Revolution at the EBRD required for any new role in Egypt
Bankwatch Mail | May 14, 2012
The figures should be well known. Somehow, though, in the western world, and especially in official quarters, they tend to get overlooked in the rush to impose the 'next latest thing' on post-revolution Egypt. The country's seven percent GDP growth figure in 2007, hailed by the World Bank and others, concealed a multitude of injustices. For one thing, average per capita GDP growth plummeted from 4.1 per cent prior to 1990 to 2.7 per cent during the neoliberal era set in motion by the IMF structural adjustment regime in 1991.
This article is from Issue 52 of our quarterly newsletter Bankwatch Mail
Since then, the percentage of the population living below 2 dollars a day has doubled, and nearly a third of all Egyptians live below the poverty line - a figure that may in fact mask the current reality as the political impasse since the overthrow of Mubarak last year continues and economic uncertainty intensifies.
While structural adjustment and market liberalisation were hugely beneficial for foreign corporations and wealthy Egyptians (in 2008 Egypt was named the top reformer in the World Bank’s Doing Business survey), it devastated Egypt's economy and induced outrageous social symptoms. The phenomenon of street children, for instance, began during the Mubarak era - children living on the streets, working at shining shoes, collecting garbage, begging, cleaning, parking cars, selling food, and highly vulnerable to being forced into a string of illicit activities.
Western development banks are now lining up to re-enter Egypt or in the case of the EBRD, to enter Egypt and other north African countries in a highly ambitious extension of its founding mandate that saw it focusing purely on the central and eastern European states since its founding in 1991. An EBRD Technical Assessment, made public earlier this year, identifies the following operational themes to 'guide a potential engagement by the bank in Egypt':
- financing and improving conditions for investments in the private sector, with particular emphasis on SMEs, to support transition and job creation;
- enhancing the agribusiness value chain to improve food security, strengthen the distribution chain, and develop a sector that accounts for a high share of employment;
- modernising the financial sector so that it can contribute more fully to economic growth by strengthening its capacity and diversifying the range of financial products offered, including risk capital;
- increasing the role of renewable energy and improving energy efficiency
- supporting reform and commercialisation of the transport and power sectors including the mobilisation of private sector infrastructure investment for accelerated development; and
- upgrading municipal infrastructure, based on decentralisation and commercial principles, to provide wider access to better quality urban services to the population.
“The link between the impact of EBRD’s programmes on transition, and their impact on people’s lives is not always well articulated”
UK Department for International Development
As the EBRD assessment makes clear, “private sector led, inclusive growth” is the key priority for both the EBRD and the as yet unelected Egyptian authorities. Privatisation and its modern-day equivalent public-private partnerships also feature heavily on the EBRD agenda for Egypt. But before assessing how 'inclusive' this 'inclusive growth' drive may end up being, especially for Egyptian women, it's worth taking a step back to consider the EBRD's credentials for stepping into a country so afflicted by poverty.
European Bank for Reconstruction and ...
In spite of the name, the EBRD does not see itself as a development bank: it neither measures the development impacts of its projects, nor sets development targets at the project or country level. A new country level transition indicator on 'inclusiveness' is under discussion at the bank, and this may or may not include something on poverty and/or wealth inequality. But, fundamentally, the EBRD does not take poverty eradication as its primary focus in its developing country operations, although this is required for EU action under Article 21.2 of the Treaty of the European Union. The UK Department for International Development's Multilateral Aid Review noted in March 2011: “The link between the impact of EBRD’s programmes on transition, and their impact on people’s lives is not always well articulated”.
Thus far no specific measures to address this gap as it pertains to Egypt and other north African countries appear to be forthcoming from the EBRD. It's certainly easier to claim, as the bank's president Thomas Mirow regularly does, that parallels between post '89 central and eastern Europe and the Arab Spring leave the EBRD very well placed to intervene now in a different continent. Yet are there so many close parallels? Poverty levels in the post-communist states were nowhere as severe as they are now in Egypt, though of course they did jump in the period up to the mid-1990s. And in certain aspects of economic organisation, lessons that have emerged from the post-1989 analysis in eastern Europe should already have been drawn from experience in Egypt.
Privatisation is being suggested without sufficient justification in the EBRD's Egypt Technical Assessment, yet of course widespread privatisation took place in Egypt pre-revolution and some of its effects have been recognised as contributory factors in the popular uprising of 2011 (and before). At the same time, the post-revolution mass privatisation drive that took place in eastern Europe has recently been strongly criticised by sociologists from the University of Cambridge and Harvard University. Their study - “Mass Privatization, State Capacity, and Economic Growth in Post-Communist Countries” - published in April this year claims to be the first to trace a “direct link” between the mass privatisation programs of the early 1990s and the “economic failure and corruption that followed.”
The EBRD's role as a proponent of privatisation both then and now in two different continents does not appear to have escaped the authors' attention. Lawrence King, one of the study authors, commented on its release: “Rapid and extensive privatization is being promoted by some economists to resolve the current debt crisis in the West and to achieve reform in Middle Eastern and North African economies. This paper shows the most radical privatization in history failed the countries it was meant to help.”
Does Egypt fit the EBRD, or will the EBRD be able to fit to Egypt?
The EBRD's gap on poverty and its ideological commitment to privatisation are clearly problematic, but on the practical level, when it comes to infrastructure and support for SMEs, two of the bank's focus areas for Egypt, is it equipped to deliver for the poor in general and, specifically, for women?
The Technical Assessment has it that the EBRD's operations in Egypt “will seek to address issues of gender equality and women’s entrepreneurship”, with the potential for further studies to look at the role of women in the economy and society, tailored lending (albeit via intermediary banks) to women-owned businesses, and, in municipal projects, “ensuring benefits are equally shared between men and women”.
It is doubtful that EBRD support for upgrading municipal infrastructure, based on commercial principles, to provide wider access to better quality services will be effective if it does not from the very outset draw its map with a gender lens. That map needs to take in a wide range of actors and sections of society, for instance mothers trying to reach clinics, and children in rural areas trying to get to school. To ensure also a more robust safeguarding of women's rights in connection with its investments, the EBRD ought to be putting gender at the heart of its operations with a dedicated Gender Policy. A Strategic Gender Approach is currently being formulated by the bank, though it appears that it will fall short of being a fully-fledged policy. At the very least, a Gender Performance Requirement within the EBRD's environmental and social policy (such as there are for community health, biodiversity and other key issues) would provide more guarantees for women.
The emphasis that the EBRD is putting on public private partnerships (PPPs) for the provision of infrastructure and utilities also raises concerns, especially if such initiatives do not have gender and poverty considerations to the fore. Will EBRD infrastructure projects across a broad range of sectors (eg water and sanitation, transport, energy) ensure that the service provider is accountable to the poor populations they are supposed to serve? Before setting forth with new PPP schemes, it needs first to be established who, on a gender-disaggregated basis, is gaining and who is losing from existing systems, and then a determination made as to how the PPP approach will affect equitable access to services.
As long ago as 2004, a World Bank Development Report, Making Services Work for Poor People highlighted that making services work for poor people necessitated changes to strengthen accountability in key relationships in the service delivery chain between: poor people and service providers, poor people and policy makers/regulators, and policy makers and providers. Continuing scepticism though about PPPs, particularly in relation to bloated project costs and questionable development impacts, suggests that the 'policy makers-providers' nexus remains paramount.
Where the poor are having an impact is when PPP initiatives ignore social impacts - the collapse of water concessions in Argentina and Bolivia because of social unrest generated by substantial tariff increases, among other factors, are vivid examples. Ongoing public dissent in Ghana over World Bank backing for private participation in the public water supply suggests that development banks may well be backing a loser if they are holding out for PPPs to deliver essential services for all sections of society - and they can expect a public backlash.
'Growth a formality' say the models, but what about the informal realities?
Egyptians survived thirty years of Mubarak and his misguided, economic policies by working predominantly - and ingeniously and creatively - in the informal economy. Post-revolution economic policies should therefore start from there. The EBRD's major emphasis on developing Egypt's SME sector conforms to widely held growth- and jobs-boosting precepts, but when faced with the extent of Egypt's informal economy shouldn't it be embraced rather than leap-frogged over? Shouldn't the poor who comprise the huge informal economy right now be placed centre stage in the investment map, rather than being supplanted by a single-minded focus on private sector development and the SME sector?
Experiences in the solid waste sector, for example, are instructive. This sector, that employed over 100,000 poor, illiterate and unskilled youths, was privatised to multinationals in 2003 and has resulted in the worst urban environmental situation Cairo has ever known. Rather than replace this with another ineffective corporate model financed by large capital, Egypt would do well to upgrade and integrate the informal private enterprises rooted in traditional systems that provided residents with door to door collectors who recycle 80 percent of what they collect. Such grassroots, out-of-the-box solutions are unlikely to be part of the EBRD's thinking for Egypt - they are certainly beyond the scope of the EBRD's current transition methodology that guides its operations.
One billion per year for who?
The range of economic and social factors for the shareholders of the EBRD to weigh up when considering whether or not to green light up to USD 1 billion per year in investments for Egypt is vast. This article is unable to adequately cover not only all the key issues but also the related micro-issues and interactions: for example, do aspirational sounding plans from the EBRD to “enhance the agribusiness value chain” in Egypt take proper account of the broad base of women farm workers who survive from working on the land? And instead of leading to food security, will EBRD assumptions and possible future investments lead to food insufficiency as more food is directed to export markets, leaving poor women farmers and their children without adequate income and nutrition?
What is troubling, based on the relatively scarce, publicly available information from the EBRD to date, is the sense that it views the economic policies enacted under Mubarak as somehow having ‘gone wrong’, rather than being inherent failures in themselves. Continuing to promote market economies and attempting to design them in an ‘inclusive’ manner will not address the huge gaps between where people are and where the market is. Poverty, malnutrition, poor access to potable water and adequate sanitation, poor health, illiteracy, lack of skills, lack of ownership of assets - all of these make the distance between where people in Egypt are, particularly women, to those markets huge.
If the EBRD wants to reform and commercialise key sectors in the Egyptian economy in order to accelerate development, it will need to shift its focus from ‘projects’ to 'people'. That's a tough ask for an institution that to date - and despite the name - is more concerned with the bottom line than with development.
Laila Iskandar is the chairperson of Spirit of Youth NGO, a non profit organisation based in Cairo. She is an Education and Development Specialist with wide experience of collaboration with international agencies such as UNESCO, USAID and UNDP.
A video produced by RNN, Platform and Bankwatch called “Egyptian Revolution and Neoliberal Economics” can be seen on YouTube