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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
Page 2 and 3: The Digital Divide is a problem tha
Page 4 and 5: This report is the major output of
Page 6 and 7: AcknowledgementsThe Team of the Rep
Page 8 and 9: Table of ContentsExecutive Summary
Page 10 and 11: Energy Consumption 68Agriculture 69
Page 12 and 13: 2.4 Health and Education 332.5 Poli
Page 14 and 15: AbbreviationsADNAADPAIAPRARCB2CBABC
Page 16 and 17: Executive SummaryI - Globalization
Page 18 and 19: Executive Summarythe main source of
Page 20 and 21: Executive Summaryfertilizers, pesti
Page 22 and 23: Executive Summarythe Egyptian labor
Page 24 and 25: Chapter OneGlobalization and Human
Page 26 and 27: Globalization and Human Development
Page 40 and 41: Chapter TwoThe Economic Well Being
Page 44 and 45: The Economic Well Being of Egyptian
Page 58 and 59: Globalization Challenges to Egypt
Page 80 and 81: The Environment and Sustainable Dev
Page 88: The Environment and Sustainable Dev
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Chapter FiveEgypt’s Position inTe
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Egypt’s Position in Technology an
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Chapter SixGlobalization and Human
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Globalization and Human CapitalOf t
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Globalization and Human CapitalOne
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Globalization and Human CapitalThe
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Globalization and Human CapitalEmpl
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Chapter SevenEgypt’s Social Capit
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Egypt’s Social Capital and Arab E
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Technical Notesand Sources of DataH
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Technical Notes and Sources of Data
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Bibliography◆ Abdallah, H. (1996)
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BibliographyOECD Development Centre
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BibliographyNational policies in a
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Bibliography◆ Springborg,Robert (
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