglect ofmarket forces in the decision process. Undermarket system regimes, the same weaknesscould occur due to an absence ofaccountability and lack of good governance.Checks and balances would ensureaccountability and good governance.The Role of the StateIn a market oriented economy the state has amajor role to play in distributing thebenefits of growth and globalization. Thetarget of equity should rank high in itspriorities. Enforcing the law createsconfidence and contributes towards a soundand disciplined climate. For example,enforcing Environment Law No.94/1995would ensure a better quality of life.Transparency in all government departmentswould contribute towards accountability andgood governance at all levels.Peace in the RegionThe Middle East has been plagued with warsand conflicts, which have diverted substantialresources away from developmental purposes.Long-term sustained growth would beenhanced by the prevalence of peace in thearea. But peace does not depend on Egyptalone. It requires cooperative action from allcountries in the region, as well as fromexternal actors such as the USA and the UN.A just and comprehensive peace willfavorably affect the human development notonly of Egyptians, but of all the peoples of theMiddle East region.Regional and International CooperationThe outcome of globalization on humandevelopment in developing countries dependspartly on international cooperation towardsgiving it a human face. So far, it has led to aredistribution of income in favor of the richcountries. The impoverishment of developingcountries will not enable them to achievebetter living conditions for their people, andEgypt is no exception.Egypt Human Development Report 2000/2001 - 39

The Economic Well Being of Egyptians in a Globalized WorldAnnex 2.1Constructing a Broader HumanDevelopment IndexConstructing such an index requires: (1)identifying the underlying dimensions ofhuman development and investigating theinterrelationships between the differentaspects of each dimension, (2) choosing themost relevant indicators or variables thatreflect those dimensions of humandevelopment; and (3) combining thosevariables in a smaller number of compositeindices, preferably one.Some subjectivity is always found in thistype of analysis. Subjectivity is involved inthe selection of the dimensions of humandevelopment, in the variables that measureeach dimension and in the way thesevariables are combined. Weighting is usedto linearly combine the selected variablesinto a smaller number of indices. Weightsmay be arbitrarily chosen as equal or theymay be determined through multivariatestatistical techniques such as factor analysis.The latter approach has been followed.Factors are determined such that each one ofthem explains successively smaller amountsof the original variability. If the originalvariables are highly interrelated, as expectedin any human development index, the firstfew factors will account for a very highproportion of total variability.In constructing the BHDI, several dimensionshave been included, namely health,education, employment, income inequality,housing conditions and gender. We startedwith 25 variables but preliminaryexperimentation with principal componentanalysis led to the elimination of some ofthem; sixteen were retained as indicators ofthe selected dimensions of humandevelopment. Health is measured using thefollowing three indicators: life expectancyat birth; the infant mortality rate; and theunder-five mortality rate. Contrary to thelife expectancy indicator, the last twoindicators reflect the actual experience ofthe community, since they capture manydimensions of life that are critical, such aseducation levels, unsafe environments,access to safe water and sanitation, efficiencyof health services, nutrition, and the statusof women. Furthermore, they are moresensitive to economic policy changes.Education is reflected through the threeindices of the adult literacy rate, enrollmentrate, and female literacy rate. Femaleeducation can strongly contribute to humandevelopment levels through reducedfertility, lower population growth, reducedchild mortality, reduced school dropoutrates and improved family nutrition.Housing conditions are proxied by thepercentage of households with access tosanitation. Four indicators representemployment: participation rates in the laborforce for the total population and forfemales; professional and technical staff asa percentage of labor force; and the ratio offemales to males in the labor force. Finally,the percentage of incomes of the highestand lowest quintiles, incidence of poverty,and of core poverty, and the percentage ofwages of the poor out of total wages will beused to reflect income inequality. Percapita GDP expresses the level of income.It has been normalized to remain within theboundary of 100 per cent, by calculating thepercentage of the difference between percapita GDP for each governorate and thenational average GDP per capita, to thedifference between the highest and lowestGDP per capita among governorates.Having decided on the set of variablesdeemed to adequately represent humandevelopment; the multivariate measurementquestion is how to combine the selectedvariables into one or more indices. That is,if Y i denotes a human development indexand X k ’s are variables that represent allaspects of human development, the problemis how to choose the functional form thatcombines X k 's to obtain Y i ’s. Thus:Y i = F i (X 1 , X 2 ,..., X n ), i = 1,2,...,pNaturally, the smaller p is, the morecomprehensive the resulting summarydescription of poverty. Ideally p is equal to one.The most popular functional form is thelinear form. In this case, Yi is expressed asa linear combination of the Xk's and themethodological problem is reduced todetermining the weights assigned to theXk's to form the linear combination. Forthis purpose, factor analysis has beenapplied. Two factors were extracted. Thefirst factor explains 69.64 per cent of totalvariability and hence it is reasonable to beconsidered as the BHDI.Annex table (2.1.1) indicates the factorloading, communality and coefficient foreach variable in the first factor. Themagnitudes and percentages of the variables40 -Egypt Human Development Report 2000/2001

The Economic Well Being of Egyptians in a Globalized Worldused in factor analysis are averages for theyears 1986, 1990 and 1996 as given invarious issues of Egypt’s HumanDevelopment Report (EHDR). Factorloading is the correlation between theoriginal variable and the first factor.Variables with higher loadings areconsidered more important. Communalitiesshow the amount of variance in a variablethat is accounted for by the factor (orfactors). Large communalities indicate that alarge amount of the variance in a variablehas been captured by the factor solution.Coefficients are the weights given to eachvariable to construct the index (BHDI).All variables show high correlation with thefirst factor (loadings exceeding 75 per cent).Variables of female literacy, literacy rate, andpercentages of the poor and of the ultra poorhave the largest communalities (exceeding 90per cent), indicating that those variablesexplain most of the variability in theconstructed index. All coefficients have theright signs. Infant mortality rate, under fivemortality rate, percentage of the poor, and ofthe ultra poor and percentage of wages of thepoor out of total wages, have negativecoefficients, indicating negative correlationwith human development levels. Eachgovernorate is assigned a BHDI calculated asthe weighted sum of the above humandevelopment indicators, using the weightsshown in Table (2.1.1). The index has beenscaled to range from zero to 100.Annex table (2.1.2) presents BHDI and HDIfor each governorate. Comparisons betweengovernorate ranks with respect to bothindices are also shown. Higher ranksindicate lower levels of humandevelopment. The estimated rankcorrelation coefficient between the twoindices appeared to be very high (0.968).There were no differences in ranks fortwelve governorates, indicating consistentlevels of all human development indicators.In six governorates, ranks with respect toBHDR were smaller than those of HDI,pointing to better levels of the addedindicators (other than life expectancy,literacy rate, gross enrollment rate and GDPper capita). Aswan, Giza and Sohaggovernorates are the only governoratesexhibiting a deterioration of their relativeposition according to BHDI. This index willbe used in subsequent analysis, as it mayhave different implications than HDI forgovernorates where ranks, according to thetwo indices, do not coincide.Annex Table (2.1.1)Loadings, Communalities and Coefficients in the First FactorLife expectancyInfant mortality rateUnder five mortality rate% households with access to sanitationLiteracy rateGross enrollment rateFemale literacy rate% income of top and lowest quintiles% poor% ultra poor% wages of poor to total wagesParticipation rate in labour forceFemale participation rate in labour force% of professional in labour forceFemale to male labour forceGDP per capitaLoadings0.864-0.880-0.915-0.9050.9050.9570.7920.9630.806-0.958-0.952-0.9190.9120.8720.9360.9170.913Communalities0.7460.7750.8380.8190.9160.6270.9280.6490.9180.9060.8450.8320.7610.8760.8420.833Coefficients(Weights)0.069-0.062-0.0690.0710.0790.0650.0790.052-0.070-0.066-0.0740.0770.0730.0700.0760.076Annex Table (2.1.2)BHDI and HDI by Governorates and According to TanksValue of Index Rank According to: Differences in RanksBHDI HDI BHDI HDIUrban GovernoratesCairoAlexandriaPort SaidSuezLower EgyptDamiettaDakahliaSharkiaQaliubiaKafr-El-SheikhGharbiaMenufiaBeheraIsmailiaUpper EgyptGizaBeni-SuefFayoumMeniaAssiutSohagQenaAswanBorder Governorates86.6574.6799.4989.3461.6259.1146.9947.0446.4554.4143.5136.1263.1660.4119.5019.5014.0411.0614.8321.0038.1048.5179.271.581.680.465.765.560.559.757.564.759.556.870.470.153.152.551.350.652.656.565.170.034126812111391416571818212220171510341289121315111416561820212219171070000-2-10-2-2-200010-2001053Egypt Human Development Report 2000/2001 - 41

Chapter ThreeGlobalization Challenges to Egypt’sProduction SectorsGlobalizationchallenges to theEgyptian economy gobeyond itsexport/importrelations with othereconomies andmarkets.Globalization challenges to the Egyptianeconomy go beyond its export/importrelations with other economies and markets.Export-import relations are the outcome ofhow different sectors of the nationaleconomy face increasing competition andmarket openness, a ceaseless technologicalrevolution, intensified knowledge-basedproduction, and the techno - economicalliances led by Trans - NationalCorporations (TNCs). This chapter,however, is dedicated more specifically toexploring the impact of globalization onEgypt’s production sectors, focusing onagriculture, industry and the financialsector.Modernizing AgricultureAgriculture is an important sector of theEgyptian economy. It constitutes 19 per centof GNP, and plays a major role in foodsupply. Moreover, one third of the Egyptianlabor force is employed in agriculture andaround 50 per cent of the population live inrural areas. In spite of a decline inagricultural exports to total Egyptian exportsduring the last two decades, agriculturalproducts remain a potentially high anddynamic contributor to export growth.In the period 1955-80, government policieswere biased towards manufacturing andagainst agriculture. This was reflected ingovernment interventions that negativelyimpacted upon the growth of agriculturalproduction and its composition as well asproductivity and pricing in the sector. Thisresulted in serious problems, notably withregard vital issues such as food security, andheavy dependence on the import of essentialfoodstuffs, which in turn, aggravated thebalance of payments deficit. Consequently,the government launched an agriculturalreform program, well before the beginningof the ERSAP.However, reform has had to take placeunder serious constraints stemming fromlimited natural resources, especiallyirrigation water, and insufficient financialand physical capital for expanding cultivableland. Despite the far from negligible effortsto modernize the agricultural sector, there isstill a need for a major technological push toease many of these constraints. Whetherglobalization will help achieve thisobjective is a question that this sectionendeavors to answer by reviewing thereform measures, and by examining theprobable effects of globalization on thissector.Agricultural Sector ReformThe agricultural policy reform (APR) inEgypt has been carried out in three distinctphases:Phase I (1986-1989) included the adoptionof a number of measures dealing with priceand market controls. During this period,procurement quotas for ten crops wereabolished, input subsidies were reduced, andthe private sector was allowed to conductagricultural marketing and agribusiness.Private sector participation in agriculturalexport of some crops was also permitted.Phase II (1990-1994) witnessed: (a) theelimination of subsidies to agriculturalcredit and inputs; (b) the end ofprocurement quotas for all crops; (c) theprivatization of seed production for somemajor crops; and (d) the liberalization ofagricultural prices as well as of agriculturalland rent (Law 96 of 1992). Thus,deregulation and liberalization were themain features of this phase. Free marketmechanism replaced government interventionin allocating agricultural resources andinvestments and deciding the terms of tradebetween this sector and the rest of thenational economy.42 -Egypt Human Development Report 2000/2001

Globalization Challenges to Egypt’s Production SectorsPhase III started in 1994 and includedprivatization of government-owned land andcompanies, and opportunities for furtherprivate investment, especially in thedevelopment of new land. The governmentremains responsible for research andinfrastructure facilities for agriculturalextension.The Impact on Crop MixLiberalization of agricultural prices and freecropping patterns had a significant effect onland allocation between crops and onproductivity per feddan due to priceincentives. Table (3.1) indicates better foodsecurity for the rural population between1991 and 1997. The increase in productiontook place for all cereals, including wheat,rice, maize and sorghums. Wheatproduction increased from 2 million tons in1983 to almost 6 million tons in 1997. Otherfood crops also showed a strong upwardtrend: vegetables, fruits and roots and tubersgrew during the same period from 6.4, 4.4and 1.3 million tons to 9.9, 7.4 and 3 milliontons respectively.After APR, the pattern of crop rotationchanged and cash crops became dominant.As is shown in Table (3.2), the agriculturallabor force was 4.48 million before APR,representing 37.2 per cent of the total laborforce. However, during Phase I of APR theagricultural labor force increased by only1.71 per cent while the total labor force inEgypt registered an increase of 5.97 percent. This means that other economicsectors were attracting more labor.. Thisbecame even clearer in Phase II, when theagricultural labor force grew by only 0.89per cent while the total labor force growthrate was 10.75 per cent.Table (3.1)Growth in Agricultural & Food Production in EgyptAgricultural ProductionAgricultural ProductionFood productionFood productionTotalPer CapitaTotalPer Capita1989-1991=1001989-1991=1001989-1991=1001989-1991=1001991104.2102.0104.4102.21997130.6114.1132.1115.4The increase in production resulted fromcrop intensification, correction of prices infavor of food crops, and an increase inproductivity per feddan due to technologytransfer, especially the spread of improvedvarieties, and to intensification andstreamlining of agricultural research andextension. Further, the implementation ofAPR resulted in an increase in the croppedarea from 11.2 million feddans to about 12.5million feddans.1982-19851986-19891990-19931994-1998Table (3.2)Agricultural Labor Force (1982-1998)Total LaborForce 000s12045127651413815850Agricultural Labor Force000s %of total448045574598480437.235.732.530.3% Change from previous periodin Agricultural Labor—1.710.891.12% Change from previousperiod in Total Labor—5.9710.753.02Impact on EmploymentAfter the liberalization measures, increasedemployment opportunities were opened tothe labor force as an outcome of agriculturalintensification. There are two types of laborin the agricultural sector; skilled andunskilled. Skilled labor works in specificoperations that require qualifications andexpertise, such as in machinery andhorticulture, and these specializationsnormally offer permanent jobs. Unskilledlabor works in manual operations, such asplanting, hoeing, and weeding. Unskilledworkers are easy to replace and their jobsare mostly temporary.Recent cross-national and inter-temporalstudies of growth show that in low andmiddle-income countries the direct andindirect effects of agricultural growthaccount for the bulk of job creation andpoverty reduction. In Egypt, an agriculturalgrowth rate of 4.9 per cent would besufficient to meet the rapidly growingdomestic demand for horticulture andlivestock, leaving a portion for export. Thisrate of growth can be achieved withfavorable and efficient institutional changes.Agriculturally-driven non-agriculturalactivities (ADNA) could expand, andconsequently increase wages and thedemand for labor in rural areas.Egypt Human Development Report 2000/2001 - 43

Globalization Challenges to Egypt’s Production Sectors1982-1985 (1)1986-1989 (2)1990-1993 (3)1994-1998 (4)GDPTable (3.3)ADP share in GDP (1982-1998)236634432013500525366ADP % Based on:41179031223244392017.420.416.517.3With a growth rate of 8.2 per cent in theEgyptian economy and of 4.9 per cent in theagricultural sector, 924,000 jobs could becreated by the year 2006/7. The autonomousnon-agriculture sector would create 44 percent of these jobs and ADNA wouldgenerate 74 per cent of the rest.Impact on Rural Income(1) Prices of 1981/1982(1) Prices of 1986/1987(1) Prices of 1991/1992(1) Prices of 1986/1987Values LE MilionThe APR has affected the major crops aswell as annual production profitability.Examining its impact on rural incomerequires the study of changes inagricultural income at the macro level, aswell as the agricultural domestic product(ADP) at the sectoral level. This could bedone through two indicators: the share ofADP in GDP and the agricultural income(AI).Table (3.3), illustrates the development ofGDP and ADP before and throughout theARP’s three phases. ADP during thepre-reform period reached an average ofL.E. 4117 million annually, with a share ofabout 17.4 per cent of GDP. During PhaseI, these two indicators increased to L.E.9031 million and 20.4 per cent,respectively. But during Phase II the shareof ADP in GDP decreased to 16.5 per centalthough its value increased to L.E. 22324million. This is due to higher growth rateswitnessed by other economic sectors.Finally, in Phase III the ADP share in GDPhas increased by only 0.8 percentagepoints.Moreover, Table (3.4), which presentsdevelopments in agriculture income (AI),both in real and nominal values, shows a netpositive impact of the policy reform. Inconstant prices, AI was L.E. 1934.4 millionduring the pre-reform period, and increasedto L.E 2135.7 million in Phase I, with anaverage annual growth rate of about 1.38per cent compared to 5.04 per cent in thepreceding period. In Phase II theagricultural income decreased to L.E 1912.2million, registering an average annual rateof decrease of 6.25 per cent. Elimination ofinput subsidies, during Phase II, resulted inan increase in agricultural input prices by ahigher percentage than that of agriculturaloutput prices. But by Phase III, and as aconsequence of implementing most of theAPR program, agricultural income reachedL.E. 2138.4 million with an increase of11.83 per cent compared to the previousphase. This growth in income resulted fromgreater efficiency and higher output prices.However, the APR does not only have adirect effect on agricultural activities, it alsostimulates and induces non-farm activities.Policy for reducing poverty and improvingincome distribution in rural Egypt shouldfocus on non-farm income, which accountsfor almost 60 per cent of total income forTable (3.4)Evolution of Egyptian agricultural income (1982-1997)Pre Reform(1982-1985)Phse I(1986-1989)Phse I(1986-1989)Difference in % betweenthe pre-reformand Phase IIIAgricultural Income at current prices29701234520261463.4(LE million)Agricultural Income at current prices1934.4213572138.410.54(LE million)44 -Egypt Human Development Report 2000/2001

Globalization Challenges to Egypt’s Production Sectorsthe rural poor. Non-farm income is a meansto reduce income inequality in a land-scarcesetting such as rural Egypt, which pushespoorer households out of agriculture andinto the non-farm sector.Table (3.5) shows the importance ofnon-farm income in total family incomeaccording to per capita income quintiles inrural Egypt. Sources of income shown in thetable are non-farm agriculture, transfers,livestock and rent. For the lowest quintile,non-farm income contributes about 59.0 percent of total income, while it is only 38.4per cent for the highest income quintile.Income from agricultural activitiescontributes only one third of total income.This shows the importance of non-farmincome in terms of its contribution topoverty alleviation and improvement in therural standard of living.Impact on Technology TransferAPR sought the exclusion of governmentfrom direct involvement in production,marketing and agribusiness activities. Thus,the Ministry of Agriculture (MOA) hasbecome responsible for just research andextension. The privatization process is partof the ERSAP, which aims to transformEgypt into a market economy. Thegovernment is keen, however, to protectpublic funds and workers’ rights. Theprivatization process is assumed to beconducive to technology transfer and theupgrading of management, as privateinvestors are supposed to use newtechnologies and to have better managementcapabilities (See Box 3.1)Most challenges confronting the agriculturalsector in Egypt may be attributed to limitedcultivated land, limited water resources (seeBox 3.2), and the rapidly growingpopulation. As a consequence, Egypt hasbeen facing a food gap for the last threedecades. Egypt needs to increase foodproduction vertically through appropriateagricultural technology, such as newvarieties of various field and horticulturalcrops. After APR, the MOA became mainlyconcerned with strengthening its integratedagricultural research and extension, inaddition to its responsibilities in the areas oflegal and regulatory quality control.Agricultural research in Egypt is supportedand financed through governmental andinternational organizations such as USAID,the EU, UNDP, FAO and by countries suchas Japan. This funding support has helpedEgypt strengthen its collaboration andQuintileLowestSecondThirdFourthHighestTotalTable (3.5)Sources of Income in Rural Egypt Ranked by Quintile onthe Basis of Total Per Capita Household Income (1997)Average PerIncome L.E.402.35615.52955.252455.28980.83Non-Farm Agricultural59.052.151.352.538.450.0Share in Per Capita Income(%)35.818.719.420.426.023.9Transfer2619.516.115.116.614.3Livestock5.48.310.68.28.68.3Rental(-2.8)1.42.63.910.43.5Box (3.1)Privatization Program of Agricultural CompaniesBy the end of 1998, the PrivatizationProgram (PP) included 119 companiesrepresenting 38 per cent of the 319 publicbusiness sector companies. In seventy-twocompanies, divestiture of public ownershipexceeded 51 per cent. Thirty-six of themwere sold in the stock market, ten to ananchor investor, and twenty-six to workers’unions. Under the PP, only one companyfrom the agriculture sector was privatized. In1999, the Ministry of Public Business Sector(MOPBS) announced the details of thesecond stage of the PP. This program coveredsixty-two companies for sale. In addition,twenty-eight companies were liquidated.Some of the agricultural companies, whichwere prepared for privatization in the first halfof 1999, were involved in direct agriculturalactivities, while the rest served the agriculturalsector or used agricultural raw materials. Theland owned by agricultural companies wassold to the private sector. In 2000, MOPBScompleted the 1999 privatization program andannounced a new program that included manyagricultural companies.Egypt Human Development Report 2000/2001 - 45

Globalization Challenges to Egypt’s Production SectorsScarcity of water constitutes a real challengeto agriculture in almost all countries of theMiddle East. Given available waterresources, the region is, and will continue tobe, a food deficit area. Egypt confronts thesame challenge. Water resources are limitedby the amount received from the Nile, whichis 55.5 billion cubic meters (CM) per year,according to the agreement with Sudan in1959. Around 85 per cent of this quantity isused by agriculture, and the rest is for otheruses (civil, industrial and navigation).Accordingly, per capita water availabilityper day is 2.5 CM, which is just equal to thewater poverty line.There are ongoing efforts to conserve andexpand water resources in Egypt. Thisincludes: planning for projects to save waterin the Upper Nile; recycling agriculturaldrainage and wastewater; expanding the useof underground water; efficient use of rainwater on the North Coast and the applicationof water management techniques; and theupgrading of water irrigation methods, suchas drip systems. The Ministry of Irrigation isalso intensifying water extension servicesand the creation and support of water serviceassociations (NGOs). Furthermore, effortshave been made to limit water pollution.Horizontal Agricultural Expansion andthe Water ConstraintThe horizontal expansion program includesBox (3.2)Irrigation and Water Availabilitythe reclamation of 3.4 million feddans (MF)during 2000-2017. There are plans to supplythis area with irrigation water in sufficientquantities. MOA is producing crop varieties ofshort cycle (with less water requirement) suchas rice, and also varieties tolerant to droughtand salt.The MOA aims to increase the cultivated areafrom 7.8 MF to about 8.39 MF in 2002, thento 8.855MF in 2007, 9.7 MF in 2012 and to11.2 MF in 2017. The annual waterrequirements for an additional one feddan isestimated on average to be about 5200 CM inthe Delta region, and 7000CM in Upper Egyptand in sandy soil.The most important question now and for thefuture is to do with the efficiency of water usein relation to the cropping pattern. Egyptshould follow a strategy to economize the useof its water. Egyptian agricultural exports arecurrently horticultural crops, which areactually indirect exports of water. Thecropping mix, which must be studied, shouldgive the maximum economic returns from theavailable water resources. It is recommendedthat the economics of agriculture in Egyptstress the productivity per CM of irrigationwater rather than per area (feddan). Foodcrops must be given sufficient priority in thecropping pattern of the land to protect andsecure food for the poor.partnership with the global system foragricultural research. Egypt should look toresearch to increase food production withhigher quality and lower prices. Theagricultural sector has to look for newopportunities to strengthen its researchcapabilities particularly under theglobalization process. These could be foundthrough collaboration with internationalagricultural research centers and the privatesector in research and extension activities(See Box 3.3).46 -Egypt Human Development Report 2000/2001

Globalization Challenges to Egypt’s Production SectorsBox (3.3)The Agricultural Research System in EgyptThe agricultural research system in Egyptstarted as early as 1897 under the RoyalAgricultural Society. Since then, researchand related activities have expandedexponentially. In the early 1980s,Presidential Decree No. 19 established theAgricultural Research Center (ARC) as asemi-autonomous organization for scientificresearch and extension activities.Activities and research conducted by ARCinclude:● Pilot agricultural projects● Training extension engineers and villageagents● Designing and monitoring national cropcampaigns.In the second half of the 1980s, the MOAstarted a comprehensive program toimprove extension services throughredistribution of staff and advanced trainingcourses. The redistribution system set upsome rules, three of which were key forsustainable and effective extension services:● One extension officer for each 200feddans.● Residential extension staff .● Transfer of extension staff throughministerial decreeA second means of improving extensionservices has been through various types oftraining courses using ARC and/oruniversity staff. These courses are plannedto cover all extension employees in theMOA headquarters and regions. Theinsufficient public funds allocated to theseactivities is largely compensated for byforeign donor-funded projects for technologytransfer and training programs, such as ADS,SFPP, EMCIP, NARP, APCP, CAT and UTP.The extension administration improved andstrengthened their staff through three types oftraining: conventional; on-the-job; andoverseas. In addition to ARC, there are othergovernmental research centers, institutes anduniversities which are involved in agriculturalresearch. There are currently 11,407professional scientific staff working in majorEgyptian research organizations in agriculturalscience.In addition to governmental research institutesand universities, there are twenty-two privatesector seed companies and several otherprivate companies involved in agricultural,chemical and pesticide research. However,most of these companies cooperate withgovernmental research staff for the creation ofnew hybrids and pay royalties for utilizingsuch varieties and innovations.Two ministerial decrees, (No.523/1993 andNo.148/199,) were issued in order to helpstrengthen and support linkages amongresearchers in academic communities throughthe establishment of four research extensioncouncils to serve Egypt’s four agriculturalregions. In 1997 ministerial decree No.89established the National Council forAgricultural Research (NCAR), which is incharge of the formulation of a nationalagricultural research policy, and theorganization and finance of agriculturalresearch to serve sustainable agriculturaldevelopment in Egypt. The NCAR isauthorized to supervise activities andfunctions related to research and extensionperformed by the four regional councils.Impact on Human NutritionTable (3.6) shows the nutritional status ofan average Egyptian between 1983 and1996. Despite the increase in populationfrom 47 million in 1983 to around 63.2million in 1996, nutritional status hasimproved in terms of both calories andtotal protein intake. Only one item in thenutritional data, namely the animal proteinintake per capita, did not show any change.It was stable at the level of 13 grams perday, constituting only 10 per cent of totalprotein intake (88 grams). Vegetablesources, mainly cereals, provide theaverage Egyptian with about two-thirds oftheir energy and protein requirements.Increasing the sources of animal protein(fish, poultry, meat, eggs and milk) mustbe of real concern to decision-makers if thenutritional levels of poor people are to beimproved.Increasing the sourcesof animal protein fish,poultry, meat, eggsand milk must be ofreal concern todecision-makers if thenutritional levels ofpoor people are to beimproved.Egypt Human Development Report 2000/2001 - 47

Globalization Challenges to Egypt’s Production SectorsTable (3.6)Per Capita Nutritional Status in Egypt for 1983 and 1996ItemElementUnit19831996Food, totalFood, totalFood, totalVegetable ProductsVegetable ProductsVegetable ProductsAnimal ProductsAnimal ProductsAnimal ProductsCerealsCerealsCerealsK/caloriesProtein Gr.Fat Gr.K/caloriesProtem Gr.Fat Gr.K/caloriesProtein Gr.Fat Gr.K/caloriesProtein Gr.Fat Gr.P. Cap/dayP. Cap/dayP. Cap/dayP. Cap/dayP. Cap/dayP. Cap/dayP. Cap/dayP. Cap/dayP. Cap/dayP. Cap/dayP. Cap/dayP. Cap/day30397962208966432311319192453143289885830917543198131521785915Probable Effects of GlobalizationThe possible effects of globalization onEgyptian agriculture will be assessed throughthree main variables: agricultural foreigntrade, farm price variability and germplasm.Agricultural Foreign TradeAs Table (3.7) shows, agricultural importsconstituted around 30 per cent of totalmerchandise imports in 1996, whileagricultural exports were around 15 per centof total merchandise exports, which meansthat agricultural exports covered only 13.5per cent of agricultural imports in 1996compared to 13.9 per cent in 1983. Thisindicates the rigidity of agricultural exportsand the large deficit in the agricultural tradebalance.Liberalization of economic relationsthrough ERSAP and the implementation ofthe WTO agreements did not have asignificant impact on agricultural exports.This is due to issues related to the supplyside. This situation may change in the futurewhen all aspects of reform produce deepand sustainable effects. From the same tablethe deterioration in agricultural terms oftrade can also be noticed. The unit importvalue index reached 125.9 per cent, whilethe unit export value index reached only 67per cent (1989-91 = 100).This evidence indicates that Egypt mustexpand its exports in general, andTable (3.7)Egyptian Agricultural Foreign Trade (1983- 1996)ItemElementUnit19831996Total Merchandise TradeTotal Merchandise TradeAgricultural TradeAgricultural TradeAgricultural Trade indexAgricultural Trade indexAgricultural Trade indexAgricultural Trade indexAgricultural Trade indexAgricultural Trade indexImportsExportsImportsExportsImports ValImport U/VImport VolExports ValExport U/VExport VolMLN $MLN $MLN $MLN $1989-91=1001989-91=1001989-91=1001989-91=1001989-91=1001989-91=100920225853076427105.5101.5104.194.6102.889.91302035343862521132.9125.9105.6109.767159.748 -Egypt Human Development Report 2000/2001

Globalization Challenges to Egypt’s Production Sectorsagricultural exports in particular, in order tobe able to import enough food to ensurefood security and to achieve self-reliance.This can only be done through an upgradingof the marketing system and tradeinfrastructure, especially in the areas of postharvest [meaning?] and transportation.Lowering the costs of Egyptian productsthrough improvement of productivity, withthe assurance of high quality, is the key tocompetitiveness in the internationalmarkets. Further, Egypt has to transform itsfresh and raw products into processed onesin order to improve its terms of trade and tocreate more job opportunities and increasevalue added.Farm Price VariabilityThe combined process of APR, themembership of Egypt in the WTO and theincreasing forces of globalization have had astrong impact on Egypt’s price structure.Agricultural prices have become moresensitive and responsive to internationalforces. They fluctuate from one season toanother and also from year to year. Theopenness of the Egyptian economy to theinternational market may lead to a widerange of price fluctuations. This priceinstability naturally creates an unstable farmincome stream, which is harmful to theagricultural sector, particularly smallfarmers, in terms of farm investment,production plans and poverty.In most countries, whether developed ordeveloping, price stabilization schemes arein force to protect the population againstsevere price fluctuations. In Egypt, theAgricultural Price Stabilization Fundcompensates farmers in the case of a drasticdecrease in farm prices. However, this Fundneeds to be supported with sufficientfinancial resources and an effective mechanismfor its efficient operation.The impact of globalization is felt not onlyon farm prices but also on prices forconsumers, especially for basic food. Egyptimports around fifty percent of its foodconsumption needs, mainly wheat. In casesof irregular and large increases in majorfood prices, the cost for the urban poor willbe very high. The GOE would therefore bewise to be ready to intervene to ensure thatbasic food needs for the poor are met at areasonable cost.Germplasm (Genetic Resources)One particular sub-sector of agriculture isplant germplasm, which provides a particularlyarresting counter-example to globalization.Restricted germplasm flows among nationsare causing potentially adverseconsequences for agricultural developmentin developing countries. This restrictedmovement is due to the monopolisticpractices of multinationals which, throughprivatization and mergers, have acquiredmost of the valuable genetic resources(Table 3.8).In order to expand food production for itsgrowing population, Egypt has to strengthenits research institutions to generate newvarieties, and to seek partnerships withinternational agricultural research centers,especially in the field of genetic improvementsin basic food crops.In most countries,whether developed ordeveloping, pricestabilization schemesare in force to protectthe population againstsevere pricefluctuations.Table (3.8)Changing Structure of the “Plant Genetics” IndustryMajor RemainingCompaniesMONSANTO (PharCorporationAVENTISDUPONTSEMINISDowChemicSyngenta (PendingFTC approvalConglomeratesAgr Evo Rhone-Poulenc HoechstScherinDow ElancoNovartisAstrazenecaAgricultural CompaniesBiotech CompanieSeed CompaniesAgracetus Calgene IMillennium Pharma DekalbAsgrow HolcFoundation seeds CargillInt’l plant B Int’lHumanscienceCuragPioneerHybrAsgrowRoyalSluisPlant Geneticplant Tec NunhernsVa plantGenetic SunSeeds Can limagrainVegetableGeneMycogenRibo PharmaeuticalMycogenunit AgriseedsCiba-SandozNorthrupKingS&Hilleshog seedsRog Co.Mogen1nt’1 N.V.Japan TobaccoAdvantaEgypt Human Development Report 2000/2001 - 49

Globalization Challenges to Egypt’s Production SectorsAchieving highersustainable growthmust be through adynamic exportsector founded on arobust manufacturingbase.Industry ModernizationSince 1992, the real growth rate in Egypthas been rising, reaching more than 5 percent per annum in the last three years of thedecade. It is targeted to reach 7 per cent inthe coming few years. In recent years,export promotion policies have beenstrongly advocated as a superior developmentstrategy for semi-industrialized countries.Moreover, evidence shows thatmanufactured goods are at the core of anysuccessful export-led growth strategy.Hence achieving higher sustainable growthmust be through a dynamic export sectorfounded on a robust manufacturing base.However, the multilateral trade liberalizationafter the Uruguay Round and the newregional initiatives in other parts of theworld are likely to erode the preferentialaccess of Egyptian resource-intensiveexports to European markets. Egypt willhave to face a sharp increase in competitionin labor-intensive exports from manyMENA and Asian countries. Competing inthese low-technology products dependsmostly on cost reduction, which requireshigh productivity growth to reduce the unitlabor cost while maintaining growth in realwages. Alternatively, but more difficult anddemanding, competition in low-technologyproducts can depend on product differentiation,which requires a high degree of masteringof the production process (in terms of newdesign, components, materials etc.)Otherwise, competition in these productswill be at the expense of suppressing realwages and welfare in the economy.A set of questions is addressed in thissection: How does the structure of theEgyptian manufacturing sector affect thepattern of trade and competitiveness? Whatare the likely prospects for globalization ofthe Egyptian manufacturing sector? CouldEgypt compete against high technologyfirms in industrialized countries or evenagainst medium technology firms in thenewly industrialized countries? What is thepattern of industrial modernization neededin order to maximize the benefits ofglobalization and minimize its threats?The Egyptian ManufacturingSector in a Global SettingThe Industrial BaseAt the macro level, the economic variablesof Egypt's manufacturing sector hadexperienced some improvement by the endof the 1990s. The growth rate of the sectorwas the highest among all economicsectors; it rose to 7 per cent on average inthe years 1996-98 (Table 3.9), which led tomore than doubling the industrial basebetween 1990 and 1998 (see Table 3.10).Also, the contribution of Egypt'smanufacturing sector to value added at thenational level had reached its highest levelover the 1990s amounting to 19 per cent in1998/99.Table (3.9)Sectoral Average Annual Growth Ratesin Egypt (%)GDP growthAgriculture, value addedManufacturing, value addedServices, etc., value added1992-953.982.803.813.211996-985.363.417.835.55This level of performance is close to thoseof most of the countries in the MENAregion. Yet, it is lower than the average forthe developing countries (with an onaverage contribution of 26.7 per cent by themanufacturing sector to GDP, during theperiod 1991-98). It is also much lower thanthat of the newly industrialized countries inSouth East Asia. The manufacturing sectoramounted to around 30 per cent of GDP inKorea, Malaysia and Thailand during theperiod 1991-1998. The industrial base ofEgypt is almost half that of Thailand orIndonesia, and two-thirds that of Malaysiaor Turkey. China and Korea are beyondcomparison. However, manufacturingoutput in Egypt is more than double that ofMorocco or Tunisia (Table 3.10).50 -Egypt Human Development Report 2000/2001

Globalization Challenges to Egypt’s Production SectorsTable (3.10)Relative Development of Industrial Base(Manufacturing Value Added of Egypt 1991=100Country 1991 Average(1992-95)ChinaEgypt, Arab Rep.IndonesiaJordanKorea, Rep.MalaysiaMoroccoPhilippinesThailandTunisiaTurkey1505100327..102515957138332273242290135466..13482576317246034350Average(1996-98)4019212556..15403327320554443355Table (3.12)Relative Development of Industrial Base(Manufacturing Value Added of Egypt 1991=100CountryChinaEgypt, Arab Rep.IndonesiaJordanKorea, Rep.MalaysiaMoroccoPhilippinesThailandTunisiaTurkeyResource-based..37.017.936.512.216.234.039.052.327.525.0Laborintensive..38.756.229.340.029.439.128.243.647.8Technologyintensive..24.425.923.147.554.426.932.847.728.927.2StructureTable (3.11) depicts the share of the majormanufacturing branches in totalmanufacturing output. It shows that the fourbranches of ‘food and beverage’, ‘textileand clothing’, ‘chemicals’, and ‘machineryand equipment,’ constitute the bulk ofmanufacturing output (between 45 percent-70 per cent) in the sample countries,but with different domestic structures.However, these branches constitute acombination of resource-based,labor-intensive (low knowledge), andknowledge-intensive products. Egypt’sindustry is heavily natural resource-based.This reflects itself in the bias of thestructure of manufacturing output towardschemicals, food and textiles. Next to Jordan,the importance of chemical industries inEgypt is the highest in the sample.The share of products with technologyintensivecontent is lower than anticipated.Table (3.12) presents a detailed distributionfor the three major contents (resource, laborand knowledge) of manufacturing output,regardless of the type of activity. As can beseen from the table, the importance ofmanufacturing products that have a highknowledge-content in Egypt'smanufacturing sector is almost half that ofKorea, Malaysia and Thailand. However, itis close to those of other countries of theMENA regionThe Structure of Manufactured ExportsStatistics show that the share of high-techproducts in Egypt's manufactured exports islower than the share of these products inmanufactured output (see tables 3.12 and3.13). This could be explained by theinability of the Egyptian output structure tobe channeled into the export structure. Whatis striking is that industrialization in Egypthas deep historical roots, yet it has notevolved to a stage beyond that of Tunisia,for example.It is argued that productive capacities andtheir knowledge levels are closely linked tothe ability of the economy to export andcompete internationally. The highperformance of the Asian newly industrializedCountryChinaEgyptIndonesiaJordanKoreaMalaysiaMoroccoPhilippinesThailandTunisiaTable (3.11)Manufacturing Outputs’ Structure (1995)31*12.025.322.620.39.114.435.029.5..23.93215.113.719.64.711.34.417.58.812.8124.5331.20.69.82.92.06.32.02.11.363.7342.83.34.75.24.32.64.43.8..2.735 3618.4 6.329.1 6.715.2 3.543.0 10.318.1 4.415.6 3.018.2 6.926.0 3.413.01 5.2323.2 7.8Statistics show thatthe share of high-techproducts in Egypt'smanufactured exportsis lower than the shareof these products inmanufactured output.3711.88.46.04.98.44.71.66.64.865.63830.212.918.08.441.448.014.419.125.337.4392.20.10.80.21.10.90.10.81.981.1*ISIC classification: Food, beverage, and tobacco (31) - Textiles, wearing apparel, leather, andfootwear (32) - Wood and wood products, including furniture (33) - Paper and paper products,printing and publishing (34) - Chemicals (35) - Non-metallic minerals (36) - Basic metals (37)- Metal products, machinery and equipment (38) - Other manufacturing industries (39)... Figures are not available.Egypt Human Development Report 2000/2001 - 51

Globalization Challenges to Egypt’s Production Sectorscountries, in terms of sustainable fastgrowth rates for two decades, is due mainlyto their ability to develop highly competitiveindustries. If this is the case, then theindustrialization process in Egypt is highlyquestionable.Competitiveness of Egyptian IndustryMeasuring competitiveness encompasses twoindicators: absolute efficiency, which reflectsTable (3.13)Manufactured Exports’ Structure1995CountryChinaEgyptIndonesiaKorea, Rep.MalaysiaMoroccoPhilippinesThailandTunisiaTurkeyResourcebased12.737.539.96.320.049.222.122.019.018.8Laborintensive51.549.835.723.711.029.928.230.255.157.2Figure 3.1 : Average Manufacturing Unit Labor Cost0.40.350.30. 25Unit Labor Cost0.2Ratio0.150.10.050TurkeyTunisiaThailandPhilippinesMoroccoMalaysiaKoreaJordanIndonesiaEgyptChinaTechnologyintensive35.812.724.470.069.020.949.747.725.924.1the level of production costs relative to othercountries; and relative efficiency, which explainsthe pattern of international specialization inproduction. Comparisons of relative wageadjusted for productivity, measured in terms ofunit labor cost, would give a simple, though notcomprehensive, technique to measure absoluteefficiency. For relative efficiency, comparativeadvantage techniques, i.e. revealed comparativeadvantages (RCA), would be the main indicator.However, with the growing tendency toestablish free trade areas, the globalizationprocess in the manufacturing sector wouldaffect not only the international position ofthe sector, but would also have an impact onits domestic presence. In this case, localcompetitiveness of the sector is an importantissue that has to be explored.Wages and productivityAs appears from Figure (3.1,) whichpresents the unit labor cost of the set ofcountries under study, Egypt has one of thehighest unit labor costs despite the relativelylow wage level per worker inmanufacturing. Levels of productivity ofmanufacturing workers in Egypt, asdisplayed in Figure (3.2), are relatively verylow. Therefore, lower wages do notconstitute any comparative advantage toEgypt's manufacturing sector.Furthermore, as shown in Figure (3.2a), thebulk of the plot clusters lie at the bottom ofthe distribution. This indicates aphenomenon of low wage-productivityequilibrium in Egyptian manufacturing. Thisis highlighted more through internationalcomparison. As figure (3.2b) shows, Egyptlies behind most other countries.1614121086420Figure 3.2 : Relation Between Wage and ProductivityFigure 3.2a Figure 3.2bValues in US $Egypt5000450040003500300025002000150010005000KoreaMoroccoTurkeyTunisiaJordan MalaysiaEgyptPhilippines ThailandIndonesia0 50 100 150 200 250 300 350 4000 10000 20000 30000 40000 50000Average ProductivityOutput per Labor52 -Egypt Human Development Report 2000/2001

Globalization Challenges to Egypt’s Production SectorsRevealed Comparative AdvantagesTable (3.14), which presents the results ofapplying the technique of RCA to figures ofexports for each country in our sample,shows that the same phenomenon, ofprimary commodity bias in Egyptian trade,manifests itself when the structure ofcommodity groups in which Egypt has arevealed comparative advantage is explored.Even the Philippines, that has a lowersnumber of products with RCA than Egypt,has a more diversified structure with goodpresentation in the high-knowledgecategories of machinery and equipment.Most of the commodities in which Egypthas RCA are natural resource-intensive orlabor-based industries. The relative highestcommodity group in which Egypt enjoys thegreatest number of commodities with RCA,in comparison to those of other countries forthe same group, is the ‘mineral fuels,lubricants and related materials’ group.Petroleum and its products belong to thisgroup. This RCA in petroleum and itsproducts is not expected to be sustainable inthe long run. And the lowest RCAprevailing in the relative structure ofEgyptian merchandise is the ‘machinery andtransport equipment’ group. This is thegroup with a continuously increasing sharein world trade.During the first half of the 1990s, thenational income of Egypt had experienced aloss of almost 2 per cent, due to thedeterioration in the terms of trade for theresource-based products that Egypt tradesin. High rates of innovation of man-madesubstitutes for natural resource - basedproducts constitute a major challenge thatconfronts trade in products with high naturalcontent. That is to say, the higher the shareof primary resource-based products inEgypt's export structure, the more the loss incompetitiveness and income the economy isexposed to. The first category in whichEgypt has the highest number ofcommodities with RCA is ‘manufacturedgoods classified chiefly by materials’, inwhich the groups of ‘textiles’ and ‘wearingapparel’ are included. For these two groups,Egypt enjoys international competitiveness,yet to a lower degree for apparel comparedto textiles.Domestic CompetitivenessImports competing with domestic productsrepresent a threat that becomes tangiblewhen the policy of economic openness ispursued at high speed. In this situation,consumer demand develops more rapidlythan the capacity of local firms. Domesticsuppliers begin to lose their internalmarkets, thereby allowing a continuousincrease in the foreign component ofdomestic consumption. If local firms fail todominate their own domestic markets, theywould presumably have little chance tocompete internationally.If local firms fail todominate their owndomestic markets,they wouldpresumably have littlechance to competeinternationally.Table (3.14)Manufacturing Outputs’ Structure (1995)Export Categories0123456789TotalChina43229763110944900361Egypt230258215490170139Indonesia3112786124311412182Korea1001110227545401205Malaysia1211778113136280151Morocco Philippines Thailand350252353923401451611622726133331193842543165841611251Tunisia1741542113214490148Turkey4443526168917500263*ISIC classification: Food, beverage, and tobacco (31) - Textiles, wearing apparel, leather, and footwear (32) - Wood and wood products, including furniture(33) - Paper and paper products, printing and publishing (34) - Chemicals (35) - Non-metallic minerals (36) - Basic metals (37) - Metal products, machineryand equipment (38) - Other manufacturing industries (39)... Figures are not available.Egypt Human Development Report 2000/2001 - 53

Globalization Challenges to Egypt’s Production SectorsProductive units inEgypt are expected toconfront with theopening of theeconomy and theanticipated change inconsumerpreferences.In this area, local competitiveness ismeasured by applying the World Bank'sIndex of ‘export competitiveness’ todomestic data. This index reflects thedevelopment of domestic consumptionarising from local output of the commodityin question. If applied to the textile sector,as a representative example of domesticcompetitiveness, the index is defined interms of growth of Egypt's textileconsumption that is satisfied by domesticproduction. This growth depends basicallyon the capabilities of local productive unitsto: (i) respond rapidly to the growth ofdomestic consumption of textiles (f1);(ii)deepen their market share, i.e. increase theshare of local production in total domesticconsumption of textiles (f2); and (iii)diversify their textile production to becapable of satisfying the increasinglydiversified consumers demand (f3).Table (3.15) depicts the results of applyingthe WB’s formula in the case of Egypt andTurkey. Computations are based on theapplication of regression analysis to regressgrowth of textile consumption satisfied bylocal production on the growth of totalnational consumption of textiles (f1), andthe market share of local manufacturingrelative to the growth of domesticconsumption (f2). The diversification factor(f3) is obtained as a residual.Table (3.15)Domestic Competitiveness of TextilesCountry f 1 f 2 f 3 gEgyptTurkey0.733.110.01-0.49-0.120.790.723.35It is also shown in the table that the bulk ofgrowth of the local component in thestructure of domestic consumption isattributable to the growth of thisconsumption per se. Effects of productdiversification are apparent in the case ofTurkey, but not for Egypt. This factorhighlights the challenges that productiveunits in Egypt are expected to confront withthe opening of the economy and theanticipated change in consumer preferences.In comparison to Egypt, consumption inTurkey has been experiencing high growthrates due to the notable increase in percapita income and the rapid opening up ofthe economy. With the growth ofintra-trade, (f2) would most probablyregister low values, and negative signs inmore open economies.With the relaxation of tariffs on importsunder the Egypt-EU Partnership Agreement(E-EUPA), effective rates of protection ontextile products would decrease to negativerates by the end of the phases of tariffreductions. Figure (3.3) illustrates thereduction of effective rates of protection onthe two major branches of the domestictextile sector (spinning and weaving, andready-made garments) according to the fourphases of tariff relaxation of the E-EUPA.The market penetration ratio (MPR) wasalways minor on products of this industrydue to the existence of import bans and veryhigh tariff walls. After the removal ofprotection, the domestic products of thissector will not be able to face externalcompetition. Prices of most of theseproducts (either inputs, or final outputs) aremuch higher than international prices due toinefficient domestic production processes.This shift towards imports will negativelyaffect the level of domestic production. Thisloss of local competitiveness could begeneralized to many industrial branches.Many of the local industrial outputs havehigher prices than their internationalcounterparts, due to inefficient practices inthe production and pricing processes, suchas the presence of both technical andallocation inefficiencies and high mark-upprices.To sum up, the above analysis discussed theposition of Egypt's manufacturing sector inthe international context. Relatively speaking,the level and technology content of theindustrial base in Egypt is close to that ofmany competitive economies, such asTunisia, Morocco, and Turkey. Yet, forEgypt's manufactured exports, both the leveland the technology content are largelybelow these countries. The internationalposition of this sector in external markets isexpected to face major challenges frommany developing countries that areproducing close substitutes to Egypt’sexports. Moreover, the increase in thedegree and speed of globalization throughthe introduction of regional free trade areas54 -Egypt Human Development Report 2000/2001

Globalization Challenges to Egypt’s Production Sectorswill endanger the domestic competitivenessof this sector. International competition willextend to the domestic market through thephasing out of tariffs. The high tariff wallthat the sector enjoyed for long decadescould collapse and open the economy tocompetition from strong advanced countries.For a suggested pattern of Egypt’s industrialdevelopment under globalization see Box(3.5).Globalization and the AppropriateExport StrategyThis critical situation raises many questionsabout how to proceed in dealing with thesechallenges. Could the Egyptian economyspecialize in producing and exportinglabor-intensive products? Many countrieswere able to compete internationally andrealize high levels of growth through thisstrategy. This in turn depends on theeconomy's capacity to reduce the unit laborcost of its labor-intensive exports to practiceprice competition. If the skills and productivityof the labor force are not growing fast,implementing the suggested export strategywill be at the expense of reducing realwages. If real wages are already very low,then poor employees in the manufacturingsector will subsidize the export strategy,which will result in a high negative impacton welfare. This is likely to be the case inEgypt.In investigating this assumption, we willfocus on the private manufacturing sector0.80.60.40.20-0.2Figure 3.3 :Effective Rates of Protection on the Textile Sector1ERP on Textilesspinninggarments3 5 7 9 11 13 15%Box (3.4)Egypt’s Industrial Development: A Suggested PatternbyDr Mamdouh Al- Sharkawi(Institute of National Planning)In a globalized world, a domestic marketbecomes an extension of foreign markets. Itis therefore necessary, when developingexisting industries and selecting new ones,to focus on those which deepen domesticindustrialization. These industries shouldmainly be characterized by the following:● Strong backward and forward linkagesthat allow the establishment of newindustries that depend on the use ofdomestic inputs.● Capability of responding to domesticmarket needs by using domestic rawmaterials and/or domestically producedsemi-finished products.● Ability to compete with similar importedproducts in terms of both price and quality.● Maximization of manufactured exportsand job opportunities.aluminum; and iron and steel. It is alsorecommended that special attention is given tosmall and medium firms, especially in thefurniture, shoe, and garment industries.Moreover, the suggested industrializationpattern requires the adoption of a number ofpolicies, among which are the following:● The existence of specialized marketingfirms that play both the role of guidingindustrial firms in deciding what to produceand in what quantity, and for marketing theproducts of these firms.● Establishment of specific industrial regionswhere industries of the same activity areconglomerated together. This would raiseproductivity through enhancingcompetitiveness, facilitating the foundationof R&D centers, encouraging trainingprograms, and by the presence of banks andfinancial institutions.If the skills andproductivity of thelabor force are notgrowing fast,implementing thesuggested exportstrategy will be at theexpense of reducingreal wages.The most important Egyptian industries thatare likely to meet these conditions arechemicals; cement; garments; shoes andleather products; toys and sports equipment;● Development of textile industries.● Effective application of duty drawback andtemporary admission systems.Egypt Human Development Report 2000/2001 - 55

Globalization Challenges to Egypt’s Production SectorsTo compete ininternational marketsthrough a costreduction strategy,manufacturing firmsshould be able tocontinuously reducethe unit labor cost.for two reasons. Firstly, the privatemanufacturing sector is taking the lead inthe industrialization process of Egypt with ashare that had reached two-thirds by1996/97. Secondly, aside from sectors witha high-resource-base (basic metals andchemicals), the contribution of privatemanufacturing to total manufactured exportsis about 80 per cent or more of allmanufacturing activities.According to the Family Budget Survey of1996, about 42 per cent of workers in themanufacturing sector in Egypt are below thepoverty line. A household is consideredpoor in Egypt with a daily income of aboutLE15/day. Figure (3.4) shows the distributionof daily wages of employees in the privatesector, as revealed by the Enterprise SampleSurvey of 1998, and the Labor SampleSurvey of 1998. It is interesting to note thatin figure (3.4) while the median is almostLE8, the average wage is up to LE34.6.To compete in international markets througha cost reduction strategy, manufacturingfirms should be able to continuously reducethe unit labor cost. Given the very low laborproductivity of manufacturing employees inEgypt, this strategy would suppress wagesand exacerbate the poverty problem.Globalization and Prospects ofEgypt’s Industrial SectorThe aforementioned analysis pinpoints someof the features of the manufacturing sectorin Egypt and shows their trade implications.It is clear that the sector suffers from manyproblems that are reflected in its weakperformance in the context of internationaltrade. Building an export promotion programon a cost reduction strategy will negativelyaffect the level of welfare of workers in themanufacturing sector unless the program ispreceded by a modernization plan whichtargets higher productivity?Some firms in the manufacturing sectorsuffer from obsolete technology. But this isnot the core problem of the sector. One ofthe striking findings of the present analysisis the dichotomy between the industrialstructure and that of exports. This makesindustry in Egypt a good representativeexample of the consequences of thediscrepancy between the level of technologyin machinery and the level of knowledge inlabor skills. Assembling industries in Egyptare the industries that can compete leastinternationally, or even in the local market ifit is not highly protected. Their unit laborcost is one of the highest in the world,despite the fact that they have acquired verymodern technology.The history of the evolution of industryindicates that the first step to establish anindustrial complex system stems from thedesire of the industrial unit, on the microlevel, to increase its efficiency in usingeconomic resources. Therefore, the first stepin modernization should focus on the microlevel. Parallel to this, the creation of aneffective innovation system is crucial.Learning must be institutionalized. The linkbetween scientific bodies, laboratories,universities, and technology centers, with theFigure 3.4RELATION BETWEEN WAGE AND PRODUCTIVITY%403020100Distribution ( All )-3 -5 -10 -15 -20 -25 -30 -40 -50 50-Wage Catergories%120100806040200-20Cummulative Distribution ( All )-3 -5 -10 -15 -20 -25 -30 -40 -50 50-Wage Catergories56 -Egypt Human Development Report 2000/2001

Globalization Challenges to Egypt’s Production Sectorsknowledge-building process at the firm level,is essential to sustain the process ofknowledge upgrading at the micro-level. Inother words, modernization depends on thesuccess of creating a mechanism to generatethe learning process within firms on the onehand, and on linking the acquisition oftechnology and its diffusion with educationaland training programs on the other.The performance of firms is path-dependent.The process of developing industrialcapabilities needs time. And because thetime dimension is of the essence, it iscrucial for the government to intervene in away that accelerates this process. Governmentactions are indispensable to implementing anational innovation system, to guide firmsin how to acquire technology, and to supportscientific bodies and educationalorganizations to provide firms with acontinuous stream of technology,information, and knowledge.This modernization is the only way toenhance productivity and to enable theindustrial sector to compete in labor -intensive products under globalization.Following this, with the mastering oftechnology over time, the economy wouldbe able to compete in differentiatedlabor-intensive products.Labor-intensive exports are the major fieldof specialization for Egypt, now and formany years to come. Targeting a mereincrease of these exports would negativelyaffect economic welfare. To raise nationalincome and economic welfare, buildingcompetitiveness for this type of export isessential. In order to benefit fromglobalization, Egypt has no other alternativebut to accelerate the process of structuringits national innovation system and speedingup the evolution of knowledge capacities toachieve the shift from ‘learning by doing’ to‘learning by research’.Strengthening the Financial SectorThe growing importance of financial sectorreform in the context of rapid globalizationtogether with the international financialturmoil of the second half of the 1990s,triggered thinking in the area of how tostrengthen the global financial system (SeeBox 3.5). There is internationalunderstanding among concerned bodies thatthere is a pressing need for much strongerModernization is theonly way to enhanceproductivity and toenable the industrialsector to compete inlabor-intensiveproducts underglobalization.Box (3.5)Financial Crises of the Late 1990sThe origins of the Asian crisis can be foundin financial and corporate sector weakness,macroeconomic vulnerabilities together withformal and informal currency pegs, and theartificial stability of exchange rates. Amongfinancial sector vulnerabilities, analystsconcentrated on the deterioration of bankloan values and capital adequacy ratios, thebuild-up of corporate indebtedness, andunsustainable banking practices (such asdirected, connected, and insider lending).This was coupled with a weakness in thesupervision of financial institutions and theabsence of prudent regulations, coupled witha weakness in bank and corporategovernance and accounting standards (suchas loan valuations and disclosure practices).In the aftermath, the aim of policy makerswas to stabilize the financial system and torestore confidence in economicmanagement. The priorities of theauthorities were set in the followingsequence: (i) to stop bank runs; (ii) toprotect the payment system; (iii) to limit thecentral banks liquidity support; (iv) tominimize disruption to credit flows; (v) tomaintain monetary control; and (vi) to stemcapital outflows.The negative social impact of the Asian crisishas been enormous. Human capital costseither resulting from the additionalunemployment or loss of jobs resulting fromthe recession or from the reduction of thepublic expenditures on social developmentprojects left a negative impact on the qualityof life at the time of the crisis or in theaftermath.In recent research that addressed the socialimpact and consequences of the financialcrisis in Thailand, Indonesia and Korea, it wasfound that the loss of employment has broughtabout a loss of income, which has affectedexpenditure on health and education. Withoutgovernmental programs to provide reliefthrough short-term employment assistance,public-works type activities andunemployment benefits, the impact of thecrisis on people would have been harder.Egypt Human Development Report 2000/2001 - 57

Globalization Challenges to Egypt’s Production SectorsInternational capitalmovements andfinancial volatilitycan play a role indestabilizing theeconomy concerned.surveillance over financial markets.Recently, numerous initiatives haveemerged to reshape the global financialarchitecture. The aim of the recentinitiatives is to assess the vulnerabilities ofnational financial sectors and theinternational financial markets, to supportthe strengthening of national andinternational financial systems and to lessenthe likelihood of crises or to reduce theirseverity should they occur.For emerging financial markets to avoidcrises, the lessons extracted from otherexperiences should be carefully studied (seeBox 3.6), internal economic policies andpractices should be analyzed, and an earlywarning system to protect domesticfinancial systems introduced. National andinternational bodies responsible for monitoringthe stability of financial systems should poolresources and experiences towards thiscommon aim. In the remaining part of thischapter we shall deal with the globalfinancial architecture, the external pressuresfacing the Egyptian economy since 1997/98,and suggested measures to mitigatefinancial vulnerability.Global Financial Architecture: What to Do?In the last twenty years or so almost allcountries throughout the world haveexperienced major episodes of financialinstability, sometimes with devastatingeffects on economic activity, as was thecase in the recent financial crises in Asia. Atthe same time we have seen increasingliberalization of financial systems throughthe lowering of barriers to capital flows anda greater role played by the financialmarkets. Linking these developmentstogether has led to increasing concern overinternational capital movements andfinancial volatility that could be harmful tothe economy.With a careful analysis based on asymmetricinformation, it can be seen that internationalcapital movements and financial volatilitycan play a role in destabilizing the economyconcerned. However, their role is frequentlyoverstated. Thus, there is a danger that intrying to avoid financial instability, policymakers will pay too much attention tointernational capital movements rather thanto deeper fundamentals.Economists and other policy analystsinterested in analyzing the Asian crises havemade the following recommendations:● The most important lesson to be learnedfrom the Asian crisis is the link betweenfinancial sector soundness andmacroeconomic stability. The lattershould be based upon good fundamentals,transparency and disclosure. The formershould always be monitored andsupported by rules and prudentialregulations, transparency and bank/corporategovernance.● Short-term foreign currency debt andcapital inflows together with formally orinformally pegged and artificially stableexchange rates may lull investors intoignoring currency risks. It is alsodangerous for governments and centralbanks to think that such short-term flowsare signs of international confidence in theperformance and health of the economy,while closing their eyes to other signs ofinternal vulnerability.Box (3.6)Lessons Derived from the Asian Crisis● It is essential to develop capital inflow andcounter-policies. Such policies must includelimiting short-term borrowing, encouragingforeign direct investment inflows, relyingmore on equity to prevent the corporatesector from building up large un-hedgedforeign exchange exposures, developingcapital markets in order to reduce corporateleverage and improving corporategovernance. Sterilizing [meaning?] capitalinflows and hedging for such inflows,together with reducing the corporate sectordependence on foreign financing shouldalways be a policy target in emergingmarkets.● It is also important to develop prudent andmore supportive counter-cyclicalmacroeconomic policies, especially ineconomies that might face recession or slowdown in their economic development pathsor those who face currency or balance ofpayment problems. The net worth of banksshould be built up in times of economicboom to provide a cushion in times ofeconomic bust. Early warning systems mustbe put into action.58 -Egypt Human Development Report 2000/2001

Globalization Challenges to Egypt’s Production SectorsGone are the old days when a regulator feltthat he did his job once he had translatedinternational standards of supervision andregulation, and added some localingredients and flavors. Quality ofsupervision does matter, a credit cultureshould be established, and corporatestructure and governance is of crucialimportance.Despite the numerous proposals that havebeen put forward to establish a ‘new’global financial architecture, so far littleprogress has been made. The debacle inSeattle and the growing anti-globalization(and anti - capitalist) movementdemonstrate that these proposals havehardly gained ground. It may be the casethat the developed countries see no valuein revolutionizing the international system.In the international financial environment,the G7 currently put an emphasis on threeissues: more market-sensitive riskmanagement; stronger prudential standards;and improved information disclosure andtransparency, in a way to equip themarkets to reward good behavior andpenalize bad.External Pressures on theEgyptian Economy Since 1997/98The relatively strong economicfundamentals resulting from the ERSAPhelped Egypt lessen the impact of thefinancial crises that faced some otheremerging markets in 1997 - 1998.Nevertheless, by the end of the decade, theEgyptian economy faced some unfavorableconditions. This was partly due to theaccumulation of external pressures, and theinternal economic policies that were appliedto overcome their impact. The outcome ofthese pressures resulted in a deterioration ofthe external position that was reflected in aslower pace of real GDP growth rates.During the three years 1997/98-1999/2000,the accumulated overall deficit of thebalance of payments reached US$10.4billion. This deficit was financed either byofficial international reserves, whichdeclined by US$5.3 billion (or 51 per centof the accumulated deficit) and reduced netinternational reserves (NIR) to US$ 15.13billion by the end of June 2000, or by thedecline of the net foreign assets (NFA) ofthe banks by about US$ 5.1 billion (orabout 49 per cent of the accumulateddeficit). This decline in the banks’ NFAraised concerns regarding the future of theexchange rate while the deterioration ofthe NIR raised other concerns andexpectations.Pressures started with a limited outflow ofportfolio investments in 1997/98, coupledwith a decline in tourism income, andintensified by the deterioration of internationaloil prices. This has negatively affected thecountry's overall balance of paymentsposition.The decline of international oil pricesseverely hit Egypt’s oil exports receipts,which declined from US$2.6 billion in1996/97 to about US$1 billion in1998/99. This decline represented around61.5 per cent of the revenues from oiland gas exports of the previous year.Although the downward trend of oilprices has been reversed since early1999, the Egyptian oil trade balancechanged to show a deficit, for the firsttime, in 1998/99. This deficit continuedduring 1999/2000. The continuation ofthe trade deficit after the surge ofinternational oil prices indicated thatthere is a structural problem in the oilsector (see Table 3.16).The relatively strongeconomicfundamentalsresulting from theERSAP helped Egyptlessen the impact ofthe financial crisesthat faced some otheremerging markets in1997-1998.Egypt Human Development Report 2000/2001 - 59

Globalization Challenges to Egypt’s Production SectorsIn US $ MillionTotal Imports (c.i.f.)Imports Groth Rate%Trade BalanceOil export price (US$/barrel)Oil & Gas exportsOil & Gas Imports**Oil Trade Balance ($ million)Oil exports/total exports, f.o.b.Travel recciptsTourists nights (million)Current Account BalanceNet Prtfolio Investment.Net FDIIncrease(+)/decrease(—)in banking assetsIncrease (—)/Decrease (+) in banking liabilitiesChanges in Net Foreign Assets of banksCapital & Financial AccountNet Errors and omissionsOverall Balance including banksOverall Balance excluding banksFinancing: Increase (—)/Decrease (+) in NFA ofbanks & changes in GIR.Increase (—)/Decrease (+) in GIRIncrease (—)/Decrease (+) in NFA of banksTable (3.16)Major External Sector Indicators:1995/961410710.12- 9498.415.72225.6-853.81371.848.3%300922.9-185257.6626.9-1148.7161.3-987.41017.3-261.3570.6-416.8416.8-570.6987.41996/97 1997/98 1998/99 1999/00*1556510.34-10219.417.82577.8-1395.81182.048.2%364626.0118.61462.9769.7377.1-1245.0-867.92040.7-247.01912.31004.4-1004.4-1912.3867.9168998.57-11770.615.61728.4-1389.8338.633.7%294121.5-2478.6-2481103.9-1672.2-1783.5-3455.73386.9-1043.3-135.0-3590.73590.7135.03455.7170080.65-12652.59.7999.7-1137.2- 137.522.5%323525.7-1723.8-173.6710.6-2125.6-346.6-2472.2918.6-1311.5-2116.7-4588.94588.92116.72472.2178615.02-11473.717.32272.9-2387.8-114.935.6%431434.0-1170.5472.61656.1198.2650.7848.9-974.1-880.1-3024.7-2175.82175.83024.7-848.9* Provisional**Including oil product imports and foreign investors share in productionAlthough Egypt’s capital and financialaccount has always compensated thestructural deficit of the Egyptian currentaccount, its balance of payments deteriorationstarted in 1998/99. While FDI continued tocontribute positively to the balance of thecapital and financial account during theperiod 1996/97-1999/2000, the privatizationof cement companies during 1999/2000contributed significantly to the flow of thisFDI.Net changes of other assets are the outcomeof changes in the non-reserve assets andliabilities of the CBE, changes in the NFAof the banks, and changes in other assets. Itis important to focus on changes in the NFAof the banks to analyze the impact onEgypt’s external position. The net decreasein banks’ FA during the period 1995/96-1998/99 reached US$ 4569.4 million. Onthe other hand, the net increase in thebanks’ liabilities during the same periodreached US$ 3213.8 million. These changesin the NFA of banks amounted to adeterioration of about US$ 7.8 billion,which raised concerns regarding the futureof the exchange rate and the ability of banksto meet foreign obligations.Mitigating Financial VulnerabilityAs shown above, the Egyptian economymanaged to enjoy positive trends in itsperformance until its exposure to threemajor shocks within 6 months starting mid-1997. It is normal for a small open economyto be exposed and affected by externalshocks, and does not necessarily implyvulnerability. There is a set of selectedindicators that can be used to investigate thelikely vulnerability of an economy (seeTable 3.17).60 -Egypt Human Development Report 2000/2001

Globalization Challenges to Egypt’s Production Sectors(Period ended December 1996)Macro IndicatorsInflation > 5%Fiscal deficit > 2% of GDPPublic debt > 50% of GDPCurrent account deficit > 5% of GDPShort-term flows (net portfolio & other investment) >50% current account deficitCapital inflows > 5% of GDPRatio of short-term debt to international reserves > 1Table (3.17)Selected Indicators of Vulnerabilities.Indonesia***Korea Malaysia Philippiens Thailand**************Financial Sector IndicatorRecent financial sector liberalization****Recent capital account liberalization*Credit to private sector > 100% of GDP****Credit to private sector, real growth > 20%*Emphasis on collateral when making loans***Estimated share of bank lending to the real estate****sector > 20%Stock of nonperforming loans > 10% of total loansStock market capitalization (% of GDP)40303109856Nonetheless, it is within the realm ofeconomic management and governance thatcontrolling for the degree of exposurematters most. After all, it is theresponsibility of this management to dealwith these shocks in order to minimize theirnegative consequences, while at the sametime maximizing the benefits. This calls for:External position strengthening. Defendinga fixed exchange rate is not the only optionavailable for policy makers. Marketpressure should not be absorbed by usingNIR without allowing for reflection on theexchange rate. Fixing the exchange rate ofthe Egyptian pound should not be a goal initself since most of the countries thatdefended the fixed rate using theirinternational foreign exchange reserveswere faced with currency attacks andspeculative demand. Moving towards amore liberal exchange rate policy will help:reduce the local demand for dollarization ofdeposits, the dedollarization of loans; andwill reduce expectations for furtherdevaluation. It will also create confidencethat the economic policies adopted by theauthorities are more market oriented.Timely actions are always recommended.To increase the earnings of the economy,the authorities should work on attractingFDI through the privatization of publiclyowned enterprises and allowing foreignfinancing for public investment projects.Some foreign concessional borrowing mightbe helpful in the present stage to continuethe development efforts, without addingmore pressure on local financing.To avoid the tendency to increaseshort-term borrowing by banks andcorporations, the CBE should work onrestricting the ability of banks to increaseEgypt Human Development Report 2000/2001 - 61

Globalization Challenges to Egypt’s Production Sectorsshort-term liabilities in foreign currencies.This can be done either by applying higherreserve ratios on bank liquid liabilitiesdenominated in foreign currencies owedeither to locals or to foreigners, or to set atargeted growth rate for bank short-termforeign liabilities.In managing the country’s foreign debt,monitoring private sector borrowing andshort-term obligations is an importantpolicy objective at all times. Introducinglegislation to monitor corporate borrowingis a good tool for hedging sources and usesin foreign currencies.The long-term solution to balance ofpayment problems lies in the ability tocontrol the growth rate of imports and toenhance the opportunities for more exports.Controlling Monetary Aggregates. TheTable (3A.1)The Plan of Agricultural Horizontal Land Expansion up to the year 2017RegionEastern DeltaMiddle DeltaWestern DeltaSinaiMisr El WastaUpper EgyptEl WahaatSouth ov ValleyTotalTotal Area46412234872488.8531.5252868.53398.8Annex TablesArea Irrigated1064964.523.5115055.74363.7Area to be irrigated by 2017Area % of Total35873238.5700.577.8481.5196.3864.53035.177.159.8468.5396.7587.6190.5977.999.5489.3Table (3A.2)Water Requirements and Water Resources Available in 2017Requirements1997 billion cubic meters 2017 billion cubic metersAgricultureEvaporationCivil usesIndustryNavigationTotalWater available from NileJongly CanalUnderground water in the Delta & ValleyRecycling drainage waterReducing water lost to seaManagement of cropping patternSaving water by irrigation managementUnderground aquifer in desertsTreated sewage waterRain on the North CoastTotal52.132.104.547.420.1566.3455.50-4.804.900.15-0.150.570.201.0067.2767.132.36.610.570.1586.7455.52.007.508.403.043.772.01.5087.6762 -Egypt Human Development Report 2000/2001

Globalization Challenges to Egypt’s Production Sectorsexpansion of domestic credit could createmany shortfalls in the banking sector. Also,increasing government debts to the bankingsector might cause other problems, not onlyto banks, but also to macroeconomicperformance in general. Although theeconomy is facing a slowdown in economicactivities, it is argued that counter-cyclicalmonetary policy might help in developingcountries. For that reason, a temporary tightmonetary policy with higher interest ratesmight ease the pressure on the externalposition. However, this has a negativeimpact on the growth of the real sector. TheCBE is also required to focus onintroducing more measures that target notonly a better quality of bank lending butalso decreasing the cost of lending.Controlling private sector credit growthrates and government borrowing is alsoimportant in the authorities’ efforts tocontrol inflation.In addition, a continuous and closemanagement of bank reserves is essentialduring the coming period. Reportingoperations should be used on an overnight,in addition to weekly, basis to control bankliquidity. The CBE should be able topossess tradable financial instruments toenable it to perform open market operationsthat help achieve the stability of thefinancial system.Fiscal Policy Options. Expansionary fiscalpolicy is recommended during recessions.Investment expenditure on projects andpublic works can be financed by concessionaryforeign borrowing, as long as the overallexternal debt does not exceed safe limits.Counter-cyclical fiscal policy is also aviable policy option.Inflation Avoidance. Fiscal deficitfinancing should not reflect itself in M2 andreserve money growth rates. Financing thetargeted deficit should come from domesticsavings, in addition to the externalfinancing mentioned above, to avoidinflationary pressures. A moderate rate ofinflation might help private sector earningsand might, accordingly, enhance performance.The depreciation of the exchange rate of theEgyptian pound on is expected to impact oninflation since the value of imports exceedsexport earnings.Strengthening the Financial Sector. Thereis a need for bank restructuring. This can bedone by encouraging mergers and acquisitionsand by increasing the minimum capitalrequirements of the banking sector. Thelatter should be introduced for a limitedperiod of time.Strengthening CBE supervision over banksis essential at all times. CBE institutionalcapacity must be reviewed to increase itsinspection capacity and surveillance overthe banking sector. Measures could include:increasing the number and quality of staff ofthe supervisory department; increasing thefrequency of on-site inspections; off-sitesupervision enhancement by automation;working on line with banks; and enhancingreporting system quality and frequency.There may be a need for law amendment toenforce the quality and responsibility ofreporters. It is essential to introduce earlywarning system indicators. Reducing the actof forbearance and strengthening theinformation base by means of disclosureand transparency is a cornerstone for abetter banking sector in Egypt.The creation of supporting agenciesresponsible for collecting information,valuation of assets, and for financial advisoryservices is important as a necessarymechanism for the better functioning of thebanking sector.From the policy perspective, protectingdeposits (via enforcing the articles of thebanking law to introduce the depositinsurance system) and the creation of apolicy to avoid risky credit expansion(asset/liability management, avoiding maturitymismatching, and reducing the cap onlending to a single customer, currently set at30%) are essential.In addition to the above, it is important tocreate a market for long-term bankinvestments. This can be done by issuinggovernment LT treasury bonds, freeinginterest rates on government treasury billsand introducing a primary dealers system.These actions might also help, indirectly, incontrolling the growth of lending rates.Strengthening the Egyptian financial sectoris a priority for policy makers before deeperintegration into the global financial systembecomes unavoidable.Controlling privatesector credit growthrates and governmentborrowing is alsoimportant in theauthorities’ efforts tocontrol inflation.Strengthening theEgyptian financialsector is a priority forpolicy makers beforedeeper integration intothe global financialsystem becomesunavoidable.Egypt Human Development Report 2000/2001 - 63

Chapter FourThe Environment and Sustainable DevelopmentIt is generallyaccepted thatglobalization willincreasingly affectthe environmentaround the world.The Nile Delta isthreatened with risingsea levels due to themelting of polar icecaps.Ideas and concepts, culture and society,capital and finance – together, these providethe elements according to which space canbe organized and environments created.They set the conditions within whichplanners work to produce an environmentconducive to sustainable human development.The intellectual challenge is to construct aconceptual framework that is clear andconsistent, and able to clearly pimpoint theissues and goals, so that decision-making inthe planning and development process ispredicated on a sound understanding. Theimpact of increasing globalization on theEgyptian environment, with respect toEgypt’s spatial, material, and humanresources is a question that relates directlyto planning success or failure. What is therole of planners, both urban and rural, giventhe potential impact of globalization? Andhere, it is important to differentiate betweenthe production and consumption processesin which individuals and organizations areengaged, and the contexts and structures inwhich these processes take place.Impact of Global EnvironmentalIssues on EgyptIt is generally accepted that globalizationwill increasingly affect the environmentaround the world. How will these changesimpact on Egypt? This section will discussthree major areas of concern: climatechange; ozone layer depletion; and someaspects of biodiversity.Climate ChangeClimate change is potentially a most seriousenvironmental threat to human survival. Itcan cause a variety of major alterations inclimatic behaviour, including changes inprecipitation patterns, wind currents andstorms; it can elevate temperatures and raisesea levels, and it can contribute to thespread of disease.Increased emissions of greenhouse gases(GHG) such as carbon dioxide, methane,and nitrous oxide, have the ability to absorbheat emanating from the Earth to theatmosphere, and are among some of theelements responsible for climate change.Carbon dioxide emissions come mainlyfrom the consumption of fossil fuels.Deforestation and land-use changes alsoincrease carbon dioxide levels in theatmosphere. The evidence shows that thepre-industrial concentration of carbon dioxidein the atmosphere was 280 particles permillion, and that this has now risen to about358 particles per million.Egypt’s current emission rates are consideredmoderate (about one metric ton per capita in1996) compared to the USA and Australia(15 metric tons per capita for the sameyear). Industrial nations such as these andalso oil producing countries such as SaudiArabia, resist the idea of changing fossilfuel consumption patterns to reduce carbondioxide emissions. But while most carbondioxide emissions originate in the developedcountries, the consequences of climatechange would touch all the countries of theworld. Unfortunately, the effects are likelyto hit poor countries harder than rich ones.Taking Egypt as an example, the Nile Deltais threatened with rising sea levels due tothe melting of polar ice caps. Variousscenarios estimate that one third of the Deltawill be inundated if the sea level rises by0.5-1.00 meters. Additionally, seawater willseep into the remaining parts of the Deltaand cause salinization of its soils. Evenmore alarming are the changes predicted forthe hydrological regime of the Nile, whichcould contribute to desertification anddrought.An equally serious threat associated withclimate change is the expected surge indiseases as the Earth’s atmosphere heats up.More floods and droughts create the conditionsnecessary for the spread of infectious64 -Egypt Human Development Report 2000/2001

The Environment and Sustainable Developmentdiseases. For Egypt, lethal malaria could betransmitted from the Sudan to thegovernorates of Aswan and Qena as a resultof the migration of this mosquito-bornedisease which breaks out in hot weather.Similarly, agricultural pests from the Sudanwill migrate to southern Egypt, and possiblyto the Delta, if global warming continues toincrease.Ozone LayerThe ozone layer is vital for life on planetEarth (see Box 4.1), and a consensus hasemerged that its protection is a globalmission. The depletion of this layer isviewed as a major threat from the globalizationprocess, but its protection entails costs thatwill burden the developing economies.While the depletion of the ozone layer isalmost entirely the outcome of theindustrialization and development of advancedsocieties, developing countries have to pay alarge part of the cost and to rely on cleanerproduction technology, as part of their“responsibility” to the internationalcommunity. This puts financial burdens ondeveloping economies such as Egypt whichhave to abide by international conventions.Egypt is committed to the objective ofdecreasing ozone depletion, as manifestedin its signature of the various internationalagreements such as the Vienna Conventionand Montreal Protocol (1998).BiodiversityBiodiversity means variability among livingorganisms. It is important to maintainbecause it can directly and indirectlyinfluence the structure and functioning of anecosystem. In September 1989, the WorldResource Institute (WRI), WorldConservation Union (WCU) and the UnitedNations Environment Programme (UNEP)developed a program to prevent theAfter theliberalizationmeasures, increasedemploymentopportunities wereopened to the laborforce as an outcomeof agriculturalintensification.Box (4.1)Earth Layers and OzoneThe atmosphere of the Earth consists ofseveral layers. The lowest is 10 kilometersin altitude and is called the troposphere andthis is where virtually all human activitiesoccur. The next layer is called the stratosphereand it continues from 10 km to 50 km. Mostcommercial air traffic occurs in the lowerpart of the stratosphere and most atmosphericozone is concentrated about 15-30 km abovethe surface of the Earth. Normal oxygen,which we breathe, has two oxygen atomsand is colorless and odorless. Ozone is amolecule containing three oxygen atoms,blue in color and has a strong odor. Out ofevery 10 million air molecules, around 2million are normal oxygen, but only threemolecules are ozone. However, even thissmall amount of ozone plays a key role inthe atmosphere. The ozone layer absorbs aportion of the radiation from the sunpreventing it from reaching the planet’ssurface. It absorbs the portion of ultravioletlight called UVB, which has been linked toharmful effects including various types ofskin cancer, cataracts, and harm to somecrops, some materials and forms of marinelife, such as coral reefs. Recently, convincingscientific evidence has shown that the ozoneshield is being depleted well beyond changes dueto natural processes. Use of Chlorofluorocarbons(CFC) as refrigerant, solvents and foamblowing agents, other chlorine containingcompounds, halons (extremely effective fireextinguishing agents) and methyl bromide(effective produce and soil fumigant)contribute greatly to ozone depletion. All ofthese compounds have an atmosphericlifetime long enough to allow them to betransported by winds into the stratosphere.They release chlorine or bromine when theybreak down. One chlorine atom can destroyover 100,000 ozone molecules. The net effectis to destroy ozone faster than it is naturallycreated. Experiments have shown that thementioned chemicals produce roughly 85 percent of the chlorine in the stratosphere, whilenatural sources contribute only 15 per cent,indicating that the larger effect on ozonedepletion is caused by human activities.Egypt Human Development Report 2000/2001 - 65

The Environment and Sustainable DevelopmentMany of Egypt’simportant and uniquehabitats are notrepresented in thenation’s ProtectedArea Network.destruction of the world’s biodiversity (seeBox 4.2).For several reasons, biodiversity in Egypt isthreatened, and our natural heritage is atrisk. Egypt lacks sustainable and effectivesystems to address natural heritage managementissues and has limited national capacity inthe field of nature conservation, which ishampering the nation’s ability to conserveand manage its unique and criticalresources. The Ministry of EnvironmentalAffairs (MEA) and its affiliates, especiallythe Egyptian Environmental Affairs Agency(EEAA), still have to establish an appropriateinstitutional structure for conservingbiodiversity according to their mandateoutlined under Law 102/1983, Law 4/1994and international treaties for conservingnature.Many of Egypt’s important and uniquehabitats are not represented in the nation’sProtected Area Network (see Box 4.3).Also, most protected areas which have beenidentified and designated under Law102/1983 are still lacking proper managementand infrastructure. Despite a large body ofinformation on Egypt's natural heritage,crucial data is still lacking or informationhas become outmoded in certain fields.Egypt also lacks sufficient funds andfacilities necessary to undertake biodiversitystudies and research. There is stillinsufficient coordination between allconcerned parties for data collection, storageand analysis of biodiversity, habitat/landscape diversity, and other naturalheritage resources. This also applies towildlife, wetlands and the marineenvironment.Wildlife. Wildlife preservation for the mostpart is unregulated in Egypt and excessivenumbers of wild animals are being hunted.Over-hunting and fishing has depleted thepopulations of many species, with somespecies on the verge of extinction. Acomprehensive system for managing huntingin Egypt exists but is not strictly enforced.Many organizations have responsibilities forhunting management, with overlappingroles and insufficient coordination betweenthe various bodies. Egypt also lackssufficient trained personnel, facilities andother resources necessary to regulatehunting and fishing. Little revenue isgenerated from regulating hunting and thefunds raised are not ploughed back into themanagement and protection of wildlife andits habitats.Wetlands. The Nile provides the nationwith nearly all of its water resources. TheNile and the lakes also provide the countrywith fisheries. In addition, Egyptianwetlands are among the richest ecosystemsin the country in biodiversity, and areconsidered internationally important staging,wintering and breeding areas for waterbirds. Nonetheless they are subject to avariety of human threats, which could leadto their degradation. The northern lakeshave been substantially reduced in size.Nearly all wetlands in Egypt are pollutedwith industrial, domestic and agriculturaldrainage water not only leading to changesin the ecology of the lakes, but also causinghealth problems in surrounding communities,economic loss and, eventually, socialproblems. Over-fishing and hunting is alsoprevalent in most wetlands. While these problemshave received national and internationalattention, insufficient action has been takenfor the regeneration, management andpreservation of the wetlands and theirresources.This strategy adopted by WRI, WCU andUNEP calls for:1. Catalyzing action through internationalcorporations and national planning.2. Establishing a national framework forbiodiversity conservation.3. Creating an international environmentpolicy that supports national biodiversityconservation.Box (4.2)The Global Biodiversity Strategy4. Creating conditions and incentives for localbiodiversity conservation.5. Managing biodiversity throughout thehuman environment.6. Strengthening protected areas.7. Conserving species, populations andgenetic biodiversity.8. Expanding human capacity to conservebiodiversity.66 -Egypt Human Development Report 2000/2001

The Environment and Sustainable DevelopmentMarine Environment. The Egyptianmarine environment is one of the nation'smost important natural resources. However,it is haphazardly managed and is developingin an uncoordinated manner. This is leadingto rapid degradation of the country's marineand coastal resources, jeopardizing futuresustainable returns from them. In addition,there is neither evidence of strongmanagement of fisheries (both commercialand sport), or appropriate control over thepharmaceutical and research bodies thatexploit marine resources, such as soft coralsand invertebrates.Environmental Degradation andPer Capita IncomeSustainable development implies policiesand instruments that develop economicresources to satisfy the needs of existinggenerations without compromising theability of the economic system to meet theneeds of future generations. Sustainabledevelopment is achieved when an economyis on a time path where future generationshave economic opportunities that are at leastas large as earlier generations.It is feared that current economicdevelopment, while leading to the accumulationof physical and human capital, exhausts theworld’s stock of natural capital. If a balanceis not maintained, the outcome will impactnegatively on the welfare of futuregenerations. It is for this basic reason thatenvironmental resources and ecologicalservices are essential, and cannot be easilysubstituted by human and physical capital.One way to estimate overall cost/benefits isapplication of the The United NationsSystem of National Accounts (SNA), whichsuggests the depreciation and user-costapproaches for measuring depletionallowances for non-renewable naturalresources (see Annex 4.1).The Environmental Kuznets Curve (Figure4.1) suggests an inverted U-shapedrelationship between environmentaldegradation and the levels of per capitaincome. The turning point of the curve iswhere environmental degradation starts todecrease with the increase in per capitaincome (approximately beyond US $4,500).This turning point in the curve is very high,and overall Egypt has not yet reached thelevels of per capita income at whichenvironmental improvements are likely tohappen.The Egyptian marineenvironment is one ofthe nation's mostimportant naturalresources.Box (4.3)The Desert Environment: Resource for the FutureWhile about 95 per cent of the Egyptianterritories are desert, there is little awarenessand appreciation of this important nationalresource. Egypt's deserts have significantreserves of oil, gas, minerals and othernon-renewable natural resources. The desertis also rich in biodiversity harboringrestricted range and globally threatenedspecies. This vast wilderness area with itsspectacular scenery and numerous culturalheritage sites is becoming an increasinglyimportant resource for tourism. Only a smallpercentage of the population resides in thedesert. However, vast areas of the desertregions are coming under threat as a resultof rapid and inappropriate development.Many areas are being destroyed anddegraded as a consequence of uncontrolledtourism, land reclamation, quarrying andsolid waste dumping. Over-grazing andcollection of vegetation is a problem in mostrangeland threatening the livelihood of thelocal population.Nature-based tourism is a rapidly growingmarket in Egypt, particularly in South Sinai,the Red Sea and the Western Desert. Thiseconomic activity is closely related toglobalization and links to the global economy,and has a direct impact on the country'sbiological and natural resources. It isestimated that 12 per cent of all tourism inEgypt is directed to the Red Sea alone and thisshare is growing. Insufficient regulation of marinetourism and lack of adequate infrastructure isdamaging the natural resources that attracttourists, in particular the coral reefs. Therecontinues to be low awareness and appreciationof marine conservation and Ecotourism in thebusiness community and the general public.Desert (safari) tourism is also a fast growingactivity in Egypt. At present most desert safaritours in Egypt are not ecologically sound,causing the destruction and degradation ofnatural habitats, landscapes, cultural heritagesites and other resources.Egypt Human Development Report 2000/2001 - 67

The Environment and Sustainable Development250200Figure 4.1: An Environmental KuznetsCurve for Sulfur Dioxidecountries, and that the profit motive begiven priority over the environment andpreservation of resources (see Box 4.4).Energy Consumption1501005000 5000 10000 15000 20000 25000$ GNP per capitaThe growth processcould affect thesustainability of theenvironment.Effect of Growth on EnvironmentalSustainabilityThe growth process could affect thesustainability of the environment. This willbe shown through four aspects namely,pattern of industrialization, energy consumption,agriculture, and tourism.The Pattern of IndustrializationGlobalization tends to favor large-scaleindustries that use advanced technologies.Developing countries, including Egypt, fearthat open markets and competition mightdestroy national industries due to theirinability to compete with the quality andproductivity of industries in developedcountries. Another threat is that globaldemand for certain industrial products mightgive a comparative edge to some developingGlobal energy use has increased by over 70per cent in the past twenty-five years, and isexpected to grow by another 50 per cent by2010. This will definitely contribute toclimate change since industrial countrieshave adopted a "business as usual" scenarioat the last meeting on climate change held inthe Hague, in November 2000. Developedcountries consume about two thirds ofglobal energy supplies, while developingcountries about 33 per cent.In Egypt, the total production of primaryenergy was about 60 million Tons of OilEquivalent (TOE) in 1996 and 58.5 millionTOE in 1997, of which about 93 per centoriginate from petroleum. The industrialsector is the main energy consumer inEgypt. It accounts for 48.8 per cent of totalenergy consumption. It is followed by thetransportation sector at 29.15 per cent, andhouseholds and commercial activities at18.4 per cent (see Figure 4.2.). Egypt hasbeen experiencing improvements in energyutilization and efficiency and is also pursuinga number of cleaner production measuresthrough a number of environmental projects.One of these is the Support for EnvironmentalAssessment and Management (SEAM)project.The use of cleaner energy is a key goal forBox (4.4)The Cement Industry and PollutionAlthough the cement industry has a negativeenvironmental impact, it is an importantindustry in Egypt. Shares in cement industrycompanies account for 10 per cent of the stockmarket. Recently, this industry has undergonea process of privatization in an attempt toimprove its productivity and financial situation.A number of public sector companies weresold to TNCs. These corporations were afterlow production costs, and the relatively lowcost of meeting environmental regulations inEgypt as opposed to Europe. Ultimately, theywere after profit and most probably willincrease their capacities. In turn, this is likelyto increase the pollution produced by thisindustry.More factories mean more harmful emissions,leading to the deterioration of air quality,especially where factories are close to urbanareas. This will also mean more wasteproducts for disposal. If these factories areclose to cultivated land, crops may becomepolluted, unsafe, suffer lower sales or lessexports. It is the role of the government ofEgypt to control industrial expansion in a waythat is safest for the environment, withoutthreatening the process of capital accumulation.Under no circumstances should economicconcerns outweigh ecological ones, since thelong-term losses will be by far greater.68 -Egypt Human Development Report 2000/2001

The Environment and Sustainable DevelopmentEgypt. Considering that Egypt has, onaverage, 3500 hours of sunshine every year,solar energy is an important resource thatshould be considered. Wind energy is alsopossible in areas where wind speed rangesbetween 20 and 30 km/hr (and is alreadyapplied in Hurgada and Eastern Al-Owainat).The use of natural gas as a ‘cleaner’ energysource is encouraged in various industries tocontrol pollution caused by other types offossil fuels, especially the commonly useddiesel.AgricultureScarcity of fresh water and fertile soil foragricultural production are two of the majorproblems that face the Egyptian economy.The gap between agricultural productionand the growing population is expected toincrease in the coming twenty years. Thus,the government has adopted new projectsand plans to fully utilize available landresources in an attempt to achieve thehighest possible growth rate derived fromthe agricultural sector. This by cultivatinghigh value agricultural products that meetglobal specifications. These products(Figure 4.3) could be exported and therevenues used to support the import ofstrategic products. Government policiestowards a better agricultural environmentinclude controlling and reducing the amountof fertilizers, pesticides, and other addedchemicals used. Price changes discouragethe excessive use of chemical fertilizers andpesticides. New types of fertilizers andpesticides that contain less harmfulchemicals for the environment are to beintroduced and farmers will be encouragedto use them. According to the profile ofinitiatives for year 1998/99 published by theMinistry of State for Environmental Affairs,pesticide use has been slashed from 34,000tons a year to 4,000 tons a year. Thegovernment is also encouraging large newland reclamation projects in Toushki and theWestern and Eastern Delta areas. This will,however, put pressure on available freshwater resources. The question is whether theopportunity cost to the exploited and/orpolluted natural resources is less than orequal to the revenues generated from landreclamation and agricultural production.Finally, it is important to remember that asadherence to WTO increases the globalization6050403020100Sectors of the Economyof agriculture, Egypt’s agricultural sectormight face threats that would harmlow-income groups and the poor in ruralareas.TourismFigure 4.2: Pattern of Energy Consumption in Egypt 1997/98Others26%Onion2%Rice15%Potatoes12%Cotton30%Tourism is one of the major sources ofincome in Egypt, and is a fast growingsector of the economy. The share of tourismin national income increased from US $300million in 1982 to US $3.8 billion in 1997.More growth is expected in the tourismindustry in the coming years as foreigninvestment continues to increase. Globalinterest in Egypt, as a unique internationaltourist attraction, is considerable, since thecountry incorporates a rich historical andcultural heritage as well as an aestheticnatural environment.Tourism is a ‘blessing’ because it generatesjob opportunities, encourages maintenanceof Egypt’s cultural and historical heritage,Vegetables5%Fruits10%IndustryTransportationHousehold &Commercial ActivitiesGovernmental & PublicActivitiesAgricultureFigure 4.3: Major Agricultural Products, 1992-97CottonVegetablesFruitsPotatoesRiceOnionOthersTourism is one of themajor sources ofincome in Egypt, andis a fast growingsector of theeconomy.Egypt Human Development Report 2000/2001 - 69

The Environment and Sustainable DevelopmentTourism depends onthe environment tosustain it.and enhances growth. Tourism depends onthe environment to sustain it. It also relieson the development and utilization ofnatural, historical, cultural and humanresources in the local environment. Providinga high quality world class experience forvisitors, and maintaining or furtherimproving the quality of the environmentare among the objectives of sustainabletourism development.A boom in the tourism industry will,undoubtedly, incorporate positive as well asnegative impacts on the biodiversity of theEgyptian environment. Coral reefs in theRed Sea are one of the main attractions,their lavish richness harboring about 179species. These submarine animal forestshave an even greater diversity of life thanrain forests, which marine biologists andscientists are still learning about. One coralreef species is being used in bone grafts andanother has helped develop pesticides. Coralreefs serve as natural breakwaters protectingland from typhoons and erosion. In Egypt,coral reefs extend along most of theshoreline of the southern part of Sinai,especially at Ras Atantur and from RasNasrani to Ras Mohammad. Reefs are alsofound round Hurgada and near Gebal Elbaat the extreme southern border of Egypt.This phenomenal coral reef formation ishighly vulnerable to environmental changes,such as in climate, sewage discharge,spillages, and from human handling.Recreational divers and snorkelers can causeconsiderable damage through trampling, thedropping of dive boat anchors, and physicalcontact. In addition, the fast development oftourism in Hurgada and Sharm El Sheikh onthe Gulf of Aqaba has led to the building ofmore hotels to accommodate the increase inthe number of local and internationaltourists. According to 1996 figures, thesouth Sinai coastal region generated about308 million tourist nights or 16 per cent oftotal national hotel nights. A surveyinvestigating sustainable management ofcoral reef diving sites indicates that this willlead to more services such as roads, anddesalination and sewerage treatment units,which will generate more marine pollutionand increased danger to the coral reefs. Thesurvey calls for action to protect thisprecious natural gift.Damaging our coral reefs not only meansdegrading the environment, but eventuallylosing international, and local, tourists in thefuture. Regulating tourism, educating divers,and controlling infrastructure expansion sothat it does not cause environmental damagewill protect our environment and guaranteea continuous and prolonged flow of tourists.Hence, sustainable tourism development is afar-sighted concept that must be adopted.The Impact of EnvironmentalPollution on HealthHuman health is highly sensitive to waterand air pollution for the simple reason thatair and water are indispensable for thesurvival, not only of human beings, but ofall living creatures on which human livesdepend. Thus, water and air pollution figureamong the most serious challenges worldwide,and in developing countries in particular,where practice lags behind awareness.Egypt is no exception in this regard,notwithstanding significant progress achievedduring the last few years.Water ResourcesThe Nile basin in Egypt is a closed watersystem. Thus inputs and outputs must bebalanced. The release from the Aswan HighDam is the major input into the system,excluding a small amount of rainfall on thenorthern coast and some deep groundwaterfrom outside the basin, both of which areinsignificant. The overall efficiency of thesystem is relatively high because of waterrecycling. Of the total amount of water inthe system about 12.97 billion cubic meters(BCM) comes from reused agriculturaldrainage, 4.8 BCM from groundwaterabstraction from the renewable aquifer inthe Valley and Delta, and 0.7 BCM fromtreated domestic sewage.Water QualityAn assessment of water quality in Egypt hasindicated that the major water qualityproblems are bacteria/parasites, heavymetals and pesticides. The indiscriminatedischarge of human waste into waterwayshas created significant pollution problemswith serious health implications. Analysis ofrandom samples collected from effluents70 -Egypt Human Development Report 2000/2001

The Environment and Sustainable Developmentdischarged from wastewater treatmentplants indicates a high percentage ofnon-compliance. The major areas of concernare groundwater contamination, internal orexternal contamination of crops, andtranslocation to grazing animals.Among the major sources of water pollutionis domestic and agricultural wastewater. Theamount of domestic wastewater wasestimated at 3.6 BCM for the year 1995/96.Most treated and untreated domesticwastewater is directed to the agriculturalsector. Currently, the government is developinga national policy to encourage the reuse ofdrainage water by mixing it with freshwater.Irrigation WastewaterIrrigation wastewater is considered a nonpointsource of pollution. The wastewater iscollected by drains that pour their loads intothe river Nile, the northern lakes, orirrigation canals to be mixed for reuse.Eventually, non-point sources of pollutionmay affect the quality of groundwater.Pesticides enter the hydrosphere via thedirect discharge of wastewater, runoff fromnon-point sources, and leaching through thesoil. If not properly handled, pesticides cancause serious health and environmentalproblems. During 1998, for example, 5,300pesticide poisoning cases were reported.Industrial WastewaterIndustrial wastewater is a major source ofcontamination by heavy metals.Unfortunately, once discharged into waterways,these attach to sediment particles and arethereby passed to bottom-dwellingorganisms. The subsequent consumption ofthese organisms produces successivelyhigher concentrations that cause toxicitywhen reaching certain level at the top of thefood chain. Crops irrigated with contaminatedwater may take up contaminants through thesoil and roots, or may retain thecontaminants on the crop surface aftercontact with irrigation water.Drinking WaterPoor quality drinking water is a concern formany in Egypt. This is due, in part, to thefact that sources of raw water for manyareas have become increasingly polluted,and therefore require more sophisticatedtreatment to produce drinking water ofadequate quality. Furthermore, water treatmentunits do not always function properly as aresult of poor maintenance andinappropriate operational procedure. Evenwhen water treatment is satisfactory,drinking water, in some old districts andsettlements, is sometimes contaminatedthrough leaking distribution networks.Rooftop water storage tanks have also beenidentified as a source of bacterial contaminationof drinking water. The results of theanalysis of random drinking water samplescollected from conventional treatmentfacilities during 1998, indicated noncompliancewith Egyptian standards.Samples that failed to meet these standardsranged from 6.3 per cent in the governorateof Matrouh to 15.2 per cent in South Sinai.This ratio was much higher in areas usinggroundwater as their source of drinkingwater. Bacteriologically contaminatedsamples ranged from 12 percent in Giza to43.6 per cent in Ismailia. With regard tochemical contaminants, non-compliancewas much higher, ranging from 20.8 percent in Gharbia to 73.7 per cent in NorthSinai. Total reported cases of infectiousdiseases in 1998 amounted to 50,328.Air PollutionOne of the environmental crises resultingfrom rapid urban growth associated withglobalization, is the deterioration of airquality. The issue of ambient air pollutionhas become a main environmental priorityin Egypt. Air pollution comes from naturaland human-made sources. Natural airpollution sources are wind-blown dustcoming from desert areas. Human sourcesare of two main types: stationary andmobile. The first includes industrialfacilities, thermal power stations, somecommercial residential buildings, openburning of garbage and agriculturalresidues. Mobile sources include passengercars, buses, trucks, motorcycles, and othervehicles. More than fifteen millionEgyptians residing in cities are exposed tolevels of dust and smoke, known collectivelyas Total Suspended Particles (TSP), whichexceed WHO standards. Air qualityCurrently, thegovernment isdeveloping a nationalpolicy to encouragethe reuse of drainagewater by mixing itwith freshwater.Egypt Human Development Report 2000/2001 - 71

The Environment and Sustainable Developmentmonitoring data show that TSP in allmonitoring stations, from Alexandria toAswan, exceeded the maximum limit of 90microgram/m3. Among the main contributingfactors to this type of pollution are regionaldisparity and heavy congestion in somecities and governerates (see Box 4.5).Action to combat the air pollution problemsincludes developing accurate data on airquality, and the creation of comprehensiveinventories of air pollutants in the urban andindustrial centers of Egypt. The EEAA hasalready embarked on two major projects forenvironmental monitoring, namely, the EnvironmentalInformation and MonitoringProgram (EIMP) and the Cairo Air ImprovementProject (CAIP). The two projects havebeen developing monitoring networks toprovide data on air quality. However theyare not currently equipped to deal with forecasting.Nevertheless, they may be considereda good start towards developing an integratedmanagement system for air quality.Such a system can be further developedthrough cooperation with other stakeholders,such as experienced research centers(e.g. the National Research Center, and theMinistry of Health and Population) to mapout comprehensive strategies and air qualitymanagement programs. Legislation shouldbe reviewed and realistic air quality andIn Egypt, there is alarge gap in thedistribution of power,status and wealthbetween Cairo andthe countryside.Box (4.5)Globalization, Disparities and Women, A Dependency Point of Viewby Ahmed El-KholiIn many parts of the Third World, there is adiscontinuity and a sharp discrepancybetween urban and rural areas. Dependencytheory suggests that the disparities betweenrich and poor, city and countryside,powerful and powerless can shape thedevelopment of the process of urbanization.In Egypt, there is a large gap in thedistribution of power, status and wealthbetween Cairo and the countryside. Cairo,as a "core" has exploited the resources ofthe "peripheral" countryside, leading to acondition of excessive dominance overother parts of the country and hinderingtheir development. This unequalrelationship is demonstrated within theCairo metropolitan area, where formal andinformal areas co-exist in close proximity toeach other. The Egyptian elite reside incities which are well connected to the globaleconomy, and services, communications,transport, education and medical facilities ingeneral are significantly better than inperipheral areas. . The more the Egyptianeconomy integrates into the globaleconomy, the more these disparities willgrow with likely increased urban economic,social and environmental ills.As globalization redefines the division oflabor and specialization between nations atthe core and those at the periphery, it alsoreaffirms the exploitative relationshipbetween urban and rural areas, and betweenformal and informal sectors within themetropolitan area. Informal settlements donot grow in a vacuum; rather they grow in thesphere of capital circulation. Thus, the fasterthe national economy integrates into theglobal economy while maintaining thisdualism, the faster informality will spread, anda greater degradation of the environment is tobe expected. All this will impact negatively onhuman resources.While women constitute around 48 per cent ofthe total population in Egypt, they do notreceive an equitable share of wealth andpower, particularly in informal settlements.Since globalization will promote regionaldisparities, it will reinforce the trend towardsinformality and the deterioration in women’sconditions, particularly in the informal sector.The GOE could enhance those programswhich improve the working conditions ofwomen in the informal sector. Different waysto assist include capacity-building programs,job training, education, and encouraging smallbusinesses. More generally, the governmentshould pursue plans to increase awareness andempower women to participate in thedecision-making process. The needs ofwomen should be taken into considerationduring all the phases of planning, policymaking,programs and projects. Thepromotion of informal sector activities willraise women’s living standards. Finally, theprovision of affordable child-care and familyplanning services should lighten the burden ofwomen’s reproductive role and permit them agreater degree of economic participation.72 -Egypt Human Development Report 2000/2001

The Environment and Sustainable Developmentemission standards adopted for the differentlocations and sources.Waste ManagementBetter waste management techniques couldreduce pollution, which will be favorablyreflected in the QOL and people’s health.This applies to all kinds of waste, includingmunicipal, health care, radioactive, agricultural,construction, and demolition waste.Municipal Solid WasteMunicipal Solid Waste (MSW) is comprisedof solid waste materials produced in homesand businesses as a consequence ofeveryday activities. An estimated 60 percent of the generated MSW in Egypt comesfrom urban areas. According to a surveyconducted in six Egyptian cities, generatedMSW consists mainly of organic fraction(68.2 per cent), paper (15.0 per cent), plastic(5.5 per cent), cloth (2.5 per cent), glass (1.7per cent), wood (1.4 per cent), metals (1.4per cent), bones and dust (3.3 per cent).MSW management covers a broad andcomplex range of processes and activities,including collection, transportation, treatment,disposal and/or recycling. Solid wastesinclude all domestic refuse and nonhazardouswastes such as commercial andinstitutional wastes, street sweepings, andconstruction debris. Rapidly growingquantities of garbage threaten human healthand the environment. In Egypt, less than 10per cent of urban wastes are treated, andonly a small proportion of that treatmentmeets acceptable standards. Organicmaterials in MSW generate methane, whichcontributes to climate change.Health Care WasteThe major problem with health care wastein Egypt is the result of the mixing ofmedical wastes with MSW. In 1999, a studyfor EEAA, financed by the Danish Danida,showed that some hospitals treat their wasteby incineration. However, observationrevealed that there are problems withoperating most of these incinerators. Inhealth care units that lack incinerators,medical waste is mixed with the ordinarymunicipal solid waste which contractorscollect to transfer to dump sites. Fewhospitals seperate their waste for disposal.Health care waste is a potential hazard forpublic health if not properly managed, andthe development of an integrated managementsystem for the collection, treatment,transport, and disposal of this type of wasteis essential.Radioactive WasteRadioactive waste is generated from thenuclear fuel cycle, and from nuclearapplications (the use of radionuclides inmedicine, research, and industry). There islimited information regarding the magnitudeof the problems associated with the import,use and disposal of radioactive materials inEgypt. These materials are used as inputs incertain manufacturing and treatment processes.Given the potentially dangerouscharacteristics, safe and environmentallysound management of radioactive wastes isan important concern which needs attention.Agricultural WasteAgricultural residues are estimated to beabout 25 million tons per year, of which 12million tons are used in energy production,which include rice straw, used for industrialpurposes. Another 3mn tons are used to producebiogas. The remainder is burned directly.Very little is used as organic fertilizer oranimal fodder. The unsafe management ofagricultural waste has negative impact onthe quality of air and soil. Agriculturalwastes, which include manor, are partly responsiblefor generating GHG. For sustainingrural areas development, the Governmentwill have to increase its efforts inenvironmental issues of managing agriculturalwastes.Construction and Demolition WasteMost construction and demolition waste(CDW) is non-toxic and suitable for recycling.However, the recycling industry inEgypt is highly selective and uses a verysmall portion of the total generated waste.CDW is often dumped on the side of highwaysor undeveloped land, causing a traffichazard, and on windy days, increases thelevel of TSP. Proper CDW managementwould result in cleaner sites around con-Better wastemanagementtechniques couldreduce pollution.Egypt Human Development Report 2000/2001 - 73

The Environment and Sustainable Developmentand consumption indicators based onresources input and pollution output shouldreplace conventional economic measures.A democratic planning process should notbe based on deterministic planning models.The ‘if-then’ logic will have to be replacedwith ‘both-and’ logic that recognizes andacknowledges diversity and pluralism. Theplanning process should move away frombeing a problem-solving exercise into atechnical-political process that aims tobuild consensus on issues and reachagreements on solutions that are acceptableto all parties. It should be extended tobuilding partnerships to cope with ongoinglocal and global transformations. Efficientuse of specialist advisory and consultationmechanisms could also be of great help inthis respect. This transformation is aprerequisite for sustaining developmentand achieving economic growth whilstprotecting the environment.A democraticplanning processshould not be basedon deterministicplanning models.Egypt Human Development Report 2000/2001 - 75

The Environment and Sustainable DevelopmentAnnex 4.1Incorporating The Depletion of Non-RenewableResources as a Cost of ProductionTwo approaches have been proposed forincorporating the depletion of nonrenewableresources as a cost intoproduction accounts. El Serafy (1981) hasproposed a ‘user-cost’ approach to distinguishbetween the true (that is, sustainable)income component of the sales revenues ofminerals and its capital component, whichis to be deducted from the gross productionvalue as a user-cost. In contrast, Repettoand his colleagues (1989) have applied a‘depreciation’ approach. Gross value addedis not affected by this method, in that theconsumption and increase of naturalresources are treated as produced capital.This makes it possible to obtain furthermodified (in addition to the depreciation ofproduced fixed assets) estimates for netvalue added of the oil and gas sector and forthe whole economy.The Depreciation ApproachThere are two proposed, and widelyapplied, models of the current net pricemethod for estimating the depletion allowanceunder the depreciation approach. The firstmodel, Net-Price II (NPII), is proposed andapplied by Landefeld and Hines for US oiland gas for the period 1941-1978; Repettoet al for Indonesia (1989); Vaze (1996) forthe UK; and Common and Sanyal (1997)for Australia. The second model, Net Price I(NOI), is suggested and applied by theUnited Nations (1993). NPI proposes thatnew discoveries from the NPII model berecorded in balance sheets, and not in flowaccounts, under ‘other volume’ changes.This is to avoid the volatility it may bring toincome measures. Another view is thatdepletion allowance is a transaction betweenagents (from non-produced to economicassets) and can legitimately be brought intothe income account, which is not the casefor discoveries (Bartelmus et al., 1993, 1994and Van Tongeren et al., 1993).Proponents of the depreciation approachmaintain that the depletion allowance ofnatural resources entry should be placed atthe level of NDP with depreciation ofman-made assets.In NPI the net profits from the naturalresource are simply deducted from GDP. Inthis method:GR = TR-COE (1)PR = GR – (rNS+Dep) (2)8 = PR/QE (3)DEPL = (QE) (4)VR = 8 (QRES) (5)Where:GR = gross rent,TR = total revenue,COE = average variable cost of extraction,including compensation of employees,materials consumed, etc.,RR = resource rent,r = interest rate, discount rate,NS = net stock of capital employed inmineral extraction valued at current replacementcost,Dep = depreciation of net stock,8 = resource rent per unit (net profit),QE = quantity of resource extracted duringthe year,DEPL = value of the annual depletion,VR = value of the resource stock,QRES = stock of resourcesIn equation (4) natural resource depletionequals the resource rent per unit (8) timesthe quantity of resource extracted during theyear (QE). But Repetto modifies equation(4) by adding the discovery of newresources to income in the year ofdiscovery; this method is known in theliterature as NPII.DEPL = 8 (QE-ND) (6)Where:ND = discoveries during the yearThe User-Cost ApproachThe handbook of Integrated Environmentaland Economic Accounting (United Nations1993), or SEEA, mentions two concepts oranalogies for viewing natural resources:fixed capital and inventory. It also suggeststwo approaches for valuing the depletion (ordepreciation) of natural resources: the netprice method and the El Serafy ‘user-cost’76 -Egypt Human Development Report 2000/2001

The Environment and Sustainable Developmentapproach. The net price method has alreadybeen discussed. In 1981, El Serafypresented his method for dividing theproceeds from the sale of an exhaustibleasset, such as an oil reserve, into a portionthat could be consumed and a portion to bereinvested. The El Serafy method calculatesthe proportion of true, perpetual or ‘sustainable’income to the proceeds from the extractionof a natural resource from a fixed stock.According to the user cost model the ratioof true income to receipts is given as:X= 1 - 1R (1+r) (n+1) (7)1R - X = R (1+r) n+1(8)??Where:R = the net receipts of the resourceX = true income of the resourcen = the life expectancy of the resourcer = social discount rateThe El Serafy method of calculating ‘properincome’ has become an important approachto estimating the depletion allowance ofnon-renewable natural resources. For example,Vaze (1996), Common (1997), and Foy(1991) have applied his user-cost approachwhen they calculated the depletionallowance using the possible valuationapproaches. More importantly perhaps, theEl Serafy approach is presented by theSEEA, the satellite counterpart to theSystem of National Accounts, as a validalternative to the net price approach. Stocksof natural resources can easily be treated asinventories in both physical and monetaryterms. Conceptualizing natural resources asinventories gives rise to the possibility of,not the preference for, using the El Serafymethod. In fact the El Serafy method avoidsthe application of negative net prices bysubdividing the actual operating surplus intotwo parts: depletion or user-cost whichshould be invested to achieve a constantflow of income in the future, even after thecomplete exploitation of the natural resources,and a remaining true income element (UN,1993).The user-cost approach results in a lowerdeduction from, or in addition to, GDP thanthe value of depletion resulting from NPIIor NPI. For example, NPII adds the totalvalue of new discoveries to GDP whereasthe user-cost approach only adds a percentageof its total present value. Therefore, the ElSerafy depletion allowance would not beless than zero. But NPII gives a negativedepletion allowance if new discoveries aregreater than extraction. However, NPI givesa higher estimate for the depletionallowance and lower estimates for incomeadjusted measures because it does notaccount for new discoveries.Egypt Human Development Report 2000/2001 - 77

Chapter FiveEgypt’s Position inTechnology and Information Led GlobalizationGlobalization hasbecome inseparablefrom the elements ofcontrol andorganization inherentto the hi-techrevolution,The world has had a series of industrialrevolutions. The first began at the end of theeighteenth century, lasted to the end of thenineteenth century, and was characterizedmainly by the manufacture and use of ironmachines, as well as by the use of steam asan industrial energy source. A second industrialrevolution extended until nearly the end ofthe Second World War and wascharacterized by intensified multipurposeusage of iron and steel, sophistication anddiversification of machinery for increasedmanufacturing, and use of petroleum andelectricity energy sources. The presentindustrial revolution has come with theintroduction of nuclear energy and spectaculardevelopments in the aerospace, electronic,machinery and automatic control industries.Starting in the 1970s, the development ofelectronics and integrated circuits has introducedthe use of minute multipurpose equipmentin almost every domain, notably in theaviation and space industries, and hasbrought computers, remote controls and ahost of other products to the ordinary man.By the 1990s and to date, hi-tech hasextended to cover essential and basicactivities and functions all over the world.This present-day revolution manifests itselfin the domains of information technology,communication, and biotechnology (seeBox 5.1), with digital electronic technologyas the pivotal catalyst. Further, it hasimpacted on a wide range of humanactivities, including research on the compressionof time and space, or, indeed, on the spreadof globalization.Globalization has become inseparable fromthe elements of control and organizationinherent to the hi-tech revolution, especiallyin the fields of electronics and theirapplication, and in the exponential growthof information and communication technology.Where does Egypt stand with regard thesenew and rapid developments? It faceschallenges on a variety of fronts, includingthose encompassed by human developmentconcerns. Can Egypt meet these challengesBox (5.1)The Hi-Tech RevolutionFrom within the electronic revolution, ahigh-tech revolution, mainly in theelectronics and biological fields, overtook theworld in the late 1980s and early 1990s. In theminute electronic field, a number of qualitativechanges were introduced to informationprocessing and long-distance communicationequipment. After being relatively separatefields, informatics and telematics wereintegrated to become the nucleus of thewell-developed information technology oftoday. This was achieved by thedigitalization of information transfertechnology.This revolution is reflected in two majorareas. The first is network connectionthrough computers, or the “Internet revolution”,progress in the techniques of digitaldiffusion, the recording of sound andpictures together via satellite TV and spatialdiffusion, and cellular phones (mobiles).Furthermore, there is a program aiming tointegrate the technology of cellularcommunication and that of spatial diffusionand reception of sound and pictures. Thiswould link the computer, the mobile, and thetelevision in one homogeneous digitalelectronicspace, which represents a newqualitative change in information andcommunication technology.The second area is the biological field, wheregenetic engineering is at the forefront oftremendous developments in medicine, agriculture,and food. Scientific research to accomplish agenetic map of the human body, known as theGenome Project, is one of the most recenthi-tech applications in the biological field.78 -Egypt Human Development Report 2000/2001

Egypt’s Position in Technology and Information Led Globalizationin such a way to maximize its gains andminimize its losses? It is to these and relatedquestions that this chapter is devoted.The Digital DivideInformation and communication tools, suchas personal computers and the Internet, arebecoming increasingly critical for economicprogress and the growth of humancapabilities. New information andcommunication technologies are transformingthe ways we live, learn, and work. Nationsthat succeed in harnessing the potential ofthese technologies can look forward togreatly expanded economic growth,dramatically improved welfare, and strongerforms of democratic government. Peoplewithout ready and reliable access to thetools of the information age willincreasingly become second-class globalcitizens.The technology gap is a reflection of greatersocial issues. With an uneven spread of informationand communication tools, disadvantagedcountries and societies could becomemarginalized. Whether in education orincome, health or politics, the digital dividemust be addressed, since there is a risk ofrelegating a portion of the world, or of a societyto an underclass.The ‘digital divide’ refers to the gap betweenthose who have access to, and can effectivelyuse, new information and communicationtools and those who cannot. Formany groups, the digital divide has beenwidening as the information ‘haves’ outpacethe ‘have-nots’ in gaining access to electronicresources.Internationally, penetration levels differsubstantially according to income, educationallevel, gender, household type, andgeographical location. The differences inconnectivity are most pronounced withrespect to computers and Internet access.Nevertheless, it is apparent that more andmore people are becoming increasinglyconnected whether by telephone, computer,or the Internet.The Digital Divide in EgyptThe gap in technology between South andNorth is undeniably large. Moreover, thesignificant digital divide, separating the globalinformation ‘haves’ and ‘have-nots’, iswidening due to many factors. In Egypt, thefactors affecting the digital divide can becategorized into common and local factors.The common factors include infrastructure,income levels and literacy rates. The localfactors go beyond to include language andcultural barriers as well as business infrastructureand the digital trust .Dependence on information technology isquite limited within the Egyptian economy.Limited local demand, absence of a unifiedIT legislation, limited per capita incomelevels, low literacy rates, lack of basic computerskills, and non-adherence to intellectualproperty law, have all contributed to aweak IT industry. Moreover, four fifths ofweb sites are in the English language,whereas only a limited number of Egyptianscan communicate in this language.Despite these weaknesses, Egypt has a verylarge educated workforce, comparativelylow labor cost, a fairly developed infrastructureand proximity to the European market.All these strengths put Egypt in an advantageousposition and create better opportunityfor investment in, and development of, theinformation and communication industries.Recognizing the impact of the digitaldivide, Egypt has been implementingseveral projects in order to improve its ITstatus. These projects aim at helpingchildren, as well as adults, to familiarizethemselves with the new technologicaltransformation spreading all over the world.The digital divide in Egypt might seemdifficult to bridge in the short run, butserious efforts are being made to provideInternet access and other telecommunicationmeans for each citizen in the long run. TheCabinet Information and Decision SupportCenter (IDSC), and other governmentalbodies are developing a number of schemesto provide easy access to the Internet and toincrease the Internet literacy rate inEgyptian society. While significant, theseefforts remain insufficient and risk beingconstrained by the scarcity and cost of hardcurrencies unless a parallel developmenttakes place in the domestic production ofthe means of information andInformation andcommunication tools,such as personalcomputers and theInternet, are becomingincreasingly criticalfor economic progressand the growth ofhuman capabilities.The digital divide hasbeen widening as theinformation ‘haves’outpace the‘have-nots’ in gainingaccess to electronicresources.Egypt Human Development Report 2000/2001 - 79

Egypt’s Position in Technology and Information Led GlobalizationEfforts are beingmade to encouragemore people to owntelephone lines byreducing installationcosts, the price ofcalls and the‘wait-time’ to getconnected.Figure 5.1 : Number of Telephone Lines in Egypt (1982-2000)864200.541.52.12.51982 1986 1990 1992 1996 1998 2000South SinaiNorth SinaiMatrouhNew ValleyluxorRed SeaAswanQuenaSuhagAssyoutMeniaFayoumBani-SuefIsmailiaBeheraMenoufiaGharbiaKafr El-SheikhKalyoubiaSharkiaDakahliaDamiettaGizaSuezPort SaidAlexandriaCairocommunication, notably in computers, software,mobile telephone posts and the necessaryinfrastructure needed.Is the Digital Gap Narrowing inEgypt?Different indicators have been adopted todescribe the status of the digital divide.Among these are the following:Telephone density. This is calculated bydividing the number of telephone lines bythe number of people. The commonly usedfigure is the number of telephone lines per1,000 inhabitants.Since 1981, telephone lines in Egypt havegrown dramatically, from 510,000 lines inservice in 1981 to over six million lines in2000. Figure (5.1) shows this increaseduring the period 1982-2000. This jumprepresents more than a 1000 per centFigure 5.2 : Egypt: Telephone Density by Governorate (2000)(Telephone Line per 1000 Persons)4.2118.5195.1172.6192.1235.271.534.345.546.137.535.844.6108.343.8 65.77151.7 7756.164.1141 168174.9156.4208.2280.270 120 170 220 270 32020 370 4205.86.6428.2increase. Efforts are being made toencourage more people to own telephonelines by reducing installation costs, the priceof calls and the ‘wait-time’ to get connected.The increase in the number of telephonelines is an indication that the digital dividegap in Egypt is narrowing. Nonetheless,national distribution of lines is uneven.Figure (5.2) shows that the highest densityis in urban areas and South Sinai. However,figures for Luxor and Aswan, which aretourism governorates, could be quite misleadingas telephone density in these areas does notreflect local use. The number of telephonelines also differs from location to location.For example, Giza has more telephone lines(867,096) than Port Said (126,800),although Port Said’s telephone density(256.4) is greater than that of Giza (168).At present, there are more than 6.6 milliontelephone lines distributed across Egypt.This means that there are 104.2 lines forevery 1000 persons. However, data from1998 indicates that the relative position ofEgypt (60 lines) is low when compared tothe Middle East and North Africa (MENA)Region (80 lines), or to the Arab countries(140 lines).Mobile Phones: Other telecommunicationservices have been introduced in Egypt overthe last four years. The Global System forMobiles (GSM) was launched in 1996.Telecom Egypt established the first mobilenetwork, which was later privatized. Asecond mobile concession has been awardedto Misr-Phone to enable competition in thisarea. Since the introduction of the mobilephone, there has been a considerable increasein the number of users. In 1997, the numberof mobile phone users was a little over58,000 users. Following privatization, thenumber had exceeded 1.3 million users bythe year 2000, as shown in Figure (5.3).PC Density. Since having access to a PC is aprerequisite for Internet users, PC densitybecomes another important indicator of thedigital divide. This is measured by dividingthe number of PCs-in-use in a region by thenumber of citizens, although it is somewhatdifficult to calculate the exact number ofPCs in use, given frequent upgrades anddisposal of old computers.80 -Egypt Human Development Report 2000/2001

Egypt’s Position in Technology and Information Led GlobalizationConsequently, data on PC density is hard tocollect at the national level. The EgyptianPC industry is not well organized andcompletely controlled by the private sector,with the informal sector playing a key role.Based on available data (Table 5.1), thenumber of sold PCs, both imported and locallyassembled during the period 1994-2000 canbe estimated at 947,000 units.Table (5-1)Egypt: Number of PC’s sold (in thousands)1994 1995 1996 1997 1998 1999 2000*4564* Forrecasted90120160208260Assuming that only one person uses eachcomputer, only 1.4 per cent of Egypt’s totalpopulation is using computers. This percentageis considered low compared with internationalstandards, or even with the figuresavailable for the United Arab Emirates (almost11 per cent).While data about PC density at the governoratelevel is not available, it is estimated that80 per cent of the computer base is locatedin greater Cairo and Alexandria, leavingonly 20 per cent for the rest of the country.1600140012001000800600400200050403020100Figure 5.3 : Number of Mobile Users (1997-2000)58.240119.4473.913541997 1998 1999 2000Figure 5.4 : Egypt: Distribution of the ISPs By Region(July 2000)13Urban Gov's Lower Egypt Upper Egypt Frontier gov's105Percentage of Internet users. Internet usageis the most crucial element in determiningthe potential of a region to participate in thisnew information world. The Internet wasintroduced in Egypt by the IDSC and theSupreme Council of Universities (SCU) in1993. IDSC controls government andcommercial domains, while SCU managesthe educational domain. Yo begin with,IDSC provided Internet services free ofcharge for three years to increase awareness.In 1997, it started to privatize the servicethrough Internet Service Providers (ISPs).More than sixty-six ISPs are now operatingin Egypt. They cover twenty-four governorates.Figure (5.4) shows the distribution of ISPsby regions.IDSC subsidizes the service outside GreaterCairo and Alexandria by providing otherareas to Service Providers at a reduced rate,costs ranging from 50 per cent to a low 90per cent, which applies to the most deprivedgovernorates.6005004003002001000Figure 5.5 : Number of Internet Users in Thousands45180Figure (5.5) indicates that there has been aconsiderable increase in the number ofInternet users over the last three years dueto efforts aimed at achieving a breakthroughin this area. The number of Internet usersgrew from 45,000 in 1997 to around 330,000in 1999. Currently, the number is estimated3005001997 1998 1999 2000Egypt Human Development Report 2000/2001 - 81

Egypt’s Position in Technology and Information Led GlobalizationArea45at around 500,000 users. This is a relativelysmall number compared with othercountries, but reflects a high growth ratecompared to previous years. In terms ofabsolute number of users, Egypt is leadingthe Arab countries, but the United ArabEmirates take the lead in terms of thepercentage of Internet users in total countrypopulation.Data related to the distribution of Internetusers between governorates has to date notbeen gathered in a formal way. A sample of5,000 users using IDSC services shows thatdistribution is biased towards Greater Cairo andAlexandria. Table (5.2) shows the discrepancybetween the major five regions of thecountry.Table (5-2)Egypt: Distribution of Internet Users by RegionCreat Cairo64Developing countriesalready suffer fromeconomic and socialdivides.Alexandria90Upper. Egypt120Lower Egypt160Frontier Govern.208Volume of E-Commerce. The Internet hasrecently become a powerful tool forcommunication, education, entertainment,and of course, commerce. E-commercetransactions are now used by businesses tocut costs in many areas includingpurchasing, sales and pursuing new salesopportunities, and providing more efficient andeffective customer services. E-commerce isattracting an increasing share of the worldeconomy, its volume growing by hundredsof billions of US$. It is estimated to havereached US$ 223.1 billion by the end of2001 with the United States holding amarket share of 70 per cent.E-Commerce was introduced to Egypt in1998, but it is still very difficult to measureits volume. This is due to the large numberof parties who only partially carry outprocedures. However, despite the legal andfinancial problems associated with itsgrowth in Egypt, it appears to be growing ata reasonable rate. The basic form it takes inEgypt is business to customer (B2C), withbusinesses focusing on fast food, recruitment,and real estate. ‘Dot com’ companies arestarting to operate locally, and have becomea ‘hot’ issue as big business moves in tobecome part of the new economy. Six new‘dot com’ companies alone have beenestablished in the last six months, currentlyonly in greater Cairo, and these appearlimited to the younger generation.The E-Government ProgramAlthough the GOE believes that it is theprivate sector that should take the lead,within a legal and regulatory framework thatis conducive to IT, it is in fact thegovernment which took the initiative toprovide services on the Internet in order topromote Internet usage in Egypt. TheE-Government project encompasses threephases:The first phase was inaugurated on 4October 2000. This phase is limited to theprovision of information about governmentservices to the public. A web site has beenlaunched on which all governmentprocedures and fees required to conduct aservice have been posted. One can also dial131 on the telephone to get informationabout government services. Moreover,privately operated kiosks are slated toprovide this data to the public at minimumcost. The second phase covers transactionswith selected government units, and thethird phase will cover the full integration ofservices in different government units.ThreatsBox (5.2)Digital Divide versus DigitalOpportunityDeveloping countries already suffer fromeconomic and social divides, given anaccumulation of development problems,so it is legitimate to ask why they shouldcare about the digital divide. However,governments are aware of the threatsarising from the widening digital divide,which can dramatically increase theexisting economic and social divides.● Widening Productivity Gap. The latestsix major economic studies in the USAconfirmed that the intensive use of ITproducts contributed by half or more tothe acceleration of the USA economy inthe last five years. Given the existing gapin productivity between North and South,one can conclude that the increase of thisgap comes as a result of the extensive use82 -Egypt Human Development Report 2000/2001

Egypt’s Position in Technology and Information Led Globalizationof IT in the North, while the South is stillstruggling to close the old gap.● Severe Competition. IT opens the doorfor developed countries to access themarkets of developing countries with newproducts and services, representing a realthreat to all businesses in these markets.Further, IT helps developed countriesadopt new business models thatoutperform existing business models indeveloping countries. Developed countrieshave lower costs, better services andhigher performance. As a result, businesscommunities in the developing countrieswill face severe competition and may losetheir markets to the more efficientmodels.● Lower Migration Opportunities. ITapplication in the developed countries ischanging workforce requirements byincreasing demand for highly qualifiedpersonnel. This will limit the job opportunitiesopen to citizens of developing countries inindustrialized countries, reducing thechances of wage equalization.Opportunities:● Problem Solving. Application of IT in thedeveloping countries can create newopportunities for solving developmentalproblems.● Better Education Services. DistantLearning can help developing countriessolve some of their higher educationproblems. High enrollment rates atovercrowded universities and colleges canbe largely offset by the application ofdistant learning, which also lends itself tomore flexible study hours and part-timeeducation for the employed. Course contentcan be significantly improved throughcooperation between different staffmembers using the potential of IT.● Better Health Services. Telemedicinecan provide better health services,especially to rural areas. Doctors in thesmall villages of Egypt – and indeed, inurban areas - can experience the professionalvalue of the Internet as a tool to access thelatest medical developments, to enhancethe level of service provided.Collaborative work with other doctorsoffers opportunities to consult and to raiseskills.● Less Bureaucracy. The average numberof visits to conclude a service withgovernment agencies in Egypt is 3.5visits. The first visit is simply to knowwhat the required procedures are, when aweb site or telephone center wouldachieve the same end more speedily.Corruption resulting from “gatekeepers”who control access to bureaucratic procedurecan be cut down dramatically by allowingtransactions to be conducted on the Net.● Wider Markets. IT can open the door forbusiness organizations to outreach to theworld. Small and medium enterprises(SMEs) can have access to world marketsand expand their local markets.Additional exports can be realized throughproper planning and coordinationbetween different bodies. Subscription toelectronic trade zones or electronicmarket places would open newopportunities for developing countries torationalize their imports and increasetheir exports. IT can allow developingcountries to enter and compete in somefields on an equal footing with developedcountries.● New Jobs and Income Creation.Software industries, IT services, dataentry, operation, and maintenance are afew examples of activities that developingcountries are already equipped toaccomplish, which would create more jobopportunities and raise incomes.Turning these opportunities into realityrequires coordinated efforts and collaborativework between different constituencies,including government, the private sectorand NGOs. Setting national plans andstrategies is essential in order to maximizethe advantages and mitigate the threats.Characteristics of the DigitalDivide in EgyptThe most important characteristics of theIT can allowdeveloping countriesto enter and competein some fields on anequal footing withdeveloped countries.Egypt Human Development Report 2000/2001 - 83

Egypt’s Position in Technology and Information Led GlobalizationThere are hugedifferences in thelevel of servicesbetween urban andrural areas.300250200150100500digital divide in Egypt can be summarizedin the following four categories:Urban / Rural Divide.There are huge differences in the level ofservices between urban and rural areas.Telephone density varies heavily betweenrural and urban areas as shown in Figure(5.6). In Upper Egypt, urban areas have atelephone density of 191 compared to 18 inrural areas. This is also applicable in theFrontier governorates where urban areatelephone line density is 286 compared to48 in rural areas.Figure 5.6 : Egypt: Telephone Mainlines Density in 1999Per 1,000 person252173221911828648213Urban Gov Lower Gov. Upper Gov. Frontier Gov.Total EgyptUrbanRuralTable (5-3)Egypt: The per capita income By Region (1997)RegionUrban GovernoratesLower EgyptUrbanRuralUpper EgyptUrbanRuralFrontier GovernoratesUrbanRuralGrand TotalUrbanRuralRegion6.5503.8114.7714.4473.6735.2602.9275.2845.7154.6104.3065.6793.526High Income / Low Income DivideIn the new Global Information System,income level is a crucial element in determiningthe capability of absorbing and properlycomprehending the new technologies.21Table (5.3) presents data on income levelsin governorates in Egypt. Examination ofper capita income for the differentgovernorates reveals that accessibility tonew technologies is associated with relativelyhigh yearly income. Given that the averagecomputer today costs about L.E. 3,000, theaverage person in Cairo would have to saveup to 6-month’s salary to buy a PC withcash. As Table (5.3) shows, per capitaincome in most of Egypt’s governorates isquite low. In Urban Governorates (Cairo,Alexandria, Port Said, and Suez), theaverage monthly per capita income is aboutLE 545. Moreover, in Upper Egypt (Giza,Beni-Suef, Fayoum, El-Menya, Assyout,Sohag, Quena, and Aswan), monthly percapita income reaches L.E 438 in urbanareas, while in rural areas it is as low as L.E243 (less than half that of Cairo).Table (5.4) shows that in Egypt the cost ofInternet access from home is L.E. 95 permonth, which represents about 17.5 per centof the monthly income for a citizen in Cairoand Alexandria, and about 39 per cent for acitizen from Upper Egypt.Table (5-4)Average Cost of Home Internet Accessper YearDial-UpConnection Cost per YearTelephone Connection CostAverage Daily UseYearly UseTotal Cost of Telephone ConnectionTotal Internet Cost per YearL.E 600L.E 1/hour2 hours = L.E2250 daysL.E 500L.E 1150Given the high cost of owning a computerand accessing the Internet, and given theunequal distribution of income in Egypt,one could argue that the digital divide wouldbe deeper between different governorates,and between rural and urban areas withinthe same governorate. This would, in turn,be reflected negatively in future incomedistribution in Egypt (see Box 5.3)Egypt has a largely cash economy which84 -Egypt Human Development Report 2000/2001

Egypt’s Position in Technology and Information Led GlobalizationMuch of the business sector in Egyptconsists of micro to small units with smallcapital investments. Capital usually is lessthan the cost of ownership of a computer.Further, the dominance of informalenterprises in the business community doesnot create an environment conducive for ITto flourish in Egypt. IT entails the recordingof each transaction, which is frequentlyBox (5.3)Structure of IT Enterprises in Egyptavoided in the informal sector, to dodge socialsecurity and tax payments.The business structure in Egypt is shown inthe following table. This shows that more than70 per cent of businesses are micro to smallenterprises that are incapable of bearing thefinancial burden of access to Internet.Changing attitudestowards the paymentmechanism is a majorrequirement forE-Commerce toexpand.Table (5.6)Egypt: Distribution of IT Enterprises by CapitalCapital (US$)*< 425425 - 42604260 - 14.20414.204 - 284.090> 284.090TotalNo. ofEnterprices**(thousand)1.1183478249.610.21.606.8Percentage70.820.74.93.00.6100.0* The Official Exhange rate used = 3.52 LE/US$,November 23, 2000.** In addition to the total number of Workingenterprises, there are also 301 thousand branchesof these enterprises.adversely affects E-Commerce. The numberof “plastic” cardholders in Egypt is about300,000, who use credit cards mainly fortransactions and payments abroad. Althoughthe number of points of sale accepting cardsis quite large, a number of businesses stillprefer to receive cash payments. Thus,changing attitudes towards the paymentmechanism is a major requirement forE-Commerce to expand.Literate / Illiterate DivideEducation is a decisive factor in determiningthe ability of a person to absorb the newtechnologies. The illiteracy rate in Egypt isa little above 39 per cent of the totalpopulation, which means that more thanone-third of Egyptians are neither able noreducationally prepared to understand InformationTechnology. It is obvious that the higher theilliteracy rate in a given country, the lessviable it is to receive, understand and blendin with the new Global Information System.Table (5.5) shows illiteracy levels bygovernorate in Egypt for the year 1998.There is a wide variation from onegovernorate to another. These figures caneasily be related to the figures of Internetusers in Egypt, where the number ofilliterates is inversely proportional to thenumber of Internet users in the same area.In El Menya, for example, the illiteracy rateTable (5.5)Egypt: Illiteracy Rate by Governorate 1998GovernoratesFayoumEl-MenyaBeni-SuefSuhagAssyoutQuenaBeheraKafr-El-SheikhMatrouhSharkiaLuxorDakahliaMenoufiaNorth SinaiKalyoubiaGharbiaGizaAswanDamiettaIsmalilaSouth SinaiNew ValleyAlexandriaCairoSuezRed SeaPort SaidTotalPercentage56.7155.1553.8252.8352.5351.7647.6047.4446.4141.9441.5636.8536.7235.8235.4634.8434.0933.2232.8531.5628.4925.1324.8124.2424.0022.4721.4139.36More than one-thirdof Egyptians areneither able noreducationallyprepared tounderstandInformationTechnology.Egypt Human Development Report 2000/2001 - 85

Egypt’s Position in Technology and Information Led GlobalizationIT is seen as aprerequisite for Egyptto build, manage andeffectively use theinformationinfrastructure of thetwenty-first century.Government of Egyptwill also invest inresearch anddevelopment in orderto tailor services andproducts for the poorand illiterate.is quite high, at 55.2 per cent. Accordingly,the percentage of Internet users is as low as4 per cent of the total number of Internetusers in Egypt. Cairo, on the other hand,where the illiteracy rate is relatively low,contains 75 per cent of Internet users.Thus,while other countries in the world areredefining illiteracy to be the lack ofcapacity to use computers, Egypt is stillsuffering from the primary problem of theinability to read and write.Bilingual / Single Language DivideEgypt faces another problem, namely thelanguage barrier. Not everyone in Egypt isbilingual or at least speaks English. Thosewho do not speak English will face theproblem of how to deal with newtechnologies, access the Internet or gaininformation through it. Therefore, thenumber of schools teaching English languageas an obligatory course is rapidly increasing.The National Program for Closingthe Digital GapOver the years, the Egyptian governmenthas applied several programs to close thedigital gap, whether in comparison withother countries or at the national levelbetween socioeconomic groups and betweenthe different regions. IDSC led the way overthe last fifteen years, in diffusing IT ingovernment offices, and in establishingmore than 1,500 information centers all overEgypt. More recently, in 1999, a newMinistry for Communication andInformation Technology was established toimplement a broad National Program, whichconsists of strategies, policies, programs andprojects.Strategies and PoliciesGovernment Commitments. The governmenthas committed to expanding the informationand communications technology in Egypt. Ithas stated its intention to be a role model inusing the new technology in all facets of itsoperations. It will implement the E-Governmentconcept, paving the way for the privatesector to follow.Building Human Capacity in Educationand Training. Increasing the number ofpeople with high skills in IT is seen as aprerequisite for Egypt to build, manage andeffectively use the information infrastructureof the twenty-first century. This will beachieved through schools, universities,communities, and the workplace, using theappropriate means for each.Expanding Basic Connectivity to PeopleEverywhere. This will be accomplishedthrough the expansion of CommunityAccess Centers, to make Internet andtelecommunications services available andeasily accessible to everyone. During thelast fifteen years, more than 1,500 InformationCenters have been established, of whichmore than 600 are in villages. GOE will alsoinvest in research and development in orderto tailor services and products for the poorand illiterate.Creating More Affordable Access toInformation Tools. This program intends toreduce taxes and customer fees for accessingnew technologies, to support new technologiesand techniques that will enable fast accessin rural areas, and to subsidize connectivityto remote areas.Creating new Opportunities for SMEsthrough E-Commerce and E-Business.This is to be achieved by encouraging thedevelopment of micro-enterprises and smallbusinesses that harness the power of newinformation and communication technologies,as well as by developing venture-financingsources that can drive innovation.Fostering Policy, Regulatory Policy andNetwork Readiness. This will beaccomplished by developing policies,regulations, and practices that willencourage private sector investment, whileharvesting the full social, cultural, andeconomic benefits of the Internet, and otherinformation and communication technologies.Enhancing Financial Infrastructure. Aprerequisite for more openness to the newtechnologies is building a less “cash”dependent economy and restructuring thefinancial sector.Programs and ProjectsThe Egyptian government is committed to86 -Egypt Human Development Report 2000/2001

Egypt’s Position in Technology and Information Led Globalizationseveral programs and projects, which wouldstrengthen IT application and diffusion.These include introducing computers intopublic schools, promoting more privateeducation and establishing a number ofprivate universities and institutions toexpand the absorbent capacity of highereducation. Egypt has also launched two TVbroadcasting satellites. Other projects relatemainly to infrastructure, human resourcedevelopment and access centers for citizens.Infrastructure● Enhancing the communication infrastructureincluding telephone mainlines, mobilelines and Internet access. This is beingdone by reducing the cost ofcommunication, which will eventuallylead to a growth in telephone ownershipand Internet access across the country.● A new digital network is being laid downto allow faster, cheaper and betterconnectivity, locally and internationally.● Computer density: the government plansto increase the number from 947,000computers today to reach 3.3 million bythe year 2005, meaning the averagegrowth rate will be around 29 per centper year.● Internet Access: In January 2000, therewere 500,000 users. The governmentplans to raise this number to five millionover the next five years, i.e. an averagegrowth rate of around 59 per cent peryear. It also aims at providing Internetaccess for university students, in schoolsand through Public Access Points.● The Digital Internet Backbone has beenlicensed to a private sector company tobuild the latest state of the art networkaround Egypt.● An application to translate English intoArabic on the net is being undertaken,allowing people with little English tobrowse English web sites easily. Aprivate sector company has created a website allowing Arabic Internet users totranslate all English content online.Human Resource DevelopmentThe GOE has launched a number ofprograms to introduce the new technologiesto children, schools and professionals. Thegoal is to enhance Egypt’s human capitalbase, and to become a regional leader in ITskill formation and application. Theprogram includes the following:● Computers in schools. A national projecthas been adopted to equip all schoolswith computers. The program aims tobuild a computer-based training lab ineach primary and preparatory school andto build a computer-training lab in eachsecondary school. More than 20,000schools are already equipped withcomputers and more than 1,500 secondaryschools with computer labs. Instructor trainingis undertaken using a videoconferencenetwork covering all the governorates ofEgypt.● Twenty-first century kids clubs. Thisprogram provides children in the agebracket 6-18, with Internet connectivityin a friendly environment. The club isintended to provide education to childrenwhereby they learn by playing. Morethan fifty clubs have been establishedduring the last two years, and it isplanned to build an additional 1,000clubs by the year 2005.● A Computer for each university student.An initiative adopted by the Ministry ofHigher Education will finance studentpurchases of computers by installmentsof less than US$20 per month. Throughthis initiative, it is expected that morethan one million students will buycomputers. The Ministry has signedagreements with software companies toprovide original software to students atan annual nominal fee of US$30 for allsoftware packages necessary for theirwork.● Information Technology Institute (ITI).IDSC has built this world-class center forstate of the art training in technology foruniversity graduates in a competitiveenvironment. ITI graduates are internationallyrecognized.The GOE haslaunched a number ofprograms to introducethe new technologiesto children, schoolsand professionals.A national project hasbeen adopted to equipall schools withcomputers.Egypt Human Development Report 2000/2001 - 87

Egypt’s Position in Technology and Information Led GlobalizationThe Ministry ofCommunication andInformationTechnology isimplementing anational trainingprogram to providedifferent levels of ITtraining.If globalization meanstime-spacecompression in thecontext of technologyexchange andtransfer,globalization oftechnology will be theactual evidence thatthis is beingaccomplished.● Training for government employees.IDSC is playing a national role inproviding IT training for governmentemployees. More than thirty-five trainingcenters have been established across thecountry with at least one training centerin each governorate.● The National Training Program. TheMinistry of Communication and InformationTechnology is implementing a nationaltraining program to provide differentlevels of IT training: This providesprofessional training for 5,000 traineesper year in co - ordination withinternational training institutes; andgeneral training for computer usage for200,000 trainees per year.● Computers for the handicapped. IDSC hasestablished seventeen centers in differentgovernorates to provide computer trainingfor the handicapped. These centers haveso far graduated more than 3,000handicapped people.Additionally, the Institute of NationalPlanning (INP), CAPMAS, and the Instituteof Statistics play an important role inbuilding up human capabilities in ITthrough programs in computer techniques,software packages, and Internet use. Theseprograms are usually short-term (2-3 weeks)and delivered for moderate fees paid by thetrainees. INP, for example, has beenorganizing such programs since the early1960s. However, INP activity in this respecthas been intensified with the spread of PCsand software packages. For example, duringthe 1990s, the average yearly number ofprograms run by INP amounted to ninetyprograms with an annual average of 1,700trainees.Mass Access Centers (MAC)This consists of a number of projects andinitiatives implemented jointly by thegovernment and the private sector to allowmass access to the Internet through differentapproaches. The Program includes:● Technology Access Community Centers(TACC).: The project is co-funded byUNDP and the government of Egypt toestablish access centers for small andmedium enterprises. Currently, threecenters have been established outsideGreater Cairo and have proved to be ofhigh value to the community. Theyprovide training, Internet accessibilityand basic office services. It is planned toexpand these centers to cover all areas ofEgypt.● Youth Centers. This is a project toupgrade existing youth centers to provideInternet connectivity and IT training foryouth. The program includes upgrading120 centers this year and training morethan 120,000 people on the Internet.● Internet Road Shows. An initiative byIDSC to build a mobile access center totour untapped areas and inspire people tointeract with the Internet. The first roadshow took place during the wintervacation of 2000. During the summer of2001, a Nile boat show providedexposure to the Internet to villages on theborders of the Nile.Globalization and TechnologyIf globalization means time-space compressionin the context of technology exchangeand transfer, especially from North toSouth, supported by free market mechanismswithout barriers - or with the leastpossible economic and legal barriers – aglobalization of technology will be the actualevidence that this is being accomplished.Nonetheless, under globalization the supplyof technology is subject to an imperfectmarket ranging from monopolistic competitivenessto the oligopoly and monopolypracticed by gigantic actors at the internationallevel. Accordingly, one might arguethat the free transfer of technology, or of innovationin particular, is far from being thereality.In recent years three main factors havecontributed to restricting technologicalmobility at the international level:● The technological factor concerns theintensity of innovation. This isconcentrated in a few countries allowingthem to increase their monopolisticcontrol, and their capability of capturingtechnological rents.● The economic factor or the increasinglyenormity in the size of already gigantic88 -Egypt Human Development Report 2000/2001

Egypt’s Position in Technology and Information Led Globalizationfirms through integration, acquisition andstrategic alliances.● The legal factor as manifested in a newlaw for the international trade of technologyin the context of the TRIPS [TradeRelated Intellectual Properties] agreementthat guarantees the protection of innovations.These are usually owned byrich developed countries that sell them topoor developing countries who are in realneed of these types of products.While these three factors apply to technologyat large, they will be discussed in detailthrough a case study of the pharmaceuticalproducts market.Restrictive Globalization inPharmaceuticalsAn investigation of the above-mentionedrestrictive factors affecting the globalizationof technology in the field of pharmaceuticalmanufacturing and trading reveals thefollowing:The Technological Factor.From the purely technological viewpoint, apharmaceutical product goes through thefollowing main phases:1. Research and Development (R&D),which itself consists of three sub-steps:basic research; applied research; andexperimental development. It is estimatedthat the two latter steps absorb 85 percent of the total costs in this industry.This shows their relative importance inthe pharmaceutical industry.2. Pharmaceutical Manufacturing, whichis in turn divided into two steps:a. Manufacturing of pharmaceuticalmaterials, whether from natural orsynthetic sources.b. Pharmaceutical formations, ormanufacturing the preparations intheir various forms (syrup, tablets,capsules, ampoules, etc.) capable ofdealing efficiently with diseases, andto meet the needs of different patientgroups.In relation to these steps there is an-other important dimension in themanufacturing process of pharmaceuticals,namely, the manufacturingof the machines and equipment necessaryto produce the materials andpreparations.3. Post-Manufacturing: the supervision ofmedicines by the competent governmentauthorities, whether through research onthe degree of bioavailability or toxicity,or through experiments with the medicineupon patients over different periods oftime, doses, etc.It is noteworthy that a medicine would takeabout ten years to be placed on the market,starting from R&D, through medicinedesign, extraction of the effective substances,standardization, and clinical experiments,and requires expenditures ranging betweenUS$40 million to US$250 million.However, some would argue that thesefigures are overestimated in order to put offlikely competitors, especially in developingcountries. Nonetheless, this does not denythe fact that a very high level of ‘criticalmass’ is technologically necessary to startin this industry.The Economic FactorThe market structure of pharmaceuticals ischaracterized by the dominance of a fewenormous firms over the whole process ofmedicine manufacturing. In general, internationalizedproduction at the level of multinationalfirms shows a tendency towardsdeepening the oligopolistic trait of the pharmaceuticalindustry. This tendency is expressedby two types of operation: integrationsand acquisitions; and strategicalliances.Mergers and AcquisitionsMerger and acquisition operations representthe driving force of FDI nowadays. Mostinvestments have recently taken the form ofMerger of companies, or the acquisition ofall or some of the shares of a company, orseveral, by a transnational corporation.Merger and acquisition are also among theprincipal features of privatization. Thepharmaceutical and chemical industry wasconsidered in 1999 one of the mostThe market structureof pharmaceuticals ischaracterized by thedominance of a fewenormous firms overthe whole process ofmedicinemanufacturing.Egypt Human Development Report 2000/2001 - 89

Egypt’s Position in Technology and Information Led GlobalizationMerger of firmsenables them tobenefit fromeconomies of scalesand from externaleconomies not onlyface firms workingfrom an economicperspective, but alsocountries workingfrom a strategic one.important five industrial sectors in terms ofMerger and acquisition operations acrossborders. Two of the most importantobjectives of these operations are increasingmarket power, and supporting innovationstrategies.The cost-benefit analysis of these Mergerand acquisition operations is debatable.Many writers believe that their negativeimplications for developing countriesoutweigh their benefits especially withrespect to:1. Maximizing market power. Theoligopolistic trait of thepharmaceutical market increases theability of firms to influence the pricingsystem. Consumer choice and welfaretherefore become endangered, and thedistorted prices are inefficient inallocating resources or distributingincomes. If the good (medication) andthe service (medical treatment) areinelastic with respect to price andincome, the negative impact of anoligopolistic market on consumers,society, and the whole economy willbe more severe.2. Impact on invention. Merger of firmsenables them to benefit from economiesof scales and from external economies.In addition, it allows firms to allocatemore financial resources to R&D, and toestablish a larger base of human skills inthe scientific-technological area. However,integration and acquisition operationsmight have negative implications onSMEs specialized in innovation, knownas start- ups, especially in the pharmaceuticalsector. The increasing power oflarge firms allows them to exploit theyield of small firms’ efforts, integrate itinto their invention circuit, and therebyget the larger share in the rent comingfrom technological scarcity.In general, major pharmaceutical firms (lessthan twenty) seize more than 50 per cent oftotal world medicine sales. Glaxo (Mergerwith Wellcome), Novartis (emerging fromthe Merger of Sandoz and Cibageigi),Merck (Merger with Lipha) and Hockst(integrated with MMD) come at the top ofthe list.It is worth mentioning that the Egyptianpharmaceutical industry is not removedfrom this global integration-acquisitionfever. Britain’s Glaxo Wellcome acquired90 per cent of Amun shares (private sector),thereby increasing its share in the Egyptianmedicine market from 6 per cent to 10 percent and becoming the seventh largestpharmaceutical firm in Egypt.Strategic AlliancesStrategic alliances are concluded at the levelof R&D or promotion and marketing, in orderto form blocks able to reduce expenditures,increase revenues, and maximizeprofitability rates. Strategic alliance agreementsin the technological area can be undertakenwith independent, university, orgovernment research centers, or betweenlarge firms. The agreements often focus oncertain areas (genetic treatment, antibodies,neurological treatment etc). The Egyptianpharmaceutical industry has not yet enteredinto this type of exercise.Finally, the enlargement of pharmaceuticalindustry actors, who are concentrated in asmall number of firms belonging to a limitednumber of nationalities (USA and someEuropean countries), is coupled with influenceover the organs of state through interventionin public policy to organize and mobilizethe pharmaceutical industry. This isaccomplished through a number of tools,among which are government and militaryR&D contracts, medicine registration, supervision,and pricing.It could therefore be argued that developingcountries not only face firms working froman economic perspective, but also countriesworking from a strategic one. Mostly thesetwo perspectives overlap, for example whenthe ex-president of Pfizer undertook theresponsibility for the preparation ofAmerican trade policy with respect to intellectualproperty, and eventually succeeded informulating an international agreement inthis area in the context of the UruguayRound.90 -Egypt Human Development Report 2000/2001

Egypt’s Position in Technology and Information Led GlobalizationThe Legal FactorThe core of globalization is the eliminationof all barriers and the opening of markets tothe free movement of goods, services,capital, knowledge, and skills across differentcountries. In the TRIPS agreement, the legalformulation of commitment to liberalizationis clear in two articles that are concernedwith the national treatment (NT) principleand the most favored nation (MFN) rule.Hence, all countries that have signed thisagreement, including Egypt, are committed,with very few exceptions, to offer allmember countries treatment equal to thatgiven to their own citizens, and to extendthe privileges provided to any other countryto third parties.However, the agreement includes transitoryarrangements related primarily to exemptionperiods and its application in favor ofdeveloping countries, economies in transition,namely the East European countries, and theleast developed ones. All member countrieswere allowed to suspend implementation ofTRIPS rules for a year starting from the datethe WTO agreement took effect. In addition,developing countries were given the right toput off the date of implementation of thepresent agreement’s rules for another fouryears, to 31 December 1999, without beingexempted from the commitment to the MFNrule and the NT principle.Moreover, countries whose laws do notallow for patents in certain technologicalareas are allowed to delay their commitmentto invention patent rules in these areas, evenafter the allowed grace period (four years).It is important to note that the protectioncovering patents encompasses both productsand methods of production.The present Egyptian law of patents, LawNo. 132/1949, which has been adjustedseveral times, exempts medicine from theprotection covering other technologicalareas, by providing patents to the method ofproduction but not to the product itself. Thismeans that the TRIPS agreement allowsEgypt to postpone for five years theimplementation of the rules for pharmaceuticaland food chemical products, areas that havenot yet been covered by protection.The GOE has already used this license andhas put off its commitment to TRIPS rulesfor another five years starting from the endof the four-year grace period on 31December 1999. This means an extension ofthe grace period until 31 December 2004.Moreover, the government intends tointegrate this into the draft of the intellectualproperty law, giving particular attention topatents concerned with medicine andagricultural food chemicals.The most important rules of the TRIPSagreement, which surpass all previous internationalagreements and national laws, canbe summarized as the following:● Enlargement of the boundaries oftechnological and invention areascovered by protection, and narrowing,thereby, the boundaries of exemptions.● Unifying the period of protection for inventions,through patents in all technologicalareas, to twenty years.● Widening the rights of patentees or thoseto which patents were transferred, withsome conditional regulations such asinternational exhaustion.● Restricting the compulsory licensing andthe tendency to tighten its conditions, inreturn for an extension of the protectionof confidential or closed data, and ofmarketing rights whether exclusive orabsolute.TRIPS includes a license to members - inparticular developing and the least developedcountries - to delay the implementationof the agreement for different periods,in order to implement their commitments towardsprotection, and to protect their interestsin areas such as compulsory licensesand patentee rights. Nonetheless, one importantquestion remains: Are these legaltexts sufficient to boost the pharmaceuticalindustry in the developing countries toachieve one of the most important objectivesof human development, namely physicaland mental health?The answer suggested here is that thelegislative framework is insufficient. Thisincludes texts of the agreement itself andThe core ofglobalization is theelimination of allbarriers and theopening of markets tothe free movement ofgoods, services,capital, knowledge,and skills acrossdifferent countries.Egypt Human Development Report 2000/2001 - 91

Egypt’s Position in Technology and Information Led GlobalizationWhat really matters ishow qualified thenationalpharmaceuticalindustry is to dealwith globalization andrestricted technologytransfer.those of the new and adjusted national lawswith all that they imply for encouraging thedevelopment of the technology of nationalpharmaceutical industry. The Egyptian caseis a good example. What really matters ishow qualified the national pharmaceuticalindustry is to deal with globalization andrestricted technology transfer.Today in 2001, Egypt has had six years ofthe grace period, and is left with only four.So, what has been done, and what will bedone in the remainder period? And what areinventors and the makers of technologylikely to do?Transfer of Foreign Technology tothe Egyptian PharmaceuticalIndustryThere are few studies available on technologytransfer to the Egyptian pharmaceuticalindustry. However, one might argue thatpublic enterprises often produce medicineswhose patents have become invalid. Theseenterprises are also used to producinggeneric medicines similar to those marketedunder well-known trademarks, with the leastamount of production generated throughknow-how or patents. A precise evaluationof the results of using expired patents hasnot yet been undertaken. On the other hand,the extensive use of patents and trademarksby the domestic private sector, especially byjoint and foreign enterprises, has resulted inalmost total dependence on licenses frombig foreign pharmaceutical corporations.A recent study pointed to what the UnitedNations Conference for Trade and Development(UNCTAD) calls “restrictive tradepractices” by technology transferring firms,which insist, in general, on the inclusion ofrestrictive texts in agreements concludedwith technology recipients. The study investigatedthe negative elements of licenses intwo particular areas: agreements for finalpharmaceutical formulation production; andthose for producing materials from pharmaceuticalchemicals. Among the most importantcommon negative traits of foreign firmsproviding technology, are the following:1. They are not committed to substitute newor upgraded technologies for obsoleteones.2. They do not provide Egyptian firms withupgraded technical assistance on a regularbasis.3. They stipulate the employment of someof their own personnel.4. Foreign parties frequently stipulate thetransfer of pharmaceutical technologythrough ‘whole package’ or ‘turnkey’approaches.This does not give sufficientopportunity to local firms to acquirethe relevant technological knowledge andskill.5. The use of technologies that are inappropriate,and sometimes harmful, for thenatural environment in Egypt.6. Foreign parties impose restrictions on thekinds of formulations that can be locallyproduced, or exported to foreign markets,including Arab and African markets.This is more the case with branches offoreign firms.7. They impose restrictions, even if indirect,on technology receiving firmsundertaking local R&D activities.How to Deal with theGlobalization of RestrictedTechnology in the PharmaceuticalSector?The answer will be approached through aninvestigation of two main ideasAdmit the Globalization Challenge. Sinceglobalization offers opportunities but at thesame time implies threats to all sectors inthe national economy, one should accept thechallenge by designing a comprehensivestrategy that deals with globalization underthe supervision of the national administration.For instance, a pharmaceutical strategyshould be derived from a general healthstrategy that consists of the following:1. Disease Prevention Policy. Especiallyfor diseases that have recently becomewidespread such as kidney, liver, andheart diseases. This in addition toprimary care for the largest populationpossible.92 -Egypt Human Development Report 2000/2001

Egypt’s Position in Technology and Information Led Globalization2. Treatment Policy. This should targetparticular social groups: the poor;women in difficult social conditions; andyoung people whether students, graduates,or dropouts.3. Medicine Policy. For pharmaceuticalproduction, import, and publiccirculation. State intervention in this areashould activate the authorities’ role inmedicine registration, pricing, andcontrol, to stimulate national inventionand R&D in the pharmaceutical industry,and to suggest the necessary policieswith respect to research contracts,priorities, follow-up and assessmentmethods, finance and resource recruitment,taxation etc.4. Activate Pharmaceutical Scientific andTechnological Capabilities and Paths.This is achieved by adopting variousmeasures.5. R&D and Invention. This should beencouraged in order to achievebreakthroughs in the manufacture offinal pharmaceutical products and theirmeans of production. It is necessary, inthis respect, to focus on researchconcerned with the treatment of diseasesof special importance to Egyptiansociety, such as endemic, contagious,tropical, and intestinal diseases, inaddition to those other diseases that havebecome widespread recently. Further, itis necessary to catch-up with thescientific revolution and participate inthe production of pharmaceuticals basedon biotechnology, especially in areas ofspecial importance to society, such asmedication for viral hepatitis, and toextract effective substances frommedicinal herbs and plants that areavailable in the Egyptian and Arabenvironment. As to development, itshould be concerned with improving thecharacteristics of effective substances ofpharmaceutical production in circulation,whether with respect to composition,pharmaceutical form, or effectiveness.Activating R&D requires a change in theorientation of specialized scientificresearch centers where the work of thescientific staff tends to be mainly forpromotion purposes.6. Industrial Deepening. This couldproceed through the following paths:● Manufacturing pharmaceutical rawmaterials from chemical and biologicalorigins.● Producing machines and equipmentnecessary for pharmaceutical factories.● Expanding and modernizing theexisting pharmaceutical industry andrelated activities especially in thefields of:1. Development of pharmaceuticalmixtures, requirements, and packingmaterials and products.2. Expanding the production ofmedications under their generics.3. Exploring the production of newmedicines using public-propertytechnological methods (of thepre-1995 period). This should beaccelerated to achieve the maximumpossible before the end of thegrace period of the TRIPSagreement.Activating Researchand Developmentrequires a change inthe orientation ofspecialized scientificresearch centerswhere the work of thescientific staff tends tobe mainly forpromotion purposes.Egypt Human Development Report 2000/2001 - 93

Chapter SixGlobalization and Human CapitalThere is a stronginterdependencebetween globalizationand its mechanisms,on the one hand, andthe labor market withits different nationalcharacteristics on theother.While human development (HD) isgenerally defined as ‘enlarging people’schoices’, a first step to operationalize thisconcept is to redefine HD as the ‘developmentof people by people and for people’.Building up human capabilities is a secondmajor step to operationalize the generalconcept of HD, for the simple reason thatbuilding up capabilities is, per se, adevelopment of people. Further, there is nopossibility for ‘development by people’,unless they have the necessary capabilities.Acquiring these capabilities could be seenas partially translating the paradigm of‘development for people’.mitigate the likely threats accompanying theintegration of the Egyptian economy intothe global economy. The role of socialcapital in confronting the possible negativeimplications of globalization is coveredelsewhere in this Report.Globalization and the LaborMarketsThe anticipated impact of globalization onlabor markets is an area of specific concernto many researchers, especially in developingcountries. The following factors explainwhy:Thus, building up human capabilities is acore operational step to achieve HD. Thisstep is essentially the formation of humancapital. Employment opportunities are themeans by which this capital is recycled togenerate, on a larger scale, the differenteconomic, social, political, scientific, technological,and cultural aspects of development.In recognition of the prime importance ofhuman capital and the opportunities for itsemployment, this chapter aims to investigatethe impact of globalization on the Egyptianlabor market and to provide somesociopolitical policy guidelines. These could● There is a strong interdependencebetween globalization and its mechanisms,on the one hand, and the labor marketwith its different national characteristicson the other. In developing countries,globalization has often been accompaniedby the implementation of reformprograms, in order to enhance the abilityof a country to cope with the mechanismsof the global market, including theadjustments needed to face externalshocks. As displayed in Figure (6.1),economic reform implemented at themacro level will eventually impact on theFigure 6.1 :The Analytical Framework of Economic Reform ProgramEconomic Reform ProgramOther Institutional andLegislative ReformsPricePoliciesForeignTradePoliciesExchangeRatePoliciesMonetaryand FiscalPoliciesInfrastructureSocial Economic CapitalLaborMarketCommodityMarketFamily Members: income, assets, expectations, human investmentIndividual Behavior94 -Egypt Human Development Report 2000/2001

Globalization and Human Capitalindividual units of the micro-economy,mainly on households. The impact translatesthrough a network of communicationchannels at the intermediate level,including the demand side (that is, thedemand for the products and the factors ofproduction) and the supply side (that is,the economic structure providing basicproductive services and the socialstructure affecting human investment).● Economists hold different views on the likelyimpact of globalization. Some advocatethe view that enormous benefits willaccrue to developing countries as a resultof their increasing integration into theglobal economy. Gains will come fromenhancing the ability of these countries tocreate new and productive jobopportunities following the correction oflabor and capital price distortions, and thesubstitution of limited individual domesticmarkets for an expanded global market.Other economists fear that globalizationwill have a negative effect on developingcountries in general, and on labor marketsin particular. Their analysis is based onthe fact that globalization is accompaniedby large technological advances thatreduce the role of labor, specifically theunskilled labor which constitutes thelargest proportion of the labor force indeveloping countries, including Egypt.● In the 1980s and during the first half ofthe 1990s, the foreign direct investmentflows capable of creating new productivejobs were largely concentrated in theindustrial countries, especially the UnitedStates, Europe and Japan. Their share oftotal flows exceeded 75 per cent, whilethe share of all developing countries,during the same period, did not exceed 5per cent, of which two thirds was devotedto ten countries only, mainly in East Asiaand Latin America. This trend in theallocation of foreign investment tocountries enjoying advanced technologyand knowledge, rather than to developingcountries characterized by abundantunskilled and low-wage labor invalidatesthe assumptions of conventional neoclassicaltheory. The trend is expected to persistand to grow, because the cost of labor isestimated at only 20 per cent of the totalproduction cost of any industrial product.These reasons, among others, explain whyis it important to analyze the actual andpotential impact of globalization on theEgyptian labor market. The objective is totrace the implications of globalizationwhich, rather than being simply threats ofan economic nature, could spill over intopolitical and social instability.The Features of the Labor Marketin EgyptGlobalization could impact on a number ofdimensions of the Egyptian labor market, ofwhich the most important are: theemployment level; the demand for labor;the wage level; labor market segmentation;and labor force mobility. However, sincethe overall condition of the labor marketdepends on regional, national, andinternational factors, it is difficult toattribute all observed changes solely toglobalization.The Demand for Labor(1) The employment/unemployment databasein Egypt is incomplete and exhibitssome inaccuracy and inconsistency.However, available indicators and otherevidence show that the employment levelhas been declining in line with the implementationof ERSAP policies. Consequently,the rates of both unemploymentand underemployment (disguised andundisguised) appear to have been growingconsiderably during the 1990s. AsERSAP policies are closely related tothe globalization process, the growth inunemployment could be attributed to theimpact of globalization on the Egyptianeconomy. However, it is clear that thegrowth of unemployment has not beendue to globalization only. The slowdown,or contraction, of the migration ofEgyptian labor to oil-producing Arabcountries, and the decrease since the early1980s in the capacity of the Egyptianeconomy to create productive jobs sufficientto absorb the increase in the laborforce have also been contributing factors.According to the 1976 and the 1986 census,the open unemployment rate increased from4.27 per cent to 11.1 per cent between thesetwo periods. This could be an indication ofGlobalization couldimpact on a number ofdimensions of theEgyptian labormarket.It is clear that thegrowth ofunemployment hasnot been due toglobalization only.Egypt Human Development Report 2000/2001 - 95

Globalization and Human CapitalOf the mostsignificant traits of theEgyptian labor marketis the male bias in thedemand.a relationship between high unemploymentrates and the increased openness of theEgyptian economy. The population censusof 1996 revealed a slight decline in the unemploymentrate to 8.9 per cent of the totallabor force. But the results of this censushave been subject to a number of reservationssince they contradict other statisticalsources and the implications of peopleEgypt’s macroeconomic performance duringthe 1990s for the country’s labor market.This is demonstrated by the following:● The results of the Labor Force SampleSurvey indicate a sustained trend ofincreasing unemployment between themid 1970s and mid 1990s, reaching11.8 per cent in 1995.● The same trend is clearly noticeablewhen comparing Egyptian labormarket research of October 1988 withthat of 1998, since the unemploymentrate increased from 5.4 per cent to 7.9per cent, an increase of 46 per centover these ten years. The number ofthe unemployed has increased inabsolute terms from 890,000 in 1988to 1.27 million in 1998, with anaverage annual growth rate of 6.6 percent. This is almost triple the growthrate of the labor force and theworking-age population. Although theresults of these two studies cannot becompared with other statisticalsources, due to differences indefinitions and methodologies used,the upward trend of the unemploymentrate during the period 1988-1998 doesnot allow us to conclude that this ratedecreased between 1986 and 1996.● Despite the high level of the previousestimates, it is argued that they stillunderestimate the unemployment ratein Egypt. Long periods of unemploymentlead to a situation of ‘discouragedunemployment’ in which individualsstop seeking work and are thusexcluded from registered unemploymentaccording to the internationaldefinition.(2) It should be noted that one of the mostsignificant traits of the Egyptian labormarket is the male bias in the demandfor labor. There is a considerabledifference in unemployment ratesbetween males and females. A highfemale unemployment rate of about 24per cent is observed, especially amongeducated females, in contrast with a rateof only 5 per cent for males. Thisimplies the waste of an importantcomponent in the drive for humandevelopment, namely underuse of theincreasing rate of educated Egyptianfemales.(3) Moreover, the educational level of theEgyptian labor force seems to lead tolower demand, given the increasingglobalization of most productionactivities. The illiteracy rate is as high as36 per cent among the labor force, and ifthose who only read and write are added,this ratio jumps to 54.4 per cent. Thisimplies that around half of the laborforce cannot deal with the newtechniques and rapid technologicaladvances characterizing globalization.Advances in technology lead to thecreation of new jobs with highknowledge and skill content, but are alsoconducive to the reduction orelimination of certain types of job thatare numerous in Egypt and most otherdeveloping countries. Those jobsperformed by unskilled and semi-skilledlabor, which constitute the broad base ofthe labor force in Egypt, will certainly beaffected.(4) Given that Egypt has become moreinvolved in the globalization processsince the early 1990s (the beginning ofthe ERSAP), one could argue that thetwo major and expected effects of thisinvolvement on the structure of labordemand in the Egyptian market have notyet been realized. Table (6.1) providesevidence for this as exhibited in thedistribution of employed persons (15years and over) by sectors in the threecensus years 1976, 1986, and 1996:● Instead of a relative decrease, personsemployed in the government increasedover the three years, from 17.7 percent, to 22.4 per cent, and then to 28per cent of total employed persons.96 -Egypt Human Development Report 2000/2001

Globalization and Human CapitalTable (6-1)Distribution of Employed Persons by Sectors (15 years and More)Sectors1976000.s %1986000.s %1996000.s %Average rate of growth%1976-86 1986-96Government1.78617.672.54522.364.37428.023.615.56Public Enterprises9649.541.28711.318765.622.93-3.77Private Enterprises7.35572.787.53766.2010.33666.210.243.21Foreign Enterprises0—100.10230.15—8.23Unclassified0—40.040.00—-37.89Total10.106100.0011.385100.0015.611100.001.203.21Urbann.a—5.44647.847.21446.21—2.85Ruraln.a—5.93952.168.39753.79—3.52Malen.a—10.34390.8513.52686.64—2.72Femalen.a—1.0419.152.08513.36—7.19● In terms of the relative importance ofpersons employed in the privatesector, this decreased from 72.8 percent in 1976 to 66.2 per cent in 1986,remaining at the same level in 1996. Ithad been expected to increase betweenthe last two census years due toprivatization and the lead given to theprivate sector.● Foreign enterprises continued,between 1986 and 1996, to contributelittle to employment (0.1 per cent and0.15 per cent respectively), althoughthis contribution was expected to behigher in response to the incentivesprovided to such enterprises.● As expected, persons employed inpublic enterprises decreased from 11.3per cent in 1986 to 5.6 per cent in1996.In spite of fears that privatization would bebiased against female employment, therelative share of females in total employedpersons increased from 9.5 per cent in 1986to 13.4 per cent in 1996.(5) The structure of demand for labor by differentoccupation showed some importantchanges over the three censuses.Most of these changes coincide with thetransition to a privatized market economy,although they do not reflect significantchanges in the technological level ofthe national economy. Accordingly, table(6.2) shows that:In spite of fears thatprivatization would bebiased against femaleemployment, therelative share offemales in totalemployed personsincreased from 9.5 percent in 1986 to 13.4per cent in 1996.Table (6-2)Distribution of Employed Persons by Skills (15 years and More)Occupation1976000.s %1986000.s %1996000.s %Average rate of growth%1976-86 1986-96Professionals, Scientists& ManagersClerical Workers & LikeSales & Services WorkersWorkers in Agriculture& FisheriesProduction Workers & LikeUnclassifiledTotalUrbanRuralMaleFemale8267001.4424.0332.0525579.613n.an.a8.9156988.607.2915.0141.9521.355.80100.00——92.747.261.5889981.4284.3022.76929911.3855.4465.93910.3431.04113.958.7712.5437.792.76929911.3855.4465.93910.3431.0414.3701.1231.4564.6763.86012515.6117.2148.39713.5262.08528.007.209.3330.0024.730.80100.0046.2153.7986.6413.366.743.61-0.100.653.04-6.041.71——1.504.0810.651.180.190.843.38-8.343.212.853.522.727.19Egypt Human Development Report 2000/2001 - 97

Globalization and Human CapitalOne of the importantchanges in theEgyptian labormarket, especiallyunder the ERSAP, isthe decrease in realwages● The share of professionals, scientistsand managers in total employedpersons increased from 8.6 per cent toabout 14 per cent and to 28 per centrespectively,● Clerical workers and the like increasedfrom 7.3 per cent to 8.8 per cent, andthen decreased to 7.2 per cent,● Sales and services workers decreasedfrom 15 per cent to 12.5 per cent andto 9.3 per cent,● Workers in agriculture and fisheriesdecreased from 42 per cent to 37.8 percent, and then to 30 per cent,● Production workers and the likeincreased from 21.4 per cent to 24.3per cent and then to 24.7 per cent.The Real Wage LevelOne of the important changes in theEgyptian labor market, especially under theERSAP, is the decrease in real wages after along period of increase between the mid1970s and the mid 1980s as an outcome ofthe impact of the oil boom. Data shown inTable (6.3) reveals that real wage rates in alleconomic activities during the mid 1990shardly exceeded two-thirds of their level inthe mid 1980s. It can be also observed thatthe deterioration in the level of real wagesTable (6-3)Trends in Average Nominal and Real Wages by Sectors and Economic Activity, 1987-1996Agriculture andFisheriesMining andQuarryingManufacturingElectricity,Gas and WaterConstructioTrade andHotelsTransportand StorageFinance,Insurance andBus. Serv.Soc. andpers. Serv.AllActivitiesEconomicActivitiesSectorsPuPrTPuPrTPuPrTPuPrTPuPrTPuPrTPuPrTPuPrTPuPrTPuPrTN27172549645938373830333040464034363434493638112493931333742381987R25.115.823.345.659.654.935.434.535.427.930.727.937.242.837.231.733.531.731.745.633.535.4104.345.636.328.930.734.539.135.4N5651541092491657972776495658514488846677831238895210120626363818482R17.816.317.234.779.352.625.222.924.520.430.320.727.145.928.026.821.024.526.539.228.030.366.938.219.820.120.125.826.826.1Notes: (1) Pu=Public, Pr=Private, T = Total, N=Nominal, R = Real.(2) Real Wages are calculated using Urban CPI for year 1986 = 100; National Bank, Economic Bulletin, vol.51, No. 3, 1998.(3) Public Sector includes Public Enterprises.(4) Private Sector: Etablishments using 10 workers or more.(5) In 1996 the classification of Economi Activities is different in CAPMAS data from previous years. In thatyear the data are more detailed for Agriculture, Trade, Finances, Social and Personal Services. For thepurpose of accurate comparison, we calculated the average nominal wage in each of the four activities asan average of the sub-activities in that year.19941996 % of change 1987-1996N R N R74596412927818110276938811988100931001068283111119112107230170738894103919919.815.817.134.574.348.427.320.324.923.531.823.526.724.926.728.321.922.229.731.829.928.661.545.419.523.525.127.524.326.5174.1247.1156.0163.3334.4206.8168.4105.4144.7193.3260.6193.3150.0102.2150.0211.8127.8144.1226.5142.9211.1181.6105.4246.987.2183.9184.8178.4116.7160.5-21.10.0-26.6-24.324.6-11.8-22.9-41.2-29.7-15.83.6-15.8-28.2-41.8-28.2-10.7-34.6-30.0-6.3-30.2-10.7-19.2-41.0-0.4-46.3-18.7-18.2-20.3-37.9-25.198 -Egypt Human Development Report 2000/2001

Globalization and Human Capitalwas more severe in the private sector, whereit declined by almost 38 per cent, comparedto the 20 per cent decline in the publicsector. Nonetheless, nominal wages tended,in general, to increase by about 160 per centduring the period in question.Moreover, data in Table (6.4) points tosome discrimination against women in thewage level. A female worker obtains nomore than 83 per cent of the wage level of amale doing the same job. However, thisdiscrimination is relatively less in the publicsector compared to the private sector.Market SegmentationThe Egyptian labor market suffers fromseveral types of segmentation, namelypublic/private, male/female, andformal/informal. The latter is considered themajor characteristic of this market. Theinformal labor market appears to be the lastresort for all those not absorbed by theformal market. This is because the majorityof the unemployed in Egypt, especially inthe absence of a comprehensive system ofunemployment insurance, cannot afford tostay without work and a source of income.There are many difficulties, statistical andotherwise, concerning the collection of dataon the activities within this sector or thenumber of those employed in it. However,estimates provided by the most recent studyof the degree of elasticity andcompetitiveness in the Egyptian laborThe informal labormarket appears to bethe last resort for allthose not absorbed bythe formal market.Table (6-4)Trends in Average Nominal and Real Wages by Economic Activity, 1990-1996Agriculture andFisheriesMining andQuarryingManufacturingElectricity, Gasand WaterConstructioTrade andHotelsTransportand StorageFinance,Insurance andBus. Serv.Soc. and Pers.Serv.AllActivitiesEconomicActivitiesAll ActivitiesPublicPrivateGenderMFF/MMFF/MMFF/MMFF/MMFF/MMFF/MMFF/MMFF/MMFF/MMFF/MF/MF/MN34320.941141050.9256380.68394611855500.9151420.8253551.0475851.1355340.6257460.810.890.6919961996N65540.831821690.9397670.6988901.02991081.0984760.901111171.051741490.86991001.01103830.810.920.68Notes: (1) M= Male, F=Female, N=Nominal, R=Real.(2) Real wages are calculated using urban CPI for year 1986 = 100 ; National Bank, Economic Bulletin,volume 51, No. 3, 1998.(3) For Classification of Economic activities see note (5) Table 6.3.R19.017.963.758.761.321.221.825.730.727.928.523.529.630.741.947.530.719.031.825.7R17.414.448.645.225.917.923.524.126.528.922.520.329.731.346.539.826.526.727.522.2% of change 1987-1996N91.268.8—59.661.0—73.276.3—125.695.7—80.0116.0—64.781.0—109.4112.7—132.075.3—80.0194.1—80.780.4———R-8.4-19.6-23.7-23.0-17.3-15.67.8-6.2-13.73.6-21.1-13.60.32.011.0-16.2-13.740.5-13.5-13.6Egypt Human Development Report 2000/2001 - 99

Globalization and Human CapitalThe Egyptianinformal sector hasplayed a pivotal roleas an absorber of theshocks that hit theformal labor marketduring the 1990s.The most importantglobalizationmechanism, namelythe GeneralAgreement on Tradein Services (GATS),is likely to fosterinequality in labormobility acrosscountries.market show that there has been a greatincrease in the number of those joining theinformal labor market, especially during the1990s, when it ranged between 4.8 and 5.2million individuals. This suggests that theemployment level in the informal labormarket had almost doubled since 1986.The Egyptian informal sector has played apivotal role as an absorber of the shocks thathit the formal labor market during the1990s. But it should be remembered thatthose employed in the informal labor marketdo not enjoy the benefit of legal protectionon working hours or minimum wage levels.They also lack all forms of insurance orsocial security, and have to contend with theinstability that characterizes this sector.Wage levels tend to fall as the number ofthose joining the sector increase, with fiercecompetition among them. The sector isincreasingly becoming a reservoir ofunskilled and low-wage labor, increasingthe severity of poverty and socialmarginalization, especially in urban areas,with dangerous economic and socialimplications.Labor Force MobilityThe phenomenon of globalization issynonymous with a higher degree ofliberalization and the abolition of all barriersdeterring the flow of commodities or factorsof production across national borders. Thiscan suggest a higher degree of mobility forindividuals, parallel to the liberalization ofgoods, services, and capital flows. However,for at least two reasons, this, in fact, is notsupported by empirical evidence:(1) Some analysts have noted thatglobalization will result in a distinctionbetween three different categories of thelabor force, regardless of nationality:● A limited category, not exceeding 10per cent of the total labor force of theworld, qualified to fill any jobopportunity at the international levelbecause of high caliber and skills, andthe ability to innovate. Sincemultinational companies will competeto attract this category, the wagesoffered and promotion opportunitieswill be very high.● A category of between 30 to 40 percent of the total labor force of theworld, characterized by a lower levelof skills compared to the firstcategory. This category will have jobopportunities within the borders oftheir country, but under the ‘hire andfire’ principle will lack any guaranteeof job stability. There will also befewer chances for promotion to higherwage levels.● The last category, involving allunskilled labor, will only be able tofind temporary and unstableemployment, with extremely lowwage levels due to severe competitionwhether within their country or fromoutside.(2) The most important globalizationmechanism, namely the GeneralAgreement on Trade in Services(GATS), is likely to foster inequality inlabor mobility across countries. Theliberalization of services includes,among other things, labor mobility fromone country to another in order toprovide certain services. This might leadto the movement of labor fromdeveloped industrial countries todeveloping countries because of therelative and competitive advantage oftheir highly sophisticated skills. Thiswould increase the pressures imposed byglobalization on developing countries,including Egypt. However, it should benoted that the agreement allows eachcountry to choose certain service sectorsin which it commits itself toliberalization in a way that seeks tomitigate negative impact. Egypt, forexample, promised to fulfill certaincommitments in specific sectors, namelyconstruction, financial and bankingservices, tourism, and transportation.The same result could also apply in the caseof the EU Partnership Agreements, wherethe European side aims to limit themovement of labor from southern to northernMediterranean countries, by improving joband wage opportunities, especially for laborwith limited-skills, in Europe proper.Further, the opportunities for Egyptianworkers to move within the borders of theArab world have decreased and are not100 -Egypt Human Development Report 2000/2001

Globalization and Human Capitalcomparable with those witnessed during thepetroleum boom. It would therefore beunwise to expect Arab oil-producingcountries to continue to absorb the surpluslabor force of other Arab countries such asEgypt, Jordan and Yemen. The movementof labor will be limited and concentrated inthe highly skilled labor category, and thenonly in a few fields where no substitution bynational or Asian labor is possible.In addition, recent empirical evidence on theEgyptian labor market shows a tendencytowards using foreign labor, especially thosewho are highly skilled and capable ofdealing with new advanced productionmethods. Foreign labor in Egypt is mainlyfrom Asia, given high quality performanceand work ethic. This phenomenon isnoticeable in the construction and medicalservice sectors. There is also an increasinginflow of unskilled labor from Sudan,Ethiopia and Eritrea, working mainly in jobsrelated to domestic services.We might therefore conclude that contrary tofirst impressions, globalization will increasinglyput constraints on employment and on laborforce mobility, with the exception of smallnumbers of the highly skilled who constitutea special class of workers.The Spread of Poverty and SocialExclusionIn spite of the assertion that there is nodirect relationship between the impact ofglobalization on the labor market andpoverty, it appears that the complexinteraction between the forces of change islikely to have a negative impact on thestandard of living of the majority of theEgyptian labor force. Poverty is essentiallya process of social exclusion that preventslarge categories of citizen from acquiringeconomic, human and social assets. If, assome economists believe, the increasingopenness of the Egyptian economy hashelped, through different mechanisms,reinforce the phenomenon of exclusion overthe last ten years, one could argue that inEgypt, as a developing country, globalization,by definition, will help integrate only asmall elite into the process of productionand capital accumulation of the globaleconomy. These few beneficiaries, or thelabor “aristocracy”, enjoy a higher standardof living than that attainable by the averageincome level. Further, the number of thosemarginalized and excluded from theproduction and income cycles is on theincrease, to the extent that poverty isassociated with economic and socialexclusion.Social Policies Supporting theLabor MarketIn view of the negative spin-offs ofglobalization, the GOE has recognized theneed to pursue new social policies that aimto mitigate adverse effects, especially on thepoor and vulnerable groups in society.These policies vary in their nature, objectivesand in the groups benefiting. The main linesof the social policies proposed are thefollowing:Short-Term PoliciesIn the short run, two main types of programcan be distinguished. The first cover theestablishment of appropriate social safetynets, while the second focus on thedevelopment and efficiency of employmentoffices to more effectively match unemployedjob seekers with available job vacancies.The Social Safety Net. The term ‘socialsafety net’ (SSN) is widely used in theliterature dealing with ERSAP indeveloping countries. Most empirical studieshave shown that the implementation ofERSAP programs not only deepens theseverity of poverty, but also generates newgroups of poor, whose standards of livingdeteriorate as a result of the programs.Thus, the SSN has become an additionalcomponent to the two main elements ofreform, namely the stabilization programand the structural adjustment program, inorder to give these programs a human face.There are three main components toEgypt’s SSN. The first is consumer foodsubsidies. The second relates to the SocialFund for Development (SFD), establishedto provide financial assistance, and createjob opportunities, for certain categoriessuch as female-headed families, laborreturning to Egypt after the Gulf war, andworkers hit by privatization programs. TheThe movement oflabor will be limitedand concentrated inthe highly skilledlabor category.Poverty is associatedwith economic andsocial exclusion.Egypt Human Development Report 2000/2001 - 101

Globalization and Human CapitalEmployment policiesshould target, in themedium-term, thedevelopment andupgrading of thecapabilities and skillsof unemployedworkers.third component consists of all forms ofinsurance and financial assistance providedby the Ministry of Social Affairs to help thepoorest families and individuals and thosewith special needs, such as the disabled.The SSN, though necessary to protect thepoor, especially under the structuraladjustment program and the increasedopenness of the economy, is not a sufficientmechanism to eliminate poverty, unemploymentand marginalization. An SSN, by itself, canneither cure these ills nor address theiractual causes. Instead it addresses itself toalleviating the symptoms only. Thus, a SSNshould be considered a complementaryprocedure only, undertaken within the moregeneral and inclusive economic and socialframework of each country.Active Labor Policies. Lack of informationand inappropriate mechanisms for matchingjob opportunities and the accumulated stockof unemployment characterize the Egyptianlabor market, reducing market efficiency inallocating human resources. What is neededis the effective development of the labormarket information system. The provisionof timely, updated and accurate databases isa prerequisite for monitoring developmentsin the labor market, and, consequently,devising sound policies.It is also necessary to enhance the role ofemployment agencies in the Egyptian labormarket. This can be achieved by extendingthe scope and services of employmentoffices affiliated to the Ministry of LaborForce and Training, increasing theefficiency of their employees, and usingstate of the arts techniques for speedyinformation flow. Private sector agenciescould also help. The assistance ofinternational institutions specialized in thisarea, such as the International LaborOrganization, and the Arab LaborOrganization, could help in identifying bestpractices.Medium-Term PoliciesEmployment policies should target, in themedium-term, the development and upgradingof the capabilities and skills of unemployedworkers. In addition, policies should beaccompanied by ‘training’, so that trainingbecomes the principal mechanism throughwhich the labor market improves thequalifications of job seekers, and increasesthe skills and productivity of employedworkers, thereby raising their livingstandards.This highlights the importance ofcomplementary roles between the state andthe private sector in designing andformulating new training policies, as well asin providing the necessary resources fortheir implementation. This should be along-term process that encompasses alltypes of training (transformation training,efficiency-upgrading training, continuoustraining, etc) and which would enable labornot only to acquire a job at a given point intime, but also to increase employability formore productive and higher-wage jobsthroughout working lives (see Box 6.1).Long-Term PoliciesTo successfully confront the likely negativeimpact of globalization on the EgyptianThe Government of Egypt is currentlydesigning a National Program for Employmentin cooperation with UNDP, in order to find aprompt and effective solution for theaccumulated stock of the unemployed, andto address the increasing number of newentrants to the labor market. According to arecent study, this number has almostdoubled over the second half of 1990s, toreach 800,000 per annum. One of the mainpivots of the proposed program is theBox (6.1)The National Program for Employmentfoundation of a National Fund for Trainingwith tripartite participation from the state, theprivate sector, and employees. The fund is tobe financed partly by the government, andpartly by charges paid by private sector firmswith more than thirty workers, in addition tothe donations granted by internationalinstitutions and agencies. The fund aims toformulate and develop training programs toaddress the new needs of the Egyptian andother labor markets.102 -Egypt Human Development Report 2000/2001

Globalization and Human Capitallabor force in the long run would require thefollowing:Sustainable and Equitable Economic Growth:Given the on-going globalization processand fierce competition among differentcountries, the pursuit of economic policiesaiming for high growth rates becomes anecessity. Howeverthis is not a sufficientcondition to achieve the societal targets ofeconomic growth. What really matters is thenature of growth and whether its benefitsare equitably distributed or not.In order to achieve sustainable and equitablegrowth, the nature of economic growth andthe sectors generating it in Egypt may needto be reconsidered. This may meandiversifying sectors of production andconcentrating on higher productivity activitiesin the commodity sector, while enhancingthe performance of the service sector inorder to be locally and internationallycompetitive. Economic growth should alsocreate adequate productive and incomegenerating jobs that allow households tomeet their basic needs. This does notsuggest the use of labor-intensiveproduction methods across the board, givenconsiderations of competitiveness and thenature of available resources; technologyintensiveproduction in specific areasaccelerate growth and help break into newproduction areas. This implies the need forforward and backward linkages betweenmega industrial projects and small andmedium clusters of industries. Theselinkages would stimulate small firms toraise their efficiency and to comply withinternational quality standards, therebyensuring the marketing of their productsinternationally.Finally, some mechanism should assure theequitable distribution of the benefits ofeconomic growth among all groups andclasses. Development experience, supportedby analytical and applied research, indicatesthat the trickle-down effect is not enough toguarantee the transmission of benefits to allindividuals in a society. There is a role forthe state in the income redistributionprocess in favor of poor groups, to raisetheir income levels, and thereby to acquireproductive social and human assets.Support for Human Development. Theonly way to take advantage of the opportunitiesthat are likely to result from globalizationis to develop human knowledge andcapabilities, and to establish the infrastructureappropriate to the employment of thesecapabilities in the production process. Thishas to be achieved in a way compatible withinternational technological breakthroughs.Political, Institutional and LegislativeReform. The success of growth with equitypolicies, although necessary for theupgrading of human capabilities, is notsufficient. These policies need to be associatedwith reform in political, institutional, andlegislative areas. One of the most importantreform aspects should be to enable citizens,especially vulnerable groups (the poor,low-income groups, women), to effectivelyparticipate in the decision making process atthe local, regional, and national levels.Finally, it is believed that implementingefficient and successful reform policiesnecessitates the creation of a ‘new socialcontract’ to provide a solid base for anEgyptian development model capable ofmeeting the challenges of globalization.This ‘contract’ would mean the establishmentof a new set of relationships between thegovernment, the private sector, and civilsociety institutions of a complementaryrather than acompetitive or exclusive,nature, and which would assure themaximum social protection.It is believed thatimplementingefficient andsuccessful reformpolicies necessitatesthe creation of a ‘newsocial contract’ .Egypt Human Development Report 2000/2001 - 103

Chapter SevenEgypt’s Social Capital and ArabEconomic IntegrationSocial capital is oneof the most importantassets of nations.Social capital andregional integrationimpact mutually oneach other.Social capital is one of the most importantassets of nations. Indeed, it is inseparable,not only from the demographic characteristicsof any given population, but also fromcultural and moral values, behavioral trends,organizational structure, gender attitudes,possessions, and all other societalmechanisms dealing with the differentaspects of life.These various and complex aspects of lifehave been subject to continuous andgenerally gradual change worldwide overthe past centuries. But since the beginningof the 1990s, the accelerated process ofglobalization has speeded the process ofchange disruptively in a large number ofcountries. Wherever this disruption takesplace, sociopolitical stability is endangeredand human development itself threatened.So far, Egypt has largely escaped this threat,but there is no guarantee that this willremain the case given increasing involvementin the process of globalization. EnhancingEgypt’s social capital can provide asafeguard against this danger.Different forms of regional integration alsohave an impact on the social capital of thosecountries, and/or societies, involved in theintegration process. Indeed, social capitaland regional integration impact mutually oneach other. Regional integration is usuallygreatly facilitated when all the elements thatconstitute social capital are in harmony, orare shared to some extent by the countriesinvolved, while social capital’s constituentelements themselves undergo favorablechange with greater progress towards regionalintegration.This chapter will assess the stock of socialcapital in Egypt and examine itscontribution to development, particularly inits political aspects. It will suggest howEgypt’s stock of social capital might beinfluenced by the process of globalization,and ways to protect it against future shocks.Egypt’s economic cooperation with theArab countries is also addressed from theviewpoint of social capital formation withina human development perspective.Measuring Social CapitalSome publications, particularly from UNagencies, define the concept of social capitalto include both government institutions andthe formal and informal groupings ofcitizens. Putnam), however, defines socialcapital broadly to be “the features of socialorganization, such as networks, norms andtrust, that facilitate coordination andcooperation for mutual benefit. Socialcapital enhances the benefits of investmentin physical and human capital”. For thepurposes of this EHDR, we adhere to anarrower definition of social capital. It isalso more relevant, in the context of thischapter, to focus only on those aspects ofthe social structure that impact ondevelopment.Most authors would agree that the roots ofsocial capital are the family, the communityand the school. Others, such as the WorldBank, would add to these sources the firm,civil society, NGOs, the public sector,ethnic groups and gender. In either case, thepresence of social capital in a society ismanifest when teamwork becomes customary,and the negative aspects of individualisticbehavior do not present a significantobstacle to collective action. In other words,collective action becomes the norm whenmembers of society trust each other, notnecessarily out of a belief in the commongood, but simply out of the realization thatindividual interests will be served throughcommon action. In such situations, it can besaid that an ‘invisible social hand’ guidesthe behavior of individuals and privategroups.In Egypt, there are indications of a strongstock of social capital. Rural and urban pooras well as the middle classes create informalmutual aid societies, known as Jam’eyyat.104 -Egypt Human Development Report 2000/2001

Egypt’s Social Capital and Arab Economic IntegrationThis is one sign of the presence of socialcapital among these groups, and thereciprocal help provided to each other byvillagers and the urban poor is yet anothersign of action towards the common good.Formally, the activities of effective tradeunions, syndicates, associations and politicalparties are also evidence of the presence ofsocial capital.At present, it is difficult to assess thevolume of social capital based on traditionalties in Egypt. However, the mixed nature ofseveral groupings, combining modernorganization and primordial loyalty, atteststo the surviving power of tradition inMuslim and Christian associations and inthe societies of people from the samequarter, town, city or governorate. Some ofthese informal associations in poor urbansettings, particularly among women, havebeen described in the literature, but therehas been no attempt to quantify theirnumber, many of which appear to belong tothe predominant Jam’eyyah type. Anothersign of robust social capital, althoughdifficult to measure, is the apparently largesum of money donated to charitable work inEgypt, especially that related to the paymentof alms (including Zakat), particularlyduring religious festivals.One additional example stands midwaybetween formal and informal manifestationsof social capital, namely the self-help effortsundertaken by citizens, very often incooperation with the government, in orderto finance the provision of certain services.Accurate estimates of the value of theseefforts do not exist, but previous officialfigures suggested hundreds of millions ofEgyptian pounds.Table (7.1) exhibits the variety of formalcontemporary associations in Egypt and thenumber of organizations belonging to eachcategory. The table clearly indicates thatEgyptian citizens come together through avariety of formal bodies catering to theirinterests in almost all areas of socialinteraction: political parties, business groups,professional associations or trade unions,and formal Jam’eyyat. This type of collectiveactivity through formal association is notnew to Egypt, and the oldest such societiesgo back to the early nineteenth century.The numbers of organizations in eachcategory (Table 7.1) are not always a trueindication of the actual condition ofassociation. The number of functioning politicalparties, for example, may not exceed five,and the number of active civic societies iscertainly less than the figure of nearly15,000 Jam’eyyah registered with theMinistry of Social Affairs. Moreover thegeographic distribution of these associationsis quite biased with a large proportiontending to be located in Cairo and othermajor cities.A second measure of social capital ismembership of organizations. It is difficultto obtain the membership figures for mostof them, as few publish any figures.Moreover, figures that may have beencredible a few years ago are no longer so,either because citizens have lost theirenthusiasm for some organizations, orbecause membership records have not beenupdated. Even when figures are available,the number of members does not reflect thelevel of their involvement in the activities ofthe organization. This is particularly theThe activities ofeffective trade unions,syndicates,associations andpolitical parties arealso evidence of thepresence of socialcapital.Table (7-1)Formal Infrastructure of Social Capital in EgyptType of OrganizationPolitical PartiesBusines groupsCooperativesTrade UnionsProfessional AssociationsCitizens’ Societies “Jam” eyyatNumber of Organizations151800026232214600Number of3.03.012.73.35.03.0Egypt Human Development Report 2000/2001 - 105

Egypt’s Social Capital and Arab Economic IntegrationEgypt appears to havea considerablepotential stock ofsocial capital.case with cooperatives, trade unions andchambers of commerce. Thus, the figuresgiven in the table should be treated withcaution.A third measure of social capital in Egypt isthe cohesiveness of organizations. Indeed,there are signs of a lack of cohesiveness ineach category of organization (see Box 7.1).Disputes which fragment these organizations,have recently been particularly marked in afew. Lack of cohesion is a feature nowconspicuous in many organizations at alllevels. The reasons behind this requireresearch, but the phenomenon may havealways existed and become apparent inorganizations that are now more visible dueto their large membership, their role in thesocial and political life of the country, andtheir presence in Cairo.A fourth measure of social capital could bethe level of cooperation among these organizations.Several authors consider networking a betterindicator of the presence of social capital.There are indeed many cases of cooperationwithin each category of organization.However, such cooperation is not common,and usually of short duration.The fifth, and last, way of measuring socialcapital in Egypt is to examine the socialvalues that either foster or hinder collectiveaction by individuals. The highly respectableWorld Values Survey, undertaken by theUniversity of Michigan, did not include anydata on Egypt or, for that matter, on Arab orMuslim societies. This may be due to a lackof such data, and might require researchefforts at the local level.In conclusion, Egypt appears to have aconsiderable potential stock of socialcapital. However, it may not be put to thegood use suggested by the inflated figureson cooperatives, civic societies and politicalparties. Further, membership in associationsof all types is presently low or inactive dueto a perceived lack of internal cohesiveness,or to conflicts with the government thathave led to the suspension of activities. Thisis the case for most professional associationsthat had their elections suspended for nearlyhalf a decade during the 1990s. It is aBox (7.1)Cohesiveness of Social Capital Organizations In EgyptWith regard political parties, a number ofmembers of Egypt’s National DemocraticParty (NDP) contested the elections of thePeople’s Assembly (PA) in October-November 2000 as independents. In manycases they competed against the officialcandidates of their party, despite warningsby the party leadership that not abiding byparty discipline would be held against them.These warnings were later disregarded bythe same leadership, who, following theirvictory, hastened to reintegrate theindependents into the party parliamentarygroup. The party was therefore able to retaina parliamentary majority with the support ofthese undisciplined “floating” members.Regarding Egypt’s professional associations,major internal disputes have marked therecent history of some of the most importantof these. The cause of the disputes variedfrom one association to the other, being thevalidity of electoral procedures in somecases, such as the Syndicate of Engineers, ormanagement of funds, as in the case of theBar Association (BA). The BA in particularwas the stage for several internal disputesthroughout the 1980s and the 1990s, beforethe government took advantage of thesequarrels to order the sequestration of theassociation in 1996.Finally, within civic societies, the mostimportant internal disputes were those thattook place within the Egyptian Human RightsOrganization in the 1990s, particularly in1991. On the occasion of the election of theExecutive Committee of the organization, onefaction used questionable tactics in order toobtain a majority, thereby getting rid ofanother faction that had been its partner inestablishing the organization in 1987. Similardisputes related to electoral procedures werealso reported in some of the most exclusivesports and recreational clubs in Cairo.Business organizations did not escape suchaltercations either, with the Cairo Chamber ofCommerce paralyzed in 1998-9 by an internaldispute that was resolved only through theintervention of the Minister of Supply.106 -Egypt Human Development Report 2000/2001

Egypt’s Social Capital and Arab Economic Integrationpositive sign that elections have now beenallowed in the Bar Association, and arelikely to be allowed in other associations.Delays in the adoption of a law ofassociations, acceptable to the leaders andmembers of these associations, is causinguncertainty as to the future of many of them,particularly those that deal with humanrights issues.Social Capital and DevelopmentSocial capital, as defined above, isconducive to development. In economicterms, social capital reduces the ‘cost oftransaction’ because of the reduced need forbureaucratic regulation or for supervisorybodies to ensure honesty and good faith inall types of transaction. Non-economicinteractions are also less costly in thepresence of a good stock of social capital.Social capital fosters strong norms ofgeneralized reciprocity, which allows moreefficiency than that allowed in a“mistrustful” society, for the same reasonsthat money is more efficient than barter.A rich base of social capital facilitates therise of networks of civic engagement.These, in turn, contribute to intercommunitylinkages, provide coordinationand communication channels betweenvarious social actors and promote positivevalues such as cooperation and socialaltruism. Moreover, successful networks ofcivic engagement demonstrate theeffectiveness of collaborative effort, serveas a model for civil society participation,and help build a strong sense of civicresponsibility and national identity.Social capital is also useful for theformation of other types of capital. Theefficient accumulation of a stock of physicalcapital requires the cooperation of largenumbers of people; otherwise, the volumeof physical capital stock may not come intobeing or would need to be obtained throughcoercion. Coercion is a costly means ofbuilding physical capital, as it requires thepresence of an enforcing agent and couldsubsequently provide an outcome that maynot be of good quality. Social capital is alsonecessary for the accumulation of financialcapital. The mobilization of savings, smallor large, is impossible without those involvedtrusting each other sufficiently, or trustingthe institution which enables them to savetogether.However, not all types of social capital areconducive to development. Social scientistsdistinguish three types of network:1. Those that bridge horizontal ties that linkgroups on an equal footing, such as tradeunion federations, or coalitions ofpolitical parties. Horizontal networks canfacilitate interaction, unless they aredivided along conflictive ethnic lines.Strong intra-association social capital canbecome a hindrance to overall societalintegration.2. Those that have ties of a vertical natureare often founded on paternalisticrelationships, with one group at thecenter dominating other groups, eitherbecause it has more resources, oldertraditions or because it provides otherorganizations with different types ofassistance. Vertical networks can reducethe autonomy of their individualmembers, with the dependent groupsacting on the orders of the dominantgroup. Clandestine organizations andorganized crime gangs are examples ofthis type of negative social capital.3. Those that have a mixture of horizontaland vertical ties among groups, whichgives rise to a system-changing network.This is typical of ‘social movements’.It is important to remember that thetrickle-down effect of social capital is afunction of solidarity. The goal served byties of solidarity should be compatible withcollective societal interests, as defined bythe society itself, or by its legitimaterepresentatives.In Egypt, the traditional stock of socialcapital may be shrinking, but theaccumulation of social capital through themodern forms it now takes leaves much tobe desired, as indicated earlier. New growththeories emphasize the contribution ofsocial capital to development, but if theeconomic, social and political developmentprocess in Egypt is moving more slowlythan desired, existing stock of effectivesocial capital in the country could be one ofthe reasons for this. The negative impact ofSocial capital, isconducive todevelopment.A rich base of socialcapital facilitates therise of networks ofcivic engagement.Egypt Human Development Report 2000/2001 - 107

Egypt’s Social Capital and Arab Economic IntegrationGovernment actionprovides theframework for theformation andaccumulation ofsocial capital.Globalization couldempowermarginalized or evenpersecuted groups inthe countries of theSouth.this predicament is seen in high transactioncosts with the government. The dissatisfactoryranking of Egypt in the International Indexof Transparency well illustrates theconsiderable transaction cost perceived bybusinessmen in their dealings with theEgyptian government.Another negative spin-off from lack ofeffective social capital is seen in the modestaccumulation of other types of capital inEgypt, particularly physical capital. Theexecution time for national projects extendsfor much longer periods than forecast. Onereason for this is the lack of speedy andefficient dispute settlement mechanisms.The business community is often reluctantto respond to government appeals to investin its projects for similar reasons. Governmentaction provides the framework for theformation and accumulation of socialcapital. In this respect, public policiesduring the last three decades have had amixed effect. Disregard for court rulingsand loopholes in the legal system underminethe rule of law, and citizens areconsequently not sufficiently secure in theirdealing with others, making the accumulationof further social capital difficult.In addition, attempts to organize or toaccumulate social capital through itsmodern associational forms encounternumerous restrictions from the authorities.This is the case for political parties, professionalassociations, trade unions, civic societies,and even business groups. Governmentactions and legislation have eroded thepotentially positive impact of globalizationon social capital in Egypt. However, somepublic policies, mainly in the areas of socialdevelopment and social care, now providestrong potential for the further expansion ofsocial capital in the country.Globalization and Social CapitalThe impact of globalization on social capitaldepends on many variables. One variable isthe tie which provides the foundation ofsocial capital, and its quality. It could beargued that the rapid movement of people,information, ideas, news and imagesweakens the ties of solidarity amongmembers of groups that previously lived inharmony with community values. Theexpansion of the market economy toembrace many of the services that wererendered in the past by the traditionalcommunity, such as employment, healthcare and social protection, could weaken theneed for individuals to maintain the ties ofsocial duty and collective responsibility.These ties have in the past met not onlyemotional, but also physical and survivalneeds. Another significant variable isexposure to the international mass media,particularly through satellite television. Thismay not necessarily undermine traditionalvalues, particularly among the older generation,but is likely to influence the young, and ifvalues that previously cemented groupingsacross different social levels are eroded, thiswould generate a serious and dangerousdichotomy in Egyptian society.Minimizing these real threats wouldnecessitate a sustained and widespreaddebate, possibly through the mass media, topromote the change needed to fosterbalanced human development. Here, itwould be important to strike a dynamicbalance between the material, moral andspiritual aspects of the national culture andof life within Egyptian society, and allowfor healthy interaction between differentnational variations and values.On the other hand, globalization might giverise to new forms of social capital. Thedemonstration effect, exercised by moreadvanced societies with a multiplicity ofgroups that cater for a myriad of collectiveinterests, could lead to the establishment ofsimilar groups in developing countries.Human rights, environmental and women’sgroups have appeared in the countries of theSouth in the approximate image of theircounterparts in countries of the North. Inmany cases, such groups had been active incountries of the South long before the term‘globalization’ was coined. However, it isclear that in the 1990s their number hasincreased, and their activities expanded, notonly in Egypt, but in other countries of theArab region.Globalization could empower marginalizedor even persecuted groups in the countriesof the South. The solidarity extended tohuman rights groups in many countries ofthe South by their counterparts in the North,108 -Egypt Human Development Report 2000/2001

Egypt’s Social Capital and Arab Economic Integrationand the publicity given to their activitiesprovides important support for their causes.While the financial support some of thesegroups receive from their counterparts in theNorth enables them to pursue and expandtheir activities, it has occasionally createdantagonisms and difficulties with theauthorities.Thus, the impact of globalization on socialcapital in the countries of the South is notwithout its problems. Many groups arelimited to small numbers of highly educatedpeople, and rely on foreign funding. Thismay actually reduce the likelihood ofstriking roots within their own communitiesand thus accumulating a larger stock ofsocial capital. It is feared that foreignfunding could be accompanied by a newtype of dependency relationship betweenorganizations of the North and theorganizations receiving their assistance in theSouth. The adversaries of such organizationscould stigmatize them as ‘agents of foreignpowers’, thus further distancing theseorganizations from their own citizens. If thishappens, foreign funding may paradoxicallybecome a cause of the slow accumulation ofsocial capital.To summarize, in assessing the state ofsocial capital in Egypt, three importantconsiderations should be taken into account.These are the mixed character of Egyptianculture, the rapid transition to a marketeconomy since the mid 1970s, and theincreasing openness of Egyptian societyunder the process of globalization toexternal influences. Ties of solidarity basedon primordial loyalties such as commonbirthplace, religion, and extended familyhave not disappeared, but they cannotalways survive the move away from villagesor the change in occupation, or the processof social mobility. Such ties have comeincreasingly under attack with the acceleratedexpansion of the market economy since themid-1970s, as a result of the adoption of theOpen Door Policy in 1974 and the massmigration of Egyptians to seek moreremunerative jobs, especially in theoil-producing Arab countries.The process of modernization has broughtwith it opportunities for new forms ofsolidarity. The programmed cohesion of thetraditional community is being replaced bythe organic solidarity of a modernizingsociety. Political parties, civic societies,trade unions and syndicates, provide newframeworks for people to come together onthe basis of political affiliation, occupationor simply social and intellectual interests.Traditional ties do not disappear in thismodern setting, but they become just onebasis for interaction in these organizationsalongside ideology, political stance orcommon interest.Globalization and Egyptian SocialCapitalOn the positive side, globalization has createdfavorable conditions for the accumulation ofnew social capital in Egypt. It has offeredEgyptians novel ideas that have translatedinto collective efforts ranging from thedefense of human rights to the protection ofthe environment, and a new impetus toencourage the private sector. New ideashave led to the establishment of organizationswhich have attracted a considerable numberof the Egyptian intellectual and businesselite, and have quickly become among themost active organizations of an emergingcivil society.In the area of human rights, no less thanfifteen organizations have come into beingin Egypt since the mid-1980s and havesucceeding in making human rights a publicissue. Several societies concerned with theprotection of the environment were alsoestablished during the same period.Business groups, formed since the late1970s, have become influential actors in thedecision-making process, and are supportedby research centers, think-tanks and institutesthat disseminate ideas favorable to theexpansion of the private sector and a morehospitable climate for foreign directinvestment (FDI).The process of globalization has empoweredorganizations of an emerging civil society,thus strengthening the social capital theyembody. The ties of solidarity which linksome of these organizations with globalmovements that share the same ideas haveenabled organizations, notably human rightsadvocates to survive in a hostile politicalenvironment, withstanding pressure fromthe government, and even the harassmentand persecution of their members.The process ofglobalization hasempoweredorganizations of anemerging civilsociety, thusstrengthening thesocial capital theyembody.Egypt Human Development Report 2000/2001 - 109

Egypt’s Social Capital and Arab Economic IntegrationGlobalization has hadmixed effects on theaccumulation ofsocial capital.Economiccooperation betweenthe Arab countries hascontributed greatly tothe progress that hasbeen made in humandevelopment in Egyptand other Arabcountries.Globalization has also empoweredcollective action by Egyptian citizensthrough various forms of assistance renderedto Egyptian organizations operating in thesenew areas of public involvement. Few of theorganizations operating in the fields ofhuman rights, gender equality, protection ofthe environment, or even support for theprivate sector, could mobilize sufficientfunds locally to undertake their activities.They have all found easy and generoussources of funding from abroad.On the negative side, foreign funding of organizationsthat occasionally express viewsand publish statements critical of certain actionsof the government has made it easy forthe latter to accuse these organizations ofbeing the tools of foreign powers and to attemptto bring their activities under governmentcontrol, or simply to ban them altogether.The Law of Associations No.153 of1999 promised to offer government recognitionto almost all associations in the country,provided they obtain government authorizationfor any foreign funding extended tothem. Almost all human rights organizationswere critical of this law. Some of them triedto find ways to avoid being subject to itsprovisions. The Supreme ConstitutionalCourt found this law to be unconstitutionalon other grounds in the summer of 2000.Large sections of public opinion, often informedby a sensationalist media, share thegovernment’s suspicion of foreign fundingfor certain organizations, groups and privateresearch centers. This distrust alienatesmany people from these groups and rendersthem unpopular. Those suspicious of foreignfunding tend to believe that the external supportprovided to Egyptian organizationsamounts to the establishment of verticalpaternalisticties amongst them, with foreignor international non-governmental organizationsas patrons and Egyptian organizationstheir clients and mouthpiece.In conclusion, it could be said thatglobalization has had mixed effects on theaccumulation of social capital. It facilitatesthe formation of social capital aroundseveral issues, but also creates obstacles tothe further accumulation of social capital inthe name of human rights, gender equalityor independent social science research.Regional Integration and SocialCapitalRegional integration is related to theaccumulation of social capital in thosecountries involved. On the one hand,regional integration is itself the formation ofsocial capital across the borders of membercountries. This is more the case wherecountries have common interests, language,culture, and values, as is the case with thecountries of the Arab region. On the otherhand, regional integration provides betterchances for the efficient allocation ofresources and higher growth rates, whichare positively reflected in higher standardsof living. Such favorable economicconditions help increase social cohesion andthe growth of social capital.Regionalism ranges from simple forms ofeconomic cooperation to total economicintegration. Progressing from one form toanother implies increasing coordination ofthe policies and measures regulatingsocioeconomic and political life in membercountries, which, in turn, creates greateropportunities for the consolidation of socialcapital in these countries, both collectivelyand individually. Accordingly, effectiveeconomic cooperation, when supported bythe socio-political will to move towardstotal economic integration, can help in theaccumulation of social capital and to enlargeits scope of action.Given these possibilities for developingsocial capital through regional integration,this section examines how Egypt has beenaffected by economic cooperation with theArab countries.Economic Cooperation: Egypt andthe Arab CountriesEconomic cooperation between the Arabcountries has contributed greatly to theprogress that has been made in humandevelopment in Egypt and other Arabcountries. It is noteworthy that long beforethe Arab countries could implement humandevelopment programs on their own, Egyptplayed a leading role in supporting thedevelopment of their human resourcesthrough the provision of teachers, doctors,engineers, and other experts.110 -Egypt Human Development Report 2000/2001

Egypt’s Social Capital and Arab Economic IntegrationHowever, this section concentrates on thepost-October 1973 war period after the firstoil-price shock, which resulted in abundantArab financial resources. This enabled oilproducing Arab countries to invest part ofthese resources in programs of constructionand infrastructure, and in programs aiming atdeveloping health, education, culture andother aspects of life. Non-oil producing Arabcountries contributed to this process throughlabor and trade flows, and also benefitedfrom the increased investment flows from oilproducing Arab countries, which helpedraise standards of living. Thus, one canargue that experience has shown that Arabeconomic cooperation in its different formsof trade, investment, aid, and labor flows,can become a means to achieve more balancedrelations with the strong world economicblocks and to alleviate the negative impactof globalization.Forms of Arab EconomicCooperationMeans of Economic AidArab economic aid relates to the aidprovided by oil producing Arab countries tothe less wealthy countries. Islamic and Arabhistory demonstrates other forms of socialsolidarity between individuals and countries,notably in the shape of religion endowments(Awkaf) and other aid, mainly in the formof alms (including Zakat) which involvedthe redistribution of income and wealth todisadvantaged countries, groups, orindividuals.Aspects of Arab Aid to EgyptForeign aid began to play an important rolein the Egyptian economy in the early 1970s.Two main aspects characterize Arab aid,specifically, to Egypt:1. The relationship between the size andmagnitude of Arab aid and the size ofthe financial surplus in oil exportingcountries. This is demonstrated by thefact that development aid reached itspeak when oil prices and exportsincreased enormously in the late 1970sand early 1980s.2. The simple conditions attached to Arabaid, with beneficiaries, for example, nottied to commitments to buy inputs fromdonor countries.Arab Funds and EgyptOne of the major aims in creating ArabFunds was to support Arab economicintegration. Loans provided by these fundscontributed to improving the comparativeadvantage of Arab countries. This resultedin increased trade and significantly raisedliving standards in the region. One goodexample is the Arab Fund for Economic andSocial Development, based in Kuwait, andwhich provided the bulk of the fundingneeded for the electricity networkconnecting Egypt, Jordan and Syria. Table(7.2) summarizes aid from Arab Funds toOne of the major aimsin creating ArabFunds was to supportArab economicintegration.SectorInfrastructureSuez CanalRailwaysroadsMaritime TransportTelecommunicationElectricity and PowerWaterProductive SectorsAgriculture and Arable landIndustry and MiningSmall firmsTourismTable (7-2)Sectoral Distribution of Arab Aid in EgyptMillion US$1619.8211.910517.311.417.11017.1322081380388.9717.4273.711.5Share (%)52.7013.086.481.070.701.0662.791.9812.8444.9628.1851.9919.830.83Human DevelopmentHealthEductionDwellingsResearchOthersTotal69.510.649.50.71.37.33069.32.2615.2571.221.011.8710.65100Egypt Human Development Report 2000/2001 - 111

Egypt’s Social Capital and Arab Economic Integrationthe different sectors of the Egyptianeconomy. It highlights the contribution ofArab aid to enhancing economic development,providing job opportunities, and meetingEgyptians’ basic needs for medical servicesand safe water. In addition, aid also servedregional integration among Arab countries.Figure 7-1Arab Direct Investment in Egypt 2000Kuwait27%Emirates10%Lybia8%Saudia35%Arab Direct Investment to EgyptKuwait and continued to fall due to the tightpolicies associated with the economicreform program in Egypt, reachingUS$308.1 million. However, as the businessenvironment in the Egyptian economyimproved, Arab investment started to growagain, reaching US$3.5 billion in 2000, anamount equivalent to 11 per cent of totalcumulative investment in Egypt up to thisdate.Arab Countries Investing in EgyptWith respect to the share of total Arabinvestment, the four top Arab countries, asillustrated in Figure (7.1) are Saudi Arabia(33.5 per cent), Kuwait (26 per cent), theUnited Arab Emirates (9 per cent) andLibya (8 per cent). Qatar, Jordan, Bahrain,Lebanon, Syria, and Palestine togethercontribute nearly a fifth of total Arabinvestment. The individual shares of otherArab countries are less than 1 per cent.Sectoral Distribution of ArabInvestments in EgyptArab investmentflows were primarilyassociated with theimprovement in theinvestmentenvironment in Egypt.Arab investment flows were primarilyassociated with the improvement in theinvestment environment in Egypt. In theearly 1970s investments increased inresponse to the Open-Door Policy, then fellby the late 1980s, to grow once more afterthe implementation of the economic reformpolicies. The stability of the domesticenvironment and opportunities for profitabilityproved to be more effective determinants ofinvestment than the special incentivesprovided to foreign investors. The share ofArab investment in Egypt has been steady at15 per cent of total investments during thepast twenty years. The following sectionshows the development of flows of Arabinvestment into Egypt, the relativeimportance of investors by country, thesectoral distribution of these investments,and the factors that might help Egypt attractfurther investment.During the 1970s, Arab investment in Egyptincreased after the rise in oil prices,reaching US$300 million in 1980. With thepeace treaty between Egypt and Israel, thisfigure fell, but rose again after 1988,reaching US$922.6 million in 1991 as aresult of the Gulf War. Arab investmentdecreased in 1992 after the liberation ofMost Arab investment is concentrated in theservices and industry sectors, with about 52per cent and 25 per cent of total Arabinvestment respectively. Free zone projectsattract 19 per cent of total Arab investment,while the agricultural sector attracts only 4per cent. In terms of their share of totalsectoral investment, the main sectors withshares higher than 10 per cent are thefinancial, agricultural, tourism, and freezone sectors (see Table (7.3).The preparation of the economic environmentin Egypt to absorb private investmentthrough huge projects such as the SouthValley Development Project and the SinaiDevelopment Project, in addition tostrengthening political stability in thecountry, could have the positive impact ofattracting more Arab investment.Trade with Arab CountriesGiven the challenges imposed byglobalization and by world economic blocks,one might argue that Arab inter-trade is ameans towards Arab integration, which inturn, would mitigate the negative impact ofthese challenges. Enhancing trade in theArab region would result in a new outlet for112 -Egypt Human Development Report 2000/2001

Egypt’s Social Capital and Arab Economic IntegrationTable (7-3)Contributon of Arabs in Subscribed Capitalto Established Companies till Decemer 2000SectorShare valueRatio to Total Arab Capital %Ratio to Sector Total investment %Industrial Co.3448258Agricultural Co.522412Construction Co.34225Tourism Co.33982512Funding Co.29692217Service Co.36535Free Zone Co.26661911Egyptian exports, especially as Egypt enjoysa strategic geographic location in the Arabregion. Inter-Arab trade is already supportedby several factors: the availability ofnon-exploited natural resources; the economicreforms and liberalization policies that havebeen carried out in most Arab countries; andthe implementation of trade agreements,such as the ‘Arab Free Trade Area’. Egypthas already signed four agreements toliberalize trade with other Arab countries.Trade between Egypt and the Arab countriesstill faces many obstacles, however. Forinstance, Egypt has not enjoyed anypreferential privileges in Arab markets untilrecently. In addition, difficulties withcross-border measures, the absence ofregular navigation lines, high shippingcosts, and the similarity of productionstructures in Arab countries, weaken thecomparative advantage of the Egyptianproducer and narrows inter-Arab tradeopportunities. Further, most Arab countrieslack an adequate economic database andstill need to reform and unify commercial,monetary and financial codes. Additionally,unstable economic and politicalcircumstances in the Middle East region, adecline in the price of oil, the variability ofexchange rates, fierce competition fromSouth East Asian countries and other fastgrowing economies, and the challengesimplied by world economic blocks, complicatethe situation even further.Nonetheless, part of the problem lies withthe Egyptian exporters themselves who stillhave insufficient experience of Arabmarkets despite their proximity, are usuallysmall and irregular exporters with a limitedexporting capability, and are not alwayscommitted to international standards.Egyptian-Arab Trade during the1990sArab trade with Egypt, as shown in Table(7.4), represents about 7 per cent of totalEgyptian foreign trade, and is characterizedby a fast growth. During the 1990s, Egypt’strade with Arab countries increased fromUS$484 million in 1990 to US$1474million in 1999. It is notable that the rate ofEnhancing trade in theArab region wouldresult in a new outletfor Egyptian exports.Table (7-4)Egypt’s Trade with selected Arab countries During the NinetiesYears199019941999CountryExportsImportsTotalExportsImportsTotalExportsImportsTotalSaudia7776153155194350121698819Libya441244444892425799Syria71258581774422567Arab Emirates13741411354376198Sudan21342929231223759Egypt Human Development Report 2000/2001 - 113

Egypt’s Social Capital and Arab Economic IntegrationThe group ofcountries forming theArab Free Trade Arearepresents animportantconsumption market.growth of Egyptian exports to Arabcountries was much lower (5.1 per cent)than that of Egyptian imports (19.3 percent). Saudi Arabia has kept the position offirst trade partner for Egypt during the1990s. However, since 1994, the Egyptianbalance of payments has been deterioratingin favor of Saudi Arabia. Severe competitionwas felt mostly in the case of constructionmaterial and petrochemical products. Insecond place comes Libya where theinternational economic boycott pushed it totrade more with it neighbors, especiallyEgypt and Tunisia. Starting in 1994, Egypt’sbalance of payments with Libya turned alsoin favor of the latter due to the increase inEgypt’s import of iron and petrochemicals,in which Libya enjoys a comparativeadvantage. However, the balance ofpayments with the third major Arab tradepartner, namely Syria, has remained in favorof Egypt throughout the whole period. Infourth position, come the United ArabEmirates, which have benefited, with Egypt,from the geographic location of Dubai andits role as a re-exporting port. Sudan’sposition as a trade partner with Egypt hasdeteriorated due to the boycott imposed onit by the international powers.The Arab Free Trade AreaThe agreement signed in 1981 forfacilitating and developing trade betweenthe Arab countries, is considered the pointof departure for building up an Arab freetrade area that would eventually lead to theestablishment of an Arab common market.The Economic and Social Council of theArab League decided in February 1997 toimplement this agreement through an actionplan, which included the following steps:● Gradual liberalization of trade betweenthe member countries by annuallyreducing 10 per cent of tariffs in effect on1 January 1997.● Elimination of non-tariff barriers.● Applying Arabic rules of origin.● Exchanging data and information.● Establishing a committee for settlingdisputes.● According preferential treatment to theless developed Arab countries.● Exchanging views concerning traderelatedactivities, such as scientific andapplied research, legislation, and theprotection of intellectual property rights.The group of countries forming the ArabFree Trade Area represents an importantconsumption market with a population of174 million, an average per capita incomeof US$3000 and a total gross domesticproduct of US$515 billion (according to1997 data). Among the twenty-two Arabcountries, fourteen have already announcedtheir commitment to the implementation ofthis agreement, while the remaining eightwill join the Area after receiving specialtreatment as least developed Arab countries.It is noteworthy that the fourteen committedcountries contribute 90 per cent and 96 percent respectively of total Arab foreign tradeand intra-Arab trade.Bilateral Free Trade AreasIn addition to the multilateral Arab FreeTrade Area, some Arab countries havesigned free trade agreements on a bilateralbasis. Egypt has been keen to sign bilateralagreements, especially with those Arabcountries that have implemented economicreform and structural adjustment. 1998witnessed the signature of four free tradeagreements between Egypt and Tunisia,Morocco, Lebanon, and Jordan. Theseagreements aim at bilateral liberalization oftrade via eliminating tariff and non-tariffbarriers.Egypt considers expanding intra-Arab tradeas a main component in its exportdevelopment program. Although only about15 per cent of Egyptian exports go to Arabcountries, there is considerable potential forincreasing this figure. Egypt has onlyrecently started to benefit from the naturaladvantage of its geographical location amongthe Arab countries, and the cultural andsocial ties between the Arab peoples.Labor MobilityThe number of Egyptians working abroadhas never been agreed upon, and significantdifferences exist among the availableestimates. For example, the 1996 censusestimated the number at 3.5 million, whileother estimates suggest the figure of 1.7million, at most. The boom accompanyingthe considerable increase in oil revenues,114 -Egypt Human Development Report 2000/2001

Egypt’s Social Capital and Arab Economic Integrationparticularly from 1973-1980, contributed toan increase in demand from oil-exportingArab countries for all kinds of services,including administrative, financial andpersonal. In addition, the administrativesystem was expanded to provide health,education, social and all the other serviceprovisions of a welfare state without havingto burden citizens with high taxes. Thisnecessarily implied increased labormovement to these countries.As shown in Figure (7.2), most Egyptianworkers were attracted to Libya, the Gulfcountries and Iraq. Their number in the Gulfcountries decreased significantly in theaftermath of the Gulf War. However, therewere other factors feeding this trend:notably, the fall in oil prices; and the policyof substituting foreign labor by nationallabor.Egyptian labor movement to Arab countrieshas been characterized by the concentrationof labor (53.1 per cent) in productiveprofessions, whether in the industry,agriculture, construction or transportationsectors. Technical, scientific, and managerialprofessions come next with a share of 21.3per cent, while bureaucratic jobs representonly 3.6 per cent.However, a recent study suggests that theGulf War had harmful effects on unskilledand uneducated labor. For example, agriculturalworkers represented 18.5 per cent of totalworkers coming back from Iraq, whileproduction and transportation workersamounted to 55.6 per cent of the same total.It appears then that Arab-Egyptian relationshave contributed to achieving higherstandards of living, and more opportunitiesand choices for all, as well as thedevelopment of mutual understanding. It iscertain that the movement of Egyptian laborto Arab countries was significant factor,contributing to prosperity in the Arabworld. Egyptians working in Arab countrieshave accelerated the implementation ofeconomic and social development programsbecause of their qualifications, experience,low cost, and ability to train other workers.Labor movement has raised the standard of10000008000006000004000002000000Figure 7-2Estimates of Egyptians working in some Arab Countries12000001990 1991 1992 1993 1994 1996Saudia Kuwait Qatar Emirates Jordan Yemen Sudan Libyaliving of no less than an estimated 15 percent of the Egyptian population, supportedthe balance of payments, and has had amajor role in preserving the value of theEgyptian pound from further depreciation.In addition, the investments of Egyptiansworking abroad have helped narrow thesaving-investment gap and thereby contributedto economic growth in Egypt. However,with respect to trade, Egyptian exports haveso far failed to achieve an adequate share ofthe Arab market. This is evident in thereversal of the balance of payments in favorof several Arab countries such as SaudiArabia and Jordan.Finally, Arab economic cooperation is not asubstitute for globalization. On the contrary,it is believed that cooperation will increasethe opportunities for benefiting, bothsocially and economically, from globalization.Arab economiccooperation is not asubstitute forglobalization. On thecontrary, it is believedthat cooperation willincrease theopportunities forbenefiting, bothsocially andeconomically, fromglobalization.Egypt Human Development Report 2000/2001 - 115

Technical Notesand Sources of DataHuman development indexThe Human development index (HDI) isbased on thre key components: longevity ,educational attainment and standard ofliving. longevity is measured by life expectancyat birth . Educational attainment is measuredby a weighted average of adult literacy(two-thirds) and combined first-, second-,and third-level gross enrollment ration(one-third). For standard of living, theadjusted measure used is the purchasingpower parity of the income equivalent inUS$ ( see, UNDP Human DevelopmentReport 1995, technical note 3 pp.134-135).It is to be noted that the mean years ofschooling was replaced by the combinedenrollment ratio in 1995 report.In earlier years, the minimum value of eachof the variables was determined at the levelof the poorest-performing country, and themaximum value at that of the bestperformingcountry. The HDI for a givencountry was, therefore, its position betweenthe worst and best countries. However, theminimum and maximum values changedevery year in accordance with theperformance of the countries at the extremeands of the scale. The basic issue withshifting the goal posts is that it precludesmeaningful comparisons overtime.The UNDP Report of 1994 has introduced amajor refinement in the methodology ofconstructing HDI when goal posts werefixed for each indicator to allow analysisover time. The minimum and maximumvalues of the four basic varialbes in thesubsequent Report remained the same withone exception where the minimum value ofreal GDP per capita was revised from PPPUS$ 200 to PPP US$100 since 1995 Report(Table T.1).The index for any component of HDI can becomputed as : (the actual value – theminimum value) (the maximum value- theminimum value). For income , the thresholdvalue is taken to be the global average realGDP per capita. Multiples of incomebeyond the threshold are discounted using aprogressively higher rate. The present reportapplies a refinement introduced since 1999UNDP Report, for computing the index ofincome. This refinement implies theapplication of the aforementioned formulawith one expception , namely, using thelogarithms of the actual, minimum andmaximum values of real GDP per capita(PPPS).In the present report, GDP per capita forEgypt was estimated from National IncomeAccounts of 1999/2000. The estimated GDPper capita in local currency (LE) wastranslated to its value in US$ using anappropriate exchange rate. Then , the realGDP per capita (PPP US$) may becalculated by applying a suitable factor tothe estimated GDP per capita in US$.However, the implied value of this factor inthe UNDP Reports rose markedly fromabout 2.1 to 6.1 for a relatively short period(1987-1994).The report team preferred the value of thefactor implied in the 1999 report. Theresulting HDI for Egypt in 2000 amounts to0.665.One of the main objectives of the report isto construct human development index atthe governorate level. The governorates’life expectancies at birth are estimated fromdetailed data on deaths and population byage. The educational attainment indices arecalculated on the basis of the maximum andminimum values of literacy and combinedfirst-, second-, and third-, level grossenrollment ratio given in Table (T.1).Table (1)Minimum and Maximum ValuesMinimum Values Naxunyn ValuesLife expectancy at birth ( years )Adult literacyCombined enrolment ratioGDP per capita (PPP$)25001008510010040000For income per capita in differentgovernorates, this report has benefited fromthe early information available from thelatest Household Income and ExpenditureSurvey (HIES) carried out by the CentralAgency for Public Mobilization andStatistics (CAPMAS). From the availabeinformation, it was possible to determine the116 -Egypt Human Development Report 2000/2001

Technical Notes and Sources of Datapattern of regional differences . In the lightof this pattern and the estimated real percapita (PPPs) from national incomeaccounts, the values of real per capita(PPPs) were estimated for individualgovernorates .The following example for Assyoutgovernorate may illustrate the abovementioned steps of calculating humandevelopment index . The estimates of thecomponents of HDI for Assyout are asfollows :- Life expectancy at birth = 65.4- Adult literacy rate % = 46.7- Combined enrollment ratio % = 62.9- Real GDP per capita (PPPs) = 2650.4Using these estimates as well as themaximum and minimum values givenabove, indices of the three components andhuman development index were derived inthe following manner:● life espectancy index:= (65.4-25) (85-25)= 0.673● education index:= 1/3 (.467x2+.629) = 0.521* GDP index:= (log 2650.4-log100)/(log40000-log 100)= 0.547Assyout human development index= 1/3(/673+.521+.547) = 0.580Demographic aspectsThe main sources of demographic data arepopulation censuses, vital registration andspecial national surveys. CAPMAS is theofficial national organization responsible forcarrying out and/or publishing the results ofsome of these sources (population censusesand vital registration) and a major partner orconsultant in carrying out the remainingsources (e.g. national fertility surveys). Thedemographic indicators, derivable from thesesources, reflect the demographic situationand its trends. Some of these indicators areused in other related fields (e.g. health). Inaddition, population figures (total or forspecific categories) are necessary forcomputing many indicators in various fields.The present report includes The followingdemographic indicators ;● Population counts 000’s● Population annual growth rates %● Rural population as % of total● Urban population as % of total● Annual growth rates of urban population%● Population of largest city as % of totalurban● Demographic dependency ratio %● Net lifetime internal migration as % oftotal population● Population density per Km2● Population doubling date at current rate.● Crude birth rate (per 1000 population)● Total fertility rate● Ratio of 1998 fertility to 1960%● Contraceptive prevalence %● Average age at first marriage● Crude death rate (per 1000 population)● Infant mortality rate (per 1000 live births)● Under five mortality rate (per 1000 livebirths)● Children dying before age 5● Maternal mortality rate (per 100000 livebirths)● Life expectancy at birth.The first ten indicators listed above werederived from census data and populationprojections. These indicators are given atthe national and regional levels, except netlifetime internal migration which isprovided for each governorate only andpopulation doubling date given at thenational level. The latter indicator iscalculated by the exponential function usingthe annual growth rate of 2.2 % for1996/2000 intercensal period.Mortality measures, crude birth rates andaverage age at first marriage rely on vitalregistration. It is to be noted, however, thatregistered infant deaths suffer fromunder-registration. Therefore, the re-gisteredand adjusted infant and under 5 mortalityrates are given for 1996 Moreover, thereported average at first marriage tends tobe higher than its actual value particularlyin rural areas where families report higherage to escape legal constraints. Lifeexpectancy at birth, at the national andregional levels, in 1976, 1998 and 2000were computed from detailed data on deathsand population by age and gender afterallowing for under-registration of infantdeaths. The maternal mortality rates areEgypt Human Development Report 2000/2001 - 117

Technical Notes and Sources of Datataken from the ministry of Health andPopulation, The treservation of the Child’slife 1998.Total fertility rate and contraceptive prevalenceare provided by Egypt Demographic andHealth Health Survey (EDHS) 1984,1995.1997 & 1998, carried out NationalPopulation Council.Labor force and unemploymentThe main sources of labor force data inEgypt are population censuses and theannual labor force sample surveys.However, the two soruces are not strictlycomparable. Population censuses providevarious distributions of the labor force (bygender, age, industry, occupation,employment status, etc.) for urban/ruralareas of each governorate. Information onunemployment is covered by the distributionof labor force by employment status and itscross-classifications. In general, however,the cross-classifications of labor force dataexclude the small numbers of foreigners. Onthe other hand, labor force sample surveysare confined to the civilian labor force, andthe data provided are not as detailed as inthe case of population censuses. Secondly,labor force concept is not the same in thetwo sources. The labor force samplesurveys, as population censuses, are carriedout and publised by CAPMAS.Labor force and unemployment data frompopulation censuses were used by thepresent report. The indicators covered are asfollows:● Labor force 15+as % of total population● % females in the labor force 15+.● Labor force 15+ in agriculture, industry,or services.● Wage earners, I.e. employees, (as % oflabor force 15+)● Professionals and technicians as % oflabor force 15+.● % females in legislative and managerialstaff.● % females in professional and technicalstaff.● Employees in government and publicsector as % of total labor force 15+ .● Unemployment rate (%): Total, females,adults 15-29.● Urban and rural unemployment rates15+%.● Unemployment rate by education 15+:(below secondary, secondary includingabove secondary but below university,and university).%● Absolute numbers of the unemployed.● Future labor force replacement ratio(%),i.e. population under 15 divided byone – third of population aged 15-64.The indicators are calculated for the nationaland regional levels by gender and urban/rural disagreggations.Education and literacyEducation and literacy indicators requirethree type of data:a) Standard educational data, e.g. students(enrolled or graduates), teachers, classes,etc. The primary sources of this type ofdata are the Ministry of Education andEl-Azhar Education Administration.These data are up-dated and publishedannually. They are given in dteailedgender and governorate disaggregationsfor pre- university levels. For the tertiarylevel, the data are published at thenational level by the Supreme Council ofUniversities.b) Census-based data, including school-agepopulation , and educational status of thepopulation 15 years of age and over, areavailable also in census years for alllevels of disaggregation.c) Economic data required for deriving indicatorsof public expenditure on education.The government budget, publishedannually by the Ministry of Finance is theprimary source for data about public expenditureon education. However, thedata are not disaggergated by governorate.d) Based on these types of data, the reportincludes the following indicators oneducation and literacy:● Apparent primary intake rate (%)● Primary enrollment ratio (gross)(%)118 -Egypt Human DevelopAment Report 2000/2001

Technical Notes and Sources of Data● Preparatory enrollment ratio(%)● Basic enrollment ratio (%)● Secondary enrollment ratio(%)● Combined basic and secondary enrollmentratio (%)● Tertiary enrollment ratio (%)● Combined first-, second-,and third-levelenrollment ratio(%)● Primary repeaters as % of primaryenrollment● Preparatory repeaters as % of preparatoryenrollment● Secondary repeaters as % of secondaryenrollment● Transition to preparatory as % ofenrollment in the final grade of primaryeducation in the preceding year.● Transition to secondary as % ofpreparatory completers● Primary pupil/teacher rate(i.e., averagenumber of pupils per teacher)● Preparatory pupil/teacher rate● Class density (average number of pupilsper calss ); primary and preparatory.● Secondary technical enrollment as % oftotal secondary● Tertiary science enrollment as % of totaltertiary● Public expenditure on education as % oftotal● Public expenditure on education as % ofGDP● Public expenditure on pre-universityeducation as % of all levels● Public espenditure on higher education as% of all levels● % of basic and secondary enrollment ingovernment, private and El-Azhar schools● % of unfit school buildings (Total, andimproper maintenance)● Adult literacy rate %● % of population 15+ with secondary orhigher education● Tertiary graduate ratio ( as % ofcorresponding age)● Science gradutes (as % of total gradutes)● Absolute numbers of illiterate adults 15+These indicators are given by gender for thenational and regional levels. Moreover,literacy indicators are also calculated forurban and rural areas. However,expenditure indicators and those of thetertiary education are given for thenational level only.The following notes pertain to the indicatorslisted above:a) Since reliable data on enrollment by ageare not available, specially for primaryeducation, gross enrollment ratios werecalculated for all levels.b) The population figures in the age groupscorresponding to different educationallevels were estimated by applyingSprague Multipliers to the census populationby age groups in 1960 and 1996 respectively.c) Some of the enrollment and transitionratios exceed 100% as a result of thenumbers of students above (or below) theage limits of the education level, thereturn of families from abroad and/orIntergovernorate migration.d) Since enrollment in higher education bygovernorate is not available , thecombined first-, second-, and third-levelgross enrollment ratios for variousgovernorates were derived afterdistributing total enrollment in highereducation according to the relative sharesof the governorates in pre-universityenrollment.e) The differences between sciences vs.humanities and theoretical vs. practicaldichotomies are mainly due to thevarying classification of technicalinstitutes (2yeas after secondaryeducation).Nutrition and food securityThe report includes the following nutritionand food security indicators:● Daily calorie supply per capita● Shares in daily calorie per capita(vegetable vs. animal products)● Children ever breastfed %● Underweight below age five %● Food production per capita index(1979-81=100)● Agricultural production as % of GDP● Cereal imports (1000 metric tons)● Food exports as % of food imports● Food imports as % of merchandiseexports● Food self sufficiency ratio %Egypt Human Development Report 2000/2001 - 119

Technical Notes and Sources of Data● Food import dependency ratio %The first two indicators are based on FoodBalance Sheet (FBS) published by Ministryof Agriculture and Land Reclamation. Thenext two indicators about children nutritionare taken from (EDHS 1997, 1998 & 2000)referred to earlier for the country and itsmajor regions. The remaining indicators aregiven at the national level only. Foodproduction per capita index is taken fromthe FAO “Quarterly Bulletin of Statistics”.Agricultural production as % of GDP wasderived from national income accountsprovided by the Ministry of Planning. Foodimports and exports as well as totalmerchandise exports are published annuallyby CAPMAS.The latest four indicators depend on thevalue of local food production, food importsas well as food and total merchandiseexports. The volumes of detailed groups ofcommodities of local food production wereavailable from the Ministry of Agriculture,while the detailed tabulations of volumes ofcommodities of the remaining componentsare published annually byCAPMASThe value of local food production wascomputed by applying FOB prices (i.e. FreeOn Boar) to the volumes of tradablecommodities and producer prices tonon-tradable commodities. The value offood imports were derived by applying CIFprices (i.e. Cost Insurance Freight) whereasFOB prices were applied for computing thevalue of food exports. The overall foodself-sufficiency ratio was derived by divingthe value of local food production by thevalue of total food consumption (i.e. localfood production – food exports + foodimports). On the other hand, food importdependency ratio is computed by dividingthe value of food imports by the value oftotal food consumption.Health and public utilitiesIn addition to health related indicatorscovered by other sections, this reportincludes the following indicators on healthand public utilities.● Population with access to health services%● Pregnant women with prenatal care %● Births attended by health personnel %● Children fully immunized %● Doctors per 10000 people● Nurses per 10000 people● Nurse / doctor ratio %● Beds per 10000 people ( Total andMinistry of Helath only)● Health units per 100000 people● Public expenditure on health as % of total● Public expenditure on health as % of GDP● Population or Households with access topiped water %● Population or Households with access tosanitation %.Health services are constitutionally renderedfree of charge to everyone. However, thefirst indicator is estimated to be 99% in ruralareas compared to complete accessibility inurban areas.The next three indicators are provided forthe country and its major regions by EgyptDemographic and Health Survey (EDHS),1997 and 1998. It may be noted that healthpersonnel attending birth include doctors,nurses, trained midwives. The traditionalbirth attendant (dayas), however, play animportant role, especially in rural areas.The data on total health personnel aredeficient as long as there is no efficientsystem to update their number taking intoaccount some factors such as migration,retirement, on-leave periods, and duplicationin the statistics of personnel in provate andgovernment institutions, The relevantindicators in this report for the country andby governorate include only the healthpersonnel in the Ministry of Health (MOH).Consequently, they may not accuratelyreflect regional disparities in this respect.Bed/population indicators are given for totalbeds and those of the MOH at the nationaland regional levels. The indicators ofhealth-units/population include all healthcare units. The data required for theseindicators by governorate were provided bythe MOH.Indicators of public expenditure on healthdepend on data from Government Budgetpublished annally by the Ministry of120 -Egypt Human DevelopAment Report 2000/2001

Technical Notes and Sources of DataFinance and GDP figure from NationalIncome Accounts provided by the Ministryof Planning.Data on accessibility to piped water and sanitationare available from censuses. The indicators,given at the national and regionallevels, on accessibility safe water in 1976and 1996 are based on census data , wheteasthose of 1999 are based on early informationavailable from the latest (EGHS). However,due to differences in the classificationsused, the trend of accessibility to safe wateris confined to piped water.On the other hand, reliable data on accessibilityto sanitation is less satisfactory becauseof the varying concepts and classificationsused in the censuses and surveys. Theindicators given for the country and governoratesin 1996 are taken from 1996 census,where accessibility to sanitation includesonly the households connected to public network.On the other hand , the indicators for1999 include the following categories: modernflush toilet, trditional w/tank flush andtraditional w/bucket flush. These categoriesare avaiable for 33.4%, 3.6% and 57.5% ofhousehlods at the national level and 7.8%,3.7% and 78.2% of households in rural areas.G. Natural resources and energy consumptionThe. present report includes the followingindicators on natural resources and energyconsumption:● Land area (thousand Km2)● Cultivated area: Thousand feddans- As % of land area- Persons per feddan● Irrigated land as % of arable land area● Crop area : Thousand feddans● Crop/cultivated land ratio● Total water resources (Billion m3)● Water consumption as % of total waterresources● Internal renewable water as % of totalwater resources● Per capita internal renewable water(m3/year)● % of water withdrawals by:- Agriculture- Municipal- Industry- Navigation● Total fish catch (thousand tons)● % of fish catch from:- Fresh water (Nile & lake Nasser)- Marine (Mediterranean & Red Sea)- Other lakes- A qua culture* Electricity consumption : Total (billionsof kilowatt-hours)● Electricity consumption per capita(kilowatt –hours)● Total commercial energy consumption(million ton oil equivalent)● Commercial energy consumption percapita (kg oil equivalent)● % of commercial energy consumptionfrom:- Oil products- Gas- Electricity● Commercial enery consumed in kg of oilequivalent per LE 1000 of GDP● Net commercial energy imports (as % ofenergy consumed● Final energy consumption from :- Oil prooducts- Gas- Electricity- Coal● % of final energy consumed by:- Transportation- Agriculture- Households & commercial- OtherThe total land area by governorate isavailable in several CAPMAS’ publicationamong which is the “Annual StatisticalYearbook, 1997”. The data on cultivatedand crop area were taken from thepublications of the Ministry of Agriculture(MOA).The indicators on water resources,withdrawals and consumption were derivedfrom unpublished data from the Ministry ofPubic Works and Water resources (Centreof Water Resources).Fish catch indicators were calculated fromthe data available in CAPMAS, StatisticalYearbook 1998.The indicators on energy consumption for1997/98 were computed from data in :“Energy in Egypt 1997/98” published byAgency of Energy Planning . The mainEgypt Human Development Report 2000/2001 - 121

Technical Notes and Sources of Datadifference between commercial and finalenergy consumption is the exclusion in thelater of the amounts of energy source ( orsources) consumed as input in theproduction of another source (e.g. the use ofnatiural gas or oil products in the productionof electricity). The commercial energyconsumed in kg oil equivalent per LE 1000of GDP in 1997/98 is based on GDP atmarket prices.H. CommunicationCommunication profile is represented by anumber of indicators. The major sources ofdata required for deriving these indicatorsare population censuses and annual reportson related areas. CAPMAS publishes thesereports in cooperation with the concernedministries, organizations, etc.The communication indicators presented inthis report are:● Households with television %● Households with radio %● Daily newspaper circulation per 1000people● Average number of people served by onepost office.● Annual cinema attendance per 1000people.● Annual theater attendance per 1000people● Annual museum attendance per 1000people.● Library book per 1000 people● Passenger cars per 1000 people.The first two indicators, are taken from thelast EDHS. The remaining indicators werederived from the latest abailable CAPMAS’annual reports for the related areas ofcommunication.All indicator are given at the national andregional levels with the exception of thedaily newspaper circulation which is givenat the national level only. The latter wascalculated by dividing the annual circulationof daily newspapers by (365) to get dailycirculation and relating the daily circulationto the population.1. Economic AspectsEconomic indicators included in this reportare as follows:● GDP per capita (LE)● GDP per capita (ppp$)● Income share of lowest 40% of people %● Ratio of highest 20% to lowest 20%● Gini coefficient● Total poor persons as % of the population● Ultra poor persons as % of the population● Total and ultra poor persons (000’s)● Wages of poor households as % of theirincome● Wages of poor households as % of totalwages● % of total expenditure spent on socialsecurity● % of total expenditure spent on defense,(in addition to % of public expenditurespent on education and health referred toearlier)● Public expenditure on social security as %of GDP● Public espenditure on defense, as % ofGDP. (in addition to public expenditureon eduication or health as % of GDPreferred to earlier)● Total GDP (LE billions)● Agricultural product as % of GDP● Industrial product as % of GDP● Services as % of GDP● Private consumption as % of GDP● Government expenditure as % of GDP● Gross domestic investment as % of GDP● Gross domestic saving as % of GDP● Tax revenue as % of GDP● Exports as % of GDP● Imports as % of GDP● Total civil external debt as % of GNP● Civit external debt service ratio ( as % ofexports)● Workers’ remittances from abroad (LEmillions)● Export/Import ratio %● Trade dependency (exports plus importsas % of GDP)● Current account balance (LE millions)● Gross international reserves includinggold : ( Us $ million Months of importcoverage● GDP at constant (1991.92) factor cost (LEbillions)● Annual growth rate of real GDP %● Annual growth rate of per capital GDP %● Consumer price index (1986/87=100)● Annual growth rate of consumer priceindex %● Wholesale price index (1986/87=100)● Annual growth rate of wholesale priceindex122 -Egypt Human DevelopAment Report 2000/2001

Technical Notes and Sources of Data● Annual growth rate of exports %● Annual growth rate of tax revenue %● Direct taxes as % of total taxes● Overall budget surplus (deficit) as % ofGDP at market prices● GDP per capita (LE) and GDP per capita(PPP$) were derived for the country andat the governorate level using nationalincome accounts, provided directly by theMinistry of Planning (MOP), and theresults of CAPMAS’ Household Incomeand Expenditure Survey "(HIES) in themanner described in Section A above.The results of HIES were used in derivingthe next eight indicators. It is noteworthy,however, that a poor person (or household)is defined in the present report as the onewhose expenditure is less than the specifiedpoverty line urban and rural areas. Thefollowing procedure was adopted forestimating poverty lines.(i) The composition required is set to accordwith the observed diet pattern of the poor toreflect their condumption habits and tastes.(ii) The actual diet per adult equivalent inthe reference households was augmented toyield adequate energy intake, i.e.2200caloires daily.(iii) The cost of the selected diet perhoushold was estimated using the actualcurrent prices. The cost of such diet wasestimated as LE 3264 and 3123 for urbanand rural areas respectively. This is consideredas food-based poverty line . Those who arebelow this line are referred to as ultra poor.(iv) Non-food expenditure was estimated forhouseholds who are capable of reachingtheir food requirements, but choose not to soin order to get their essential non-foodneeds. This is the non-food expenditure ofhouseholds whose total expenditure is justequal to the food- based poverty line.Non-foods is added to the food poverty lineto yield poverty line used in this report (i.e,L.E. 4438 and3963 in urban and rural areasrespectively).(v) Indicators of public expenditure onvarious sectors were derived from thegovernment budget published annually bythe Ministry of Finance (MOF). The datarequired for deriving the next twelveindicators on national income accounts wereprovided directly by the Ministry ofPlanning (MOP). These data are regularlyincluded in the successive follow-up reports.Nevertheless, the following observations arepertinent to this type of data;a) The available estimates of sectoral valueadded were always given at the constantprice of the Plan base-year. However theGDP expenditures (namely consumptionand investment) are estimated at currentprices. A resource-use balance is thushard to compile annually.b) The national income accounts have beenfrequently revised by the MOP. Anexplanation is rarely found for revisionsof the estimates. It is understandable thatthe estimates for a late year can be onlypreliminary. But persistent revisions ofthe data not only reduce its credibility,but also complicate the time seriesnecessary for trend analysis.The eight indicators on “resource flowimbalances” were taken or derived from dataavailable in the “Economic Bulletin”published by the NationalBank of Egypt (NBE) and the “AnnualReport” of the Central Bank of Egypt(CBE), with the exception of tradedependency (i.e. exports plus imports as %GDP) which was calculated from dataprovided directly by the Ministry of Planning.The indicators of GDP (growth rates and percapita growth rates), as well as growth ratesof exports are calculated from data provideddirectly by the Ministry of Planning. Finally,the indicators of taxes and budget surplus(deficit) were calculated from data provideddirectly by the Ministry of Finance.Egypt Human Development Report 2000/2001 - 123

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Governorate IndicatorsG.1 Human development indexLifeexpectancyat birthAdultliteracyrate(15+)%Combined1st,2nd & 3rdlevelgrossenrolmentratio (%)RealGDPpercapita(ppp$)Lifeexpectancy Education GDPHumanDevelopmentIndexRankof1998 1998 1998/99 1998/99 Index Index Index 1998 Gov.Cairo 67.5 75.1 70.1 8092.1 0.708 0.734 0.733 0.725 3Alexandria 67.7 74.4 72.8 6420.0 0.712 0.739 0.695 0.715 4Port-Said 68.3 77.8 71.7 9629.0 0.722 0.758 0.762 0.747 1Suez 68.0 74.1 76.6 7287.7 0.717 0.749 0.716 0.727 2Urban Govs 67.6 75.0 71.2 7857.2 0.710 0.737 0.728 0.725 ..Damietta 68.4 64.1 73.6 4974.9 0.723 0.673 0.652 0.683 6Dakahlia 67.5 59.8 72.1 3480.8 0.708 0.639 0.592 0.646 12Sharkia 67.0 54.4 71.0 3328.2 0.700 0.599 0.585 0.628 13Kalyoubia 68.3 61.8 65.5 4291.2 0.722 0.630 0.627 0.660 9Kafr-El Sheikh 66.4 48.0 71.2 4009.4 0.690 0.557 0.616 0.621 14Gharbia 68.0 61.8 72.9 4229.9 0.717 0.655 0.625 0.666 8Menoufia 68.6 59.8 70.6 3352.7 0.727 0.634 0.586 0.649 11Behera 67.3 48.3 67.4 3719.0 0.705 0.547 0.604 0.619 15Ismailia 66.7 66.0 73.4 4766.7 0.695 0.685 0.645 0.675 7Lower Egypt 67.6 57.0 70.3 3973.6 0.710 0.614 0.615 0.646 ..Urban .. 70.7 .. .. .. .. .. .. ..Rural .. 51.5 .. .. .. .. .. .. ..Giza 66.2 63.7 68.6 4897.3 0.687 0.720 0.649 0.685 5Beni-Suef 65.4 43.0 60.7 2651.1 0.673 0.489 0.547 0.570 20Fayoum 67.4 39.6 59.8 2875.3 0.707 0.463 0.561 0.577 19Menia 65.3 41.0 62.5 3314.9 0.672 0.482 0.584 0.579 18Assyout 65.2 43.4 62.7 2394.6 0.670 0.498 0.530 0.566 21Suhag 66.5 42.1 66.5 2608.9 0.692 0.502 0.544 0.579 17Quena 65.8 44.2 73.1 3128.0 0.680 0.538 0.575 0.598 16Aswan 66.0 63.1 75.1 3804.7 0.683 0.671 0.607 0.654 10Upper Egypt 66.0 47.8 65.9 3191.1 0.683 0.531 0.578 0.597 ..Urban .. 68.1 .. .. .. .. .. .. ..Rural .. 38.3 .. .. .. .. .. .. ..Red Sea .. 74.8 76.4 .. .. 0.753 .. .. ..New Valley .. 72.3 78.5 .. .. 0.744 .. .. ..Matrouh .. 50.6 63.4 .. .. 0.549 .. .. ..North Sinai .. 61.3 68.3 .. .. 0.636 .. .. ..South Sinai .. 69.7 65.9 .. .. 0.684 .. .. ..Frontier Govs .. 63.8 70.1 5142.9 .. 0.659 0.658 .. ..Urban .. 74.3 .. .. .. .. .. .. ..Rural .. 48.1 .. .. .. .. .. .. ..Egypt 66. 9 57.7 68.8 4407.3 0.698 0.614 0.632 0.648 ..Urban .. 72.1 .. .. .. .. .. .. ..Rural .. 45.9 .. .. .. .. .. .. ..Egypt Human Development Report 1998/99 - 145

Governorate IndicatorsG.2 Profile of human developmentLife Households with Combined GDPexpectancy access to Literacy basic and per Households withat birth Piped water Sanitation rate(15+) secondary capita Electricity Radio Television(Years) (%) (%) (%) enrollment % (LE ) % % %1998 1999 1999 1998 1998/99 1998/99 1999 1999 1999Cairo 67.5 99.9 99.9 75.1 86.7 8854.3 99.9 90.9 95.9Alexandria 67.7 99.7 99.8 74.4 88.1 7024.7 99.4 87.9 93.7Port-Said 68.3 96.5 100.0 77.8 86.7 10536.0 99.8 93.1 97.6Suez 68.0 99.7 100.0 74.1 89.9 7974.2 99.5 97.5 96.7Urban Govs 67.6 99.7 99.8 75.0 87.2 8597.3 99.7 90.3 95.3Damietta 68.4 99.2 99.4 64.1 88.0 5443.5 98.6 85.3 90.7Dakahlia 67.5 85.3 99.3 59.8 84.9 3808.7 99.6 90.7 95.5Sharkia 67.0 61.3 98.5 54.4 82.5 3641.7 97.2 75.4 86.2Kalyoubia 68.3 94.1 98.7 61.8 77.3 4695.4 99.3 95.2 95.3Kafr El-Sheikh 66.4 97.1 95.3 48.0 82.9 4387.1 98.8 78.2 85.6Gharbia 68.0 95.0 97.4 61.8 85.9 4628.3 99.3 87.4 92.6Menoufia 68.6 75.0 97.8 59.8 83.2 3668.5 98.6 88.6 88.8Behera 67.3 79.7 97.2 48.3 79.0 4069.3 98.1 71.6 86.2Ismailia 66.7 92.5 100.0 66.0 87.0 5215.7 99.2 91.3 94.9Lower Egypt: 67.6 83.8 98.1 57.0 82.5 4347.9 98.7 83.9 90.4Urban .. .. .. 70.7 .. .. .. .. ..Rural .. .. .. 51.5 .. .. .. .. ..Giza 66.2 94.0 98.9 63.7 80.4 5358.5 99.2 92.3 93.1Beni-Suef 65.4 69.0 83.2 43.0 68.3 2900.9 91.0 50.8 78.8Fayoum 67.4 99.4 81.4 39.6 69.1 3146.1 92.4 73.2 76.0Menia 65.3 69.8 89.3 41.0 71.0 3627.1 93.0 57.8 78.6Assyout 65.2 83.7 73.0 43.4 72.2 2620.2 92.8 66.6 78.4Suhag 66.5 74.8 75.7 42.1 75.3 2854.6 94.5 66.2 83.9Quena 65.8 80.8 86.2 44.2 83.0 3422.6 97.1 79.6 84.3Aswan 66.0 99.0 88.3 63.1 88.2 4163.1 98.1 68.6 90.7Upper Egypt: 66.0 83.9 86.3 47.8 75.7 3491.7 95.3 71.9 83.6Urban .. .. .. 68.1 .. .. 99.0 .. ..Rural .. .. .. 38.3 .. .. 93.3 .. ..Red Sea .. 98.8 99.5 74.8 93.0 .. 99.4 81.5 90.8New Valley .. 97.9 98.4 72.3 91.8 .. 99.0 96.9 95.3Matrouh .. 63.1 77.9 50.6 74.8 .. 70.5 71.9 61.3North Sinai .. 78.6 91.1 61.3 80.4 .. 93.7 80.4 83.5South Sinai .. 78.8 88.5 69.7 78.8 .. 95.6 82.3 84.1Frontier Govs .. 81.6 90.2 63.8 83.0 5627.3 89.7 81.4 81.2Urban .. .. .. 74.3 .. .. .. .. ..Rural .. .. .. 48.1 .. .. .. .. ..Egypt: 66.9 87.4 94.5 57.7 80.7 4822.4 93.7 81.9 89.4Urban .. .. .. 72.1 .. .. .. 89.3 94.5Rural .. .. .. 45.9 .. .. .. 74.6 84.3146 -Egypt Human Development Report 1998/99

Governorate IndicatorsG.3 Profile of human deprivationThousandsWithout Without Children Unemployedaccess access Children not in basic Poor personss Malnourished personsto piped to dying before or secondary Illiterates (% of total) children 15 +water sanitation age 5 schools (15+) Total Ultra poor below age 5 Total Female1996 1996 1998 1998/99 1996 1995/96 1995/96 1997 1996 1996Cairo 207.0 567.2 5.2 249.1 1270.1 749.4 201.2 .. 155.8 47.3Alexandria 6.0 447.6 2.4 111.9 634.2 1025.5 373.2 .. 76.4 24.3Port-Said 0.1 48.8 0.3 17.8 79.1 20.2 11.4 .. 15.8 6.8Suez 0.3 41.6 0.4 12.9 75.2 11.4 5.7 .. 11.6 4.3Urban Govs 213.4 1105.1 8.3 391.7 2058.6 1831.8 591.5 109.5 259.6 82.7Damietta 9.0 443.9 0.7 33.7 225.3 6.3 0.0 .. 18.1 8.3Dakahlia 442.2 1631.0 3.6 196.8 1138.8 475.4 75.1 .. 150.6 64.5Sharkia 1058.9 2606.8 4.5 241.1 1249.0 579.9 79.3 .. 117.9 46.6Kalyoubia 924.3 1950.8 2.6 244.3 833.1 957.7 297.8 .. 70.9 23.3Kafr El-Sheikh 66.1 1642.3 1.6 121.5 744.8 220.0 56.6 .. 82.5 35.3Gharbia 599.2 2410.2 2.5 146.1 883.8 321.9 54.8 .. 135.3 62.0Menoufia 924.7 2366.2 2.4 150.5 735.1 613.8 220.7 .. 75.1 31.5Behera 853.6 3116.7 2.5 278.8 1322.0 1136.0 291.0 .. 108.2 38.6Ismailia 134.2 411.0 0.8 29.7 162.7 72.2 29.8 .. 16.0 5.4Lower Egypt: 5012.2 16578.9 21.2 1442.5 7294.6 4385.3 1105.1 262.3 774.7 315.4Urban 334.4 1890.9 .. .. 1468.3 1527.5 472.7 53.1 225.3 93.6Rural 4677.8 14688.0 .. .. 5826.3 2857.8 632.4 209.2 549.4 221.8Giza 607.7 2065.2 5.5 299.6 1149.7 613.9 133.0 .. 71.6 13.2Beni-Suef 472.4 1598.7 4.4 197.3 624.7 600.4 189.0 .. 40.9 15.4Fayoum 31.3 1665.9 3.0 224.5 702.3 791.7 273.0 .. 44.0 13.8Menia 1511.7 3067.4 7.9 324.2 1160.6 1142.7 399.0 .. 79.5 21.9Assyout 793.0 2076.5 7.2 261.9 941.7 1446.1 698.7 .. 73.1 23.6Suhag 1253.1 2820.2 6.2 256.7 1078.4 1153.6 360.1 .. 72.9 18.1Quena 922.2 2060.0 5.7 156.4 945.8 1065.5 420.1 .. 68.1 13.6Aswan 42.8 762.6 1.5 36.8 235.0 306.5 100.5 .. 39.0 12.0Upper Egypt: 5634.2 16116.5 41.4 1757.4 6838.2 7310.0 2573.4 427.0 489.1 131.7Urban 405.0 2955.5 .. .. 1438.2 2377.6 883.3 64.7 198.3 69.0Rural 5229.2 13161.0 .. .. 5400.0 4932.4 1690.1 362.3 290.8 62.6Red Sea 11.0 118.7 0.1 2.9 26.0 .. .. .. 2.8 0.9New Valley 4.0 72.7 0.1 3.6 26.6 .. .. .. 5.3 2.4Matrouh 63.6 204.6 0.3 17.3 64.5 .. .. .. 1.5 0.2North Sinai 51.2 238.9 0.4 15.7 58.8 .. .. .. 4.6 1.7South Sinai 16.9 28.0 0.1 2.9 10.9 .. .. .. 0.4 0.1Frontier Govs 147.1 662.9 1.0 42.4 186.8 110.9 24.9 .. 14.6 5.3Urban 0.3 360.9 .. .. 81.1 83.8 22.5 .. 10.0 3.7Rural 146.9 302.0 .. .. 105.7 27.1 2.4 .. 4.6 1.6Egypt: 11006. 34463.4 71.0 3634.0 16378.2 13638. 4294.9 798.8 1538.0 535.190Urban 953.0 6312.5 .. .. 5046.2 5820.7 1970.0 227.3 693.2 249.1Rural 10053.928151.0 .. .. 11332.0 7817.3 2324.9 571.5 844.8 286.0Egypt Human Development Report 1998/99 - 147

Governorate IndicatorsG.4 Trends in human developmentLife Infant mortality Population with Literacy Combined basicexpectancy at (per 1000 live access to piped water rate (15+) and secondarybirth (Years) births) (%) (%) enrollment1976 1998 1961 1998 1976 1996 1960 1998 1960* 1998/99Cairo 57.0 67.5 151 25.7 91.1 96.9 48.9 75.1 58.9 86.7Alexandria 59.1 67.7 139 25.1 94.9 99.8 45.3 74.4 57.6 88.1Port-Said 59.2 68.3 108 22.8 90.5 100.0 42.2 77.8 63.4 86.7Suez 52.6 68.0 157 26.3 92.9 99.9 38.3 74.1 68.0 89.9Urban Govs 57.6 67.6 147 25.4 92.3 98.0 46.9 75.0 59.1 87.2Damietta 57.5 68.4 82 17.3 89.5 99.0 31.3 64.1 45.7 88.0Dakahlia 56.9 67.5 71 20.4 77.4 89.5 27.9 59.8 42.9 84.9Sharkia 54.6 67.0 72 24.5 72.8 75.2 21.5 54.4 36.3 82.5Kalyoubia 53.9 68.3 137 23.0 62.3 71.9 24.8 61.8 43.4 77.3Kafr El-Sheikh 56.6 66.4 60 18.4 73.2 97.0 15.3 48.0 23.2 82.9Gharbia 55.5 68.0 107 21.3 76.0 82.4 25.3 61.8 45.2 85.9Menoufia 54.8 68.6 130 23.6 71.2 66.4 24.2 59.8 46.2 83.2Behera 56.0 67.3 77 16.6 47.8 78.6 18.8 48.3 28.1 79.0Ismailia 57.7 66.7 99 22.7 56.3 81.2 29.2 66.0 52.7 87.0Lower Egypt: 55.6 67.6 93 21.1 69.2 80.5 23.1 57.0 38.9 82.5Urban .. .. .. .. 80.8 95.3 .. 70.7 .. ..Rural .. .. .. .. 65.0 75.0 .. 51.5 .. ..Giza 55.2 66.2 126 30.0 61.1 87.2 27.9 63.7 45.8 80.4Beni-Suef 50.1 65.4 106 42.8 67.7 74.6 18.6 43.0 43.6 68.3Fayoum 49.3 67.4 151 30.9 83.0 98.4 16.3 39.6 40.9 69.1Menia 52.1 65.3 108 42.7 58.9 54.2 18.1 41.0 35.2 71.0Assyout 53.2 65.2 107 49.0 58.4 71.4 17.4 43.4 37.8 72.2Suhag 54.7 66.5 86 34.3 56.2 59.7 14.2 42.1 27.0 75.3Quena 53.6 65.8 80 39.1 45.6 67.0 13.5 44.2 28.7 83.0Aswan 51.4 66.0 109 49.8 67.0 95.6 20.0 63.1 45.8 88.2Upper Egypt: 53.0 66.0 102 38.6 60.4 73.9 17.8 47.8 36.5 75.7Urban .. .. .. .. 72.4 93.8 .. 68.1 .. ..Rural .. .. .. .. 55.2 65.1 .. 38.3 .. ..Red Sea .. .. 114 22.5 77.5 91.4 37.7 74.8 .. 93.0New Valley .. .. 181 27.0 42.2 97.1 20.3 72.3 .. 91.8Matrouh .. .. 98 22.5 42.0 69.7 12.3 50.6 .. 74.8North Sinai .. .. 94 25.7 .. 79.6 39.9 61.3 .. 80.4South Sinai .. .. 17.1 .. 61.6 69.7 .. 78.8Frontier Govs .. .. 124 23.9 47.8 81.0 22.5 63.8 .. 83.0Urban .. .. .. .. 63.6 99.9 .. 74.3 .. ..Rural .. .. .. .. 28.7 54.1 .. 48.1 .. ..Egypt: 55.0 66.9 108 29.2 70.9 81.4 25.8 57.7 42.0 80.7Urban .. .. .. .. 84.2 96.2 .. 72.1 .. ..Rural .. .. .. .. 60.6 70.4 .. 45.9 .. ..* Excluding El-Azhar education.148 -Egypt Human Development Report 1998/99

G.5 Human capital formationGovernorate Indicators% of population 15+ Professional & tech-Literacy rate Basic & secondary with secondary or nical staff (as % of(15+) enrolment ratio higher education labor force ( 15+)Total Female Total Female Total Female Total Female1998 1998 1998/99 1998/99 1996 1996 1996 1996Cairo 75.1 67.8 86.7 88.0 43.4 38.8 31.6 52.2Alexandria 74.4 66.9 88.1 88.1 36.5 33.2 25.9 48.5Port-Said 77.8 71.7 86.7 87.7 45.4 43.0 33.0 49.9Suez 74.1 64.3 89.9 91.4 39.0 33.9 27.5 52.0Urban Govs 75.0 67.6 87.2 88.2 41.3 37.1 29.8 51.0Damietta 64.1 59.5 88.0 90.8 27.6 27.8 18.6 49.5Dakahlia 59.8 48.7 84.9 85.7 29.7 25.5 19.5 34.2Sharkia 54.4 41.3 82.5 80.6 26.7 21.1 19.8 40.6Kalyoubia 61.8 48.8 77.3 75.8 29.4 24.4 20.5 38.4Kafr El-Sheikh 48.0 35.5 82.9 79.9 24.3 18.8 15.3 27.4Gharbia 61.8 48.9 85.9 85.1 31.8 26.5 21.7 32.9Menoufia 59.8 45.6 83.2 81.3 29.9 24.1 21.0 31.7Behera 48.3 34.5 79.0 72.8 22.2 16.1 14.9 35.1Ismailia 66.0 55.5 87.0 85.6 33.4 28.6 23.3 45.4Lower Egypt: 57.0 44.5 82.5 80.6 27.9 22.8 19.2 35.4Urban 70.7 62.2 .. .. 39.0 35.0 28.6 47.3Rural 51.5 37.3 .. .. 23.4 17.8 15.2 27.6Giza 63.7 52.7 80.4 78.2 32.7 26.9 24.4 56.5Beni-Suef 43.0 27.5 68.3 58.3 21.6 14.3 15.5 24.3Fayoum 39.6 26.9 69.1 57.8 20.1 14.0 14.3 41.6Menia 41.0 26.2 71.0 58.5 20.8 13.1 15.0 30.1Assyout 43.4 29.9 72.2 63.3 22.9 15.3 17.5 39.9Suhag 42.1 26.5 75.3 66.5 19.3 11.2 16.5 41.6Quena 44.2 29.2 83.0 75.5 19.8 10.4 18.1 43.4Aswan 63.1 50.5 88.2 85.2 30.5 21.2 24.4 42.1Upper Egypt: 47.8 34.0 75.7 67.8 24.0 16.5 18.5 41.3Urban 68.1 58.6 .. .. 39.8 33.7 30.4 51.1Rural 38.3 22.6 .. .. 16.0 8.0 12.0 26.7Red Sea 74.8 61.7 93.0 94.0 41.2 28.6 20.2 30.3New Valley 72.3 61.7 91.8 89.4 38.7 31.1 33.5 47.8Matrouh 50.6 33.8 74.8 61.9 17.4 11.3 13.3 54.0North Sinai 61.3 46.9 80.4 74.0 30.5 22.7 24.1 37.0South Sinai 69.7 45.0 78.8 76.4 39.9 23.8 21.1 29.6Frontier Govs 63.8 48.7 83.0 77.2 31.4 22.3 22.2 39.1Urban 74.3 61.0 .. .. 39.0 30.3 28.4 46.9Rural 48.1 31.3 .. .. 20.0 11.1 12.9 23.2Egypt: 57.7 45.7 80.7 77.0 29.3 23.5 21.2 41.0Urban 72.1 63.8 .. .. 40.2 35.6 29.6 49.8Rural 45.9 31.1 .. .. 20.3 13.6 13.9 27.3Egypt Human Development Report 1998/99 - 149

Governorate IndicatorsG.6 Status of womenMaternal Females ProfessimortalityAverage 15+ with Legis- onal & WomenLife rate (per age at secondary lative & techni- in laborexpectancy 100000 first Enrollment ratios (gross) or higher managerial cal staff forceat birth live marriage Basic education education staff(% (% (as % of(years) births) (years) Total Primary Preparatory Secondary % females) females) total)1998 1998 1998 1998/99 1998/99 1998/99 1998/99 1996 1996 1996 1996Cairo 68.9 .. 25.2 103.5 104.9 101.5 59.5 38.8 13.5 32.5 19.7Alexandria 69.0 .. 26.3 107.4 111.7 100.5 49.6 33.2 11.8 33.8 18.1Port-Said 68.8 .. 24.1 99.3 97.3 102.3 64.5 43.0 10.6 37.4 24.8Suez 69.0 .. 23.2 103.3 99.7 108.8 66.0 33.9 10.7 35.4 18.7Urban Govs 68.9 122 25.3 104.5 106.5 101.5 57.1 37.1 12.8 33.2 19.4Damietta 69.5 .. 22.4 105.0 102.2 109.2 61.9 27.8 11.3 40.9 15.3Dakahlia 69.0 .. 22.5 98.6 99.1 97.4 59.2 25.5 12.8 32.0 18.3Sharkia 68.6 .. 22.1 93.7 96.9 88.5 52.5 21.1 11.0 27.5 13.4Kalyoubia 69.2 .. 22.3 91.3 96.1 83.9 43.9 24.4 11.3 28.1 15.0Kafr El-Sheikh 68.2 .. 22.8 93.2 95.1 90.1 52.4 18.8 10.8 28.9 16.1Gharbia 69.6 .. 23.2 98.7 101.3 94.6 57.3 26.5 15.7 31.4 20.7Menoufia 70.0 .. 22.5 96.2 99.3 91.4 51.2 24.1 16.6 28.1 22.8Behera 68.5 .. 22.8 88.7 93.3 81.1 39.9 16.1 9.3 27.1 11.5Ismailia 67.9 .. 23.6 101.3 104.1 97.0 53.9 28.6 15.9 33.8 17.4Lower Egypt: 69.0 91 22.6 94.8 97.6 90.3 51.3 22.8 12.7 29.8 16.1Urban .. .. .. .. .. .. .. 35.0 13.8 35.8 21.6Rural .. .. .. .. .. .. .. 17.8 11.0 25.1 13.8Giza 67.1 .. 22.9 94.2 99.4 85.6 43.5 26.9 10.7 28.8 12.4Beni-Suef 66.4 .. 21.0 68.1 73.4 59.0 34.3 14.3 16.2 25.3 16.2Fayoum 68.3 .. 21.1 67.7 74.0 56.6 33.5 14.0 13.7 28.9 9.9Menia 66.1 .. 21.1 68.6 73.3 60.2 33.6 13.1 12.3 24.1 12.0Assyout 65.9 .. 22.0 75.6 79.9 68.0 34.8 15.3 10.9 26.7 11.7Suhag 67.1 .. 21.8 80.5 83.6 74.3 32.4 11.2 7.2 22.6 8.9Quena 66.0 .. 21.9 89.2 90.1 87.6 43.0 10.4 5.8 19.6 8.2Aswan 67.1 .. 23.4 100.4 98.3 104.0 52.6 21.2 9.1 26.3 15.2Upper Egypt: 66.7 92 21.9 80.5 84.3 73.8 38.0 16.5 10.5 25.8 11.5Urban .. .. .. .. .. .. .. 33.7 12.9 33.0 19.6Rural .. .. .. .. .. .. .. 8.0 6.0 15.8 7.1Red Sea .. .. 24.9 105.1 106.0 103.5 66.6 28.6 6.3 23.2 15.5New Valley .. .. 23.0 99.2 100.6 97.4 68.9 31.1 11.0 31.8 22.3Matrouh .. .. 28.6 79.2 85.3 67.2 22.7 11.3 2.9 25.0 6.2North Sinai .. .. 24.9 88.4 91.9 81.7 41.2 22.7 10.4 28.4 18.5South Sinai .. .. 27.7 88.3 88.8 87.3 39.6 23.8 6.2 17.0 12.1Frontier Govs .. .. 25.5 90.8 93.8 85.4 45.7 22.3 6.7 26.7 15.2Urban .. .. .. .. .. .. .. 30.3 7.6 28.0 16.9Rural .. .. .. .. .. .. .. 11.1 3.6 22.6 12.5Egypt: 68.0 96 22.8 90.8 93.7 85.9 47.5 23.5 12.0 29.6 15.3Urban .. .. .. .. .. .. .. 35.6 13.0 33.8 20.1Rural .. .. .. .. .. .. .. 13.6 8.9 21.9 11.2150 -Egypt Human Development Report 1998/99

Governorate IndicatorsG.7 Female-male gapsFemales as percentage of malesLifeexpectancy PopulationLiteracy rate15+Primary enrollment PreparatoryenrollmentSecondaryenrollmentLaborforce(15+)1998 1998 1960 1998 1960 * 1998/99 1998/99 1998/99 1996Cairo 104.2 95.1 50 82.6 80.5 94.3 97.7 105.5 24.6Alexandria 103.9 95.6 48 82.0 75.7 90.1 95.8 107.0 22.1Port-Said 101.5 94.8 50 85.8 83.7 92.3 98.4 98.6 33.0Suez 102.8 95.0 40 77.2 69.1 92.6 94.7 110.6 23.1Urban Govs 103.9 95.2 48 82.4 78.7 92.7 97.0 105.7 24.1Damietta 103.1 95.5 44 86.9 79.6 88.0 108.3 124.6 18.1Dakahlia 104.4 96.2 28 69.0 65.8 91.1 98.4 100.6 22.4Sharkia 104.9 94.5 21 61.7 55.9 88.9 89.7 87.8 15.5Kalyoubia 102.5 93.6 19 66.1 59.8 89.3 92.4 93.6 17.6Kafr El-Sheikh 105.4 98.9 20 58.6 56.9 88.6 88.6 87.1 19.1Gharbia 104.8 97.9 24 65.6 61.7 91.6 94.2 97.7 26.2Menoufia 104.0 94.3 20 62.3 54.4 88.9 89.4 92.6 22.8Behera 103.6 96.2 21 55.9 52.8 81.3 80.3 80.6 13.0Ismailia 103.7 96.0 33 72.9 60.5 88.7 94.0 94.2 21.0Lower Egypt: 104.2 95.8 23 64.4 59.7 88.3 91.1 92.7 19.2Urban .. .. .. 78.8 .. .. .. .. 27.6Rural .. .. .. 57.3 .. .. .. .. 16.1Giza 102.8 93.3 31 71.3 58.1 86.9 87.1 88.8 14.2Beni-Suef 102.9 96.3 20 47.1 69.4 69.1 62.2 60.9 19.3Fayoum 102.7 92.7 26 52.3 74.2 71.9 63.6 57.5 11.0Menia 102.3 95.9 23 47.1 54.2 68.1 58.6 57.5 13.6Assyout 102.0 95.1 25 52.7 54.0 72.5 69.0 69.0 13.3Suhag 101.7 95.8 18 46.0 35.8 75.0 68.6 60.5 9.8Quena 100.5 98.5 21 49.0 53.1 82.3 76.5 63.1 8.9Aswan 103.4 99.5 22 66.5 60.9 91.0 89.2 82.0 18.0Upper Egypt: 102.1 95.4 23 55.5 55.6 77.0 72.3 68.0 13.0Urban .. .. .. 76.0 .. .. .. .. 24.4Rural .. .. .. 42.1 .. .. .. .. †7.7Red Sea .. 75.0 54 74.1 .. 92.1 93.6 102.4 18.3New Valley .. 93.9 21 75.1 .. 88.7 86.2 96.4 28.6Matrouh .. 90.9 17 51.5 .. 70.6 58.5 50.6 6.6North Sinai .. 92.9 37 62.8 .. 84.6 76.1 62.8 22.6South Sinai .. 61.8 55.1 .. 81.4 77.1 71.4 13.8Frontier Govs .. 86.5 25 63.9 .. 82.3 76.7 75.5 17.9Urban .. .. .. 71.8 .. .. .. .. 20.4Rural .. .. .. 49.9 .. .. .. .. 14.3Egypt: 103.2 95.4 30 65.9 63.2 84.5 84.8 85.9 18.0Urban .. .. .. 79.8 .. .. .. .. 25.1Rural .. .. .. 51.5 .. .. .. .. 12.6* Excluding El-Azhar education.Egypt Human Development Report 1998/99 - 151

Governorate IndicatorsG.8 Rural-urban gapsHouseholds with access to Literacy (15+)Rural population Piped water % Sanitation % % Rural-urban disparity(as % of total) Urban Rural Urban Rural Urban Rural Water Sanitation Literacy1960 1996 1999 1999 1999 1999 1999 1999 1999 1999 1999Cairo 0.0 0.0 99.9 .. 99.9 .. 75.1 .. .. .. ..Alexandria 0.0 0.0 99.7 .. 99.8 .. 74.4 .. .. .. ..Port-Said 0.0 0.0 96.5 .. 100.0 .. 77.8 .. .. .. ..Suez 0.0 0.0 99.7 .. 100.0 .. 74.1 .. .. .. ..Urban Govs 0.0 0.0 99.7 .. 99.8 .. 75.0 .. .. .. ..Damietta 75.1 72.6 100.0 98.8 100.0 99.1 71.2 61.2 98.8 99.1 86.0Dakahlia 81.9 72.2 99.7 78.7 100.0 99.0 70.9 55.2 78.9 99.0 77.9Sharkia 83.8 77.5 98.6 49.0 99.5 98.3 72.3 48.8 49.7 98.8 67.5Kalyoubia 74.6 59.4 99.8 88.6 100.0 97.3 69.7 56.1 88.8 97.3 80.5Kafr El-Sheikh 83.0 77.1 98.8 96.3 98.2 94.1 63.3 43.1 97.5 95.8 68.1Gharbia 71.8 68.9 100.0 91.6 99.2 96.3 75.7 55 91.6 97.1 72.7Menoufia 86.4 80.1 100.0 65.2 98.8 97.3 71.3 56.8 65.2 98.5 79.7Behera 81.8 77.2 88.9 76.5 98.9 96.6 65.5 42.9 86.1 97.7 65.5Ismailia 0.0 49.7 98.0 86.8 100.0 100.0 76.7 54.4 88.6 100.0 70.9Lower Egypt: 78.3 72.4 98.4 76.5 99.4 97.5 70.7 51.5 77.7 98.1 72.8Urban .. .. .. .. .. .. .. .. .. .. ..Rural .. .. .. .. .. .. .. .. .. .. ..Giza 67.6 45.9 98.4 86.7 99.6 97.8 74.2 49.7 88.1 98.2 67.0Beni-Suef 78.6 76.5 98.3 60.8 97.5 79.2 62.6 36.3 61.9 81.2 58.0Fayoum 80.7 77.5 100.0 99.2 97.3 75.3 59.9 32.9 99.2 77.4 54.9Menia 82.8 80.6 96.7 62.5 97.4 87.1 66.5 34 64.6 89.4 51.1Assyout 78.2 72.7 99.2 75.8 96.2 61.3 65.0 34.2 76.4 63.7 52.6Suhag 81.9 78.3 99.2 69.5 92.2 72.0 62.1 36.1 70.1 78.1 58.1Quena 86.3 75.6 97.9 75.0 95.2 83.2 63.3 37.4 76.6 87.4 59.1Aswan 74.6 57.4 100.0 98.2 97.7 80.8 70.7 57 98.2 82.7 80.6Upper Egypt: 79.4 69.2 98.6 75.6 97.7 79.9 68.1 38.3 76.7 81.8 56.2Urban .. .. .. .. .. .. .. .. .. .. ..Rural .. .. .. .. .. .. .. .. .. .. ..Red Sea 0.0 25.3 100.0 90.5 99.3 100.0 77.4 66.8 90.5 100.7 86.3New Valley 0.0 51.7 100.0 96.1 96.7 100.0 81.8 63.0 96.1 103.4 77.0Matrouh 0.0 44.5 93.5 9.0 97.1 43.6 60.9 37.3 9.6 44.9 61.2North Sinai 0.0 40.9 99.4 24.2 99.4 69.5 75.8 10.1 24.3 69.7 52.9South Sinai 0.0 50.0 69.8 90.0 92.1 84.0 89.0 44.4 28.9 91.2 49.9Frontier Govs .. 41.3 .. .. .. .. 74.3 48.1 .. .. 64.7Urban .. .. .. .. .. .. .. .. .. .. ..Rural .. .. .. .. .. .. .. .. .. .. ..Egypt: 62.0 57.4 99.0 75.9 99.2 89.6 72.1 45.9 76.7 90.3 63.7Urban .. .. .. .. .. .. .. .. .. .. ..Rural .. .. .. .. .. .. .. .. .. .. ..152 -Egypt Human Development Report 1998/99

Governorate IndicatorsG.9 Child survival and developmentMaternalChildrenPregnant mortality Births 12-23women rate (per attended month old Underwith 100000 Under five Children by fully weightprenatal live Infant mortality rate mortality rate ever health immun- (below age 5care % births) Registered Adjusted Registered Adjusted breastfed personnel ized %* years) %1998 1998 1961 1998 1998 1961 1998 1998 1998 1997 1998 1998Cairo .. .. 151 25.7 25.7 240 32.0 31.2 .. .. .. ..Alexandria .. .. 139 25.1 25.1 216 29.9 30.0 .. .. .. ..Port-Said .. .. 108 22.8 22.8 147 26.7 26.7 .. .. .. ..Suez .. .. 163 26.3 30.0 236 30.1 34.3 .. .. .. ..Urban Govs 59.1 122 147 25.4 26.3 231 31.1 31.2 94.0 82.3 97.3 9.2Damietta .. .. 82 17.3 22.9 136 22.0 27.4 .. .. .. ..Dakahlia .. .. 71 20.4 25.7 179 27.5 32.5 .. .. .. ..Sharkia .. .. 72 24.5 28.2 159 33.2 36.6 .. .. .. ..Kalyoubia .. .. 137 23.0 23.5 297 29.9 30.3 .. .. .. ..Kafr El-Sheikh .. .. 60 18.4 21.3 125 26.2 29.0 .. .. .. ..Gharbia .. .. 107 21.3 22.3 215 27.5 28.8 .. .. .. ..Menoufia .. .. 130 23.6 24.1 275 31.8 32.3 .. .. .. ..Behera .. .. 77 16.6 17.2 158 23.2 23.6 .. .. .. ..Ismailia .. .. 99 22.7 26.6 161 30.4 34.9 .. .. .. ..Lower Egypt: 48.8 91 †93 21.1 23.9 194 28.4 30.7 95.3 60.3 82.4 8.4Urban 65.8 .. .. .. .. .. .. .. 94.2 79.3 86.7 4.7Rural 43.7 .. .. .. .. .. .. .. 95.6 54.5 81.3 9.5Giza .. .. 126 30.0 32.1 254 39.8 41.8 .. .. .. ..Beni-Suef .. .. 106 42.8 50.0 196 60.9 67.8 .. .. .. ..Fayoum .. .. 151 30.9 34.0 290 44.0 46.7 .. .. .. ..Menia .. .. 108 42.7 54.2 213 59.3 66.5 .. .. .. ..Assyout .. .. 107 49.0 56.8 207 64.2 72.0 .. .. .. ..Suhag .. .. 86 34.3 42.5 173 48.2 56.5 .. .. .. ..Quena .. .. 80 39.1 51.2 154 53.2 61.2 .. .. .. ..Aswan .. .. 109 49.8 49.8 191 65.8 65.8 .. .. .. ..Upper Egypt: 40.5 92 102 38.6 44.9 199 52.8 58.7 93.7 41.3 81.2 13.7Urban 60.3 .. .. .. .. .. .. .. 94.2 66.2 91.7 12.1Rural 33.4 .. .. .. .. .. .. .. 93.5 32.3 77.7 14.2Red Sea .. .. 191 22.5 22.5 266 29.7 29.7 .. .. .. ..New Valley .. .. 181 27.0 29.7 334 31.7 35.0 .. .. .. ..Matrouh .. .. 98 22.5 35.1 176 28.6 41.6 .. .. .. ..North Sinai .. .. 94 25.7 41.7 136 34.1 50.0 .. .. .. ..South Sinai .. .. 17.1 31.7 27.9 42.6 .. .. .. ..Frontier Govs .. .. 124 23.9 34.1 210 31.0 41.3 .. .. .. ..Urban .. .. .. .. .. .. .. .. .. .. .. ..Rural .. .. .. .. .. .. .. .. .. .. .. ..Egypt: 47.2 96 108 29.2 32.4 204 39.1 42.1 94.4 56.4 84.3 10.7Urban 61.0 .. .. .. .. .. .. .. 94.1 76.9 93.1 8.9Rural 38.5 .. .. .. .. .. .. .. 94.6 43.2 79.5 11.9* Those who have received BCG , measles and three doses of DPT and pilio vaccines.Egypt Human Development Report 1998/99 - 153

Governorate IndicatorsG.10 Health profilePhysicians Nurses per Nurse / Maternal Healthper 10000 10000 physician mortality rate Beds units perHouseholds with access to people people ratio % (per 100000 per 10000 people 100000Piped water % Sanitation % MOH* MOH* MOH* of live Total MOH* populationbirths)1999 1999 1998 1998 1998 1998 1998 1998 1998Cairo 99.9 99.9 7.8 7.7 99.0 .. 43.0 35.0 4.9Alexandria 99.7 99.8 14.4 11.4 79.0 .. 32.0 28.0 3.7Port-Said 96.5 100.0 10.8 24.8 229.0 .. 33.0 32.0 4.1Suez 99.7 100.0 7.0 16.8 241.0 .. 28.0 23.0 6.3Urban Govs 99.7 99.8 9.9 9.9 100.0 122 39.0 32.0 4.6Damietta 99.2 99.4 10.4 36.6 351.0 .. 31.0 28.0 4.5Dakahlia 85.3 99.3 9.3 11.5 123.0 .. 16.0 15.0 3.7Sharkia 61.3 98.5 5.4 8.3 154.0 .. 14.0 13.0 2.4Kalyoubia 94.1 98.7 4.1 10.2 251.0 .. 24.0 23.0 2.9Kafr El-Sheikh 97.1 95.3 6.9 16.1 234.0 .. 16.0 16.0 2.5Gharbia 95.0 97.4 10.9 26.6 244.0 .. 20.0 17.0 4.1Menoufia 75.0 97.8 4.4 12.3 280.0 .. 15.0 14.0 3.4Behera 79.7 97.2 4.8 12.5 263.0 .. 11.0 10.0 2.5Ismailia 92.5 100.0 4.9 12.1 245.0 .. 26.0 24.0 4.2Lower Egypt: 83.8 98.1 6.7 14.3 215.0 91 17.0 16.0 3.2Urban .. .. .. .. .. .. .. .. ..Rural .. .. .. .. .. .. .. .. ..Giza 94.0 98.9 8.8 8.3 95.0 .. 20.0 13.0 4.6Beni-Suef 69.0 83.2 4.2 14.3 344.0 .. 13.0 13.0 3.6Fayoum 99.4 81.4 4.0 11.3 284.0 .. 10.0 10.0 2.2Menia 69.8 89.3 4.9 11.7 238.0 .. 15.0 14.0 2.9Assyout 83.7 73.0 4.8 11.3 237.0 .. 19.0 17.0 3.8Suhag 74.8 75.7 4.3 3.0 70.0 .. 13.0 12.0 3.0Quena 80.8 86.2 4.2 3.3 80.0 .. 10.0 10.0 2.9Aswan 99.0 88.3 8.1 15.1 186.0 .. 23.0 19.0 5.5Upper Egypt: 83.9 86.3 5.6 8.9 160.0 92 15.0 13.0 3.5Urban .. .. .. .. .. .. .. .. ..Rural .. .. .. .. .. .. .. .. ..Red Sea 98.8 99.5 9.8 18.0 185.0 .. 19.0 18.0 8.0New Valley 97.9 98.4 8.3 36.4 441.0 .. 50.0 50.0 10.3Matrouh 63.1 77.9 16.0 13.2 82.0 .. 28.0 24.0 9.2North Sinai 78.6 91.1 7.7 18.9 245.0 .. 17.0 17.0 3.9South Sinai 78.8 88.5 17.2 32.5 189.0 .. 34.0 34.0 15.8Frontier Govs 81.6 90.2 11.0 21.2 193.0 .. 27.0 26.0 8.0Urban .. .. .. .. .. .. .. .. ..Rural .. .. .. .. .. .. .. .. ..Egypt: 87.4 94.5 6.9 11.6 168.0 96 21.0 18.0 3.6Urban .. .. .. .. .. .. .. .. ..Rural .. .. .. .. .. .. .. .. ..* MOH = Ministry of Health154 -Egypt Human Development Report 1998/99

Governorate IndicatorsG.11 Education flowsPrimary Transition Preparatory Transition SecondaryPrimary Primary repeaters to preparatory Preparatory repeaters to secondary Secondary repeatersintake rate enrollment (as % of (as % of enrollment (as % of (as % of enrollment (as % of(%) ratio(gross) primary primary ratio preparatory preparatory ratio secondaryTotal Female (%) enrollment) completers) (%) enrollment) completers) (%) enrollment)1998/99 1998/99 1998/99 1998/99 1998/99 1998/99 1998/99 1998/99 1998/99 1998/99Cairo 116.9 115.9 105.2 4.2 101.2 100.0 6.3 90.3 56.4 4.3Alexandria 109.7 108.0 114.5 8.4 98.4 99.8 14.3 84.7 46.7 3.8Port-Said 102.3 104.3 98.2 5.7 101.9 100.8 3.6 95.2 62.1 3.5Suez 109.9 111.0 100.8 7.0 103.8 108.6 11.4 92.0 60.5 2.4Urban Govs 113.7 112.7 107.6 5.8 100.5 100.3 9.0 89.0 54.0 4.1Damietta 117.2 114.3 106.2 8.3 97.3 102.5 11.7 93.9 53.9 2.8Dakahlia 143.7 134.9 100.4 6.1 99.5 95.3 8.2 95.4 56.9 3.5Sharkia 146.4 133.3 99.3 4.3 100 90.5 6.1 97.3 53.7 2.2Kalyoubia 108.1 103.7 98.8 8.3 98.7 84.6 14.9 94.0 44.3 2.7Kafr El-Sheikh 151.6 134.3 97.7 4.6 98.6 93.4 8.6 95.5 55.3 3.5Gharbia 155.5 142.5 103.0 6.6 99.4 95.4 8.3 94.4 56.8 2.6Menoufia 131.1 125.5 102.3 7.9 101.5 94.0 10.2 94.9 51.5 2.4Behera 129.2 110.3 100.3 8.3 98.1 88.2 16.2 91.3 43.8 4.1Ismailia 127.2 121.0 107.6 8.1 97.1 97.2 9.8 98.4 53.8 3.0Lower Egypt: 136.9 125.6 100.7 6.7 99.2 92.0 10.4 94.9 51.8 3.0Urban .. .. .. .. .. .. .. .. .. ..Rural .. .. .. .. .. .. .. .. .. ..Giza 120.3 115.5 103.1 5.2 97.4 88.6 9.4 85.4 43.9 4.1Beni-Suef 98.7 85.9 83.9 6.2 97.9 71.3 11.0 94.6 42.8 3.4Fayoum 106.8 90.2 86.8 3.8 99.3 70.4 5.4 100.9 41.1 2.9Menia 111.6 93.2 86.2 4.8 97.2 77.1 11.1 94.5 42.4 2.4Assyout 128.4 111.0 89.9 7.5 98.1 79.0 13.8 91.4 40.3 2.7Suhag 157.9 135.7 92.0 5.0 97.9 85.3 18.2 86.9 40.1 2.6Quena 138.8 118.9 95.4 2.5 101.6 96.3 8.1 92.9 52.9 4.5Aswan 119.7 114.3 100.2 2.7 99.0 107.4 7.5 89.4 56.8 4.1Upper Egypt: 125.0 109.8 92.6 4.9 98.4 83.6 10.8 91.0 44.1 3.4Urban .. .. .. .. .. .. .. .. .. ..Rural .. .. .. .. .. .. .. .. .. ..Red Sea 126.5 125.6 108.2 7.7 111.9 104.9 10.0 102.0 60.7 1.6New Valley 117.8 116.2 103.1 3.6 106.4 102.7 5.6 95.7 68.5 2.3Matrouh 114.2 104.5 97.6 7.0 93.6 85.5 15.1 83.7 32.0 5.1North Sinai 121.5 120.0 95.4 5.7 99.2 89.3 6.5 96.2 50.7 5.6South Sinai 134.6 123.3 93.6 5.3 97.2 90.1 14.1 81.9 40.3 6.5Frontier Govs 120.5 116.1 99.4 6.0 101.1 93.7 9.4 93.8 50.2 3.9Urban .. .. .. .. .. .. .. .. .. ..Rural .. .. .. .. .. .. .. .. .. ..Egypt: 128.3 117.1 98.5 5.9 99.2 90.2 10.2 92.4 49.3 3.3Urban .. .. .. .. .. .. .. .. .. ..Rural .. .. .. .. .. .. .. .. .. ..Egypt Human Development Report 1998/99 - 155

Governorate IndicatorsG.12 Education imbalancesSecondarytechnical % of basic and % ofPrimary Preparatory Primary Preparatory enrollment (as secondary enrollment in unfitPupil/ Pupil/ Class Class % of total Government Private El-Azhar schoolteacher rates teacher rates density density secondary) schools schools schools buildings1998/99 1998/99 1998/99 1998/99 1998/99 1998/99 1998/99 1998/99 1999Cairo 22 17 42 43 39.6 74.5 21.3 4.2 15.6Alexandria 26 18 51 46 46.8 84.2 13.8 2.0 19.5Port-Said 13 17 34 38 62.3 92.3 5.4 2.3 19.0Suez 16 17 36 39 67.9 90.5 6.9 2.6 16.4Urban Govs 22 17 44 43 43.8 78.9 17.7 3.4 16.9Damietta 14 16 37 42 57.4 93.9 2.5 3.6 22.2Dakahlia 19 21 39 42 66.0 87.7 2.0 10.4 25.5Sharkia 24 20 43 43 62.8 87.0 0.9 12.1 30.2Kalyoubia 21 26 43 47 64.4 91.1 3.4 5.5 24.2Kafr El-Sheikh 25 25 42 42 64.9 86.2 0.4 13.5 28.5Gharbia 25 19 44 46 59.8 84.4 2.1 13.4 27.6Menoufia 23 23 43 46 65.7 91.3 1.5 7.2 24.9Behera 29 32 43 47 72.7 90.9 1.5 7.7 24.1Ismailia 21 19 34 33 67.6 91.0 3.6 5.4 19.3Lower Egypt: 23 22 42 44 64.9 88.6 1.8 9.6 26.0Urban .. .. .. .. .. .. .. .. ..Rural .. .. .. .. .. .. .. .. ..Giza 31 28 48 49 51.1 79.2 15.6 5.2 17.4Beni-Suef 26 25 37 40 70.5 91.8 2.5 5.7 20.2Fayoum 25 25 45 45 77.4 93.0 1.8 5.2 16.2Menia 27 20 43 44 71.4 91.3 3.2 5.5 26.4Assyout 25 20 45 41 67.5 87.0 2.5 10.4 24.6Suhag 24 26 44 42 62.1 82.3 1.3 16.4 29.1Quena 22 26 41 45 66.7 88.2 0.8 11.0 27.9Aswan 21 24 36 38 69.2 93.3 0.3 6.4 28.7Upper Egypt: 26 24 43 44 64.9 86.6 5.0 8.5 24.2Urban .. .. .. .. .. .. .. .. ..Rural .. .. .. .. .. .. .. .. ..Red Sea 15 13 29 30 64.7 93.4 2.2 4.4 19.0New Valley 7 8 23 29 65.3 95.1 0.0 4.9 20.5Matrouh 20 19 29 39 68.4 92.7 2.1 5.2 20.6North Sinai 11 10 29 27 69.8 91.9 1.4 6.7 20.8South Sinai 9 10 16 25 47.1 89.4 0.0 10.6 20.0Frontier Govs 12 11 27 30 66.5 92.9 1.4 5.7 20.4Urban .. .. .. .. .. .. .. .. ..Rural .. .. .. .. .. .. .. .. ..Egypt: 23 21 42 44 60.9 86.2 5.7 8.1 23.9Urban .. .. .. .. .. .. .. .. ..Rural .. .. .. .. .. .. .. .. ..156 -Egypt Human Development Report 1998/99

Governorate IndicatorsG.13 Communication profileAverage Annual Annual Annual% of house number of cinema theater Museum Library Passengerholds with Telephones people served attendances attendances attendances books² CarsRadio Television(per 1000 by one post (per 1000 (per 1000 (per 1000 (per 1000 (per 1000households) office people) people) people) people) people)1999 1999 1996/97 1997 1997 1997 1997 1996 1998Cairo 90.9 95.9 828 8412 644 84 533 34 99Alexandria 87.9 93.7 477 9872 513 11 273 126 85Port-Said 93.1 97.6 516 7401 498 115* 27* 106* 66Suez 97.5 96.7 338 4070 134 279Urban Govs 90.3 95.3 691 8399 640 65 413 72 100Damietta 85.3 90.7 257 6644 175 .. 5 .. 19Dakahlia 90.7 95.5 156 6214 63 .. .. .. 12Sharkia 75.4 86.2 160 4991 75 .. 6 .. 12Kalyoubia 95.2 95.3 87 7934 60 .. 10 .. 12Kafr El-Sheikh 78.2 85.6 214 5364 50 .. .. .. 8Gharbia 87.4 92.6 152 6045 117 .. 7 .. 15Menoufia 88.6 88.8 185 5228 5 .. .. .. 10Behera 71.6 86.2 93 5165 26 .. 11 .. 7Ismailia 91.3 94.9 256 8449 363 .. 7 .. 27Lower Egypt: 83.9 90.4 153 5796 71 9 5 29 12Urban .. .. .. .. .. .. .. .. ..Rural .. .. .. .. .. .. .. .. ..Giza 92.3 93.1 157 10797 89 .. 132 .. 50Beni-Suef 50.8 78.8 110 7322 6 .. 5 .. 8Fayoum 73.2 76.0 97 5843 60 .. 2 .. 11Menia 57.8 78.6 72 6119 28 .. 4 .. 5Assyout 66.6 78.4 112 6574 85 .. 2 .. 10Suhag 66.2 83.9 161 6744 109 .. .. .. 5Quena 79.6 84.3 216 6453 39 .. 71 .. 6Aswan 68.6 90.7 189 4071 19 .. 46 .. 15Upper Egypt: 71.9 83.6 139 6890 63 9 42 30 17Urban .. .. .. .. .. .. .. .. ..Rural .. .. .. .. .. .. .. .. ..Red Sea 81.5 90.8 462 5478 .. .. 263 .. 37New Valley 96.9 95.3 472 3094 .. .. 63 .. 21Matrouh 71.9 61.3 181 4733 120 .. 102 .. 17North Sinai 80.4 83.5 538 5903 .. .. 12 .. 18South Sinai 82.3 84.1 626 2520 .. .. .. .. 55Frontier Govs 81.4 81.2 423 4451 31 23 92 152 24Urban .. .. .. .. .. .. .. .. ..Rural .. .. .. .. .. .. .. .. ..Egypt: 81.9 89.4 266 6522 173 19 95 39 30Urban 89.3 94.5 .. .. .. .. .. .. ..Rural 74.6 84.3 .. .. .. .. .. .. ..* Port-Said and Suez Together . ² Public libraries only .Egypt Human Development Report 1998/99 - 157

Governorate IndicatorsG.14 Labor forceLabor force15+(as % of% ofwomenin Percentage of labor forceProfessional& technicalstaff (as % ofWage earners (as %of labor force15+)Employees in gov.& public sector (as% of total labortotal labor15+ inlaborforce 15+)population) force 15+ Agriculture Industry Services force 15+) Total Females Total Females1996 1996 1996 1996 1996 1996 1996 1996 1996 1996Cairo 31.5 19.7 1.1 32.4 66.5 31.6 76.7 85.4 38.3 59.2Alexandria 31.5 18.1 5.8 35.8 58.4 25.9 72.9 84.8 38.1 57.8Port-Said 35.7 24.8 8.2 14.6 77.2 33.0 68.0 82.5 45.7 65.9Suez 31.7 18.7 6.9 30.7 62.4 27.5 75.1 81.1 45.4 62.8Urban Govs 31.7 19.4 3.1 32.5 64.4 29.8 75.1 84.9 38.9 59.3Damietta 32.2 15.3 23.2 32.4 44.4 18.6 66.1 79.0 24.8 62.5Dakahlia 31.4 18.3 34.2 15.1 50.7 19.5 56.6 62.2 28.3 43.2Sharkia 29.0 13.4 37.5 14.7 47.8 19.8 58.2 67.6 29.4 49.6Kalyoubia 29.6 15.0 17.6 30.5 51.9 20.5 70.7 72.4 34.5 47.5Kafr El-Sheikh 29.6 16.1 44.8 9.2 46.0 15.3 45.6 53.3 22.7 32.2Gharbia 31.3 20.7 24.3 20.9 54.8 21.7 60.7 63.7 34.0 43.3Menoufia 31.0 22.8 36.9 14.2 48.9 21.0 59.1 58.9 32.9 41.1Behera 28.8 11.5 45.8 14.1 40.1 14.9 52.0 63.6 24.0 40.1Ismailia 30.7 17.4 25.1 17.8 57.1 23.3 69.7 82.6 38.2 59.4Lower Egypt: 30.2 16.1 33.5 17.7 48.8 19.2 58.6 64.6 29.6 44.2Urban 32.2 21.6 10.7 25.0 64.3 28.6 68.7 77.7 39.1 59.9Rural 29.4 13.8 43.0 14.7 42.3 15.2 54.4 56.0 25.6 34.0Giza 28.2 12.4 13.3 30.5 56.2 24.4 70.6 88.2 30.9 60.1Beni-Suef 27.7 16.2 46.8 12.5 40.7 15.5 59.3 56.6 25.1 32.9Fayoum 26.7 9.9 46.8 13.7 39.5 14.3 57.6 66.8 21.4 49.4Menia 26.5 12.0 53.0 8.1 38.9 15.0 62.9 66.5 22.2 36.6Assyout 25.0 11.7 46.3 9.9 43.8 17.5 60.0 65.3 25.3 47.0Suhag 24.8 8.9 43.4 13.9 42.7 16.5 54.9 67.2 23.0 49.6Quena 23.5 8.2 35.8 18.7 45.5 18.1 62.7 68.4 28.1 47.3Aswan 27.3 15.2 24.5 17.1 58.4 24.4 61.2 67.2 37.7 44.2Upper Egypt: 26.2 11.5 36.9 17.0 46.1 18.5 62.3 70.9 26.4 47.2Urban 30.0 19.6 9.4 22.2 68.4 30.4 70.8 79.5 39.4 59.3Rural 24.5 7.1 52.0 14.2 33.8 12.0 57.7 58.1 19.2 29.1Red Sea 41.1 15.5 7.6 21.7 70.7 20.2 68.7 46.0 31.8 34.2New Valley 34.0 22.3 19.9 13.0 67.1 33.5 70.9 76.4 59.8 61.1Matrouh 28.0 6.2 43.9 13.1 43.0 13.3 46.2 83.4 20.6 69.5North Sinai 30.1 18.5 32.7 10.4 56.9 24.1 58.4 70.5 38.7 55.2South Sinai 46.7 12.1 10.8 16.8 72.4 21.1 69.1 57.3 35.6 48.5Frontier Govs 33.5 15.2 24.9 14.7 60.4 22.2 61.4 66.2 36.6 52.4Urban 34.3 16.9 10.9 18.9 70.2 28.4 73.2 78.1 46.5 64.9Rural 32.3 12.5 46.0 8.4 45.6 12.9 43.6 42.1 21.6 27.1Egypt: 29.1 15.3 28.3 20.5 51.2 21.2 63.2 71.4 30.5 49.0Urban 31.5 20.1 7.0 27.5 65.5 29.6 72.1 81.2 39.2 59.6Rural 27.3 11.2 46.6 14.4 39.0 13.9 55.6 56.3 23.0 32.7158 -Egypt Human Development Report 1998/99

Governorate IndicatorsG.15 UnemploymentUrban /Ruralunemployment Unemployment rate by Future laborUnemployment rate (%) rate 15+ (%) education 15 + force replacementTotal Females Adults Urban Rural Below Secondary University ratio*15-29 Secondary %1996 1996 1996 1996 1996 1996 1996 1996 1996Cairo 7.3 11.2 19.0 7.3 .. 3.0 13.9 6.2 140Alexandria 7.3 12.8 17.7 7.3 .. 2.7 14.0 7.9 146Port-Said 9.4 16.2 24.9 9.4 .. 2.0 16.0 8.2 144Suez 8.8 17.2 21.6 8.8 .. 2.6 15.4 5.7 176Urban Govs 7.4 12.2 19.0 7.4 .. 2.9 14.1 6.7 143Damietta 6.2 18.3 13.7 5.7 6.4 0.6 18.2 7.9 172Dakahlia 11.4 26.7 24.7 10.4 11.8 1.1 28.5 12.4 181Sharkia 9.5 28.1 20.6 9.9 9.4 0.7 26.3 10.7 201Kalyoubia 7.3 15.9 15.9 7.5 7.1 2.2 15.8 8.2 189Kafr El-Sheikh 12.6 33.4 26.4 13.1 12.4 0.8 35.1 14.7 194Gharbia 12.7 28.0 28.2 11.3 13.4 0.9 29.4 12.2 177Menoufia 8.8 19.8 19.1 10.2 8.4 0.9 21.2 9.7 190Behera 9.4 29.2 19.6 10.2 9.2 1.1 26.8 12.0 197Ismailia 7.3 14.1 16.6 8.0 6.4 1.7 15.5 5.4 185Lower Egypt: 10.0 25.1 21.5 9.8 10.0 1.1 25.4 11.0 189Urban 9.8 18.9 23.3 .. .. 1.9 19.8 8.8 165Rural 10.0 29.2 20.8 .. .. 0.8 28.2 13.5 199Giza 5.3 7.9 12.9 6.1 4.2 2.2 11.3 5.2 186Beni-Suef 7.9 18.5 16.7 11.5 6.6 0.5 24.4 9.7 245Fayoum 8.3 26.3 16.7 10.3 7.6 0.4 27.4 9.5 247Menia 9.1 20.8 19.6 13.4 7.8 1.0 27.3 12.2 239Assyout 10.4 28.7 21.8 13.0 9.2 1.2 29.7 10.6 240Suhag 9.4 26.2 20.7 12.2 8.5 0.7 29.1 14.4 238Quena 10.3 25.4 23.5 11.4 9.9 1.8 26.8 10.1 231Aswan 14.7 29.7 30.7 14.7 14.7 3.3 27.1 9.6 198Upper Egypt: 8.6 20.1 19.0 9.9 7.9 1.3 23.9 8.6 225Urban 9.9 17.6 23.5 .. .. 2.5 19.8 6.8 179Rural 7.9 23.9 16.8 .. .. 0.9 27.2 13.2 248Red Sea 4.4 8.5 10.4 5.5 2.1 1.8 8.7 3.1 152New Valley 10.9 22.6 23.7 10.6 11.3 1.3 19.9 4.1 188Matrouh 2.6 6.6 5.7 3.7 1.3 1.3 7.1 3.1 214North Sinai 6.0 12.3 13.0 7.2 3.9 1.0 13.3 3.5 214South Sinai 1.4 3.9 3.7 1.7 1.0 0.8 2.9 0.7 157Frontier Govs 5.3 12.9 12.1 6.1 4.2 1.3 12.1 3.1 192Urban 6.1 13.5 14.0 .. .. 1.7 11.5 3.1 184Rural 4.2 11.5 9.4 .. .. 0.8 13.7 3.1 204Egypt: 8.9 20.3 20.1 8.7 9.1 1.4 22.3 8.7 192Urban 8.7 15.6 21.3 .. .. 2.5 17.3 7.2 159Rural 9.1 27.6 19.1 .. .. 0.9 27.7 13.3 219* Population under 15 divided by one - third of population aged 15-59.Egypt Human Development Report 1998/99 - 159

Governorate IndicatorsG.16 Income distribution and povertyGDPIncome shareper Ratio of Poor persons Wages of poor householdscapita highest 20% Gini (% of total) as % of total as % of their(LE ) Lowest 40% lowest 20% coefficient Total Ultra poor wages income1998/99 1995/96 1995/96 1995/96 1995/96 1995/96 1995/96 1995/96Cairo 8854.3 20.6 4.9 33.7 10.8 2.9 4.4 62.4Alexandria 7024.7 19.0 5.6 37.2 29.4 10.7 21.1 66.5Port-Said 10536.0 23.4 8.7 28.5 3.7 2.1 0.3 44.9Suez 7974.2 23.2 6.0 30.0 2.4 1.2 0.4 47.6Urban Gov's 8597.3 19.7 5.4 35.2 16.0 5.2 8.0 64.8Damietta 5443.5 27.6 2.7 21.4 0.7 0.0 0.4 54.5Dakahlia 3808.7 26.0 3.1 23.4 11.4 1.8 8.3 37.7Sharkia 3641.7 28.0 2.8 22.0 13.9 1.9 9.5 38.3Kalyoubia 4695.4 25.2 3.3 25.1 28.3 8.8 14.5 48.8Kafr El-Sheikh 4387.1 24.6 3.7 28.1 10.1 2.6 6.3 33.6Gharbia 4628.3 24.6 3.4 25.9 9.4 1.6 7.0 56.6Menoufia 3668.5 23.6 3.7 27.8 22.8 8.2 16.6 47.3Behera 4069.3 27.3 2.6 21.0 28.5 7.3 22.4 50.4Ismailia 5215.7 22.8 4.3 27.5 9.7 4.0 3.6 65.2Lower Egypt: 4347.9 24.9 3.4 25.5 17.1 4.3 11.8 46.5Urban .. 23.0 4.0 29.5 21.7 6.7 13.0 50.7Rural .. 26.4 3.0 23.0 15.4 3.4 11.1 44.1Giza 5358.5 22.1 4.4 31.2 12.0 2.6 5.2 38.3Beni-Suef 2900.9 24.2 2.9 28.1 34.0 10.7 23.7 36.2Fayoum 3146.1 25.5 3.4 25.5 40.6 14.0 33.0 37.4Menia 3627.1 27.3 2.9 22.5 35.8 12.5 26.4 34.6Assyout 2620.2 25.4 3.3 25.9 53.4 25.8 36.8 41.6Suhag 2854.6 29.4 2.3 17.4 39.4 12.3 35.1 33.5Quena 3422.6 26.5 3.1 23.0 38.3 15.1 34.3 42.8Aswan 4163.1 26.2 3.0 23.7 30.8 10.1 23.5 49.2Upper Egypt: 3491.7 23.4 3.8 28.7 34.1 12.4 21.8 38.3Urban .. 20.6 5.0 34.9 35.0 13.4 17.4 45.0Rural .. 26.7 3.0 22.7 33.7 11.9 26.0 35.0Red Sea .. .. .. .. .. .. .. ..New Valley .. .. .. .. .. .. .. ..Matrouh .. .. .. .. .. .. .. ..North Sinai .. .. .. .. .. .. .. ..South Sinai .. .. .. .. .. .. .. ..Frontier Govs 5627.3 22.2 3.8 29.6 16.0 3.6 9.7 45.3Urban .. 24.4 3.4 26.4 20.2 5.4 12.7 47.0Rural .. 21.6 4.1 31.5 10.2 0.9 5.6 40.8Egypt: 4822.4 21.9 4.4 31.6 22.9 7.4 12.9 45.2Urban .. 20.4 5.0 33.8 22.5 7.7 11.0 53.4Rural .. 25.7 3.1 24.0 23.3 7.1 16.0 38.6160 -Egypt Human Development Report 1998/99

Governorate IndicatorsG.17 UrbanizationUrban Urban Population HouseholdsPopulation Population annual of largest city with(as % of total) growth rates (%) (as % of total urban) electricity %1960 1976 1986 1996 1960/76 1976/86 1986/96 1960 1976 1986 1999Cairo 100.0 100.0 100.0 100.0 2.6 1.8 1.1 100.0 100.0 100.0 99.9Alexandria 100.0 100.0 100.0 100.0 2.7 2.4 1.3 100.0 100.0 100.0 99.4Port-Said 100.0 100.0 100.0 100.0 0.4 4.3 1.6 100.0 100.0 100.0 99.8Suez 100.0 100.0 100.0 100.0 -0.3 5.4 2.5 100.0 100.0 100.0 99.5Urban Govs 100.0 100.0 100.0 100.0 2.4 2.2 1.3 63.0 64.6 62.4 99.7Damietta 24.9 24.8 25.2 27.4 2.4 2.7 3.0 74.2 65.5 47.8 100.0Dakahlia 18.1 24.0 26.2 27.8 3.7 3.3 2.6 41.5 39.5 34.6 99.3Sharkia 16.2 20.2 21.1 22.5 3.7 3.1 3.0 42.1 38.2 34.0 99.5Kalyoubia 25.4 40.8 43.8 40.6 6.4 4.9 2.0 40.2 57.5 64.7 100.0Kafr El-Sheikh 17.0 20.7 22.8 22.9 3.6 3.5 2.2 23.9 26.6 25.0 100.0Gharbia 28.2 33.3 32.7 31.1 2.9 2.1 1.2 38.0 38.2 38.2 99.7Menoufia 13.6 19.7 20.1 19.9 3.8 2.9 2.1 29.9 30.5 29.7 99.4Behera 18.2 24.1 23.4 22.8 4.2 2.5 1.8 41.2 28.7 25.5 98.9Ismailia 100.0 49.2 48.8 50.3 -3.0 4.3 3.1 79.0 83.8 80.0 100.0Lower Egypt : 21.7 26.4 27.6 27.6 3.8 3.2 2.2 8.0 9.4 12.4 99.9Urban .. .. .. .. .. .. .. .. .. .. ..Rural .. .. .. .. .. .. .. .. .. .. ..Giza 32.4 57.0 57.5 54.1 7.4 4.5 1.9 57.8 89.3 88.8 99.4Beni-Suef 21.4 24.9 25.1 23.5 2.6 2.8 1.9 42.9 42.7 41.9 98.3Fayoum 19.3 24.1 23.2 22.5 3.3 2.7 2.2 63.1 60.6 59.2 100.0Menia 17.2 21.0 20.8 19.4 3.5 2.5 1.6 35.2 34.0 32.6 96.7Assyout 21.8 27.7 27.9 27.3 3.0 2.8 2.2 44.0 45.4 44.2 98.5Suhag 18.1 21.3 22.0 21.7 2.2 2.7 2.4 21.7 25.1 24.8 98.4Quena 13.7 22.9 23.4 24.4 4.8 3.0 2.6 31.1 23.9 23.9 99.5Aswan 25.4 37.9 39.6 42.6 5.5 3.2 2.6 49.4 61.7 59.8 99.1Upper Egypt 20.6 30.5 31.7 30.8 4.5 3.4 2.1 13.1 31.8 34.5 98.9Urban .. .. .. .. .. .. .. .. .. .. ..Rural .. .. .. .. .. .. .. .. .. .. ..Red Sea 100.0 87.4 85.5 74.7 4.1 4.7 4.4 25.1 25.9 30.8 99.3New Valley 100.0 40.8 44.5 48.3 0.2 3.8 3.1 36.4 76.6 76.4 97.8Matrouh 100.0 46.0 50.8 55.5 -4.2 4.7 3.7 29.6 53.3 52.4 100.0North Sinai 100.0 100.0 61.6 59.1 - 9.6 28.2 3.5 58.9 64.3 64.0 100.0South Sinai 39.5 50.0 9.1 38.6 96.8Frontier Govs 100.0 55.0 57.8 58.7 -2.3 7.9 4.0 13.8 19.1 20.8 99.3Urban .. .. .. .. .. .. .. .. .. .. ..Rural .. .. .. .. .. .. .. .. .. .. ..Egypt: 38.0 43.8 44.0 42.6 3.0 2.8 1.8 34.4 31.6 28.6 99.5Urban .. .. .. .. .. .. .. .. .. .. ..Rural .. .. .. .. .. .. .. .. .. .. ..Egypt Human Development Report 1998/99 - 161

Governorate IndicatorsG.18 Demographic profileAnnualNet lifetime Demographicpopulation Crude Crude Contraceptive internal dependencymigrationPopulation growth rates birth death prevalence (as % of ratiototal(000's) % rate rate rate (%) population) (%)1960 1986 1996 60-86 86-96 1998 1998 1998 1996 1998Cairo 3349 6069 6801 2.3 1.1 23.1 6.8 .. 3.2 52.6Alexandria 1516 2927 3339 2.5 1.3 23.7 6.7 .. 6.4 54.5Port-Said 245 401 472 1.9 1.6 22.3 6.1 .. 10.2 53.2Suez 204 328 418 1.8 2.5 25.4 5.5 .. 17.4 63.2Urban Govs 5314 9725 11030 2.3 1.3 23.3 6.7 62.1 .. 53.6Damietta 388 740 914 2.5 2.1 28.3 5.7 .. -1.4 62.5Dakahlia 2015 3484 4224 2.1 1.9 25.7 6.2 .. -5.6 66.0Sharkia 1820 3414 4281 2.4 2.3 27.6 6.1 .. -4.2 72.2Kalyoubia 988 2516 3301 3.6 2.8 25.0 5.3 .. 11.9 67.6Kafr El-Sheikh 973 1809 2224 2.4 2.1 23.3 5.9 .. -1.6 69.4Gharbia 1715 2885 3406 2.0 1.7 24.2 6.1 .. -4.2 64.9Menoufia 1348 2221 2760 1.9 2.2 26.2 6.4 .. -10.4 70.3Behera 1686 3249 3994 2.5 2.1 25.9 5.6 .. -0.8 70.3Ismailia 284 545 715 2.5 2.8 30.3 6.1 .. 13.5 66.2Lower Egypt 11217 20863 25819 2.4 2.2 25.8 5.9 59.2 .. 68.3Urban 2432 5750 7117 3.3 2.2 .. .. 62.2 .. ..Rural 8785 15113 18702 2.1 2.2 .. .. 58.1 .. ..Giza 1336 3726 4784 4.0 2.5 26.6 6.2 .. 16.6 66.5Beni-Suef 860 1449 1859 2.0 2.5 33.5 7.8 .. -4.3 88.9Fayoum 839 1551 1990 2.4 2.5 31.8 6.3 .. -5.3 88.7Menia 1560 2645 3310 2.0 2.3 34.7 7.8 .. -3.5 86.5Assyout 1330 2216 2802 2.0 2.4 34.5 7.7 .. -8.1 86.9Suhag 1579 2447 3123 1.7 2.5 33.8 7.4 .. -9.3 86.1Quena 1351 2259 2803 2.0 2.2 32.4 8.2 .. -7.1 84.6Aswan 385 809 974 2.9 1.9 22.6 6.8 .. -0.9 72.8Upper Egypt 9240 17102 21646 2.4 2.4 31.6 7.2 36.5 .. 81.2Urban 1905 5415 6659 4.1 2.1 .. .. 50.8 .. ..Rural 7335 11687 14987 1.8 2.5 .. .. 29.9 .. ..Red Sea 25 90 157 4.9 5.7 25.7 3.4 .. 31.6 53.5New Valley 34 113 142 4.7 2.3 27.3 4.7 .. 4.6 68.9Matrouh 104 161 212 1.7 2.8 36.7 4.1 .. 13.8 74.6North Sinai 50 171 252 5.4 4.0 31.2 4.6 .. 10.7 75.5South Sinai 29 55 6.6 24.7 4.1 .. 34.4 54.4Frontier Govs 213 564 818 3.8 3.8 30.4 4.2 .. .. 68.0Urban 213 326 480 1.6 3.9 .. .. .. .. ..Rural .. 238 338 .. 3.6 .. .. .. .. ..Egypt 25984 48254 59313 2.4 2.1 27.5 6.5 51.8 .. 69.7Urban 9864 21215 25286 3.0 1.8 .. .. 59.3 .. ..Rural 16120 27039 34027 2.0 2.3 .. .. 45.6 .. ..162 -Egypt Human Development Report 1998/99

Governorate IndicatorsG.19 Land resourcesLand area Cultivated area Crop areaPopulation as % of Persons Crop /density* Thousand land per Thousand cultivatedKm 2 (per km 2 ) feddans** area feddan feddans** land ratio1998 1998 1998 1998 1998 1998 1998Cairo 214.2 32824.0 3.8 7.5 1850.2 8.1 2.1Alexandria 2679.4 1288.0 53.0 8.3 65.1 148.0 2.8Port-Said 72.1 6775.0 6.5 37.9 75.1 11.6 1.8Suez 17840.4 24.0 14.8 0.3 29.2 25.8 1.7Urban Govs 20806.1 548.0 78.1 1.6 146.0 193.5 2.5Damietta 589.2 1603.0 112.6 80.3 8.4 203.8 1.8Dakahlia 3470.9 1258.0 638.9 77.3 6.8 1243.4 1.9Sharkia 4179.5 1059.0 668.3 67.2 6.6 1277.5 1.9Kalyoubia 1001.1 3409.0 190.4 79.9 17.9 343.5 1.8Kafr El-Sheikh 3437.1 669.0 644.3 78.7 3.6 1088.4 1.7Gharbia 1942.2 1813.0 379.7 82.1 9.3 699.0 1.8Menoufia 1532.1 1863.0 308.7 84.6 9.2 643.1 2.1Behera 10129.5 408.0 773.6 32.1 5.3 1459.8 1.9Ismailia 1441.6 513.0 169.6 49.4 4.4 277.9 1.6Lower Egypt: 27723.2 963.0 3886.1 58.9 6.9 7236.4 1.9Urban .. .. .. .. .. .. ..Rural .. .. .. .. .. .. ..Giza 85153.6 58.0 174.1 0.9 28.4 410.2 2.4Beni-Suef 1321.5 1454.0 242.5 77.1 7.9 498.5 2.1Fayoum 1827.1 1126.0 366.9 84.4 5.6 705.6 1.9Menia 2261.7 1513.0 448.6 83.3 7.6 833.2 1.9Assyout 1553.0 1865.0 334.7 90.5 8.7 611.7 1.8Suhag 1547.2 2087.0 273.1 74.1 11.8 569.4 2.1Quena 1850.6 1566.0 357.5 81.2 8.1 475.3 1.3Aswan 678.4 1484.0 133.5 82.7 7.5 178.3 1.3Upper Egypt: 96193.1 333.0 2330.9 10.2 9.6 4282.2 1.8Urban .. .. .. .. .. .. ..Rural .. .. .. .. .. .. ..Red Sea 203685 0.8 13.3 .. 12.2 13.3 1.0New Valley 376505 0.4 73.3 0.1 2.0 102.0 1.4Matrouh 212112 1.0 210.6 0.4 1.0 259.0 1.2North Sinai 60714 5.0 164.1 1.1 1.9 169.9 1.0South SinaiFrontier Govs 853016 1.0 461.3 0.2 1.8 544.2 1.2Urban .. .. .. .. .. .. ..Rural .. .. .. .. .. .. ..Egypt: 997738 61.5 7761.1 3.3 8.3 13858.7 1.8Urban .. .. .. .. .. .. ..Rural .. .. .. .. .. .. ..* Excluding desert areas, population density amounts to , 10981, 1406, 12564, 900, 1203, 4674, 1850 and 1743 for Alexandria,Suez, Urban governorates , Behera , Lower Egypt, Giza , Upper Egypt and total Egypt respectively .** Feddan = 4200.8335 m 2 . The National total includes 1004.7 and 1602.4 thousand feddans of new cultivated and crop areas.Egypt Human Development Report 1998/99 - 163

It is the illiteracy rate that pulls down theaverage value of the HDI and lowersEgypt’s rank. Many developing countrieswith similar or even lower levels of percapita income enjoy higher literacy ratesthan Egypt. Depicted from Figure 1.6 inthe Report, it indicates that if the literacyrate would increase to the levels achievedin China or Jordan, Egypt’s HDI wouldsignificantly increase, reflecting an improvementin human development.