The reform problem: What Oman (and others) would possibly study from Egypt

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First up: Oman’s regular, if bumpy, transition

Sultan Haitham bin Tariq Al Said inherited an economic system in hassle when he succeeded Sultan Qaboos in January 2020. Oman’s gross home product had contracted by 0.8% in 2019, burdened by a bloated paperwork, huge debt and deficits, and low oil costs. And then COVID-19 hit.

Oman has been praised for its dealing with of the pandemic. And regardless of COVID-19, Haitham has principally caught to a difficult reform program that was simply getting began underneath his predecessor. There have been compelled retirements within the civil service, marking a shift to a leaner, youthful and extra technocratic authorities. A price added tax has been launched. The authorities established two new businesses, the Oman Investment Authority, to enhance administration of public property, and Energy Development of Oman, to manage and finance investments in vitality. Sebastian Castelier has the story right here from August 2020.

While Oman’s economic system contracted by a pointy 6.4% in 2020, the contraction was much less extreme than anticipated. This yr the economic system is anticipating modest development of 1.8%, in keeping with the International Monetary Fund, and subsequent yr it’s on monitor for a strong 7.4%, the best IMF projection for the area.

The achieve comes with ache. A dramatic program of presidency downsizing and austerity through the pandemic have triggered standard backlash. As Castelier experiences this week, “hundreds of job seekers” protested in main cities throughout Oman final month in response to excessive youth unemployment and perceived corruption.

“The protests,” Castelier continues, “met with a heavy presence of security forces and arrests of demonstrators, prompted a swift policy reaction from Sultan Haitham, who acceded to the throne in early 2020. The ruler announced on May 25 that 32,000 full and part-time government jobs would be created.”

The job creation program could also be a obligatory short-term repair given the dislocations brought on by the reform applications to stave off unrest, and to strengthen the security internet strained by COVID-19. The query is whether or not Oman can stick with a demanding austerity and diversification program because it weathers the post-COVID restoration. 

And that brings us to Egypt.

IMF once more praises Egypt’s “resilience”

While Egyptian President Abdel Fattah al-Sisi was busy engineering a cease-fire within the Israel-Hamas battle, the IMF lauded his nation’s “robust efficiency and dedication” to “maintaining macroeconomic stability during the pandemic while protecting necessary social and health spending and implementing key structural reforms.” That steadiness is what Oman is looking for, too.

“Egypt’s economy has shown resilience, with the impact of the COVID-19 crisis mitigated by the authorities’ swift, and balanced policy response,” the report added, noting that “all structural benchmarks were met including further advancing reforms related to fiscal transparency and governance, social protection, and improvement in the business environment, while continuing efforts directed towards reducing debt vulnerabilities and creating more budget space for priority spending.”

Egypt’s economic system was alone within the area — and one of many few on this planet, together with China — which truly grew through the pandemic by 2.8% in 2020/21, with a projected development of 5.2% in 2021/22, in keeping with the IMF. This is particularly stunning given Egypt’s reliance on “contact” industries resembling tourism, as we wrote right here in April.

The IMF after all famous uncertainties related to the lingering pandemic and the necessity to for Cairo to remain on target, however the report is yet one more signal that Sisi has circled a precarious economic system in about 5 years. His self-discipline, coupled with an consciousness of the social prices of reform, might show a mannequin for different nations in transition, like Oman.

Egypt additionally increasing financial ties … together with with China

Egypt additionally has benefited from expanded regional and worldwide commerce and financial ties. Muhammed Magdy experiences on how Egypt is deepening financial ties with Iraq by constructing bridges in Mosul. Cairo has promised $500 million in reconstruction support to Gaza, the place it expects to realize as properly, as our correspondent experiences right here. Last month Egypt leveraged its quota with the IMF to assist Sudan repay a few of its excellent debt, as Rasha Mahmoud experiences, an indication of Cairo’s deepening financial, political and safety ties with Khartoum.

Ahmed Gomaa writes right here about how Egypt is also rising cooperation with China, together with within the training and satellite tv for pc fields, and George Mikhail experiences right here on Cairo turning to Beijing for recommendation on water administration, given the prospect of a disruption in water from the Nile River due to the dispute with Ethiopia, over the Grand Ethiopian Renaissance Dam.

As a small economic system, Oman’s financial future can also be linked to regional engagement, together with and particularly via the Gulf Cooperation Council (GCC). The GCC is doubtlessly poised to learn from even additional commerce and integration, now that Saudi Arabia, the UAE and Bahrain (in addition to Egypt, which isn’t a GCC member) have buried the hatchet with Qatar, with the conclusion of the Al-Ula Declaration in January. 

Karen Young wrote right here in March about how COVID-19 has accelerated traits in tax coverage, labor market regulation and immigration coverage amongst GCC states, along with alternatives supplied by the Abraham Accords signed by the UAE and Bahrain with Israel.

During its 40 years, the GCC has efficiently established a customs union and widespread market and enabled Gulf residents to travel with out restrictions, as Castelier wrote right here, however there could possibly be additional benefits in collective motion in addressing a attainable post-oil future, and emphasizing renewable and nuclear vitality, and in coping with China, as Sabena Siddiqui writes right here and right here.

Where Egypt differs: Complexity and measurement

Egypt’s standing as the largest inhabitants nation in North Africa, and its linchpin function in lots of diplomatic issues, makes it completely different from smaller nations like Oman, after all.

In addition to the potential water provide disruption over the Grand Ethiopian Renaissance Dam, which we report on right here, Egypt can also be looking for to get well from crises over the Suez Canal and the nation’s home rail networks. 

Egypt signed an settlement final month with the African Development Bank for $177 million to enhance its railway system, as Hagar Hosny experiences. Over 4 weeks starting in late March, there have been 5 prepare wrecks that killed 43 individuals and injured 319. Egypt’s rail system is the oldest in Africa and in pressing want of restore.

It didn’t assist that the prepare crashes occurred across the time that navigation within the Suez Canal was blocked when the Ever Given cargo ship ran aground on a slender passageway of the Suez Canal. It took six days for the passage to be cleared and was a front-page story around the globe.

Mohammad Hanafi experiences, nevertheless, that canal revenues have been $553.6 million in April — probably the most ever. Egypt reportedly now has huge locomotives and dredgers prepared for any future disaster.

Lessons discovered?

Egypt’s financial transition is probably not a one-size-fits-all template for the area’s fragile economies, however there are clearly some takeaways for nations resembling Oman, which regardless of final month’s protests, appears on a optimistic trajectory.

IMF-sanctioned reform packages almost at all times embody a level of austerity to scale back bloated bureaucracies and budgets, improve transparency, and permit the often undersized personal sectors to create jobs — all whereas not utterly undermining the social security internet.

This has been Egypt’s path for 5 years, with outcomes. Oman can also be on an identical path.

The individuals, understandably, need aid from financial mismanagement sooner quite than later, however progress, when it comes, takes years. Reform and austerity applications are hardly ever standard with the road, and outcomes don’t come quick, they usually don’t come with out some hardship and dislocations. 

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