According to the article the economy of the Egypt is a world’s ‘hottest emerging market.’ However, country is in recession. The foreign direct investment in Egypt has declined by 35% compared to last two years. The effort of Egyptian government to create a good environment for investments has been compared to a caricature of an IMF program. There are no significant reforms made in the Egyptian government itself and this creates a problem. According to the article the government in Egypt is clearly autocratic. The Egyptian referendum allowed government to stay in a power until 2030 instead of 2022. Due to this reason the government is acting on behalf of itself and is not representing the people. The perfect example of this is the role that the Egyptian Army plays in a foreign investment. As article states the Army made a deal with a Chinese firm to manufacture solar panels and an agreement with a French pharmaceutical giant to make vaccines. These companies invested in the country by negotiating with the Egyptian Army instead of businesses. The Army has enough control in the government that it dictates which business will be successful and which will fail. According to the article the discovery of natural gas has increased the exports of the Egypt. However, investments in gas boosts revenue only generates revenue and fails to create jobs. Another major challenge in Egypt is the social inequality. As article states 20 percent of Egyptians have the purchasing power of the 80 percent of the population. When comparing different groups of population in terms of purchasing power, only 100,000 individuals can afford to buy car in a country with the population of a 100 million. Thus, social inequality is another hinderance of Egypt’s economic development.
Clearly the globalization has had a major effect on economic and political development of the Egypt. The impact of globalization can be clearly seen through concept of political trilemma. Egypt had to choose two out of globalization, national state, and democratic policies. Considering that the regime in Egypt is going to stay in power until 2030 and has complete control over the economy through bureaucracies, Egypt clearly did not choose the democratic policies. Hence, Egypt chose globalization and national government. As far as globalization goes, it consists of three parts: trade in goods, flows in capital and migration of people. The economy of Egypt is affected by all of these three variables. First Egypt is directly involved in international trade. Exporting products and service produces domestically clearly represent that. The flow of capital can be seen through the investments that the Egypt’s government is trying to increase. Finally, the effects of migration can be explained through migration. The $26.4 billion worth of remittances that article mentions clearly demonstrates how the emigration is affecting the Egyptian economy. As individuals emigrated from Egypt and started working in foreign country, they started sending the money back to their families. The Egypt’s failure to attract investments can be explained through conflict, bed governance, and natural resource dependency. First, variable, the conflict represents the risks that businesses have to take when they invest in Egypt. The conflict variable defines how dangerous it is to invest in the country and what are the possibilities that the investors will be able to get their money back before any conflict occurs in the country. As Egypt just got out political crisis, country still remains unstable. Due to this reason no businessman would want to invest in the country that has high risk of failure due to possible future conflict. Hence, the variable for conflict would predict that the possibility of investments in the Egypt is low. Second, the bad governance is another variable that explains why the Egypt is not able to attract investments. The bad governance of Egypt can be seen through its autocratic government that does not enforce contracts, and rule of law. As already mentioned Egyptian army decides what businesses will succeed and what will fail. Based on that, foreign investors probably have high uncertainty whether or not if they will be treated fairly. Finally, the discovery of natural gas in Egypt can actually be worse than good for Egyptian economy. The income gained from the gas exports will go straight into a government’s revenue. Thus, as government will have way other then taxes to receive the revenue. Providing the intendent source of the income will disincentivize the government to rely on the taxes and will encourage Egyptian government to not represent its population. Considering that the Egypt is already struggling with authoritarianism, natural gas dependency will make this matter even worse.