Egypt, The Troubled Giant
The case highlights some of the key factors that have enabled Egypt to grow over the last five years. Egypt is the most populated Arab state. More than 75 million people live there. Starting in 2004, Prime Minister Ahmed Nazit was able to pass into law many economic reforms that lowered tariffs, cut taxes, and the deregulation of trade that allowed Egypt to create billions in foreign direct investment in the economy. Many projects began in Egypt that built offices for large American companies to operate in as well as a huge construction project on the Suez Canal. This growth kept Egypt??™s growth parallel with many other emerging economies.
At the end of 2008, like many other countries, Egypt??™s economy plummeted. This crushed the Egyptian people. The difference between the rich and the poor citizens is significant. This difference became the driving force in the divide of the country. The political and social pressures began to crumble the countries framework. The government has become corrupt and even the elections were ???rigged??? to favor the current President (at that time) Hosni Mubarak. Leaders opposing the President were harassed and falsely imprisoned.
1. How would you describe the economic policy that Egypt implemented during 2004??“ 2008 Do you think that this policy helped to boost Egypt??™s growth rate Why
I would describe Egypt??™s economic policy during these years as mixed. There was a great deal of deregulation of trade as well as tax breaks implemented, however, the then President still remained in overall control. Yes, I believe that the Egyptian grow rate was boosted during this time. Because of all of these changes, companies like Microsoft and many Egyptian technology companies were allowed to conduct business in the country. This created a large increase in the money coming into as well as out of the country. This created growth in the Egyptian economy.
2. How vulnerable is the Egyptian economy to a slowdown in global economic activity such as that which occurred in 2008??“ 2009
I believe that Egypt is extremely vulnerable to economic slowdown. The country gets a large portion of their annual revenue from tourism and expatriate workers. Almost any change in the global economy could change the country forever. I believe that the effect will change primarily the ???lower??? class of people. With the majority of citizens currently living in poverty again, any decrease in the economy will make day to day living impossible.
3. What are the potential risks inherent in Egypt??™s current political system What is the best case scenario going forward What is the worst- case scenario
At the time that this case was written the primary potential risk was the corrupt government being overthrown. I believe the best scenario going forward is for Egypt to become more of a democratic society where the elected officials care about all of the citizens. The worst-case scenario would have been for the country to remain on the same path of increased political corruption. ???Where the people are disenfranchised, one can easily envisage a situation where economic turmoil spills over into the political arena, destabilizing the country and setting it on an uncertain future path???. (p. 88)
4. All things considered, is Egypt an attractive market for international business What advice would you give to a multinational enterprise considering investment in Egypt
At this point in time I believe that Egypt is a prime market for international business. The country is in a period of positive change. Corruption is being overthrown and the people are ready to become self-sufficient. The advice that I would give a company considering investment is to research those in power and the direction they are taking the country. Change is already underway and a more democratic environment is emerging. This can foster additional benefits for companies willing to invest.