Over the past year, several countries and multilateral institutions
have promised to give or loan significant resources to Egypt. The Deauville Partnership
pledged close to $40 billion in economic assistance for Tunisia, Egypt,
and other MENA countries at last year's G-8 summit in France; Gulf
countries, the African Development Bank and the World Bank have also
pledged billions. But the money has been slow to arrive-in no small part
due to lenders' unease about the lack of political clarity in the
region. For more than a year, Egypt has been involved in protracted
negotiations with the IMF for a $3.2 billion loan. These talks at last seem to be in their final stages, which could help unlock other funding. As Mohsin Khan,
a senior fellow at the Peterson Institute for International Economics
noted in February, "Many of Egypt's friends aren't going to move until
the I.M.F. loan is approved." A successful completion of Egypt's
presidential election could bring some much needed political direction,
and get the financial ball rolling. Still, analysts warn that Egypt now
needs about $15 billion in external financing.
While international funding can help address Egypt's immediate
balance of payments problems, over the longer term, the countries of
North Africa will flourish only if they can attract private sector
investment and marshal domestic resources. Let's not forget that before
the revolution, Egypt was regularly touted as an up-and-coming emerging
market, notable for its large, youthful population, untapped natural
resources, and busy ports on the Mediterranean Sea and Suez Canal. It is
the "E" in CIVETS
(Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa), the
catchy acronym coined by investors to describe the next set of countries
to watch after the BRICs.
Yesterday, I hosted Jose Fernandez,
assistant secretary of state for economic and business affairs, for a
meeting at the Council on Foreign Relations. Fernandez's office is
working on projects in several North African countries to strengthen
economic governance, encourage investment, and reduce corruption. In
particular, he discussed the State Department's efforts to expand a
program called Domestic Finance for Development (DF4D)
in the Middle East. DF4D aims to improve countries' abilities to
attract investment and build up internal resources through measures like
reducing corruption, publishing more transparent budgets, and creating
more efficient tax systems. This month, DF4D worked with the government
of Tunisia to host a conference bringing together regional finance
ministers, tax experts, and business representatives in Tunis to discuss
best practices in domestic resource mobilization. (Fernandez cited the
example of Sergio Fajardo,
the mayor (2004-2007) of Medellin, the Colombian city once synonymous
with corruption and drug trafficking, who was able to significantly
increase tax collections (and turn the city around) by convincing
citizens that their taxes might actually be put to productive uses and
not siphoned into politicians' pockets.)
