Egypt ranked 100 out of 137 countries in the Global Competitiveness Index 2017/2018 edition, according to a new report of the International Finance Corporation (IFC) affiliated to the World Bank Group on Tuesday, mentioning that 2016/2017 Egypt’s rank was 115 out of 138 countries, while it was 116 out of 140 countries in 2015/2016, 119 out of 144 countries in 2014/2015 and 107 ranking out of 144 countries in 2012/2013.
In 2017/2018 edition, Egypt scored 3.9 out of 7 points, said the report, adding that ranking depends on three main sub-indexes, the first one is basic requirements which Egypt ranked 106 includes institutions, infrastructure, macroeconomic environment, health, and primary education.
The second sub-index is efficiency enhancers which Egypt ranked 87, includes higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, and market size.
The third sub-index is innovation and sophistication factors which Egypt ranked 101 includes business sophistication and innovation.
The report clarified that the most problematic six factors for doing business are policy instability, inflation, corruption, inefficient government bureaucracy, an inadequately educated workforce, and access to financing.
Egypt enters the rankings as the 100th this year and approaches levels of competitiveness similar to those of 2009 and 2010, said the report, adding that in past years, improvements have been particularly sharp in terms of financial market development (77th) and infrastructure (71st).
In addition to the opening of the Suez Canal extension in 2015, a number of transport connections have been restored recently, contributing to the expansion in road and railway connectivity. Financial market conditions have benefited from the flexible currency regime introduced at the end of 2016, while the banking sector weathered the change smoothly and is sufficiently sound (49th).
The country will also benefit from its ambitious programme of fiscal reforms, which included the introduction of the Value Added Tax in 2016 and the phasing out of many fuel and energy subsidies. However, its macroeconomic environment (132nd) suffered from high inflation in the period that immediately followed the stronger than-expected depreciation of the Egyptian pound.
Moreover, the report mentioned that countries in the Arab world have faced difficulties in diversifying their economies away from areas of low productivity and exports of fossil fuels toward production and exports of higher-value-added goods and services. Although some countries in the region, such as Egypt, Jordan, Lebanon, and Tunisia, have levels of diversification that compare well to others at their level of income, most Arab world countries have levels of diversification that are well below it.
Governments should support the development of angel investment in the Arab world to include private investments, bridge equity gaps, and improve the pipeline of investment-ready start-ups for venture capital and private equity firms, said the report, adding that growth of the Arab world angels would provide access to early-stage financing to start-ups that can easily be combined with mentorship and market-access connections.
Within the Arab world, Gulf Cooperation Council (GCC) countries generally are undertaking the most intensive efforts to increase the amount of available seed capital to MSMEs, but other countries, such as Lebanon, Egypt, and Morocco, have been more active lately in this market, said the report.
Lower prices for oil and gas imports have benefitted resource-poor countries in the short term, but not significantly improved their macroeconomic performance in the long term because additional challenges have emerged, mentioned the report.
Reduction in employment opportunities and real salaries in the GCC countries as the result of slower growth and increased taxes to offset the fall in oil revenues has reduced the flow of remittances into the rest of the region, as well as lessening import volumes from neighbouring countries, said the report.
Moreover, Egypt had to face higher inflation and fiscal budget deficits together with a worsening of country credit rating while Jordan experienced a rise in public debt, partly as a consequence of the support given to the millions of refugees it is currently hosting from neighbouring countries, and its balance of payments was negatively impacted by the decrease in remittances from the Gulf economies, as well as the slowdown in tourism.
The public sector remains the largest employer in many Arab countries, accounting for 60% to 80% of total formal employment in the GCC economies, Egypt, Iraq, Jordan, and Tunisia.