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Mideast: Egypt's Economy Leads, While Lebanon Tries A Comeback

  • Breffni O'Rourke



Prague, 1 October 1998 (RFE/RL) -- The sounds of Egyptian pop music drift through the bazaars and cafes of Cairo, a teeming city of 10 million people squeezed between the desert and the life-giving Nile.

It's a city of contrasts, combining ancient and modern, poverty and wealth, the capital of a country rich in history but poor in resources. While the members of the urban elite pay millions of dollars for apartments overlooking the river, small farmers up country live almost the same way as in the time of the pharaohs.

Poverty has always stalked the land, and with high population growth one of the great difficulties is to provide some sort of future for the swelling numbers of Egyptians. But the government of President Hosni Mubarak has pressed ahead with economic reforms begun under the late president Anwar Sadat, and Egypt can now boast one of the most vibrant economies in the Middle East.

Senior analyst Hanno Sonntag, Mideast specialist with the Deutsche Bank, notes growth has been running in the last fiscal year at almost 6 percent, inflation per annum is down to a reasonable 4 percent, fiscal deficit is only about 1 percent of Gross Domestic Product (GDP) and investment is strong. He said growth would have been higher except for the negative impact of last year's Luxor terrorist attack on tourism, a key industry in Egypt.

But Sonntag says the government must continue its efforts: "I think where they could still improve would be in the area of structural reforms, one area would be the banking sector. A positive thing is that the legislation for privatization of state-owned banks which control up to 70 percent of the total loans has been passed. But implementation of that would now be a good thing. The same applies to the insurance sector".

Sonntag goes on to say that the continuing grip of the Egyptian bureaucracy, famed for its labyrinthine ways, is another point of concern. But still: "In the overall picture, I would go so far as to say that Egypt right now is the star performer in the Middle East".

To the northwards, beside the blue waters of the Eastern Mediterranean, lies Beirut, the battered capital of Lebanon. Once known as the Paris of the Middle East, Beirut was famed for its wealth, its boulevard lifestyle and its cosmopolitan atmosphere. Almost two decades of civil war shattered the city both physically and as a focus of business. But a new city center is shooting skywards from the rubble, driven by strong investment from the Arab world at large and from Lebanese sources at home and abroad. Konrad Petersen, the head of ING Barings in Beirut, explains: "Lebanon is far from being a poor country. If you look at the total balance sheets of the banks in Beirut, you see total bank deposits close to $30 billion -- or about twice the country's entire gross national product. Then over and above that, Lebanese wealth in other parts of the world is estimated at another $30 to $40 billion."

Although in terms of goods Lebanon is a big net importer, it maintains a positive balance of payments in part because of invisible exports like tourism, educational and medical services. Beirut was always well regarded for the expertise of its doctors, and patients regularly traveled to that city from all over the eastern Mediterranean and the Middle East. Part of the country's high-quality medical treatment capabilities came through the disruption unscathed and are again steady earners. Likewise foreign students are starting to return to Lebanon's famous universities.

Analysts say that provided the regional situation remains stable or improves, Beirut has a good chance of recapturing at least some of its pre-war status, particularly as a leading business center of the Middle East.

Lebanon's overall economic growth is presently about 4 percent per annum, down from pre-1996 levels because investor confidence is being affected by the dimmed peace prospects between neighbor Israel and the Palestinians. Lebanon and Israel remain alienated, with no official trade between the two. Israel itself has also felt the same ebbing of investor confidence, and has also been hard hit by the economic crisis in Asia, which has cut demand for Israeli high-tech products.
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