Stephen Kalin Cairo
The economist behind a plan to unlock at least $380 billion (R4 trillion) worth of assets from Egypt’s black market says that President Abdel Fattah al-Sisi must first restore another asset that has depreciated over the years: the trust of a wary public.
That is a tall order in a country where the government has chronically neglected basic duties, in many cases leaving citizens to fend for themselves and find ways around laws and bureaucracy that hinder more than help.
But Peruvian economist Hernando de Soto, who has been consulted by dozens of world leaders on private property reform over the past 25 years and has met with Sisi three times since May, is confident the president will use a narrow window of opportunity to address Egyptians’ pervasive suspicion of government.
“Egyptians don’t trust their own administration,” De Soto said. “They’re not going to hand in names or data, so you have got to start by establishing credibility.”
He has given Sisi a plan outlining specific changes to the bureaucracy and legal code needed to integrate an estimated 60 percent of the population into the system by registering and documenting ordinary Egyptians’ assets.
He predicts such reforms could more than double growth rates within five years by giving people access to credit and the protections of legal status. Forecasts for Egypt’s economic growth this year range between 2 percent and 2.5 percent.
De Soto’s initiative is part of efforts to restore public finances, attract foreign investment and revive an economy battered by three years of political turmoil and unrest. It is expected to be implemented alongside others including from US consultancy Strategy& and investment bank Lazard.
Sisi is standing by other ambitious initiatives, such as one to build 48 cities in the desert.
De Soto said Sisi had begun appointing officials to form an agency that would run a campaign aimed at building consensus for the reforms and ensuring their implementation.
The presidency was not available for comment. But a statement from Sisi’s campaign two weeks before elections in May said the candidate had met with De Soto to discuss “a vision for the future of the informal economic sector in Egypt”.
Sisi, the army chief who ousted president Mohamed Mursi last year following protests against his rule and then won 93 percent of votes cast in May, has already expended some political capital on tax hikes and subsidy cuts.
Previous governments have talked about reforming the economy without much effect. De Soto met with officials from former president Hosni Mubarak’s government a decade ago and all the candidates in the 2012 presidential elections, including Mursi of the Muslim Brotherhood.
Loss of faith in central government was a main cause of the 2011 uprising that ended Mubarak’s 30 years in power. Mistrust only increased in the following years, as police abandoned their posts and officials avoided making decisions they feared could land them in jail.
De Soto said the key to his plan was for Sisi to “create enough enthusiasm for the idea of being able to work within a system where everybody obeys the law. That allows you to break the inertia.” – Reuters