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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