Debt Swap to help Egypt…Wrong approach!

By: Michael Armanious

Edit by: Nancy Girgis

In May 25, America and its G8 partners discussed ways to help Egypt to convert its debts— a multi-billion dollar plan— into investments to create new jobs. Previously on May 19, President Obama had announced that the US would forgo up to $1B, from the $3B, that Egypt owes to the US. As a result of these decisions, Egypt will have another $3B loan agreement with IMF and $2.2B with the World Bank.

In early 2010, Egypt announced its external and internal debts. The country owes over $35B to external entities and over almost a half trillion Egyptian pounds to internal entities. 

Stop! 

We have tried this way before! Financial aid and more loans – it does not work. The main problem is the central planning strategies. For the past 59 years, Egypt has used the central planning strategy and it has failed miserably. Egypt needs a new type of planning. 

Rather than continuing to offer cash loans, why not try offering a new motivation for productivity? If the US could capitalize on the resources and competitive advantages available in Egypt and offer to buy the products thereof, Egypt would simultaneously gain the self-sufficiency it needs to potentially compete with the other great nations of the world while paying off their external and internal deficit. 

 At one time, Egypt was known as the breadbasket of the entire Roman Empire. Today, Egypt imports over 40% of its food, especially wheat (60%). The central government still subsidizes bread and energy.

The debt swap should be used as incentive for American companies to work with private Egyptian local partners to solve Egypt’s short and long term challenges, both Egypt and the U.S. It must be invested in projects that will have a long term impact on Egypt. 

Less than 6% Egypt’s landmass, 1,000,000 Km², is inhabited. By the year 2050, the Egyptian population will increase by 60 million people. The core problem for Egypt is the redistribution of the population over new areas, which requires new lands, new energy sources, new water resources, and creation of new cities with industrial sections, homes, schools, and transportation systems.

The Map was copied from Dr. El Baz's website

Over 25 years ago, Dr. El-Baz, a geologist at Boston University, submitted a proposal for a project “Development Corridor” that would give Egypt large, new, urban, industrial and agricultural areas ($24B Estimated cost in 2010). As part of the project, there would be a superhighway and a railway network running from the northern coast to the southern border that is connected to the Nile River This project would have both short and long term solutions to the high rate of population growth and expand the limited inhabited area (6%)  outside of the Nile valley into adjacent and then further successive areas. 

Unfortunately, there are some objections that have delayed the project for 25 years: the high cost and un-renewable source of water. 

Over 42 years ago, Dr. El-Baz successfully assisted the spacemen to land on the moon during the Apollo missions, but Egypt today has been unable to instill their trust in Dr. El-Baz’s vision for the country.  Unable to find solutions to the renewable source of water and how to fund such a project, “Development Corridor” remains in the bureaucratic processes.

Egypt is abundant with energy resources (solar & wind) and empty desert land. The debt swap can be directed toward projects where Egypt can take advantage of the current technology to produce enough clean electricity to fulfill its needs and export the surplus. Furthermore, the solar energy can be used in water desalination from the Mediterranean and the Red Seas which can further agriculture by drip irrigation, and the energy from this could then be transferred to several other related industries.

If Dr. El-Baz’s “Development Corridor” could be integrated with the solar energy and water desalination project, then the hindrances to his proposal—the cost and renewable water sources—would immediately be alleviated. 

Rather than viewing the proposal as one $24B project, the integrated projects would be customized for the unique needs and capabilities of the various regions throughout Egypt.  Implementing the projects in conjunction within specific regions would allow the productivity of each area to be realized to its fullest potential.  

There are thousands of villages in the desert vicinity known for its very low income, high illiteracy rate, and the absence of any economic opportunities, the inhabitants of which  are the main source of migration to the slums area in Cairo and other major Egyptian cities. These villages would benefit from El-Baz’s “Development Corridor” project by giving them another option of moving west to the new communities that this project would create.

This integrated project coupled with a incentive campaign that includes low-cost homes, new social service benefits, and most importantly an employment directed vocational and technical training,  would attract people to these new communities. 

To alleviate the financial concerns about how to finance such a big project, this project can be implemented on a smaller scale with unique deliverables for each region. The region to the northwest of the Delta Nile, for example, renowned for its handcrafted goods, desert tourism, grazing and marine activities, will be a stakeholder in the project. The Middle of upper Egypt, especially the three governorates; Menia, Suhag and Qena can be another project for their region has different needs to address than the people in the North.

United States has its own problem with large debts; therefore, let’s be creative in helping ourselves and Egypt.

Let’s use the debt swap payments in moving Egypt forward and open a new market for our own companies.

Moving Egypt Forward by Vocational/Technical Training & Technology and not financial aid

By: Michael Armanious, MBA

Edit by: Nancy Girgis

Lately, there have been many depressing reports about the state of Egypt’s economy.

Egypt is in a severe state of economic and human crisis despite the fact that it has tremendous resources[1] such as human (with over 24 million employable persons), the River Nile and land (while Egypt covers an area over one million km2, only 6% of Egypt’s land is inhabited). Tourism is the driving force of the Egyptian economy and has the potential of creating millions of jobs. There are also resources such as the Suez Canal, petroleum, natural gas and much more. Despite all that, Egypt is still dealing with some serious challenges, especially after the January 25 popular uprising. 

Sadly, following the revolution, there was a near-complete shutdown in the tourism industry ($10 billion in revenue in 2010 alone). Foreign reserves are decreasing sharply, which will impact the country’s ability to borrow more money or attract foreign investment. Furthermore, the country’s “traditional” challenges such as corruption, insufficient infrastructure, and, most importantly, its large workforce that is lacking the necessary job skills coupled with high unemployment.

Are there any solutions to these numerous challenges? Should they take the form of traditional aid and loans, or should we perhaps think outside the box?

On May 19, President Barack Obama announced a new financial assistance package geared at creating new jobs in Egypt. While this might be a viable solution in the short term, I doubt it will have any sustainable impact on the long-term challenges facing the country.

Egypt needs a new vision and different solutions to its long-term challenges, particularly the unskilled work force.

In reality, Egypt needs a revolution in its education system. Not in the post-secondary level, but in vocational/technical training.

On the same day President Obama announced his aid package for Egypt, I visited Minuteman High School in Lexington, Massachusetts. I wanted to learn more about vocational/technical training and if this formula could apply to Egypt. Let me say that I was blown away from what I learned that day. Superintendent Dr. Edward A. Bouquillon had arranged for two students (Mike Breen and Alejandro Cuellar) to give me a tour of the school and explain the vision behind the school’s curriculum.

I learned that the main component of the Minuteman formula is to understand the needs the market place and work with the employers to create courses. In recent years, the school created new departments such as electromechanical/robotics, biotechnology, business finance & marketing, and computer technology.

My two young tour guides took me from one department to another, explaining the vision and mission statement behind each one. At times, I was lost in the terminology they used; I thought I was talking to people at MIT as their intelligence was astounding. They further explained their career and academic path. Mike is aiming to obtain his PhD while Alejandro is working as a research assistant at a major hospital’s liver disease lab.

I was left wondering about the environment the school created for them, and if a similar environment could benefit Egypt’s students.

Mike and Alejandro selected this “alternative” path because they were interested in math and science and hands-on experience. The school not only offered them the opportunity to select a career they love, but also give them the skills to be employed upon graduation as well as the option to pursue a higher education.

Egypt has a great potential of becoming an energy exporter, not only to other Middle Eastern countries, but also to Europe. Historically, Egypt has proven that it is capable of massive engineering undertakings. Ancient Egyptians created one of the original wonders of the world, the Pyramids of Giza. More recently, in 1859, Egyptians began excavating the Suez Canal[2], which has since become a major source of revenue for the country. Meanwhile, in 1960, Egypt began work on the Aswan dam, which quickly became main source of electricity for the country, and in the process created Lake Nasser, a 6,000 km2 artificial lake.

 

Author and clean-energy entrepreneur Tony Seba believes that if Egypt took the equivalent landmass of Lake Nasser³ (which represents only 0.6% of Egypt’s landmass) and created a solar power plant, the country would have the capacity of becoming a global energy leader. 

Egypt needs a new vision to achieve its full potential, and I firmly believe that a radical change at the vocational and technical training level is the solution.

---

[1] http://wwww.iie.com/blogs/?p=2136

[2] http://seaplus.com/suez.html.

[3] http://tonyseba.com/desert-power/can-egypt-join-the-ranks-of-energy-world-powers/
 

Michael Armanious is founder of Egypt Forward, which works to educate the American people about current events in Egyptian society.