Responding to the Financial and Economic Crisis: The Case of Egypt BY Samir Radwan Thematic Dialogue 3 of the Committee of the Whole International Labor Conference (ILC) 4 June

 Suez Canal proceeds registered a negative rate of growth of -22% compared to a positive growth rate of 12.7%  Tourism registered a negative rate of -6% compared to a positive rate of 23% during the same period.  Manufacturing, which grew at 8.3% in the Third Quarter of 2007/08 went down to only 3.5% during the same period of 2008/09.  Two sectors go against the current, vis, communications and construction which grew at 13.6 % and 16% respectively. Agriculture continued its unchanged pattern with the growth rate hovering around 3%. Egypt: Impact on the Real Economy Sectoral Impact of the Crisis 2

 Official estimates point to an increase in the employment rate during the Third Quarter of 2008/09 to 9.4% compared to 8.8% in the previous quarter.  A recent survey of the unemployed has shown that 15.3% of the presently unemployed people was due to the economic crisis, while 41.3% was due to a reduction wages.  The Center for Trade Union and Workers Service (an activist NGO) has reported that some 88,000 people lost their jobs between January and March this year. According to this report, most job losses are in the textile and tourism sectors.  Egypt: Social and Labor Consequences Unemployment on the rise Unemployment Rates (%) 3

Unemployment Rates in MENA (%) Region World Developed Economies and EU Central and South Eastern Europe and CIS East Asia South East Asia and Pacific South Asia Latin America and Caribbean Middle East North Africa Sub-Saharan Africa Source: ILO, Global Employment Trends, January 2009, p34 Unemployment rates in MENA are the highest in the world, and rising 4

Source: ILO, Global Employment Trends Update, May 09,p44 Unemployment Rates in MENA Middle EastNorth Africa In 2009, unemployment in MENA is roughly in line with earlier estimates of ILO, with an upper estimate of 1.6 million additional unemployed in the Middle East which would represent an increase of approximately 25%, and in North Africa, representing an increase of approximately 13%. 5

School to Work Transition  Unemployment in the Arab world is dominated by first- time job seekers First-time-job seekers as a % of total unemployed Source: based on data from Arab Labor Organization, First Arab Report on Employment and Unemployment in the Arab Countries: Towards Effective Policies and Mechanisms, Table 3 p65 6

Prevalence of Informal Employment  Almost half the non-agricultural labor force find employment in low-productivity, low-income occupations. Source: Arab Labor Organization, First Arab Report on Employment and Unemployment in the Arab Countries: Towards Effective Policies and Mechanisms, Cairo 2008, p245 7

Egypt: Social and Labor Consequences Increased Incidence of Poverty  A total of 6.7 million people have come into poverty during the period Poverty Dynamics 2005 – 2008 (All Population=100). Source: World Bank, Economic Growth, Inequality and Poverty: Social Mobility in Egypt between 2005 and 2008, December 2008, p.6 8

Working Poor in MENA Middle EastNorth Africa In addition, working poor is expected to increase with the global crisis. Source: ILO, Global Employment Trends Update, May 09,p44 9

Source: Energy Information Administration, release date: 5/28/2009 Impact on the Oil Market Oil Prices 10

Source: Energy Information Administration, release date: 5/28/2009 Impact on the Oil Market Oil Revenues 11

Working out of the Crisis A decent Work Agenda: The Egyptian Government’s Stimulus Package 1. Stimulating demand through an expenditure package of LE 13.3 billion(mainly allocated to infrastructure projects, export promotion and social benefits). 2. A total of LE 1.7 billion reduction in customs on imports of intermediate and capital goods. 3. Reducing interest rate over two successive stages by 1% and 0.5% as inflation goes down. 4. Providing the private sector with other incentives especially to stimulate new investment 12

Dealing with the Crisis Decomposition of Rescue Packages Source: ILO, the Financial and Economic Crisis: A Decent Work Response, Geneva 2009, p48 13

Looking into the Future Laying the Foundation for the Post-Crisis Economy and Society  The regeneration of employment-intensive-growth Projections of annual increase in the Labour Force,  In specific terms, the post-crisis recovery should take as its objective the creation of 950 thousand to a million jobs every year in the medium term as suggested by the labour force projections. Source: EIU, Egypt Country Forecast, March 2009, p 12 14

Looking into the Future Laying the Foundation for the Post-Crisis Economy and Society Restructuring the Egyptian Economy Deepening of manufacturing activities Expanding the process of industrialization through joining Global Production Chains Manufacturing Urgent need of massive investment in education and training in order to increase the future pool of medium-and-high skilled workers. A crash national training program Education and Training 15

Looking into the Future Laying the Foundation for the Post-Crisis Economy and Society: Elements of a JOBS PACT Improving Labour Market Policies and institutions Mainly by Labor Law No. 12 of 2003 contains articles that amount to an impediment to attracting investors. Workable training facilities (the Training Fund) and sanctions an inadequate provision for social protection (the Emergency Fund). Amending the legal framework Outdated wage policy makes it difficult to use wages as an instrument of economic and social policy. Update Wage Policy Current institutes do not provide for proper social dialogue. Representative organizations for workers and for the private sector should find an appropriate platform for negotiations. Improve effectiveness of institutes for settling labor disputes 16

Egypt: Seeing the Opportunity presented in a Crisis A Full-Fledged Vision : The Goals Current SituationEconomic Goal to be achieved by 2011 GDP grows at 3.8% (2009 estimate) GDP grows at 7% Gross Fixed Investment accounts for 19% of GDP Gross Fixed Investment reaches 25% of GDP The incidence of poverty currently represents 19% of the total population Poverty incidence not to exceed 20% 17

Egypt: Seeing the Opportunity presented in a Crisis A Full-Fledged Vision : The Means 1. Inject at least LE 25 billion annually from 2009 to 2011 in order to stimulate demand. 2. Use monetary policy to determine interest rates while ensuring a reasonable balance between economic growth and inflation. 3. Execute a multi-faceted plan aimed at creating the ideal investment climate for investors. 4. Enhance domestic credit growth 18

What role ILO? Initiation of interagency missions at the country level to work out the details of employment- intensive growth in the post-crisis period 19