World Bank chief economist comments on investment climate - View presentation

Dr. Nicholas H. Stern, senior vice president and chief economist of the World Bank spoke on January 21 about "Investment Climate, Growth and Employment," in a presentation organized jointly by AmCham Egypt and the Egyptian Center for Economic Studies (ECES).

Dr. Stern spoke about remarkable changes and progress in development worldwide, citing indicators for sustainable development such as adult literacy rates, life expectancy and per capita income, which have been increasing in developing countries in the last 50 years at a faster rate than any other time in history. But this progress has not been shared universally, with poverty persisting in developing countries and growth often remaining stagnant despite economic and political reforms.

He proceeded to talk about the challenges and opportunities facing the Egyptian economy, especially rapid demographic change, which creates a serious need for employment opportunities for new entrants. He also referred to Egypt's fragile environment, with the potential for acute water scarcity and land degradation.

Nevertheless, he said, Egypt has great possibilities for growth. The country's advantages include a large domestic market with rising purchasing power; natural gas reserves; a low-cost labor force; proximity to large markets; and an exceptional cultural heritage. Yet Egypt's share of Foreign Direct Investment (FDI) has declined, while total FDI to developing countries has grown.

The creation of a suitable investment climate requires ensuring macroeconomic stability, with stable and transparent fiscal accounts, low inflation and trade barriers, good governance and strong, non-corrupt regulatory institutions.

"Entrepreneurship is, or can be, the central creative economic force in all countries, and off-farm rural employment is key to escaping poverty," Dr. Stern stressed. He noted that Upper Egypt has less off-farm rural employment and higher poverty rates than other regions.

"Seven key lessons are learned from the development experience," he said, stating them as follows:
1) The state is a necessary complement to market growth;
2) Growth is the engine of poverty reduction;
3) The private sector is crucial, and the importance of small and medium-sized enterprises must be recognized
4) International trade has a key role;
5) Institutions and governance must be changed to ensure effective development;
6) Public empowerment and participation are important in the development process;
7) Importance of ownership of reform processes.

The presentation was followed by a lively question and answer session, in which Dr. Stern recognized that the situation of conflict made the Middle East a less favorable climate for investment. Attempts to bring peace to this part of the world will be of enormous importance for building a healthy, sound economy, he said.

The event, held at the Cairo Marriott Hotel, was attended by around 200 guests.

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