Egypt’s next president, sure to be Abdel Fattah al-Sisi, will have a monumental task handling Egypt’s economy.
More bad news was reported yesterday regarding the tourism sector. Al Ahram reported that tourist visits were down 32 percent, but that figure actually understates the problem. Visits were also shorter, so the number of tourist visitor nights was down 43.6 percent.Tourism revenues were down 43 percent overall.
Tourism should be a bright spot for Egypt, and the new government should do all it can to restore visits and revenues. It is hard to see what other sectors could give the economy a quick lift, and over time it’s hard to see Egypt competing well with low-wage countries in Asia for many manufacturing sectors. Moreover, as I’ve noted here before, the Egyptian Army controls too much of the Egyptian economy--a likely barrier to movement towards a free market.
When the army seized power in Chile in 1973, it soon combined a very repressive political approach with a free market economic model that has paid dividends for Chileans now for 40 years. How was it that Pinochet knew anything about economics, and realized what he must do to make Chile prosperous and lift so many out of poverty? I once asked a Chilean economist, one of the "Chicago Boys," the Chilean economists trained in free market economics at the University of Chicago and who were advising Pinochet, that question. He replied that Pinochet had known and understood nothing about economics, as one might expect. But his economic advisers told him that the Left, especially the Communist Party, hated free market economics and would surely denounce him if he adopted their "Chicago Boys" proposals. That was enough, the story went: if the Reds hated it, Pinochet thought it must be the right approach. Whatever his reasons, he adopted immensely successful policies.
General Sisi does not seem to have any "Chicago Boys," but he badly needs some. He will enter office on a wave of good will and could make some important moves toward freeing up the Egyptian economy. If he lets the opportunity pass, if he lets the moment slip by while he attends to things that seem more important, he will be dooming Egypt to more years of economic stasis and millions of Egyptians to poverty. Here’s hoping that from Chicago or the Gulf donors or the IMF and World Bank, he is getting good advice--and takes it.