Egypt needs a reconstruction fund too

March 24, 2011

By Hugo Dixon
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

LONDON — Egypt needs a reconstruction fund too. Japan will be spending tens of billions of dollars on rebuilding after its tsunami. Egypt can’t afford to finance an equivalent fund after its political tsunami. But foreign powers could help by showing they are not just interested in bombing neighbouring Libya.

In the long run, the most important thing is to accelerate free trade between Egypt and the industrialised world, notably the European Union. More immediately, as the country teeters on the brink of recession, foreign countries can show they really care about Egypt’s transition to democracy by financing a fund to invest in physical and social infrastructure — such as power generation, transport, housing and education.

Over the two months since the Egyptian revolution began, nothing concrete has emerged — despite much talk. Western countries want to help but are strapped for cash. There is also an understandable desire to link help to the achievement of the milestones on the road to democracy. Meanwhile, first the Japanese earthquake and then war in Libya has distracted attention from Egypt.

But it’s not too late to grab the moment. Nor is it impossible to raise cash. The main source of new money is the Gulf. Saudi Arabia, the United Arab Emirates and Qatar are bubbling with petrodollars. Even if these sheikhdoms don’t obviously have an interest in fostering democracy, they certainly have an interest in good relations with the Arab world’s most populous country. Meanwhile, Western countries could write off governement-to-government debt or convert it into equity in infrastructure projects. Of Egypt’s $34 billion external debt at the end of June 2010 (78 percent of which was owed by the government), 31 percent was owed to European Union countries, 12 percent to Japan and 10 percent to America.

Ideally, a reconstruction fund should be run as a public-private partnership (or a series of such partnerships) at arm’s length from the government. Given that it would be invested largely in infrastructure, it should then be able to raise more money through borrowing. Added to the money from donations and debt-for-equity swaps, total investments of around $20 billion — just under 10 percent of GDP — might be possible.

It could be argued that such a plan would do little to solve Egypt’s short-term problems of rising unemployment and inflation. But this is only partly true. An external vote of confidence could encourage industry to push forward with its own investment plans; and the government would be able to direct its own limited resources to priorities such as subsidising food if it knew cash was coming in to help take care of structural problems. Investing in democracy would be money well spent.


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Thanks for your interst in Egypt.
Egypt now have an economic crisis ,but tomorrow it will have a strong economy thanks to its great people and help of her friends that will not forget them tomorrow if they give her a helping hand today.

We now have the hope which makes us challenge the odds.

Posted by Eng.Nancy | Report as abusive

This sounds like a great idea!
I think Egypt needs education first and foremost and I personally would be grateful to anyone who would help us get started.
Although we do have schools, we have poor teachers and an old fashion curriculum.

Also, for energy generation, we have VAST deserts that are totally uninhabited and would serve great for solar power.
Our deserts stretch for 100’s of miles from the sea to the nile and then from the nile to infinity!
I imagine how great it would be if Egypt could own the technology so that we could build factories that will produce Heliostats and Solar Troughs. Not to mention the number of jobs we would create.
At the same time, we must not forget that Egypt only has 3 billion barrels of oil which will not last very long. So any power generation that comes from oil will cause us a world of hurt in the future.

Posted by AhmedAdly | Report as abusive

I believe Egyptian economy has many un-used resources Plus the strategic location.
Natural Resources + Suez Canal + Tourism + Gas
Egypt securing Israel’s Borders like Jordan live on subsidy from US and G.C.C country. I believe Egypt has to use un-used sources like this
Changing regional & International Policy
Changing Suez canal charges from USD to Egyptian Pound which will raise pound market value by increasing the international demand.

Posted by EGFeasibility | Report as abusive