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					 A Portrait of
 The Squander of Socio-Economic Rights
in the Implementation of the Government
            Development Plan,
Book: A Portrait of Egypt: The Squander of
Socio-Economic Rights in the Implementation
of the Government Development Plan, 2002-

Publisher: Budgetary and Human Rights Observatory
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    July 2002 witnessed the start of the Egyptian government’s
move towards participatory planning, i.e., the participation of the
government and the private sector in implementing a five-year so-
cioeconomic development plan. Roles were determined and con-
firmed by both the Planning and Finance Ministers and agreed to
and assigned to the relevant parties.
     Participatory planning is also known as indicative planning.
This type of planning was identified in capitalist countries where
economic matters are dependent on market forces and indirectly
influencing the private sector, in its capacity as the main economic
player. In this sort of planning, the role of the planning institution
lies in preparing a complete and coordinated plan and submitting
it to decision-makers so that they may use it as a guide for making
decisions in line with the goals laid out in the plan. The aim behind
it is to present a complete picture to active parties (the public and
private sectors) in order to show them what will happen in light of
certain suggestions and providing them with the possible choices
without forcing them to take a certain path.1
    This sort of planning does not suit the reality of developing so-
cieties, like Egypt, where the governmental sector operates along-
side the local public and private sectors, the foreign private sector,
and the cooperative sector. In addition an official sector coexists
alongside a widespread unofficial sector where modern, traditional

1 See Dr. Mohammed Fathi Qassim,

and semi-traditional means of production operate in tandem, re-
vealing the means of organization, administration and behavior.
Usually, the authority to force the implementation of the goals laid
out in the plan is limited to the governmental and public sectors
only. When it comes to the private and cooperative sectors the
planning and governmental authorities can only employ the carrot
and stick strategy, such as granting tax breaks and tariff protec-
tion and so, in addition to other administrative measures. Indica-
tive planning can be defined as the type of coordination by which
the government issues one, or several, economic and social plans
which clarify the roles of the public and private sectors in achieving
societal goals. In indicative planning, there is a greater reliance
on the private sector and a greater emphasis on those activities
which drive sustainable development at faster rates, realizing that
the tools of the economic policy to be employed and the sorts of
incentives to be used in order to encourage certain activities are
not a social or economic priority. In other words, the first ones to
benefit from development will be those heading private projects,
with the related possibility that it will benefit other segments of so-
ciety, even though this last is not a given especially in light of the
government’s modest performance rates.
    This report will attempt to shed some light on the experiment
which began with the 2002-2007 five-year socio-economic plan.
The aim will be to assess this type of planning by comparing the
actual outcomes of the plan with the goals that were set, focus-
ing particularly on budget analysis, and the extent to which socio-
economic rights have impacted this type of planning and this type
of spending.
   The report is divided into three chapters:
   The first chapter addresses the five-year socio-economic plan

as proposed by the government—represented in this case by the
Planning and Finance Ministers—to the People’s Assembly (the Par-
liament). The second chapter will detail the debates and discus-
sions of parliament members and their opinions on this plan, while
the third chapter will analyze the plan’s budget and the effect it has
had on socio-economic rights through public expenditure policies.
    The researchers relied on the analysis of the minutes of par-
liamentary meetings during the five year period addressed in the
study, from 2002 to 2007, in addition to the volumes on the general
budgets issued by the Egyptian Ministry of Finance, as well as a
few documents issued by the Ministry of Economic Development,
which was at the time the Ministry of Planning.
   This report was prepared by the Budgetary and Human Rights
Observatory (BAHRO) Rights and Budgets Program Director, Ahmed
El-Hawit, Program Researcher, Ahmed Abd el Fattah. BAHRO Ex-
ecutive Director, Helmy Elrawy edited the report and prepared it for
publication, while Susan A. Nour provided the English translation.
   This report was the fruit of a collaboration with the United States
National Endowment for Democracy, to which the BAHRO team
would like to extend its sincere thanks and appreciation. This re-
port would not have been possible without their support.

Chapter One
The 2002-2007 Socio-Economic
Development Plan
    The Planning Minister opened his statement before the Parlia-
ment by saying that the plan “was one link in a continuous chain
of five-year socio-economic plans which represent the continua-
tion of one of President Mubarak’s most important achievements in
building a complete vision for the modernization and development
of Egypt over the past two decades. It is a serious attempt to for-
malize the role of planning in light of market economics.”1
    In his statement, the Finance Minister noted that previous plans
had not been fully realized as indicated by the fact that public rev-
enues (specifically sovereign revenues) had not grown at the same
rate as public expenditure.2
    The Planning Minister highlighted the private sector’s full par-

1 Planning Minister>s statement on the first year (2002-2003) of the 2002-
2007 Five-Year Plan, People>s Assembly, Eighth Legislative Session, Second
meeting, Meeting Minutes #76, page 11, 19 May 2002.
2 Finance Minister>s statement on the first year (2002-2003) of the 2002-2007
Five-Year Plan. See previous reference, page 3.

ticipation, not only in implementing features of the plan but also in
negotiating and agreeing to the targets to be achieved and to the
distribution of roles between the government and the private sector
(as partners in development), describing this sort of cooperation as
a tool of participatory planning.
Part one: Evaluating the Fourth Five-Year
Plan (1997/1998-2001/2002)
   The Minister presented his evaluation of the Fourth Five-Year
Plan (1997/1999-2001/2002)
    Overall economic growth rates from year to year fell short of
the targeted levels. The average growth rate for Gross Domestic
Product (GDP) was 4.5% as compared to the set target of 7%. Invest-
ments—as a percentage of GDP—decreased by 4.1% from approxi-
mately 21% in 1997/1998 to 16.9% in 2001/2002. This explains the
decline in overall economic growth. These investments were un-
evenly distributed across the country. For example, the greater Cai-
ro region received 32% of total government investments, amounting
to (Egyptian Pounds) EGP 111 billion, while Upper Egypt received
just 23.5%. Another target of the plan was to balance the Balance of
payment3. However, at the end of the five-year plan the deficit was
EGP 7.8 billion, amounting to 2.6% of the GDP.
Economic, Social and Cultural Rights:
Right to education:
  Public expenditures on education services were approximately
EGP 15.6 billion, which is double that of the first five-year plan of
3 This indicator measures the State>s financial capabilities and is divided
into the trade balance, the services balance, and the current transactions.

1982-1987. Expenditure on education increased from 3.2% to 5% of
the GDP, which translated into an increase of about 4,688 schools.
The number of universities also increased.4 The rate of secondary
school enrollment rose to 91.5% and 24% for higher education en-
Right to health:
    During the fourth Five-Year Plan investments approximately
EGP 12.4 billion was invested in health, which is 14 times the in-
vestments made in this area during the first Five-Year Plan. This
reflected on indicators in this area in the following way:
    - 99% of children were vaccinated.
  - Pre-natal care services were extended to 67% of pregnant
   -The number of people with health insurance coverage in-
creased from 23.3 million to 28.5 million.
     - The number of people who received state-funded medical care
increased from 69,500 to 591,000, totaling approximately EGP 1.2
Right to work:
    The workforce increased by about 2.4 million at an annual rate
of increase of 2.6%, resulting in a labor force of 19.7 million. The
plan aimed to decrease the rate of unemployment from 8.8% in
1996/1997 to 7.3% in 2001/2002, but a slowing in economic growth
and inelasticity of the labor market resulted in a 9% increase in
unemployment in 2001.
4 A large number of existing schools were split into two schools and
renamed. In addition, regional branches of universities were transformed into
independent universities, and the process of establishing private universities
was made easier.

    As for public utilities and infrastructure, there was an increase
in drinking water capacities, water mainlines were increased, as
were the capacities of waste water and treatment plants.
Part two: Development challenges and
justifications for the shortcomings of the
fourth Five-Year Plan
    After publicizing the above indicators, the Minister emphasized
that there are a number of challenges facing development efforts
which must be addressed in the implementation of the next five-
year plan. Those challenges are as follows:
1-The necessity of increasing the Savings
    The fifth Five-Year Plan aims to increase the savings rate from
12% (of the GDP) in the first year of the plan to 17% in the final year
of the plan in order to finance investments during the fifth Five-Year
plan. A ministerial committee was formed in order to study and de-
termine ways of mobilizing local resources and increasing national
savings. This suggests that the government does not have a clear
vision or a specific policy for developing resources or attracting
investments in order to carry out projects under the Five-Year Plan,
but is relying on the savings and deposits of citizens, meaning that
the government will compete with the private sector for loans. This,
in turn, impacts the ability of the private sector to access savings in
order to finance its portion of investments under the plan.5
2-Reducing the deficit in the Balance of payment
    Another objective of the fifth Five-Year Plan is to narrow the gap
5 The National Bank of Egypt, State Budgets for the 2005-2006 fiscal year,
Economic Bulletein, Volume 2, 2005.

between the import and export of goods and services from approxi-
mately EGP 25.2 billion in 2000/2001 to EGP 13 billion in the final
year of the fifth Five-Year Plan. In order to achieve this, the plan
aims to increase exports by 12% annually, while increasing imports
at a slower pace of approximately 5% or 6% annually.
    As is well-known fact, the matter which all consecutive govern-
ments have failed is drafting targeted economic policies that would
lead to an increase in exports in order to achieve a surplus in the
trade balance to be added to the GDP. In fact, they have not even
been able to equalize the trade balance.
3-The importance of improving production stan-
    It is absolutely necessary to improve the efficiency of the means
of production (labor, land, capital, organization and administration).
This can be achieved by optimizing the use of available resources.
That is what sets societies with high rates of development apart
from other societies.
    The Minister did not detail what procedures and programs the
government would implement in order to better control stock, for
example, with the aim of optimizing the use of available resources,
or any other measures for increasing productivity.
4-Expanding the base of human capital and en-
hancing manpower capabilities
    The human element is an important component of moderniza-
tion programs. Therefore, it is essential to have full absorption of all
children and youth in all pre-collegiate educational stages, and to
improve the quality of teaching, and improve the quality of educa-
tion through continuous development. This continuous development
can be achieved by developing skills and production capacities

through training, improving labor skills through the modernization
of training centers and developing their programs, and ensuring
that vocational training centers are available in all governorates.
    Once again we ask what specific procedures have been taken
to improve manpower capabilities, but have found no answer in
the Minister’s statement other than words without substance that
have been repeated by all ministers consecutively without clear
standards for evaluating performance. This has resulted in a fail-
ure to achieve the objectives of the previous development plans
according to the aforementioned statement made by the Finance
5-Bridging the technological gap and catching up
with the information revolution
     It is necessary to take steps that will increase knowledge devel-
opment. The syllabi for basic academic subjects must be reviewed
in light of recent developments in knowledge, and increasing fund-
ing for research and development. There must also be coordina-
tion between those programs and higher education programs, and
linking between the plan’s needs and requirements for scientific
    The Minister did not clearly specify what steps were necessary
in order to raise the level of knowledge development, assuming that
there is such a thing as knowledge development in the first place.
6-The population problem
    From the government’s perspective, this problem continues to
pose great challenges and erode the achievements of development
efforts despite a 2% decrease in the population growth rate. The
aim of the plan is to decrease the population growth rate to 1.5% by
the final year. This issue is one that successive governments have

consistently relied on in order to justify the failure of their public
Part three: The goals of the fifth Five-Year
Plan 2002-2007
   After highlighting the challenges facing development efforts, the
Minister presented the goals out of which the fifth Five-Year Plan
was created.
The first target: Improving the quality of
life and the standard of living
   This is to be done by improving and expanding the provision of
basic services such as education, health, drinking water, sanitation
and achieving better results than in previous periods.
    The aim of the fifth Five-Year Plan (2002-2007) is to achieve the
    - Reduce the illiteracy rate from 30.6% in the base year to 27.4%
in the first year of the plan and to 22.6% in the final year of the
    - Absorb all children who have reached compulsory school age
into schools over the course of the current plan, so that the number
of children enrolled in the elementary stage is 1.56 million students
in the first year of the plan and approximately 1.63 million by the
final year. This would increase the rate of absorption from the cur-
rent 97.5% to 100% during the five years of the plan.
     - Increase the rate of enrollment in pre-collegiate public schools
to 95.7% by the end of the five-year plan as compared to 93% in the
first year, and 91.5% in the base year.

    - Decrease classroom density (teacher-to-student ratio) in the
pre-collegiate stage from 40.7 students per class in the base year
to 39 students per class in the first year of the plan, to 35.8 students
per class in the final year of the plan.
    - Increase the number of students accepted into higher edu-
cation institutions and universities to 507,100 students (male and
female) in the final year of the plan, as opposed to 407,300 students
in the base year so that the number of students enrolled in one year
will amount to approximately 2.28 million. This would mean a 30%
increase in the enrollment rate in 2006/2007 as opposed to 22.9%
in 2002/2003.
    - Increasing the number of students (male and female) accepted
into Al-Azhar University from 126,000 in the base year to approxi-
mately 134,800 by the end of 2006/2007 so that the total number
enrolled will amount to more than 620,000 students in that year.

   As for improving the quality of education, technological ser-
vices will be extended to at least 7,500 preparatory schools. Such
services will also be provided to all secondary schools and a large
number of elementary schools within ten years. These services will
be provided in order to incorporate modern education technolo-
    Through the plan, national programs will be mobilized for train-
ing, employing and certifying youth who have recently graduated
from training centers. The programs will also be developed, teach-
ers will be trained, and vocational and special training centers will
be established in governorates where such centers do not exist.
In addition, the needs of the labor market requirements of various
professions will be determined.

   The aim is to improve on a number of health indicators:
   - Reduce the birth rate to 25.2 births/1,000 population in the first
year of the plan, and then to 21.2 births/1,000 population in the final
     - Reduce the mortality rate to 6.1 deaths/1,000 population in the
first year of the plan, and then to 5.9 deaths/1,000 population in the
final year.
    - Reduce the maternal mortality rate from the current 38 deaths
for every 100,000 births to 33.2 deaths for every 100,000 births by
the end of the plan.
   - Increase the number of beds to approximately 144,100
beds in the first year of the plan to 151,500 beds in the final year
    - Register a steady increase in the number of public and munici-
pal hospitals, village hospitals, and rural health clinics.
   - Increase in the number of physicians, pharmacists and nurses
as needed, and to reach the targeted increase in the number of
hospitals, clinics and beds.
    - Increase the scope of care offered in rural areas and increase
the number of beds from 13,200 in the base year to 14,000 beds in
the first year of the plan, and 18,000 beds by the end of the plan.
3-Housing, construction and public utilities
    - The target is to build 938,000 residential units over the course
of the five-year plan, of which 182,000 will be built in the first year
(75% of which will be low-income housing, and about 20% middle-
income housing).

   - Lay about 2,630 more kilometers of water mains.
    - Dig 200 more wells with a total capacity of 45,500 cubic me-
ters per day.
   - Establish 49 water purification plants with a total capacity of
672,000 cubic meters per day.
   - Lay approximately1,500 more kilometers of sanitation pipes.
    - Build 15 treatment plants with a total capacity of 906,000 cu-
bic meters per day.
   - Establish 4 more central telecommunications offices and ex-
pand 6 others for a total capacity of 41,000 lines.
   - Extend the main electricity grid and sub-grids by approxi-
mately 18,400 kilometers.
   - Pave approximately 2,700 kilometers of roads.
    - Another target of the plan is to increase available drinking
water capacity by about 50% of the current capacity in order to
reach 26 million cubic meters/day by the end of the plan. That is an
increase of approximately 8.4 cubic meters/day of the current ca-
pacity, 75% of which is concentrated in the governorates that make
up great Cairo and Alexandria. This will require an approximately
25% increase of network pipelines in order to reach a total of about
31,000 kilometers worth of pipelines by the end of the plan. This
is an increase of 6,300 kilometers on the current network, 82% of
which is currently concentrated in Cairo and Alexandria.
    - Increase the drainage capacities available in the sanitation
system by approximately 75% in order to reach approximately 18
million cubic meters/day by the end of the plan. This would be an
increase of 775 million cubic meters/day on the current capacity,
with 82% of it directed to governorates outside of greater Cairo and

   - Increase purification capacities by about 80% to reach approx-
imately 15 million cubic meters/day by the end of the plan.
    - The main sanitation network will be extended by approxi-
mately 9,100 kilometers over the course of the plan, with approxi-
mately 1,200 kilometers completed within the first year. Based on
the above, the per person rate of sewage drainage will increase
from the current 156 liters/day to 247 liters/day by the end of the
plan, for an overall 58% increase. This means that the ratio of sani-
tation drainage to drinking water capacity will increase from the
current 58% to about 79% by the end of the plan.

The second target: Poverty alleviation
   The goal here is poverty alleviation, the provision of social ser-
vices to poor families and the realization of socio-economic justice
both across regions of Egypt and across social strata. (This goal
was set verbally without any mention being made of specific poli-
cies or programs to be implemented in order to realize this.)
The third target: Increase employment opportuni-
ties and confront the unemployment problem
    This is to be achieved through the planned goal which aims to
increase the number of workers from 19.750 million in 2001/2002 to
21.359 million in 2006/2007, an increase of 1,100,000 million em-
ployees. The plan also aims to decrease the number of unemployed
to about 3,409,000, which will bring the unemployment rate down
from 8.7% in the first year to 5% of the labor force in the last year of
the plan.
The fourth target: Increasing the economic growth

    The aim is to increase economic growth rates by an average
of 6.2% over the course of the five-year plan, registering a 4.6% in-
crease in the first year, resulting in a GDP of approximately EGP
415 billion. This will increase the average per capita of the national
income to approximately EGP 6,030.
The fifth target: Regaining economic balance
     This will be achieved through a coordinated package of fiscal
policies and monetary tools in order to spur growth rates and re-
alize a surplus in the current transactions balance of about EGP
0.2 billion. This is compared to a deficit of approximately EGP 11
billion, and reducing the deficit in the trade balance from EGP 38.8
billion this year to approximately EGP 38 billion in 2002/2003, and
finally to less than EGP 35 billion by the end of the plan.
The sixth target: Increased participation in and
benefit from development for women
   The effects of this will not only be reflected on women but also
on the economy as a whole and on the level of socio-economic
development. The plan aims to raise the level of participation of
women in the workforce from about 16% in the base year to ap-
proximately 20% by the end of the plan.
The seventh target: Provision of basic services to
rural areas and improving conditions in Egyptian
villages, particularly those deprived of services
    EGP 50 billion was allocated for development projects in villag-
es: 28% of which is allocated towards drinking water and sanitation
projects, with the aim of increasing the water network coverage to
92% (92% urban, 79% rural) by the end of the plan. The target is also
to increase the coverage area of sanitation networks to approxi-

mately 55% by the end of the plan.
The eighth target: Supporting the foundations for
state and citizens security
    The goal here is to develop and support the capabilities of the
armed forces and police apparatus, and to bolster the foundations
of legislation, litigation, and the rule of law. The Minister explained
that the resources available to be invested in the plan amount to
EGP 445 billion, allocated as follows: the governorates of Upper
Egypt will receive EGP 131 billion; greater Cairo will receive EGP
96 billion; the Sinai and Suez Canal zone will receive EGP 72 bil-
lion; and the East and West Delta EGP 146 billion. As for the various
sectors in the 2002/2003 plan the Ministry of Housing and Local
Development was allocated 30%, while 18% was allocated to the
Ministries of Education and Health, while approximately 7% was
allocated to the Transportation Ministry.
Part Four: The Fiscal Program of the fifth
Five-Year Plan
    In order for the socio-economic development goals of the plan
to be realized, fiscal programs were drafted and explained by the
Finance Minister in his statement before the People’s Assembly as
Program for employing recent graduates:
    EGP 1.200 billion was allocated to this plan. It will open up
17,000 job opportunities in the government at a cost of EGP 400
million, through loans for small projects and to complete the imple-
mentation of training programs for youth artisans.

6 Finance Minister>s statement on the first year (2002/2003) of the Fifth Five-
Year Plan (2002-2007), see n. 2.

Unemployment fund:
   This would benefit all workers who are laid off. It would be
funded by employers’ contributions of approximately 0.5% of an-
nual base salaries.
    1. Government employees’ salaries would increase by 10% of
the base salary, and the same would apply to retirees.
    2. The Government would repay its current and investment ob-
ligations, totaling EGP 31.1 billion.
    3. Significantly expand local industrialization through support-
ing local industry by giving custom duty exemptions of up to 90%
in some fields.
    4. Supporting farmers through rescheduling farmers’ debts to
Principal Bank for Development and Agricultural Credit by extend-
ing the repayment period to ten years, and by fixing the prices of
fertilizers with the government subsidizing the difference. In addi-
tion to which the purchase price of sugar cane will be raised by ten
Egyptian pounds per ton in order to fix the price of rationed sugar.

    In presenting the previous programs it became clear that cer-
tain considerations were not taken into account when the plan was
being put into place. The following are the most important: high
rates of inflation which affect the individual’s purchasing power; the
lack of on focus on reforming the structure of the industrial and
agricultural sectors, which could support the economy; solving the
issue of deficits in the balance of payment; limiting imports and
moving towards a state of production which would impact individ-
ual’s demands for goods inside the local market. This will in turn
be reflected in final consumption (public/private), which would as a
result increase the GDP and the per capita income and improve the
overall standard of living.
   Analysis of the plan’s fiscal programs revealed its modesty and
impracticality given the proposed targets:
     - The average monthly salary for available jobs in the govern-
ment apparatus is EGP 196. This brings home the first target of the
plan which is protecting those with low incomes. Skill transfer pro-
grams put into question successive government’s spending on ed-
ucation that has no future as the graduate finds himself in need of
retraining to be able to penetrate the labor market. In addition, the
unemployment fund deepened the unemployment situation and did
not resolve it because it is focused on those who already have jobs,
and not those who cannot find jobs. In other words, it encourages
those who are working to leave work. In the best case scenario, the
fund depletes resources because those who benefit from the fund
(i.e., former government employees) join the private sector, which
in turn is not conscientious about registering its employees within
the social security records.
    - The annual increase in wages is not at all in proportion to
the increasing in inflation rates which affects individual purchas-
ing power. It also naturally causes an increase in prices. All of this
points to the fact that past, current, and future governments do not
have real programs in place for governing and tying fair wages to
price increases, which would necessitate equal distribution of na-
tional income on various elements of society.
    - The program for settling government obligations—amounting
to EGP 31.3 billion—is considered the most massive financial pro-
gram, and points to a bloating of the government apparatus, as in-
dicated by the fact that this debt service represents approximately

22% of total public expenditure. In other words, this high level of
debt is the result of overspending during the implementation of pre-
vious budgets.
    - As regards the industrial sector, the government satisfied itself
with granting local industry exemptions from custom duties reach-
ing 90%, which was the best that the planners who were attempting
to push economic expansion could come up with. There are no pro-
grams for supporting basic industries nor are there any programs
for connecting industry with export or expanding into new markets.
This coincides with the continuous emphasis on selling the public
sector, especially the industrial ones.
   - As for the agricultural sectors—the most important sector in
Egypt—government programs are restricted to rescheduling farmers’
debts and subsidizing the price of fertilizers produced by a public
sector company, and increasing the sale price for sugar cane pur-
chased by the government from farmers by one piaster per kilo.

Chapter Two
The Plan and the Assembly

     This chapter will explore the People’s Assembly’s (Parliament)
discussions surrounding the plan proposed by the government,
as represented by the Minister of Planning and the Finance Min-
ister. The activities undertaken by the People’s Assembly include
the Parliamentary Planning and Budget Committee’s report on the
statements made by the Planning and Finance Ministers regarding
the whole plan and budget for the first year (2002/2003). These ac-
tivities also include discussions of the report by other members of
the Parliament. The following is a summary of the results of these
One: Planning and Budget Committee’s
    Following the Finance Minister’s speech, members of the Par-
liament agreed to pass the matter on to the Planning and Budget
Committee so that it could prepare a report. The Committee pre-
sented its report to Members of the Parliament after which Commit-
tee Chair, prominent businessman, Ahmed Ezz, presented a brief
follow up. After highlighting the most significant features of the bud-
get plan for the 2002-2003 fiscal year, the first year of the Fifth Five-
1   Eight legislative session, second meeting, session 90, 3/6/2002.

Year Plan (2002-2007), he explained that the current plan is the
second stage in the 1997-2017 Twenty-Year Plan. He highlighted
the following most prominent features of the Twenty-Year Plan:
    The aim of the Twenty-Year Plan is to move Egypt into the group
of high-income developing countries like Korea, Turkey, Malaysia
and Mexico. He noted that in the previous Five-Year Plan (1997-
2002) the plan was to achieve a 7% growth in the Gross Domestic
Product (GDP), but only 4.1% growth was actually achieved. This
was due to the fact that the expected amount of capital gains,
meaning profits resulting from investments, particularly private in-
vestments, was not met. He added that the most important chal-
lenges which Egyptian society must confront in implementing the
next five-year plan are:
   • A slowing in the rate of economic growth.
   • A decrease in the portion of investments made by the private
   • An increase in the deficit of the expenditure budget.
   • An increase in the population growth rate.

The Committee’s recommendations
   1. Wages:
    The Committee concluded that the wage structure and increase
in the number of government employees reduces opportunities for
administrative reform and detracts from opportunities to improve
   2. The Committee thinks the government should incorporate the

assets and liabilities from pension funds into the State Treasury,
requiring the Treasury to repay 100% of pensions, as opposed to the
70% repayment obligation it currently bears.
   3. Rethinking the role of the Treasury in financing those general
authorities that are being managed according to social objectives
and not economic ones.
    4. Increasing allocations towards operation and maintenance
even at the expense of public investments, seeing as the amount
that has been allocated for maintenance is just EGP 1 billion, for the
maintenance of a principle amounting to EGP 400 billion.
    5. With regards to the income side, it is necessary to fix the
imbalance between public receipts and public expenditures. This
requires the development of the taxation system and expanding
the taxpayers’ base. The committee is awaiting the presentation of
legislation for a comprehensive tax law in the coming session. It is
imperative to reassess existing tax exemptions in order to reach a
complete balance in receipts and expenditures.
   6. The targets set in the field of education are going to cost
much more than the available state budget so civil society should
contribute financially to the realization of educational targets.
    7. Specialized education should be offered to gifted and talent-
ed students. Experimental State Schools can help in the implemen-
tation of this idea and spending on such schools can come from
those bodies capable of doing so.
   8. The Committee supports the idea presented by the Health
Committee proposing that all medical institutions, such as hospitals
and so on, be placed under the patronage of an economic authority
or a holding company which would contract with the state health
insurance system. Funding would come from current government

expenditures on health insurance in addition to the premiums of all
those insured.
    9. If the private sector is expected to carry out 60% of invest-
ments and production then those in charge of planning should for-
mulate a very clear operational plan for the main economic tools
such as interest rates, exchange rates, the level of the custom du-
ties, as well as future legislation and laws, and privatization trends
so that the private sector can also draw up operational plans suit-
able to its expected level of responsibility.
    10. The Committee agrees with the local administrative coun-
cil on the necessity of transferring some of the responsibility for
planning and administering public funds to the local administrative
   11. The continuation of the Shorouk National Program for Rural
    12. The Parliament must hold public sessions for following up
on the implementation of the plan, similar to those sessions held for
monitoring the general budget.

Two: Assembly members discuss the plan and the
first year of its budget(2002/2003)
    After the Planning and Budget Committee’s report was pre-
sented, the plan was discussed over four sessions, from the 92nd
session to the 96th sessions of the second meeting of the eighth
legislative. It should be noted that the following points of discussion
are organized according to the synopsis of the discussion and not
according to the order of discussion. Members’ statements were

divided into subtopics, and the statements made by parliamentary
political party representatives will be presented first in order to dif-
ferentiate them from the other MPs. The members’ statements are
as follows:
Comments made by parliamentary po-
litical party members:
First: Comments by National Democratic Party
(NDP) parliamentary bloc representative2
   At the start of his statement, the MP confirmed that the current
plan is a continuation of the previous Five-Year Plan, and took
some time to make the following points:
    1—The issue of exports: The MP confirmed the importance of
exports in increasing GDP growth rates. In this context, he praised
the government’s and parliament’s efforts in making matters easier
for exporters by establishing the Ministry of Trade and Develop-
ment and passing a new law for special economic zones which will
direct all investment towards export.
    2—Zoning and residential development: It is hoped that the plan
will be able to achieve its target of increasing urban development
areas from 5.3% to 7% by 2007. This requires a continuation of poli-
cies which encourage such activity by creating new attractions,
and offering incentives to encourage citizens to live and work in
these new areas.
    3—Finding a solution to the unemployment problem and increas-
ing job opportunities: The MP explained that the unemployment
problem would only be resolved by the creation of real job oppor-
tunities. This is done by finding and creating a suitable investment
2 Statement by MP Hussein Megawar, 92nd session, Eighth Legislative Se -
sion, second meeting.

environment and applying a financial and monetary policy which
will encourage that. He also expressed his agreement with the pol-
icy of distributing cultivated land to new graduates, emphasizing
the necessity of putting into motion the suggestion to create an
unemployment fund.
     4—Taking care of social dimensions and expanding the social
security base: This is necessary despite the fact that the state
budget provided EGP 57.8 billion, or 41% of total benefits, for the
provision of citizens’ basic social demands such as education and
health, supporting and investing in pensions and the provision of
other social services, and employing recent graduates. This is in
addition to direct government subsidies for gas, petrol, and elec-
tricity. The MP added that “we think it is necessary to subsidize
these needs and to increase subsidies” and applauded the govern-
ment for rescheduling peasants’ debts with the Principal Bank for
Development and Agricultural Credit and raising the purchase price
of sugar cane and additional ten pounds per ton.
   5—The education and health sectors, etc: He applauded the gov-
ernment’s provision of the subsidies necessary for improving ser-
vices provided to citizens such as public hospitals, schools, road
works, medical treatment and the development of government ad-
ministrations. He also demanded:
   - An increase in allocations for the provision of medications
which are in short supply such as heart and diabetes medications.
    - An increasing in allocations for government-provided medical
treatment and improvement of services in state hospitals.
    - An increasing in allocations for building schools and develop-
ing teachers’ capacities.
   6—Investment and the budget deficit: Even though the MP ap-

plauded the strategy for supporting the private sector, he empha-
sized the importance of the state’s continued focus on necessary
projects and industries. He also emphasized the necessity of car-
rying out development of which the private sector is not capable,
with infrastructure projects at the forefront. He offered his vision for
resolving the budget deficit, totaling EGP 17 billion, which entails
developing public resources by:
   - Increasing export activity and limiting imports.
   - Creating an attractive tax system which lessens the burden on
investors and eradicates tax evasion.
   - Increasing the savings rate to more than 13%.
  - Encouraging foreign investment with the aim of attracting
emerging technologies.
  - Placing maintenance issues on a par with matters of invest-
    7—General domestic and foreign debt: Government debt—which
as of 30 June 2003 came to $195 billion—is not considered a danger
as it amounts to 54.2% of the GDP, while the foreign debt amounts
US$ 26.6 billion, or 45% of total debt, US$ 10 billion of which is owed
by the government. The draft budget includes EGP 38.8 billion of the
servicing the public debt and includes 27% of budget allocations.
This requires that:
   - Foreign loans should be as limited as possible.
   - Public expenditure should be controlled and regulated.
   - Overdue receivables should be taken from taxes and so on
and they are large.
   - Revenues from privatization should be allocated to settling

   - Priority should be given to ongoing projects which have neared
completion as not completing them is a waste of public funds.
    8—Economic bodies: The MP agreed with the government re-
garding the necessity of reforming its financing framework and its
method of operation, and agreed on the necessity of looking into
the transformation of some of these structures into economic bod-
ies which would contribute to social needs. He concluded his state-
ment by approving the plan and the budget.
Second: Comments by the New Wafd Party parlia-
mentary bloc representative3
    The MP praised the Finance Minister’s openness and praised
the clarity of the statement on the plan and practicality regarding
the capacities of budget resources. He then made the following
     1—Sovereign revenues: The MP advised that valuation of taxes
on incomes and profits was exaggerated and disproportionate to
the state of economic decline in which society lives. He stated that
if the tax authority tried to achieve its goals by pressuring finan-
ciers it would negatively affect the investment environment and
lessen returns.
   2—Current revenues: This year’s profits from the Suez Canal
amounted to EGP 4 billion, a 12% increase from last year, which is
suspect in light of international trade growth rates.
     3—Capital revenues: The MP expressed his doubt that EGP 5
billion would be acquired through privatization due to the faltering
of foreign investment in Egypt, the stalling of the peace process,
and the decline in the Egyptian economy’s credit rating. In addition,
3   Statement by MP Mounir Fakhry Abd el Nour, op cit n.8

while last year’s targeted gain was also set at 5 billion, only 0.5
billion was realized.
    4—Public expenditures: If wages represent 31.2% of total reve-
nues and 24.5% of total budget entitlements; and the burden of pub-
lic debt represents 34% of total revenues and 27% of total budget
entitlements; and subsidies and social security make up 11%, and
all told it amounts to 62.5% of total entitlements, this leaves only
37.5% of total revenues under the control of fiscal policy-makers.
This is a difficult state of affairs and the guiding principles set by
the Finance Minister are inadequate. We therefore demand of him:
    - The development of sovereign resources by proposing a new
tax law aimed at reforming and increasing the efficiency of the tax
system; expanding the tax base and lessening the burden on finan-
ciers, particularly the productive among them, as well the burden on
those with fixed incomes. We also disagree with the plan’s require-
ment that there be no new taxes, as any suggestion to impose new
taxes should be considered and evaluated in light of its economic
and social impact on the constant imbalance in the distribution of
income and wealth.
    - Prices charged by the economic bodies should be revisited in
light of the investments made in those bodies, what they receive in
terms of subsidies, and what they pay back in revenues.
    6—The unemployment issue: The unemployment problem will
not be solved by bringing more new employees into the govern-
ment system. Rather a ten-year plan should be implemented which
will decrease the cost of wages and increase the efficiency of the
administrative system.
   7—Increasing revenues by getting rid of unused state-owned

   8—The MP supported the idea of moving social security and pen-
sion funds to the state treasury with the aim of terminating dual
accounting between the funds, the Investment Bank, and the gov-
ernment. This would lessen the domestic debt service, which is at
least EGP 100 billion. He also accepted the budget.
Third: Comment by the Tagamua Party parliamen-
tary bloc representative4
    The respected member stated that the targets set in previous
plans had not been realized. Therefore, as long as the current plan
employs the same methods nothing new would be achieved. There
had been neglect in the analysis of what had occurred in the past 20
years with regards the composition of the industry and labor sector
and basket of goods for imports and exports. There had also been
neglect in the distribution of the national income among wages and
proprietary profits. The document also did not contain any indica-
tors on the progress of social issues, human resources, health, and
sanitation. In its report, the [Planning and Budget] Committee also
did not explain the stages, the required targets, and the connec-
tions between various matters in order to realize the development
program. He identified the problems confronting the program: un-
employment, low incomes, and the decrease in citizens’ incomes
and entitlements.
    The respected member objected to the methods of participatory
planning, stating that they are not suited to conditions in devel-
oping countries due issues with industrial frameworks, the income
structure, and poverty.
   The respected member also cast doubt on the possibility of
achieving the growth rates set in the plan based on the constant
4 Statement by MP Khaled Mohi el-Din, Eighth legislative session, second
meeting, session 94 on 9 June 2002.

economic decline of previous years. He stated that the reason be-
hind Egypt’s problems is that the Egyptian economic growth is not
progressing well, and therefore cannot accommodate this budget.
    As regards investment, the respected member noted the contin-
uous decline in rates of investment which began in the fourth Five-
Year Plan, noting that the current targeted 6% growth rate requires
30% investment. With the current plan’s weak rates of investment
this will lead to economic retraction and stagnation which would
last several years. In addition, raising the domestic savings rate
from 11% to 17% is no easy matter and realizing a 6% growth rate
with 17% savings requires requesting both domestic and foreign as-
sistance and loans. This necessitates a reconsideration of the mat-
ter. Not achieving the required rate of growth will prevent [us] from
confronting the unemployment problem and population growth, and
keep us from providing necessary services.
   As for investment allocated to sectors:
    The industrial sector: The respected representative objected to
doubling investments allocated for the privatization of the indus-
trial sector, and leaving the playing field open to the private sector
which had its chance to do something over the past twenty years
and did not achieve the necessary modernization and restructuring
of the industrial sector. Nor did the private sector bolster the indus-
trial base or solve the import problem. He demanded that the state
have a larger role in this area.
    The housing sector: The respected member explained that the
state had left 99% of investments to the private sector, which will
not solve the [housing] problem that is wrenching the country’s
poor, saying that the state has an obligation to intervene and eradi-
cate this problem.

    The health sector: He explained that allocations are few, even
the allocations for government-funded treatment. Despite the ef-
forts which have been made it requires greater support.
    The distribution of investments to governorates: The Suez Ca-
nal and Sinai received 16% of investments even though these areas
have just 3% of the population. Meanwhile, distribution was more
even in the Upper Egyptian governorates, which received 29% of in-
vestments and have 29.5% of the population. However, Lower Egypt
received 11% of investments even though 30% of the population is
to be found there. 5
    As for the budget, the respected member emphasized the ne-
cessity of solving the total deficit, which amounts to EGP 30 billion,
a 10 billion pound increase from the previous year.6 This would
require taking out loans, both from within and abroad, which would
in turn affect investment.
     Subsidies: In light of the rise in prices and population growth,
it is not possible to discuss subsidies because the budget only in-
creased by half a billion.
   Pensions: The pension system must be reformed so that the
government is not bearing 70% of the burden. The respected mem-
ber cited the above reasons for rejecting the plan and the budget.
Fourth: Comment by Arab Nasserite Party7 parlia-
mentary bloc representative
   The respected member began his statement by thanking the Fi-
nance Minister for his clarity and directness in presenting statistics
5 Greater Cairo, the Suez area, and Sinai represent 40% of the population
and received 60% of investments, while Upper and Lower Egypt represent 60%
of the population and received 40% of investments.
6 A change of 50%.
7 Statement by respected member Mohamed Haidar Baghdadi.

on the state budget. He then proceeded to make the following com-
     1—The amount of the public debt should not cause worries about
the ability to service the debt as a whole, which amounts to EGP 38
billion, which would affect the increase in the budget deficit.
    2—The government did not set a plan for dealing with the unem-
ployment problem even though the number of people retiring annu-
ally is 60,000 while the government has made commitments to hire,
170,000. This confirms the failure of the private, investing, sector,
the failure of training for transferring skills, and the failure of youth
loans to solve the unemployment problem.
    3—The EGP 650 million spent on subsidies for the population is
not reaching those who need it. The prices for apartments beings
built by the New Urban Communities Authority is high, and invest-
ments should instead by directed towards low-cost buildings. Fur-
ther, it is inappropriate for the authority to play the role of seller.
    4—The representative stated that his party did not support the
annexation of the liabilities and assets of pension and social se-
curity funds to the Finance Ministry, fearing that this money would
be funneled into losing projects under the guise of regulating the
ledger in order to stem the budget deficit and lessen local debt.
    5—Enhancing the volume of sovereign revenues to achieve EGP
72 billion in revenues. The estimated revenue was EGP 64 billion,
of which EGP 31 billion was taxes alone. Therefore, it is essential
that Suez Canal resources be enhanced along with petroleum, and
a solution be found for the rest of the economic bodies which are
being supported and losing approximately EGP 5 billion, with prof-
its of just EGP 0.6 billion.
   6—The government does not implement the decisions of the min-

isters’ council, the policy committee, or the legal committee, which
is the reason the representative gave for rejecting the budget.
Comments by other Members of Parliament
    The members’ discussions ranged from demanding projects
within their Constituency they represented and other general re-
quests. A few of these requests were directed towards policy
change or suggesting alternatives to currently enforced policies.
We have attempted to categorize the topics that were brought up in
the following points:
1—The plan and development:
   The represents contributed to the discussion on this matter with
a number of suggestions:
    - The Plan report did not explain what had happened over the
past twenty years in terms of developing the composition of the
production sector, nor did it address the wage structure and basket
of imports and exports in order to understand whether or not the
national economy has been moving in the right direction. The report
also neglected the topic of national income distribution of wages
and property income. It also did not present the extent to which
advances have been made on social issues. Nor did the document
explain the various stages of the plan and the various targets of
each of these stages over the course of the next twenty years and
how we would confront problems like unemployment, insufficient
incomes, and poverty.
    - The representatives questioned whether the government had
reviewed the previous plans, especially in light of the fact that the
no more than 62% of the targets set in the previous plan had been

    - The representatives expressed their surprise at the fact that
half of the projects set in the previous plan had not been imple-
mented in addition to which the budget deficit had continued.
    - They emphasized the necessity of staying within the limits of
the allocated budgets.
   - The members pointed out that the way in which the budget
had been prepared used the same methods that the British used in
preparing its 1931 budget. And even though the government had
announced the implementation of programmatic and performance
budget which was not clear from the current budget. The currently
operating entitlements budget lacks any monitoring mechanism for
evaluating what has been implemented in terms of project activities
and expenditures, and the extent to which the desired goals were
    - The representatives criticized the government for its failure to
implement its obligations towards some of the governorates (such
as Port Said, Suez and al-Sharqiyah), and the unresponsiveness
of the plan and the current general budgets to the demands sub-
mitted by ministries and authorities, such as the General Authority
for Roads and Bridges and Transport and the Urban Communities
    - The policies al-infitah [Anwar al-Sadat’s initiative for ‘econom-
ic opening’] should be reconsidered as nothing has been achieved
through these polices in thirty years.
   - It is not possible to realize a 6% growth rate without 30% in-
vestment from public expenditures, and it is not possible for the
government increase the current savings rate from 11.5% to 17.3%
due to the low levels of most citizens.
   - A 4.6% rate of growth for the GDP will not be achieved in light

of the current savings rate, which is 12%, the 16% rate of investment,
and the decrease in direct foreign investment despite all the pro-
tections, guarantees, and exemptions offered. This in turn leads to
foreign loans, an increase in imports and a deficit in the Balance of
payment, which negatively affects individual incomes as the value
of the Egyptian Pound drops by 30% as a result of the government’s
inconsistent policies on the exchange rate and its insistence on
tying the price of the pound to the dollar and abandoning other for-
eign currencies. They explained that the state must exercise con-
trol over the exchange rate through real economic reform and not
through administrative price fixing.
    - The numbers, statistics, and targets in the plan were set with-
out any explanation of the tools that would be used to reach those
numbers, which was the same flaw of the previous plan which failed.
They also stated that the methods used in indicative planning are
not suitable for conditions in developing countries. In addition, the
lack of cooperation between various ministries leads to a depletion
of public funds, and the numbers given in the plan are extremely
modest, particularly in terms of the agricultural sector.
    - The representatives said the reason the planner resorted to
fiscal policies is domestic and international economic downturn.
This is why fiscal and monetary policies must be complementary
and why it is necessary to amend the monetary liquidity and re-
serves of banks operating in Egypt, and why a portion of foreign
currency deposits in Egyptian banks should be used.
    - Increased spending does not represent an added value, since
4 billion of that spending goes towards an increase in wages and
pensions, 2.3 billion towards running costs, 4.25 billion towards
servicing the debt, and 4 billion towards investments.
   - It is necessary to increase productivity to suit the available

volume of investments.
   - The private sector’s level of participation should be taken into
account, national production should be developed and supported,
and the volume of exports should be expanded and encouraged.
    - The government cannot exploit available resources at the risk
of losing foreign investments and lowering the volume of exports.
    - A new plan should be implemented for the unofficial econ-
omy and it should be incorporated into the official economy. For
example, real estate wealth ($200 billion), which represents 30% of
the GDP, should be incorporated. This will allow the state to obtain
greater revenues, provide more job opportunities, and provide bet-
ter quality services, in addition to which the state would have the
right to monitor these activities.
    - Population growth is consumes resources, and this is the
cause behind the deficit in revenues, investments, and the Balance
of payment, and the reason behind the growth of debt and expendi-
ture. The plan will not be able to achieve the targeted growth rates.
However, we should not consider this an erosion of growth, but
should use it in the best possible manner. This can be achieved by
reconsidering the population map and focusing on Upper Egypt and
the New Valley, increasing investments in those areas, and imple-
menting disincentives, starting with not providing support from the
second child onwards, building up new areas and increasing built
up areas (Sinai), and focusing on the lack of marketing and export
opportunities for industries which are based on local products.

   The representatives requested:
   - An economic conference on remedying problems (debts, un-

employment, assistance, economic bodies, export) in order to set
priorities for the plan and study all possible alternatives.
    - That water, sanitation, road, and electricity projects be im-
plemented. This was one of the most common requests made by
speakers, particularly as regards the areas they represented with
emphasis on the governorates of Upper Egypt and some of the gov-
ernorates in Lower Egypt. The obligation to finish projects which
were under implementation and nearing completion was set as a
top priority, as the lack of completion of such projects is considered
a depletion of state funds, and also to prevent orders to suspend
these projects from being issued. (This issue inspired the most par-
ticipation and the greatest number of demands from the represen-
tatives throughout all the sessions.)

    At this point the government commented, noting that is had
reviewed all open projects and an agreement had been reached
with the ministries to allocate resources towards completing them.
The government also said that only in extremely necessary cases
would new projects be added before the old ones had been com-
pleted. The government also pledged not to include projects in the
plan until they had been fully studied and an implementation plan
had been prepared so that there would be no more than a 5% sur-
plus or deficit the implementation plan. In addition, implementation
would be strictly monitored.
    Representatives confirmed that there were no mechanisms for
handling global crises which affect the national economy (pointing
to the example of September 11th).
Legal and constitutional observations:
   The representatives highlighted some constitutional gaps, as

embodied in the budget allocation law, gave the Finance Minister
the authority to contract loans without the approval of the Parlia-
ment, and without setting a cap on the loan or the repayment period
(Article 7), which is unconstitutional.
    The government explained that the text to which they were re-
ferring had been included in the general budget since 1900, and
the Finance Minister only had the right to contract loans with the
agreement of the Parliament.
    At this point the committee chair intervened to say explain that
the clause “within the limits of the constitution” should be added to
the article which grants this authority to the Finance Minister.
    The representatives criticized that the budget which was trans-
ferred to the Planning and Budget Committee on April 27, 2002,
while the plan was transferred on May 5, 2002, meaning that the
budget was transferred before the plan. They considered this con-
trary and illogical and not in line with Law 153 nor Law 70 for the
year 1973.
2—The urgent action plan for villages and cities:
     This issue was one of the hot topics for discussion, with more
than half of the representatives who spoke discussing it. Essen-
tially, through this plan EGP 250,000 is allocated to every village
and EGP 500,000 is allocated to every city with intent to implement
urgent and much-needed projects which have not been included in
either the budget or the plan.
    Representatives requested that the amounts allocated in the
plan be increased, particularly as regards villages, and that the
government be obligated to make disbursements within the fiscal
year as most allocations have not been made and the fiscal year
is almost over.

    The representatives also emphasized the necessity of continu-
ing the urgent action plan as well as the Shorouk rural development
plan over the course of the coming years because it is the only
hope for villages to carry out urgently-needed projects.
3—Unequal distribution of investments across
   This issue angered many of the members, particularly as re-
gards the southern governorates and some of the governorates of
Lower Egypt, such as Baheira and Dakhaliya, Port Said and Suez.
The representatives explained that the governorates of Cairo, Giza,
and Alexandria monopolize about 27.56% of the investments which
has caused a gap on human development rates among the gover-
4—Public revenues:
   The representatives gave their recommendations for increasing
public revenues, which clearly revealed the extent to which govern-
ment recommendations have been adopted. The discussion can be
summarized as follows:
   The representatives began by explaining that the increase in
sovereign revenues is not a positive indicator because it is reliant
on increasing the tax burden on taxpayers, explaining the break-
down of public resources is as follows:
    - 87.5% sovereign revenues and12.5% current revenues. This is
why it is necessary to review economic policies in order to increase
revenues through real growth and not through the levying of taxes.
The fact that the mass of revenues are sovereign revenues demon-
strates the state’s reliance on taxes and not natural resources.
   - The value of sovereign revenues decreased by 11% from the

previous year. In addition, capital transfers, decreased by 0.5%.
This demonstrates the reliance on sovereign revenues from tax.
This led the representatives to ask about government programs for
increasing non-sovereign revenues.
     They demanded an appraisal of the tax and custom duty
structure in order to realize economic and financial goals with the
aim of achieving a monetary surplus without negatively affecting
economic and social returns, in addition to the necessity of devel-
oping public resources in order to cover public expenditures. In ad-
dition, no new taxes will be imposed and the cost of old taxes will
not be increased.
   The representatives suggested that state resources be devel-
oped in the following way:
    - The government should collect overdue receivables from tax-
es and so on, get rid of unsold inventory, and collect neglected
revenues. They pointed out that putting an tax and custom duty
evasion, seizing tariffs and smuggling operations would bring in
at least EGP 10 billion. In addition, real development of resources
will only occur with an increase in exports, the promotion of local
production, the creation of a new tax law, and the creation of leg-
islation for developing industry, and revitalization the role of the
commercial attaché abroad.
    - Unused real estate inventory in newly-built cities and neigh-
borhoods should be used to give way to new revenues for the state.
The representatives asked the government to advance a draft law
to motivate the registration of land, as 95% of land is not registered.
This will bring in large proceeds for the state. Revenues can also
be increased by selling desert land, agricultural reform land, and
imperial property. Further revenues can be brought in by continued
facilitations in selling state lands.

   - Confronting the problem of underground economics and in-
corporating it into official economy will help increase the state’s
    - There should be no allowances made for some authorities,
such as the economic zone authority, to charge the state budget for
items to be paid by the investor, as the investor should bear the cost
of infrastructure and not the state.

    The representatives also said that the increase in revenues
from the Suez Canal is an unreal increase because of the increase
in exchange rates, and demanded that the economics of operating
the Suez Canal and its promotion polices be revisited.
   - The representatives confirmed that the decrease in the petro-
leum surplus despite an increase in global prices was caused by
lack of explorations and drilling, and overloading the Ministry of
Petroleum with the burden of solving the country’s unemployment
problem, as proven by excess employment in this sector.
   - Tax and custom duty revenues will not be achieved based
on the achievements of the previous year, as it is not possible to
achieve tax returns of EGP 31 billion in the current state of eco-
nomic depression and collapse.
    - The representatives demanded that the Central Accounting
Apparatus review budget projections in addition to carrying out its
role of monitoring spending. This can be done by establishing an
authority for budget review.
    - They requested that an authority be created for managing Is-
lamic charity (alms and Islamic endowments), which would set pri-
orities for spending and achieve the development objectives and

targets in health, education, and aid to the poor.
   - Transfer revenues, as represented by the collected install-
ments of external loans that are re-loaned decreased, because of
slack in collecting these loans.
    - Fifty percent (50%) of the budget revenues that the Ministry of
Finance receives is from the taxpayers. Therefore, it is up to every
profit-making ministry to allocate a portion of its profits to the state

5—Taxes and custom duties:
    The representatives emphasized the need for tax reform by low-
ering taxes in order to attract investments in a way that does not
interfere with sovereign revenues. They also emphasized the need
to combat tax evasion, increase the efficiency of the tax collection
system, and set a limit to tax exemptions in a number of sectors,
reducing the tax burden on citizens, and moving away from hap-
hazard estimates.
    The representatives estimated that the number of tax evaders is
about 3.5 million people. The only means of punishing these people
is through the Finance Minister, so the representatives questioned
why deputy ministers in each governorate are not given the power
of attorney to file claims against tax-evaders?
    The representatives also emphasized the necessity of amend-
ing the sales tax law to create two tax brackets instead of the cur-
rent four tax brackets, in order to ease collection of the taxes, and
to make it clear what products are to be taxed.
    The representatives pointed out that increasing the tax burden
to 50% of general revenues as a result of increasing the burden on

the investors and the productive sector of the economy would lead
to the suffocation of the national economy, and scaring off foreign
and domestic capital from flowing. It is therefore imperative to have
a real increase in the Gross National Product to go hand-in-hand
the increase in sovereign revenues.
   They also recommended:
   - Expanding the taxpayers’ base by decreasing the tax rate.
    - A detailed listed of factories and unlicensed activities in order
to expand the base of tax payers.
    - Unifying the custom duty regulations in every port in order to
increase the receipt from custom duties.

6—Public expenditures:
    The members’ discussions on this matter focused on the ne-
cessity of monitoring public expenditures. They also discussed
the government’s extravagance in spending which is considered a
waste of resources and an inefficient employment of them.
    The representatives said that the value of public expenditure
in the current year (2002/2003) is EGP 141 billion, while last year it
was EGP 126 billion. The current deficit is estimated at EGP 30 bil-
lion, as compared to EGP 20 billion last year. The representatives
asked if all these amounts were spent last year with the knowledge
that the amounts which were supposed to paid out according to the
urgent action plan had not been fully dispensed, and that the rate of
implementation for projects was low?
   - The members pointed out that the decrease in this year’s rate
of government spending from 3.3% of total expenditures to 3.2%
goes hand-in-hand with an increase of EGP 296 million in spend-

ing at a rate of 0.8 million per day. While the amounts necessary
for administering government employment is EGP 4.5 billion at a
rate of 3.2% of total public expenditure, which is lower percentage
than last year. However, the total number increased from 4.2 bil-
lion to 4.5 billion, and the necessary entitlements for government
employment should be pushed down lower than 3.2% of total public
expenditures. This can be done by:
   o Restructuring the state’s administrative system
    o Achieving fiscal discipline by expanding the implementation
of programmatic and performance budget.
    The members emphasized that the crucial point is not the in-
crease of allocations, but rather drawing the greatest benefit possi-
ble from the original allocations, which will result in great savings.
They offered the analogy that increasing spending on education
does not improve the quality of education or conditions for teach-
     The representatives highlighted some of the negative budget
variance in certain sectors, such as undisclosed and classified en-
titlements for the Radio and Television Authority and the Ministry
of Defense, where the deficit of current operations was EGP 2.45
billion. Therefore, the representatives demanded the following:
   - The need to monitor implementation, especially as regards
those authorities which are subsidized.
    - They also pointed to ministerial treasuries whose accounts
are not revealed in the state budget, which means that the goal of
fully monitoring public funds is not being realized.
   - In an effort to safeguard public funds, the members asked that
feasibility studies for investment projects—such as the Abu Tartur,

Aswan steel, and al-Maghara coal—be prepared before they are
implemented in order to ensure that resources are not squandered.
In addition, projects should be implemented as soon as possible,
within one or two years instead of distributing entitlements over the
course of the five years of the plan.
    - They confirmed that some grants and loans are not used, and
as a result loans should not be taken before carrying out a thor-
ough study for those projects which require financing investments
through borrowing.
    - Rationalize spending and the most efficient use of available
means and stemming extravagant spending. “Stop building huge
government complexes such as the Tax Authority, the Foreign Min-
istry, and buildings housing government-owned newspaper and so
on.” Every village and municipal leader has an office with dozens of
air conditioners and cars, and the Ministry of Finance building cost
EGP 400 million to build, but it could not be used in the end. Why
couldn’t it be rented furnished?
    - The cost of wages can be decreased by applying the principle
of leave of absences for state employees without any restrictions,
as well through working half time for half time wages. In addition, a
policy for early retirement can be created and the system of incen-
tives and bonuses can be developed in a way that would improve
    - A commitment from the government to pay all overdue indebt-
edness, estimated at EGP 22.2 billion, and settling approximately
EGP 8.9 billion in other debts, would lead to an inflow of new money
with which to confront the liquidity crisis and solve the private sec-
tor’s financing problems.
   - Increasing the number of private schools which would lessen

public spending on education.
    - Reducing government imports and tightening the Central Bank
of Egypt’s supervision of bank operations, particularly in the area
of imports.

7—The public debt and the budget deficit:
    The size of the budget deficit, the high level of domestic debt,
and the debt service drew a lot of comments from the represen-
tatives, because of its impact on the ability of the government to
provide services on the one hand and the ability of the national
economy to grow.
     The representatives explained that the main reason behind the
budget deficit is that the deficiency of public resources (6.1%) on
the one hand, and the increase in the rate of public expenditures
(11.7%) on the other have cause the increase and continuation of
the budget deficit. Economic bodies have become the gateway for
wasting, neglecting, and squandering state funds, threatening the
lives of citizens and keeping the poor from benefiting from govern-
ment services. The assistance offered to these bodies is an essen-
tial deterrent of the deficit.
    They confirmed that the growth and increase of the domes-
tic debt from EGP 84 billion in 1993 to EGP 240 billion in 2001,
amounting to 59.2% of the GDP, shows the failure of the economic
policy and the danger of the loan policy. The fact that the cost of
debt servicing is EGP 38.2 billion, and expenditures on security,
defense and social services is EGP 28.1 billion, while investment is
EGP 19.3 billion highlights how the debt service alone is double the
amount spent on health, education, and so on.

    The members examined the volume of the domestic debt, with its
three components, which amounted to almost one hundred billion
Egyptian Pounds. They revealed that the government—by breaking
down its components—makes sure that the debt is not more than
60% of the GDP. This is an indicator to international organizations
that the level of indebtedness is dire.
    The representatives also said that if the state continues to ac-
quire foreign loans coupled with the increase of the price of the
dollar, it will result in an increase in the value of foreign loans and
the burden of servicing that debt. The burden of debt servicing in-
creased to 11% simply as a result of the change in the exchange
rate. This increase in debt means that the government has failed to
repay a portion of its debt, and also represents a loss for regular
citizens equal to this increase in debt, which is EGP 4.5 billion.
    The representatives explained that the EGP 30 billion debt will
either be repaid through savings schemes, domestic borrowing, or
treasury bills. This deficit could have been invested in real devel-
opment which would have brought returns that would have guar-
anteed the repayment of these loans. It is expected that the deficit
amount will increase as a result of a decrease custom duty re-
ceipts, income from the Suez Canal, and the decline in oil revenues
due to our commitment to sell oil to Israel at half the international
market price. Experts expect that the deficit will reach EGP 50 bil-
lion, which means an increase in public expenditure at the expense
of services offered to citizens. This only serves to confirm the flaw
of the policies in place which have led to a growth in deficit to reach
8.3% of the GDP, a matter which will lead to greater inflation and a
rise in prices.
    The representatives warned the government against offsetting
the domestic debt, and allowing the social security administration

to a part of the economic bodies because the former suffers from a
shortage of resources.
    They asked the government not to hasten to annex the social
security budgets to the Ministry of Finance and to stick with the
current system, and to decrease the government’s contribution to
social security from 70% to 60% and the pension fund would take
on the difference. Meanwhile other members saw that transferring
the budget for the social security and pension funds to the govern-
ment would reduce the domestic debt, and requested a cessation of
hostilities between state treasury and social security and pension
    The government commented on these views and explained that
there should be no concerns about the deficit as long as the state
owns enough assets and has the resources to pay the deficit. The
Prime Minister said, “I will take just three authorities—the Petroleum
Authority, the Suez Canal Authority, and the authority which has fi-
nally become the Itisalat Company (telecommunications). If I want-
ed to sell these today I could fetch EGP 240 billion for these which
are just 3 out of 42 authorities.”
    At this point, the representatives criticized this response by the
Prime Minister, calling it unacceptable because these authorities
represent historical efforts and the hard work of previous genera-
tions. “We did not establish them so that we could not sell them,”
one member responded. “It would have been better if he had said
that we will increase production and establish new factories, in-
stead of suggesting that we sell them.”
    The representatives asked the government—which are demand-
ing the financing of investments—to set priorities of these projects,
determine sources of funding and the means of repayment in order
to reduce the public debt. In addition, they demanded that the debt

be restructured, lower cost means be found, the volume of imports
be reduced, and the volume of exports increase while protecting
the Egyptian producer.
8—Investment and savings:
    In the context of the impact of both investments and savings on
realizing high rates of growth, the members were of the opinion that
both investments and savings should be increased, and domestic
and foreign investments are to be the locomotive for pushing the
national economy out of its current state of stagnation and decline,
In addition, the country’s human and monetary capacities should
be revitalized.
   The members pointed out that wages represent 25% of total ex-
penditures, social spending represent 41%, and debt servicing rep-
resents 27%, so what is left for investment?
    The government raised investments from EGP 15 billion to EGP
19 billion, while at the same time it increased current government
expenditures from EGP 66 billion to EGP 73 billion, an increase of
EGP 7 billion which means that spending is greater than invest-
ments. Noting that the debt service increased by 4 billion which is
exactly the same as the increase in investments, from 15 billion
to 19 billion, meaning that investments are being financed by the
public debt.
    They demanded that government increase investments from
16.9% (from public expenditures) to 19% in order to increase growth
rates and combat unemployment, confirming that a priorities of the
plan should be tied to production. They also demanded that the cur-
rent savings rate (13% of the GDP) be raised in order to implement
the investment plan which should be directed towards the New Val-
ley, as it represents the future of Egypt.

    The members also asked that the current savings rate (13% of
the GDP) be increased in order to carry out the investment scheme,
which should be directed towards the New Valley—which represents
the future of Egypt. They also asked that large projects be devel-
oped in the eastern Canal area, the al-Salam Canal area, Sheikh
Jaber and Sheikh Zayid, thus applying the principle that “the land
belongs to those who cultivate it”. And instead of distributing 600
million square meters to a few individuals, the land should be dis-
tributed among new graduates.
    The representatives confirmed that the instability of the ex-
change rate had led to a reduction in Egypt’s credit rating in in-
ternational money markets. They went on to say that fluctuations
in the exchange rate would negatively affect the targets set in the
plan, noting that there was no clear plan for the Egyptian exchange
rate, nor for enhancing its purchasing power.
    The representatives also pondered the secret behind the de-
crease in the private sector’s contribution to development and em-
ployment despite the facilitations granted to them by the govern-
ment. They pointed that the decrease in the share of investments on
the part of the private and cooperatives sectors during the previous
plan had pushed the government to make additional investment ef-
forts. Some people said that the private sector could not fulfill its
obligations in the current state of economic depression, weakened
purchasing power, increased prices of raw materials and energy,
the costs of employment, and the increase of taxes and custom
duties in 60 categories. All these factors together did not help the
private sector to achieve its share of investments, and therefore an
ambitious plan for helping the private sector to expand and work
towards solving the unemployment problem must be laid out.
   Some members emphasized the necessary participation of the

government, national banks, and domestic investors in an econom-
ic tripartite to pull the national economy out of its slump, noting that
this had become an urgent matter seeing as it is the only means of
building confidence, guaranteeing quality production, and increas-
ing exports as the private sector had failed to do so on its own.
They also emphasized the necessity of determining the needs of
investors and granting them what they require like other countries
have. Others commented that if peace is achieved and the Arab
brotherhood realizes that the clash between us and the enemy is
a clash of civilizations, then they should increase their increase
their investments and the growth numbers set in the plan will be
realized. [sic]
    Several members demanded that the private sector be given
assistance, especially when it comes to small industrial projects,
and that complicated procedures be eased so that the private sec-
tor may participate alongside the state in solving the unemploy-
ment problem, while increasing revenues through taxes and securi-
ties. They also demanded that new economic zones be established
quickly, and that investment laws be reconsidered in order to clear
them of all the obstacles which are crippling efforts to attract Arab
and foreign capital in order to create real job opportunities and bol-
ster the GNP.
    In order to increase the investments of the Egyptian, Arab, and
foreign private sectors, several expansion policies must be set,
such as business policies, fiscal policies, and non-traditional credit
policies 8. Meanwhile some members were of the opinion that the is-
sue was not sound expansion policies,9 pointing out there is nearly
EGP 15 billion in loans that has not been repaid and the borrowers
have no guarantees. These loans are public funds and belong to the
8   MP Mohammed Abu el-Enein, session 96.
9   MP Abu el-Ezz el-Hariri, session 96.

people, as stated in the Planning and Budget Committee’s report.
At this point the government interjected to comment that the non-
repayment of debts is not to be taken as a matter of bad faith. Sev-
eral members pointed out that investors benefit from exemptions,
and therefore the exemption system should be reviewed. They also
noted that foreign investment did not lead to an increase in exports;
this money was instead directed towards the local market.
    The MPs supported the establishment of an administration
specifically for cash flows, so that there would be no surprises
about grants received that were not used to our benefit. The MPs
also pointed out that the financing sources for current investment
schemes are derived from the Investment Bank and all the money
is pension money. Meanwhile, officially and legally, there is in fact
no such thing as the National Investment Bank.10
    The government’s response: A draft law has been presented to
the Shura Council11 and the People’s Assembly which has not yet
been discussed.
   The government presented the issue of exports as a life or
death matter. The following is a selection of the most prominent
comments on this matter:
    The members confirmed the necessity of focusing on exports
by: paying attention to the quality of products, studying the markets,
specializing in those products which set the Egyptian market apart,
opening new markets, and monitoring exports. They demanded
that exporters be supported through: a reduction of custom duties,
unifying the body that exporters deal with, increasing allocations/
subsidies to the export subsidy fund, and developing it in order to
10 MP Kamal Ahmed, session 96.
11 The Consultative Council.

realize targets, assuring that the increase in exports is dependent
on the quality of the product and the ability to compete. Some mem-
bers suggested that exports be subsidized through state budget by
way of the Export Development Bank.
     The government’s response: The government will submit a draft
bill on exports and confirms that it will support circulation efforts
and lighten the burden of bureaucratic procedures.
    Meanwhile, some members emphasized that the issue with ex-
ports is not just an issue of legislation and the granting of exemp-
tions, but it is an entire system beginning with investment policies,
their servicing and costs, along with issues of production, which
in turn leads to issues with export services such as marketing,
transportation, insurance, and circulation; stimulating the activities
of young people in the area of small industry for export; and sup-
porting fund for exporting agricultural products in order to develop
those products, in addition to implementing an export strategy.
    Some members asked that tariffs be raised on foreign products
which are flooding the Egyptian market, and leading to a decline
in Egyptian industry, which in turn leads to further unemployment.
Still others thought that there is no need to resort to exports and
producing for the local market should be enough, positing that if
Egyptian products cannot compete in the local market how are they
expected to compete in foreign markets?
    Fifty percent of members of the Egyptian Parliament represent
workers and farmers, but despite this agriculture and the concerns
of farmers and review of the state’s agricultural policies was not
given its due in the discussions. Instead MPs discussed side issues
without getting into discussions about long-standing policies which

could affect the future of agriculture and the living standards of
farmers. All the statements made regarding agriculture were filled
with thanks to the Ministry of Agriculture for forgiving the repay-
ment of farmers’ debts with the Principal Bank for Development and
Agricultural Credit (PBDAC), and requesting that the rate of interest
on loans to farmers be reduces. The following statements were the
most of-repeated:
    - Thanks for increasing the purchase price of sugar cane, and
rescheduling farmers’ debt with the PBDAC; reducing the interest
rate to 5.5%, and not adding new interest for 10 years, since the
farmer is the real producer in this country; for releasing those farm-
ers who had been imprisoned before the verdict, and not impris-
oning those who had difficulties repaying loans so that they could
repay the original debt. They emphasized to the bank officials that
they should implement the decision as a number of them refused to
do so with the excuse that they had not received orders to do, and
that all of this was just “newspaper” talk. They also expressed their
deep gratitude for increasing the increase in the purchase price of
sugar cane to ten Egyptian Pounds per ton (which amounts to one
piaster per kilo), and for paying out the increase this year as op-
posed to next year. The sugar cane growers only received 60% of
the value of what they delivered to the sugar company.
    - The MPs pointed out that the reduction in the Principle Bank’s
interest from 7% to 5.5%--as the Prime Minister promised—did not
exist in the government’s fiscal statement. They demanded that
steps be taken to revitalize agricultural cooperatives in the villages
once more. They repeated thanks to the Minister of Agriculture for
increasing wheat production to 65% and achieving a surplus in veg-
etable, fruits, and poultry production, but they pointed out the deficit
in animal, fish, and oil crops

    - The members demanded the increase of entitlements for
subsidizing the price of agricultural crop, pointing out that the re-
sources necessary for this fund had not materialized. They also
demanded that efforts be made to increase the volume of agricul-
tural exports, and that agricultural land be expanded, especially in
Salhiya, Ismailia, and northern Sinai, and resolving the problems of
landowners who were members of dissolved cooperatives and who
now have issues with the Armed Forces.
   - Some members requested that the Ministry of Agriculture’s
budget be increased in order to scout out and plant new plots of
land in order to double the export of agricultural products. They
recommended that Egyptian companies which are ready to expand
agricultural properties, reclaim desert for agriculture, and employ
youth and increase production should be encouraged.
    - The MPs explained that if the West Delta Canal project finish-
es—and it ahs neared completion—it will allow for the planting of 404
feddan of land. However, the plan set a target limiting the amount
of land to be reclaimed to just 26 feddan, which is a job for a small
company and not a job for the state.
    - Some members requested that the policy of setting the price
of nitrogen fertilizers continue, and called for a reduction in the
cost of other fertilizers, seeds, pesticides, fuel, and machinery, par-
ticularly in desert areas, and the provision of basic services. They
pointed out that increased agricultural investments will result in a
reduction of the food disparity, and emphasized the necessity of the
plan’s allocations to animal product projects.
   Industry is considered the locomotive of development in all
countries, and the essential element for advancement, civilization,

and changing social structures. Despite this, just as with agricul-
ture, this topic was not given its due by MPs, and several of them
even spoke of productive public sector companies as if they were
the spawn of the devil which should be gotten rid of. They did not
speak of this sector as a productive sector from which benefits
could be derived and developed, and through which real growth can
be realized, particularly as the transformation industry sector was
the number one contributor to the GDP from 2001-2006.
    The discussions revealed clear contradictions in the share of
public expenditure that the industrial, metallurgical, and petroleum
sectors, which amounted 0.4%, versus 0.8% for the culture and me-
dia sector.
    The members said that it is necessary to prepare national indus-
try for facing international trade agreements, reduce the industry’s
burdens, and looking into the price of energy. They emphasized the
importance of modernizing industry to the highest standards, and
at prices that are in line with international prices, because develop-
ment will not be realized without a national industrial base. They
commented on the government’s sale of factories and companies
while not adding new factories, and the stalling of the industrial
modernization program, even though it should be given top priority
in order to increase the GDP and confront unemployment problems.
They also recommended that industry be protected from threats, as
2.5 million people work in the industrial sector and it makes up 20%
of the GDP 50% of exports, at a value of EGP 6 billion.
   Privatization was one of the most important points of contention
among members, and led to a number of problems which incited
each representative according to his views and beliefs, which can
be seen in the following:

    Some members stated that the philosophy of privatization ought
to be utilizing the capital that is not being utilized. The proceeds
of privatization should be directed towards investments in order to
create new jobs, and not to be spent on early retirement, financing
the budget deficit, and meeting the debt service. After all, what will
happen if privatization comes to an end? How will we repay our
debts then?
    Some members pointed out that using 50% of proceeds from
privatization to pay the debt, exposed the government, and showed
that it did not keep its assets nor did it repay its debts, and the
country emerged from the whole situation empty-handed.
   The government responded: The proceeds from privatization
programs was EGP 16 billion from selling 134 companies. We did
not sell the remaining 170 companies fully. The total amount that
was put into the public sector since its inception is EGP 6 billion,
which means a profit of EGP 10 billion!
    The members warned about the lack of a (privatization) plan in
place in order to achieve the targeted EGP 5 billion. Regarding the
failure of the program in the previous plan, members asked what
new steps the government may have taken in order to rectify the
situation. “Will there be incentives for investors and will authority
be given to the people in charge?” they asked.
    The members were doubtful of the possibility of achieving EGP
5 billion gains from privatization to discourage investors from buy-
ing, and some demanded that efforts be made to privatize banks,
and companies in which the government does not own more than a
20-30% share. Still other members demanded that the privatization
process be reconsidered because it has become one of the biggest
sources of unemployment.

13—Economic bodies:
    The Planning and Budget Committee previously recommended
that these authorities operate on a for-profit basis regardless of the
social role they were established for, and several representatives
hastened to emphasize the same idea:
   - Either make money, be liquidated, or merge with somebody
    - The 13% increase in the deficit of these authorities means that
economic and administrative reforms failed, and they should be re-
focused and their economic and administrative structure should be
fixed in order to transform them into productive authorities which
make profits. Some members also supported the recommendations
made in the Planning and Budget Committee’s report that those au-
thorities which continually register losses absolutely cannot con-
tinue their operations without fixing its financing structures in order
not to deplete its resources. Some members backed the recom-
mendations of the Planning and Budget Committee that it is impos-
sible for some of the authorities to continue while making losses
without reforming their finance structure. Other members asked
that the subsidies be eliminated for those authorities that are losing
money unless they are in turn subsidizing the service they are pro-
viding. While others asked that subsidizing those authorities that do
not provide services as they should be reconsidered, particularly
the railways, noting that as regards transportation the government
subsidizes the railway as well as public transport, even though the
private sector provides the same services for the same price, real-
izes profits, and pays taxes to the state.
    Some members confirmed that the billions of pounds that are
spent each year on subsidizing these economic bodies is most of-
ten used for bonuses, and that regular citizens does not even reap

the benefits of it.
    Last year’s fiscal report confirmed that the economic bodies
have assets that are either or not counted or documented, and
therefore makes it difficult to do something with them. This opens
the door wide open to corruption and theft. This is why there should
be a timetable for recording those assets, selling those unsold in-
ventories for 50% of their original price.
    Some members felt it was necessary to change the structures
and locations of these economic bodies and increase the prices of
its services, while others opposed increasing the cost of services.
Some asked how these authorities would settle their EGP 45 billion
in debt in light of the domestic deficit, and others responded to them
by saying that if a successful administration were able to find the
most efficient use of what was available, subsidies would be pro-
vided to these authorities. Therefore, the board of directors of these
authorities must be changed in order to improve operations, and
subsidies and investments must be found. Some members doubted
that it is possible to fix these authorities since «the government
promises to do so every year and nothing ever comes of it.»
14—Socio-economic rights:
    The members had a range of opinions on defending these rights,
though most of them complained of the weakness of allocations,
the tardiness with which investments are made, and the plan’s dis-
regard for the needs of citizens as follows:

    Discussions revealed that the amount of expenditure on edu-
cation was low. Whereas most countries in the world spend 7% of
total public expenditures on education, Egypt spends only about

5.5%. The discussions also revealed that the per capita expenditure
on students had also decreased. In 1990/1991, nearly EGP 6,000
was spent on each public university student, while in 2001 that sum
went down to EGP 4,000. In addition, the allocation for expenditure
on the educational process was 20% of the total education budget,
as compared to the international level which is at least 40%. The
rest of the budget goes towards paying wages and incentives.
    The members also highlighted the fact that the number of gradu-
ates is incompatible with the amounts allocated to education and is
disproportionate to the needs of society. “Technical training schools
should be tied to production, and technical education should be of-
fered through ministries.”
    The members criticized the lack of programs to develop the ca-
pabilities of Egyptian citizens and the lack of training programs to
improve their qualifications. This includes paying attention to the
importance of academic research. They described the education
system as being no more than a wide-scale program for eradicat-
ing illiteracy.
    The members also criticized teachers, saying that efforts to
achieve higher marks on some abstract level, has resulted in a situ-
ation where students reach the secondary stage and do not know
how to read or write.
    The members demanded that education spending be monitored
in a way that measures outcomes and not inputs like the number of
schools, students, and books. “We need to change the ( structure )
budget ” they said.
    MPs confirmed that the allocations of the Ministry of Scientific
Research Affairs and research centers was not more than EGP 167
million. How is Egypt expected to enter into the third millennium

with such a poor level of scientific knowledge?
    Members also demanded that the standard of teaching be
raised, and that teachers be given a special classification, and that
their salaries, incentives, and bonuses be raised in order to put an
end to private tutoring. Some members explained that the student
population increased by 1.4 million annually, while the number
of teachers increases by just 35,000. The available budget is not
enough to increase teachers’ salaries.
    Members requested that contracted teachers be hired on a bo-
nus system in order to fill in the gap in public schools and Azhar
institutions. They emphasized the necessity of increasing the
amounts allocated for education, while providing additional subsi-
dies in order to begin implementing the plan for developing educa-
tion, because the funding is available but it has not been allocated.
In addition, the money that has been allocated for building class-
rooms has also been increased in order to absorb those students
who will now enter the sixth year of elementary school, and in
order to provide services to the [7,500 preparatory] smart schools,
while expanding into establishing experimental schools. Various
sources for funding pre-university and higher education must be
found, vocational schools must be developed, and the buildings and
supplies necessary for the South Valley University must be com-
pleted. Money must be allocated in order to make Sohag University
an independent institution. In addition, the colleges being added to
Suez Canal University must be completed and the new colleges
are to be added. The Azhar institutions are to be brought under the
jurisdiction of the Ministry of Education, and an authority should be
created to administer its educational buildings. The members also
emphasized how necessary it was to implement the government’s
promise to build 2,000 schools every year, which requires EGP 3

million. Increased rates of enrollment in schools has not been real-
ized because the state has only built 800 schools. This is why the
private sector should be given the opportunity to build new schools,
while allowing greater density per classroom. Classroom density in
government schools has reached 105 students, while the number in
private schools is just 28 students in one class.
    The members pointed out that most educational administrations
are located in classrooms within schools, which further increases
classroom density by decreasing the number of available class-
rooms for students. The representatives asked that the budget for
the school feeding program be increased to EGP 75 million in order
to cover 150 days of the school year. Meanwhile some members felt
that the school feeding program (currently to the tune of EGP 70 mil-
lion) is an absolute breeding ground for abuse and theft on the part
of some of the donors and those who benefit from it, and thought
that it should be removed from the budget entirely.

    A handful of observations and demands were made by mem-
bers during discussions on the issue of health. The most important
of them are as follows:
    - The amounts allocated to the health sector should be increased
in order to build new hospitals and maintain the current ones and
“to provide medical equipment, medication, and physicians.
    - A medical building authority should be established in order to
protect the real estate riches of the medical field, pointing out that
it would not cost the budget anything as the apparatus for doing so
were already in place within the Ministry of Health.
   - The necessity of increasing the number of public and mu-

nicipal hospitals and village hospitals, and the quick completion
of hospitals which are near completion or being built. Some mem-
bers asked that no new village hospitals be built and that they be
replaced with a primary health clinics, and that the focus remain
on municipal hospitals and the provision of necessary medications
and doctors.
    - Some members asked that free medical treatment be trans-
ferred to the authority of governorates other than Cairo, where the
Specialized Medical Councils are located.
    - The members said that increasing the number of beds to
151,000 is modest when compared to the population, and asked
that subsidies for medications be increased for those with limited
incomes and that efforts be made to stem increases in the cost of
medication. In addition, they asked that the amounts allocated for
medical necessities, medications, and treatment be increased at
the state’s expense. The members pointed out that most of the mon-
ey allocated to the Ministry of Health goes towards salaries, while
other members requested that doctors’ salaries be increased. They
also asked that the health insurance system be bolstered through
passing a law on health insurance which would include state-fund-
ing allocations for treatment, and would expand the health insur-
ance umbrella to include both large- and small-scale employers
equally, and that health insurance be implemented for farmers and
children. In addition, they emphasized how necessary it was estab-
lish a state hospital in the southern Qina area.

    The members started off by explaining that the New Urban Com-
munities Authority was EGP 37 million in debt. They questioned the
truth of this indebtedness asking, “Are these assets frozen or sto-

len?” The members decided that the previous plan had not solved
the housing problem because it had relied completely on the private
sector, which is geared towards making a profit. They also said
that the government had not offered enough guarantees in order to
realize its goal of building 220,000 housing units. They explained
that any citizen who reserves a state-subsidized housing unit has
to wait eight years before getting it. They also noted that the cost
of steel had gone up outrageously which increased housing issues.
They requested:
   - Housing for young people in the governorates.
   -An increase in housing allocations for those with limited in-
     -An increase in the money allocated to building low-cost hous-
ing in order to confront the increase in the price of the Cooperative
Authority’s apartments, which have not reached EGP 100,000.
    - Stop building units for sale and building some housing units
for rental.
    - Increasing allocations to governorates for building alternative
housing for citizens who have been harmed by the demolition of
their homes.

Unemployment and labor
   The unemployment issue was one of the most controversial and
focused upon issues, and received several complaints from mem-
bers. The following is the range of their opinions and suggestions:
    - The members explained that the plan aimed to provide 537,000
job opportunities in addition to 120,000 opportunities for replace-
ment. However, the Fiscal Budget Statement mentions the provi-

sion of 750,000 jobs, which proves the contradiction between the
numbers. They expressed doubts that the program would be carried
out based on last year’s experience. Members confirmed that the
amount allocated to employment, which is EGP 400 million, would
only provide 170,000 job opportunities annually, while only 154,000
job opportunities were created last year. This is confirmed by the
decline in employment entitlements in last year’s budget from EGP
1.3 billion to 0.8 billion, which means that the government has re-
gressed and neglected to solve the problem.
    The government’s response: Most job opportunities are outside
the government framework. The Minister of Administrative Devel-
opment said that creating 170,000 jobs would cost the state noth-
ing, because they would be replacing people who have retired or
are deceased. The Minister also said that the government would
lower the annual increase in workers from 7% to 0.7% within the
next year.
    - Several MPs asked that the government continue to hire new
graduates, noting that citizens spend money on their children’s
education only for them to not find work upon graduation. They
cautioned against repeating what happened with some teaching
graduates who were sent letters to receive skill transfer training
in agricultural machinery, which led them to commit suicide out of
depression and hopelessness.
    - Some representatives explained that there are approximately
1.2 million graduates each year, and every billion spent provides
from 250, 00 to 270,000 job opportunities. Therefore, EGP 12-16 bil-
lion is needed. In light of the budget deficit, this unemployment will
not go away, noting that the failure of the private and investment
sectors and training programs and loans to fix the unemployment
problem. Some of them criticized the lack of a plan to stem unem-

ployment on the part of the government, and others said that job
opportunities are available. Some said that the job opportunities
offered by the government transfers youth from real unemployment
to veiled unemployment. While other members assured that the de-
cisive solution to the unemployment problem would come through
industrial development in the governorates. Therefore, there must
be an increase in entitlements allocated for industrial zones at the
governorate level. Others felt that the unemployment problem will
only be resolved by solving the problem of the guilds, and estab-
lishing an unemployment fund which would finance between 0.5%
and 1% of basic salaries, in addition to the contributions of the pri-
vate sector, in order to included new graduates and job seekers
and not just those who are employed and who are asking to leave
their employment. Some members explained that the budget does
not include anything known as the unemployment fund, so how can
we ask that it be subsidized?
    - Some of the representatives suggested that workers be given
a leave of absence so that others can take his or her place, call-
ing on everyone to learn how China and India benefited from their
    - Some members focused on the role of the social security fund
in putting an end to unemployment, stating that the social security
fund could be used to establish small projects, owned by young
people, for producing those items which we import from China.
Some asked why the budget for the fund is not included in the bud-
get since the money therein is obtained from grants and loans with
3% fixed interest rates. Since its establishment it has received more
than EGP 6 billion, 80% of its projects have failed, and thousands of
young borrowers are either in jail or could go to jail.

The environment
    Sanitation occupied the majority of the discussions on environ-
mental situation among members. They pointed out that al-Saf is
the most polluted place on earth, and industrial pollution affects
both health and agriculture. They explained that there is no finan-
cial support to cover the expense of canals and sewers within
neighborhoods, noting that this is the main reason for pollution and
illness. They demanded that small canals be covered and that the
Ministry of Environment’s budget be increased.

Youth, culture, and women
   The members addressed the issues of youth, culture, and wom-
en very briefly as follows:
    Youth: The members demanded an increase of support pro-
vided to the youth sector and that the EGP 20 billion which were
slashed from last year’s budget be returned. They further demanded
the encouragement of youth centers and that cars be supplied to
the Youth Commission to be used in inspecting those youth centers,
and to establish youth centers in deprived villages.
   Culture: Some members asked that the additional resources
demanded by Dar al-Kotob be granted to them; that antiquities be
preserved and taken care of, particularly in Akhmim; and cultural
palaces and homes be taken care of.
   Women: Members thanked the government for its increased fo-
cus on women’s issues who have “all the respect, at the head of
which is the first lady, Suzanne Mubarak.” They asked that women’s
development be worked into the national plan.

    - The members confirmed that the increase in subsidies is not
a real increase. Due to the decline in the purchasing power of the
pound, the current situation actually constitutes a regression in the
subsidy as subsidies only increased by 8%, with another 10% in-
crease in wages and pensions, while the pound declined by 34%
during the last half of last year and prices increased by 30%. This
situation means that the state must increase subsidies, wages, and
    Members noted that the rich benefit from subsidies before the
poor because their use is greater, as is this case with butane gas,
for example. A poor person uses one butane gas canister as com-
pared to six for the rich. The members also pointed out that the ones
who really benefit from subsidies are middlemen, thugs, those with
capital, and those with projects, and they asked the state to find a
way to stimulate and guide the subsidy system and get it to those
who deserve it. Some members also asked that cash subsidies be
given instead of subsidizing the commodities, and that natural gas
be supplied to rural areas.
    Poverty is an endemic problem in Egypt and one that many treat
as a fact of life, which should be given in to, accepted, and toler-
ated because attempts to solve it will not work. A group of people
who benefited from this state of affairs helped to validate this un-
derstanding. This assures that when it come to this issue a lot of
MPs approach the government from the angle that the government
should have mercy on its children and not from the angle that citi-
zens have rights and they should be granted those rights through
legislations and policies.
   Successive National Democratic Party (NDP) governments

have managed to put more than 50% of the Egyptian population
below the poverty line. The representatives pointed out there is no
justice in the distribution of income, particularly in the governorates
of Sohag, Qina, and Aswan. They also said that the EGP 141 billion
in public expenditure, which amounts to EGP 172.8 per capita in-
come per month, is considered a poverty budget. The government’s
financial bulletin stated that wages are 14 times what they were
20 years ago, but it did not mention the increases in price, or the
income disparity between senior employees and junior employees.
A 10% increase in wages is met with a 50% increase in prices. Some
people saw this increase as a result of curtailing imports coming
from abroad which led opportunists to take the opportunity to in-
crease prices.
    The members moved the discussion from an analysis of fis-
cal policies to a discussion of the plan, explaining that the plan is
aimed at creating a balance between the cost of the debt service
and the value of the debt, which means a move towards increas-
ing the burden on citizens. It is also aimed at a review of the so-
cial security system and creating proportionality between the dues
paid by the insured and what they receive, which also means an
increase in the burden on employees. The members also explained
that the budget puts a lot of burdens on the poor. Direct taxes are
EGP 28.5 billion, while the taxes paid by those with limited incomes
amounts to EGP 44 billion, which equates to 61.13% of sovereign
revenues, noting that 50% of income comes from sovereign taxes
which is much more than in developed countries which apply a pro-
gressive tax system.
   The members demanded that the social security umbrella be
extended to everyone and not just 90% as stipulated in the budget.
They also called for an increase in pensions especially social se-

curity pension that does not exceed 50 to 80 pounds. In addition,
they called for setting a program for poverty reduction, providing
the entitlements necessary for the price balance budget, which
does not put anything new into citizens’ pockets.
    The government’s response: If the poverty line is set at $1 a day,
then using the official exchange rate of 4.6 pounds I not correct, be-
cause it should be measured according to the purchasing power of
the pound, i.e. the amount of commodities that one pound can buy.
In Egypt, this is 110 piasters a day. Thus, only 0.5% of Egyptians are
below the poverty line.
    The members asked that cash allowances be paid to workers
in remote areas and the governorates of Upper Egypt. This would
put into action the Prime Minister’s decision to provide allowances
to sanitation workers because they are poor, and 5% of those em-
ployed should be from among the disable community, and to carry
on with the Shurouk program within governorates.
    The government and the Planning and Budget Committee>s an-
nouncing regarding the trend towards adding social security funds
to the public treasury in order to lessen the size of the domestic
debt, and their intention to review the social security system in or-
der to suit what those who are insured pay, received many objec-
tions from the representatives. However, the matter did not take
away support for the idea, taking into account that the government
only wants what’s best for its citizens, which was made clear from
the opinions and comments of the representatives:
    Some said that social security funds should not be placed with
the general treasury, but rather should be freed from the govern-
ment’s control on this sector. They pointed out that all laws which

have been passed that deal with increasing pensions present an-
other obligation on the state treasury and have been issued by the
Parliament, a matter which the government has tried to deny. They
noted that pensioners are the ones supporting the government and
not the other way around. The government’s debt to the fund is EGP
26 billion and the interest on that is EGP 2.6 billion. Meanwhile
increasing pensions costs just one billion pounds. The members,
also pointed out that the interest at which pensions are invested is
less than the prevailing market interest rate, and that the greater
portion of pension money goes to the soldiers, with the government
bearing EGP 11.6 billion. This includes EGP 3.5 billion of military
pensions, EGP 1.4 billion of the total pensions and the remaining
EGP 6.7 billion is spent on workers.
    The negative effect that corruption has on the realization of citi-
zens’ rights requires no real explanation or evidence. However, the
effect that corruption has on the government’s ability to carry out
the services necessary for developing the capacities and abilities
of the individual is determined by the extent of corruption and its
resilience in the face of attempts to stem it. The poor alone suffer
and pay the price of corruption completely. The members’ opinions
on the matter were as follows:
     - The Central Accounting Authority’s report stated that EGP 5.5
billion extra were spent about which it knows nothing. We did not
receive a response from the Finance Minister about the bodies who
spent these amounts, nor are they available in the previous year’s
   - The members brought up the issue of the general treasuries
bonds, explaining that the institution that had bought it was Salo-

man Brothers and that the purchase agreement said “these bonds
guarantee both direct and indirect obligations on the part of the
Republic’s asses.” This meant that the Republic’s assets and en-
titlements were pledged to guarantee payment on due date, except
those assets owned by diplomatic missions. They also stated that
there was a Confidential Agreement no. 3, about which nothing is
known. There was also a similar agreement with Lebanon which did
not include the condition to pledge the country.

   The government did not respond.

    - The representatives noted that for the first time ministers, gov-
ernors, and some leaders had been tried, and some of them would
be put in jail due to their monetary misdeeds, saying that a continu-
ation of this sort of supervision will save billions of pounds for the
    - On the other hand, some international reports detailed the
documented alliance between the symbols of power and a group of
businessmen in Egypt to bolster their privileges and interests which
translate into money. One report noted the following:
    “The main support for reform efforts comes from the well-con-
nected and very wealthy business elite, who are often close to the
regime or even part of it. They are, therefore, very influential in both
the political and economic realms, which is a reflection of the close
association between wealth and political power in Egypt. A good
example of this kind of relationship is Ahmed Ezz, the chairman of
El-Ezz Steel, the largest company in the country’s steel industry,
which it dominates with about a 70 percent share. Ezz is a high-
ranking member of the ruling National Democratic Party (NDP) and

also the chairman of the People Assembly’s Budget and Planning
Committee. He is also a close associate of Gamal Mubarak, Presi-
dent Hosni Mubarak’s son. A recent trend signaling the increasing
political power of the business elite has been the appointment of
major businesspeople to key government posts. To list a few, Min-
ister of Foreign Trade and Industry Rasheed Mohamed Rasheed
was the president of Unilever AMET (Africa, Middle East, and Tur-
key); Minister of Tourism Mohammed Zoheir Wahid Garana was the
owner and managing director of Garana Travel Company, one of
the largest companies of hotels, floating hotels, and travel compa-
nies; and Minister of Agriculture Amin Ahmed Mohammed Osman
Abaza founded Nile Cotton Trade Company, “which became the no.
1 cotton-exporting company.”
          The report went on to specifically name several business-
men who benefited from the government’s economic policy, par-
ticularly the trend towards privatization.

General comments by the government
    The government commented on the MPs’ discussions, which
were carried out over the course of five sessions. Prime Minister,
Dr. Atef Ebeid, commented on various matters, and expressed his
happiness with and gratitude to the MPs, and over the implementa-
tion of Article 115 of the Constitution which gives the parliament the
right to amend the budget law with the government’s agreement.
The Prime Minister responded and said the government agrees to:
  1. Increase allocations to the urgent action plan for villages by
EGP 1,386,000,000 million.
   2. Increase allocations for youth activities.

   3. Increase allocations to student feeding programs.
   4. The annexation of Azharite institutes.
   5. The renovation of mosques as soon as possible.
   6. Allocate additional funds for the maintenance of roads and
   7. Complete the slum development program.
   Future trends
    1. To support the bases of development by establishing new
(economic) zones because “we have 103 zones, of which 73 are
fully equipped. Priority will be given to governorates which have
not yet benefited from the establishment of industrial zones and
underprivileged governorates.”
   2. To find real opportunities for government work in education
and health and the rest will take place in the productive sectors.
   3. Continue popular lending through Nasser Bank, seven other
banks, and 12 Civil Society Organizations, and continue the pro-
gram for training and certifying young graduates.
   4. To preserve wealth and develop it (agriculture, petroleum, al-
loys, and wood).
    5. Direct subsidy for services used by the disadvantaged, subsi-
dizing medication and housing, and improving the state of utilities,
education, and health.
   6. Updating and developing industry, capacity-building for the
agriculture, the industrial production services sector, or the export
agricultural sector.
   The Prime Minister also renewed the promise to fulfill the five

obligations towards the general budget and plan, and also to:
    - Continue the fiscal reform program in order to rationalize ex-
penditure through legislation aimed at restructuring tax and custom
duties together with bank laws, and the law of to convert the invest-
ment bank into an investment development bank.
   - Move from central planning to regional planning, or even plan-
ning at the village level.
   - Be more specific in assessing the cost of projects, with strong
monitoring and complete transparency when it comes to external
debt. In addition to which, guarantees will only be granted for gov-
ernment-contracted loans only after the Parliament’s agreement.
   - Fairly distribute resources among governorates, and com-
pensate those governorates which were left out, and priority will
be given to completing existing projects which have not been fully

Chapter Three
Evaluating the Fifth Five-Year
Plan (2002-2007)
First: Macroeconomic policies
    The plan set a target of EGP 445 billion in investment expen-
ditures. Entitlements for investment expenditure were amended in
order to bring the amount to EGP 474.2 billion, and in the final count
the actual amount was EGP 503.4 billion—13% in excess of the set
    There is no doubt that optimists will say that the state bore the
burden of these extra investments in order to meet individuals’ de-
mands. However, this trend seriously flies in the face of the most ba-
sic rules of planning, and in fact shakes the foundations of the plan.
We are not talking about investments in emergency or crisis situ-
ations which were discovered by the Parliament after the plan had
been approved. This is about investments that were pre-planned in
order to achieve certain targets which were discussed, for which
roles were distributed, and which were in the end approved by the
people’s representatives. These breaches by the government cast
a great deal of doubt on the truth of the development indicators
presented by the government to the public, and it will be the source
of much beneficial discussion in a later part of this study.
         Investments were distributed among various sectors:
27.2% to the government; 9.7% to economic bodies; 3.6% to public
sector companies; and 59.5% of the plan’s total investments came

1 The first year (2007-2008) of the Five-Year Socio-Economic Development
Plan (2007/2008-2011/2012), Volume III, Assessing Performance of the Fifth
Five-Year Plan.

from the private sector. As stated previously, the Planning Minister,
Finance Minister, the head of the parliamentary Planning and Bud-
get Committee all confirmed the private sector’s involvement in all
stages of the plan in its capacity as a partner for development.

         The graph above clearly shows that throughout the fourth
Five-Year Plan the private sector fell short of the contributions it
was supposed to make. Despite the increase in the value of the
private sector’s contributions to projects set by the plan, its share
in the contribution was approximately 4% less than the targeted
contribution. At the same time the contributions of public sector
companies exceeded 11.1% as a result of the conversion of several
public authorities into holding companies.

          An analysis of government investments in state functional
sectors shows a decline of 20.4% in all investments over the course
of the plan at a compounded annual rate of 4.4%. Despite this, gov-
ernment investments in the sovereign sectors increased with the
aim of preserving order and continuity. Investments in the areas of
defense and national security increased by about 87%, and in the
area of public order and state security affairs by 51%.

    Meanwhile, investments in the area of socio-economic rights
witnessed a dramatic regression, with investments in environmen-
tal protection decreased by 85%, followed by a 36.4% decrease in
investments in education, a 25.2% decline in health sector invest-
ments, and a nearly 12% drop in social protection investments, ac-
cording to the graph above.
    Savings are a measure of society’s ability for self-reliance. In
developed societies, domestic savings are considered the main de-
terminant for realizing independent development. If these savings
cannot keep up with the investments in the growth plan, domestic
or foreign borrowing becomes the solution, with all the accompa-

nying burden of debt-servicing and the effect it has on the general
budget and raising inflation rates.
   The target for this plan was to increase the savings rate from
11% to 17%, according to the Planning Minister. The following graph
shows the development of domestic savings rates from 2002-

    It should be noted that the domestic savings rate more than
doubled over the course of the plan which helped lower the rate of
borrowing from abroad. It is clear that the government was able to
follow through on its promise to increase savings, but the question
that poses itself is why did the government announce that the sav-
ings rate for 2002-2003 was 11% while we can see that it increased
by more than 3% in one year?
     The challenge of increasing savings rates is met with the real-
ity that nearly half of the population (41%, or 28 million people in
2005) is below the poverty line. However, there has been a notice-
able increase in abject poverty over the period from 17% in 2000 to
20% in 2005, while poverty rates have reached 52% in rural areas.
  This prevents the increase of the savings rate, which reaches an

2   National Statistics Bulletin, various issues.
3   Sufyan Alissa, note 22, page 16.

average of 25% globally. Savings rates can be increased through
forced saving and also by issuing the laws necessary for limiting
speculation, accumulation, and directing money towards savings
or investments through financial and monetary instruments which
are managed by the state.
Economic Development
     It is not possible to separate the process of economic and so-
cial development from economic activities which require invest-
ment, compliance with which depends on society’s ability to direct
its energies towards setting aside a portion of the GDP with the
intention of reinvesting it, which affects the rate of depreciation
and operation. In cases where these energies are depleted society
resorts to borrowing—whether domestically or from abroad—which
affects the ability for future growth, in addition to being subjected
to the conditions of lenders, who will not operate in the interests of
society in most cases.
   The fifth Five-Year Plan aimed to achieve an average real
growth rate of 6.2% but only managed 3.7% of real growth.4

4 GDP numbers are taken from «Developments in the GDP Over the Past Five
Years» Council of Ministers, Information Report, July 2007.

    The industrial sector contributed a great deal to the generation
of the growth rate, composing 19.3% of the GDP, followed by the
agricultural and fishing sector at 16.1%, then wholesale and retail
trade at 11.8%, while the communications sector contributed 2% to
the GDP, the Suez Canal contributed 3%, and the hotel and restau-
rant sector just 2.8%.
   The private sector’s contributions towards GDP generation
steadily declined during the period from 2001/2002 to 2005/2006,
going from 66.9% in 2001/2002 to 62.9% in the 2005/2006 fiscal
Public revenues
    Prior to analyzing expenditures on economic and social rights,
which is yet to come, this study will consider the reality of pub-
lic revenues through which the above-mentioned expenditures
are financed. It has become common practice when analyzing the
general budget to neglect the revenue side and not give enough
attention to analyzing and studying it. In its efforts to obtain neces-
sary funds states policies vary according to societal conditions the
trends of the political regime. Public revenue analysis is an attempt
to answer the question “who pays what?” in order to fairly distribute
the burden on citizens, each according to his abilities and the ex-
tent to which he receives public expenditure.
   The sources of public revenues—Public revenues come from
one of two sources:
1. Conventional sources:
   - Fees paid in return for services provided by state institutions
and offered to the public and other legal entities.

5   See previous footnote, page 3.

   - Taxes which are not paid for services rendered and which are
rendered mandatory by the authority of the state.
    - Revenue from the public domain, from assets owned by the
government such as real estate, and commercial, industrial and
financial companies.
   If these sources are not enough to cover public expenditures
then the state resorts to unconventional sources.
2. Unconventional sources:
    - Domestic borrowing from individuals and legal entities within
the state. This is a means of lapping up domestic funds and pump-
ing it back, which will is effective in case of inflation.
   - Printing new money, which results in increasing money in cir-
culation and leads to inflation.
   - Foreign loans, which puts a burden on the balance of pay-
ment, and requires servicing foreign debts. This is one of the most
negative forms of expenditure as it constitutes external flow which
requires strict monitoring in contracting and using foreign debt.

        The following is the structure of revenues over the course of the plan:

       Particulars          2002/2003   2003/2004     2004/2005    2005/2006 2006/2007 Percentage    Total
       ٌResources            149315       164884       179831       214673        274169    100%    982872
       Revenues              89347        102045       110864       130152        163906    60.7%   596314
        * Taxes              55707        67147         75759        81607        105645    65%     385865
        * Grants              3289         5058         2853         2861          3481     2.9%     17542
      * Other Revenues       30350.4      29839.1      32251.6      45683.5       54969     32.4%   193093.6
Receipts from lending and     1871        1784.6       3205.5        7572         13367.3   2.8%    27800.4
 sale of financial assets
Borrowing and Issuance       58097.2     61054.9       65761.8      76948.8       96895.7   36.5%   358758.4
of Securities other than
        *Numbers collected and calculated by researchers
     The previous table shows that there has been an increase in
resources (revenues, receipts from lending and sale of financial
assets, borrowing and issuance of securities and other stocks) that
is not proportionate to conventional revenues (taxes, grants, other
revenues). This difference is equalized by borrowing which has in-
creased by approximately EGP 58 billion in 2002/2003 to nearly
EGP 99 billion in 2006/2007, a 71% increase. This shows the gravity
and deterioration of the budget deficit which is increasing annually
and the failure of repeated attempts by successive governments
to fix it.
    The following graph highlights the fact that taxes make 62%
of total revenues, while other revenues make up 31%, and grants
make up just 3%, leaving 4% of revenues which is obtained from the
receipts from lending and sale of financial assets).

    This shows that the taxes which the government collects from
citizens makes up about one-third of revenues. Analyzing the tax
structure would make it possible to determine who bears the bur-
den of financing the plan:

    Individual income tax:           6,719               12%
    Corporate profit taxes:          14,123              25%
    Property tax:                    785                 1%
    Goods and services tax:          23,102              41%
    International trade tax:         8,232               15%
    This chart shows that corporate profit taxes and property taxes
make up 26% of total tax revenue; while the poor bear 74% of the
burden through indirect taxes on goods and services and direct
taxes on income in return for the public expenditure of 49.58% of
this tax revenue, as will be shown later, on things like: allocations
for environment, health, education, housing, and other social ser-
vices; while 43.61% of total expenditures went towards public sec-
tor services like defense, national security, public order, and secu-
rity affairs. This shows the government’s social policy to place the
burden of economic growth on citizens, so that the rich and wealthy
get all the exemptions while the ordinary citizens pay to prop the
government so that it may continue to suppress them, and they get
nothing but crumbs in return.
Second: Social, economic, and cultural
Public expenditure
     Public expenditure is considered one of the most important
fiscal policy tools the government can use in order to influence
demand, i.e., the consumption demands of individuals and the gov-
ernment consume all it can in order to quench the public need.
This expenditure is closely tied to the general price of goods and
products that individuals need. Expenditure also directly affects the

state of economic stability in any country.
   Based on what has been presented, the rules and regulations of
public expenditure can be determined in the following way:
    One: Achieve the greatest benefits possible—
     This means directing public expenditure towards realizing the
special interests of some members of society because of their po-
litical influence or what have you. This also means taking an over-
all view of what is needed by public utilities, determine the need
for each on of them, and in light of the requirements for each one
determine the necessary expenditures.
    Two: Rationalizing public expenditure—
    This does not mean reducing public expenditure. Rather it
means using resources in the best possible way in order to achieve
the greatest benefit out of them. This is from the regulation side.
However, when considering the reasons or goals, public expendi-
ture can be used for the following6 :
    1—Utilization of economic resources for the purpose of achiev-
ing high growth rate.
    2—Achieving economic stability.
   3—Redistribution of National Income to ensure fair distribution
across the various social strata.
    The state influences the distribution of income in two stages7 :
the first is the distribution of the National Income among production
elements, i.e., labor and capital. The second stage, is the redistribu-
tion stage (final redistribution), what is meant here is redistributing
production to the consumers after making some adjustments to the
6   Dr. Al-Sayid Abd el-Mawla,
7   Dr. Raafat el-Mahgoub

first stage of distribution.
   The following is a presentation of how effective expenditure has
developed over the course of the 2002-2007 plan in the following
   - The total expenses amounted to EGP 864.758 billion, an in-
crease of 74.4% of total expenditures in the previous plan, at an an-
nual compounded rate of 11.8%, as shown in the following graph:

   These expenditures were distributed among ten sectors ac-
cording to the breakdown employed in the general state budget:
    1- The general public services sector which includes the Parlia-
ment, Shura Council, the office of the President, the Prime Minister’s
Office, the Specialized National Councils, the Central Auditing Or-
ganization, Governorate Headquarters, the Ministry of Finance and
its departments, and the Foreign Ministry. Approximately 29.6% of
total expenditure goes to this sector
   2- The defense and national security sector which includes the
Ministry of Defense and Military Production and the ministry of civil

defense. Approximately 8.9% of public expenditure goes to this
     3- The public order and national security affairs sector which
includes the Ministry of Interior, the Civil Development Fund, secu-
rity and police, the Ministry of Justice, the National Justice Author-
ity, the Egyptian House of Fatwa, the fund for Courthouse Buildings,
and Model Registration Fund. Approximately 5.2% of public expen-
diture goes to this sector.
     4- The economic affairs sector which includes the ministry of
foreign trade and commercial representation , the ministry of in-
dustry and its departments, the ministry of investment, the Stamps
and Scales Authority, the Governorate Supply Authority, the Au-
thority for Imports and Exports, the general authority of the stock
market, the ministry of agriculture and the agricultural offices in
the governorates , ministry of irrigation and water resources and
it’s departments, the agency of electricity and energy , the authority
of veterinary services and the departments of veterinary medicine
of the governorates , the agency for development of fisheries , the
ministry of petroleum , the ministry of transport , the departments
of roads and transport of the governorates , the authority of roads,
bridges and the national agency of tunnels, the ministry of civil en-
gineering and the ministry of tourism. Approximately 6.8% of public
expenditure goes to this sector.
   5- The environmental affairs sector: which includes the Cairo
and Giza cleaning and beautification authority, and the ministry of
environmental affairs with a percentage of approximately 0.5%
    6- The housing and urban communities sector: which includes
the ministry of housing and utilities and the governorates’ hous-
ing departments, the central agency for urbanization, the general
authority for urban planning, the public authority for potable water

and sewage of greater Cairo and Alexandria, and the real estate
mortgage authority with a percentage of 3.6% approximately.
    7- The Health sector: which includes the ministry of health and
the departments of health affairs of the governorates, the public
hospitals, and the teaching hospitals, the specialized medical cen-
ters, the general authority of hospitals and teaching institutes, the
authority of monitoring and research of medication, the institute
of research on ophthalmologic diseases , the national council for
combating and treating addiction with a percentage of 5% approxi-
    8- Youth, culture and religious affairs: which includes the na-
tional council for youth, the national council for sport, the gover-
norates’ youth and sport offices, the ministry of culture, the theater
house, the national center for cinema, the supreme council of an-
tiquities, and the general organization of cultural places, the minis-
try of communication and information technologies, the bibliotheca
of Alexandria, Mubarak public libraries, The general organization
for books and documentation, the supreme council of culture, min-
istry of endowments (awqaf) and the religious affairs offices of the
governorates, Al Azhar Al Sharif, and the supreme council of Is-
lamic affairs. Approximately 4.2%
    9- The Education sector: which includes the Ministry of Edu-
cation and the offices of education in the governorates, and the
Ministry of Higher Education, and the universities, and the national
authority for literacy and adult education, the general authority for
educational buildings, and the education development fund with a
percentage of 14.2% approximately.
   10- The social security sector: which includes the Ministry of
Social Solidarity, and the social solidarity offices of the governor-
ates, social and insurance affairs, the National Council for Child-

hood and Motherhood, and the National Center for Sociology and
Criminology Research with 22.2% approximately.

   It is clear from the above that the general public services, de-
fense and national security, and the public security affairs make up
nearly half (approximately 44%) of expenditures,
    While the percentage of expenditure that has been allotted to
the other sectors which are of more importance to the individual—
the environment, housing, utilities, health, education, youth and
culture—comes only to 32.5% , i.e. approximately one quarter of
the expenditure. This shows that the government dedicates most
of public expenditure to preserving its own existence and its con-
tinuation regardless of the needs of its citizens or the needs for
   Expenditure items: The break down of expenditure was shown
above, but these items can be further broken down into these items:
salaries, which make up 25% of total expenditure; the purchase of
goods and services which makes up 7%; interests on debts which

makes up 22%; subsidies, grants and social welfare make up 22%;
miscellaneous expenditures 12%; and investments 12% as shown

in the figure below:
Public expenditure and inflation:
     Inflation is considered a consequence of any economic sys-
tem, which is very simply the monetary devaluation of the local
currency in response to specific financial or economic policies or
as a result of global economic trends. One consequence of infla-
tion is the reduction of purchasing power, in other words what was
purchased at a certain price last year will have to be purchased at
a higher price this year. Therefore, what the government used to
individuals in terms of goods and services, must be increased in
order to sustain the same level of provision of goods and services.
However, if the state wishes to increase the levels of provisions to
individuals it has to increase its public expenditure over and above
inflation rates.

    The previous figure shows that the rate of inflation reached 28.5
towards the end of the plan. This means that the Egyptian pound has
devalued to one-third of its original value from the years 2002/2003
to 2006/2007.
    We have previously shown public expenditure in current pric-
es8, however if we are to assess real expenditure by comparing it
to 2001/2002, prices i.e. without the effect of inflation, the graph will
be as follows:

8 These are the prices calculated according to the increase cause by infl -

    The previous figure shows the reduction in real expenditure be-
yond the levels that were declared by the government. it usually de-
clares figures without showing the effects of economic trends–e.g.
inflation—on these expenses which gives the impression of constant
increase. Conversely if we tie expenditure to the rate of inflation we
find that the public expenditure has actually decreased all the while
appearing in current prices to be always on the rise. This was the
case with expenditure on housing and health. It is shown to have
increased during the years of the plan by 86% on housing and utili-
ties, while in real terms it has only increased by 48%. What is even
more surprising is the case of health expenditure, which is shown to
have increased 34.7% in current prices, while the real expenditure
is an increase of only 9.5% as shown in the figure below:

Expenditure on economic, social and cultural
    The next part aims to analyze government expenditure on so-
cial, economic, and cultural rights during the years of the plan. This

will be done using the assessment models that were created by the
planners themselves to measure the degree of success of the five
year plan in providing for the socio-economic needs of the individu-
The right to education
   Total expenditure on education, at current prices, amounted to
approximately EGP 122.472 billion, which is an increase of 34.4%
from the previous plan at an annual compounded rate of 6.1%, as
shown in the following chart:

    Expenditure on education decreased slightly in the fourth year
of the plan before it continued to increase once again in the fi-
nal year of the plan. However, analyzing real expenditure at fixed
prices shows that expenditure continued to decline in the last two
years of the plan. Wages made up approximately 73.3% of total ex-
penditures, a 50.4% increase in value at an annual compounded
rate of 8.5%. The education sector received subsidies and grants to
the tune of 0.5% of total expenditure, and the purchase of goods and
services at 11.9% as shown below:

    Only 11.5% of total education expenditures were allocated to
investments in education. The numbers confirm a 36% decline, at
a fixed price in general investments in the education sector dur-
ing the years of the plan, at an annual compounded rate of 8.6%.
Decreases in investments reflected on education indicators in the
following way:
    - From the first year of the plan to the last, per capita expendi-
ture on education decreased from EGP 299.50 to EGP 235.99, as
shown in the following graph:

    - Classroom density improved negligibly, and the only thing to
note is that it did not reach the target set in the plan for reducing
classroom density to 35 students per classroom. The chart below
illustrates the trend9 :

    - The plan failed to increase the rate of absorption of children at
the mandatory age, in the manner indicated below:


   - The plan did not succeed in realizing desired pre-university
and university level rates of matriculation:

   Finally, the plan failed to increase the number of students ac-
cepted into higher education and al-Azhar institutions as follows:

Right to health:
   Over the course of the Five-Year Plan, total expenditure on
health amounted to EGP 43.022 billion, a total increase of 37% at a

compounded annual rate of 6.6%, as shown:

    Contrary to the statistics on spending using current prices, ana-
lyzing expenditure using fixed prices shows clearly the decrease
in expenditures on health in the final year of the plan. In the health
sector, salaries accounted for nearly half of expenditures at 41.2%,
while the purchase of goods and services ranked second at 23.8%,
while subsidies to health services accounted for 10.1%, as follows:

    The level of investment in the health sector over the course of
the plan amounted to 19.1% of total expenditure on health; while cur-
rent prices revealed just a 6% drop in investments over the course
of the plan. Fixed prices show us that investments decreased by
25% during this period, as shown below:

    As compared to the decrease in investments in health, the plan
failed to meet its targets in the following ways:
    - The plan failed to decrease the birth rate to 21.2/1,000 popula-

   - The plan failed to decrease the mortality rate to 5.9 deaths/1,000

   - The plan also failed to decrease the maternal mortality rate to
33.2 deaths/100,000 births.

Right to housing:
    Expenditure on house and utilities, at current prices, amounted
to EGP 31.247 billion, clocking an increase of 86% at a compounded
annual rate of 13.2%. However, calculations at fixed prices reveal a
48% increase in expenditure at an annual rate of about 8.2%.

   Rents represented about 4.6% of the total budget for this sector,
while most expenditure went towards investment at a rate of about

    Three main sectors carry out investments: the housing sector,
the construction sector, and the New Urban Communities Authority.
Investments the drinking water and sanitation sector made up 26%
of the total; building projects made up the biggest portion at nearly
59%; and highway and bridges projects made up 10%; and finally
services made up 5.3%.

    The plan aimed to build 930,000 housing units over the period
from 2002-2007, however only 811,000 housing units were actually
built, amounting to 87% of the target.

    The plan also set a target of building 580,000 rural housing units,
but the actual number of units built was slightly more than half at
just360,000 housing units, for a rate of 62% of the set target.

    The plan’s targets for drinking water projects were also not
met. The target was to increase drinking water capacities by about
26,000 liters per day, but only 22,000 was implemented making up
84% of the targeted rate. Only 52% of sanitation projects targeted in
the plan were implemented, with only 780 kilometers of the targeted
1,500 kilometers extension of the network achieved.

Population and the labor force:
    According to 2006 statistics, the total Egyptian population has
reached 72,349,119 people. Of this total 57.2 million live in rural
areas and 42.8 million in urban areas; and 51.1% of the population
is male and 48.9% female. The population growth rate reached ap-
proximately 2.04% annually, while the aim of the plan was to bring
this rate down to 1.8% annually.
    The labor force is about 22 million people out of the total popu-
lation, with 90.3% of them employed, meaning the unemployment
rate is around 10%. The rate of unemployment among men is ap-
proximately 7.7%, while among women it is 19.18%.

    The plan aimed to increase the labor force by 3.4 million over
the course of the plan, but that number only increased by 2 million,
or 58.9% of the targeted number. The plan had also targeted a drop
to 5% in the unemployment rate by the end of the plan. However,
the unemployment rate actually reached 9.7%, an increase of about
180%. Thus, the plan failed to regulate housing growth rates or re-
solve the issue of the growing rate of unemployment, leaving the
labor force to be taken in by the private sector in new cities.

Tables and Annexes1
Table (1); Consumer Price Index2

     2002       2003         2004         2005         2006         2007
    100       102.4317 104.9637 111.1891 115.8603 128.5368

 The total      27741        25620        25796        22667        20648
 Salaries       21473        19618        18305        16086        14278
  Goods         3420         3265         3184         2361         2302
  Interest        37           33           40           30           29
  Subsi-         130          124          100          125          104
 dies and
  Miscel-        186          143         1282          916          810
  Invest-       2495         2437         2885         3149         3125
Source: Ministry of Finance, Closing Accounts of the General State Budget

1 All tables were prepared and processed by the researchers.
2 Source: National Statistics Bulletin, various issues, Consumer Price Index,
Central Authority for Mobilization and Statistics.

Table (4); Housing and urban utilities sector

    The total sum         9247         5613       6003     5415 4969
    Salaries               338         311         283      261        245
    Goods Pur-             212         164         77        58        53
    Interest rates           5             4        6        9         31
    Subsidies and            8             5        7        6          0
    Miscellaneous            1             1        2        1          6
    Investments           8683         5128       5628     5080 4634
Source: Ministry of Finance, Closing Accounts of the General State Budget

Table (5) The planned and the achieved in the
housing and urban utilities sector

        The item                 The planned             The achieved
     Housing units                 930000                    811000
    Rural housing                  580000                    360000
     Potable water                    26                       21.9
   Sewage system                    1500                         780
Source: Ministry of economic development- the plan , and the book: twenty five
years of development.

Table (6); Planned Targets and Actual Results in the
Health Sector

 Health indicators                       Planned            Actual
 Reduction in birth rates                  21.2             26.57
 Reduction in mortality rates              5.9               6.45
 Number of hospital beds                  151000           185000
 Mortality rates of mothers                33.2              62.7
Source: Ministry of Economic Development—The Plan, and the Book: Twenty-
Five Years of Development

Table (7); Education Indicators

                                Planned                   Actual
 Education indica-

 Reduction of illit-             22.60%                     20%
 eracy rates
 Accommodating                    100%                      95%
 students at manda-
 tory school entry
 Pre-university edu-               96%                    89.70%
 cation enrollment

 university educa-                 30%                     27%
 tion enrollment
 Number of students              507000                  502000
 in accepted in
 higher education
 Number of students              260000                  491000
 accepted in Al
 Azhar education
Source: Ministry of Economic Development—The Plan, and Book: Twenty-Five
Years of Development

Table ( 8); The expenditure of the employment sec-

       Item                                      2007/2006            2006/2005   2005/2004   2004/2003   2003/2002
       Total sum                                   222029               207810     161611      145988      127320
       General public services                      67603               54106      51063       45288       37511
       Defense and national security                17922               15935      14804       14563       13333
       General security affairs                     11127               105523      8902        7590        6916
       Economic affairs                             13914               11227      11705       11959       10034
       Environmental protection                      828                  412       493         907         1569
       Housing and urban utilities                  9247                 5613       6003        5415        4969
       Health                                       10435                9665       7256        8073        7593
       Youth, culture and religious                 8729                 7635       7307        6648        5793
       Education                                    27741               25620      25796       22667       20648
       Social security                              54483               67074      28282       22878       18954
      Source: Ministry of Finance, Closing Accounts of the General State Budget

Introduction                                      3
Chapter One                                       7
The 2002-2007 Socio-Economic Development
Plan                                              8
Part one: Evaluating the Fourth Five-Year Plan
(1997/1998-2001/2002)                             9
Macro-Economy:                                    9
Economic, Social and Cultural Rights:             9
Right to education:                               9
Right to health:                                 10
Right to work:                                   10
Part two: Development challenges and jus-
tifications for the shortcomings of the fourth
Five-Year Plan                                   11
1-The necessity of increasing the Savings
Rate                                             11
2-Reducing the deficit in the Balance of pay-
ment                                             11
3-The importance of improving production
standards                                        12
4-Expanding the base of human capital and
enhancing manpower capabilities                  12
5-Bridging the technological gap and catching
up with the information revolution               13
6-The population problem                         13

Part three: The goals of the fifth Five-Year
Plan 2002-2007                                      14
The first target: Improving the quality of life
and the standard of living                          14
1-Education                                         14
2-Health                                            16
3-Housing, construction and public utilities        16
The second target: Poverty alleviation              18
The third target: Increase employment op-
portunities and confront the unemployment
problem                                             18
The fourth target: Increasing the economic
growth rate                                         18
The fifth target: Regaining economic balance        19
The sixth target: Increased participation in
and benefit from development for women              19
The seventh target: Provision of basic servic-
es to rural areas and improving conditions in
Egyptian villages, particularly those deprived
of services                                         19
The eighth target: Supporting the foundations
for state and citizens security                     20
Part Four: The Fiscal Program of the fifth Five-
Year Plan                                           20
Program for employing recent graduates:             20
Unemployment fund:                                  21
Comments                                            21

Chapter Two                                    24
The Plan and the Assembly                      25
One: Planning and Budget Committee’s report    25
The Committee’s recommendations                26
Two: Assembly members discuss the plan and
the first year of its budget(2002/2003)        28
Comments made by parliamentary political
party members:                                 29
First: Comments by National Democratic Party
(NDP) parliamentary bloc representative        29
Second: Comments by the New Wafd Party
parliamentary bloc representative              32
Third: Comment by the Tagamua Party parlia-
mentary bloc representative                    34
Fourth: Comment by Arab Nasserite Party
parliamentary bloc representative              36
Comments by other Members of Parliament        38
1—The plan and development:                    38
Legal and constitutional observations:         42
2—The urgent action plan for villages and
cities:                                        43
3—Unequal distribution of investments across
governorates:                                  44
4—Public revenues:                             44
5—Taxes and custom duties:                     47
6—Public expenditures:                         48

7—The public debt and the budget deficit:     51
8—Investment and savings:                     54
9—Exports:                                    57
10—Agriculture:                               58
11—Industry:                                  60
12—Privatization:                             61
13—Economic bodies:                           63
14—Socio-economic rights:                     64
Education                                     64
Health                                        67
Housing                                       68
Unemployment and labor                        69
The environment                               72
Youth, culture, and women                     72
Subsidies:                                    72
Poverty                                       73
Pensions:                                     75
Corruption:                                   76
General comments by the government            78
Chapter Three                                 81
Evaluating the Fifth Five-Year Plan (2002-
2007)                                         82
First: Macroeconomic policies                 82
Investments                                   82

Savings                                         84
Economic Development                            86
Public revenues                                 87
1. Conventional sources:                        87
2. Unconventional sources:                      88
Second: Social, economic, and cultural rights   91
Public expenditure                              91
Public expenditure and inflation:               97
Expenditure on social economic rights and
culture:                                        99
The right to education                          100
Right to health:                                103
Right to housing:                               107
Population and the labor force:                 110