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Egyptian minister: liberalization will bring political change

The liberalization of the Egyptian economy will ultimately affect the country's political sphere as the less privileged gain an economic stake in the system and want to expand their role in it, said Egyptian Finance Minister Youssef Boutros Ghali in a speech at the Cato Institute in Washington on Thursday.

The result of the diffusion of power that comes from opening up markets to those with skills can translate into a desire for strong participation in political life, Boutros Ghali said during a speech on "Economic Reforms in Egypt" at the libertarian think tank.

Boutros Ghali said that the less privileged must have a stake in the system to begin to want to participate.

"They must benefit from the power of the markets," he said. "It translates naturally. We want this process to happen. Democracy is an acquired taste. You are not born with it. You have to learn to tolerate democracy."

"A market economy pushes and establishes this," he said. "As a market system takes root and develops, it pushes the diffusion of power" to the less privileged.

He also said that the second democratic election, not the first one, is the most important in establishing "institutions that will preserve the process."

Establishing a market-based economy where information flows freely and where people participate will preserve a democratic process "when it happens," he added.

The Egyptian government began an economic reform process in the 1980s, he said. In 1993 he joined the government as one seen by many as having "amusing ideas" as an economic reformer, but today, he said, he is "no longer the lone reformer."

The lengthy, time-consuming process of economic reform in Egypt must come from the ground up, he said, and some in Egypt today "want to go further and faster than I think they can."

The Egyptian economy has grown in recent years from three percent to four percent to five-plus percent, and in the first half of the current fiscal year recorded 7.1 percent growth, which is projected to be at seven percent for the remainder of the fiscal year, he said.

This growth is a result of increased investments, consumption and exports, he said, and Egypt hopes economic growth will reach eight, nine or ten percent in the next five years.

Investors are finding in Egypt that "momentous things are happening on the political side, but the press does not see it," Boutros Ghali. He cited Egyptian balance-of-payment growth at between 30 and 40 percent, and said non-oil exports have grown in the last three years by 46 percent.

The Egyptian exchange rate is stable with "large capital inflows," and 22 percent of government bonds are now held by foreigners, he said.

The Egyptian national budget still exhibits symptoms of the pre-2004 period marked by deficits projected at 5.5 percent of Gross Domestic Product this year, and measures must be taken to correct this, he said.

However, the government is increasing transparency and ease of access in its budget, and has reduced the income tax by half - from 42 percent to 20 percent, he noted.

The "changed philosophy" is apparent in Customs, which is no longer the most "complex and obscure in the world" and which used to be "a breeding ground for corruption," he said. Egypt also is reforming subsidies and pension systems based on modern methods, he said.

Four principles governing the economic reform are "managing contradictions" to improve governance of the system; trying to build "a system of tensions"; trying to advance "irreversibility"; and advancing "sustainability," he said.

Egypt must maintain and guarantee an orderly process of mechanisms for contract dispute settlement, Boutros Ghali said.

In this vein, the Egyptian property registration law has been reformed to cut registration fees from 12 percent of the value of property to under 250 dollars, he said.

The Egyptian tax law is "now legible" thanks to help from the International Monetary Fund, World Bank and US Treasury Department, he said.

Another key component of economic reform in his country is the "need to stop state predation," he said. Egypt has gotten rid of two-thirds of its stamp taxes, a "nuisance taxation" inherited from British tradition, he said, and Egypt hopes to end the rest within a decade.

Marseille,05 03 2007
Redaction
The Daily Star
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