Local Economy’s Challenges and its relationship with the Egyptian national security, PART I.

6. 19. 2017

This paper provides a future vision handling the Egyptian local economy’s challenges affecting directly the Egyptian national security. PART I.

Author: Amr Essam Sukkar


a) Carrying out studies concerned with national security was compatible with the new global political and military circumstances that followed the World War II, the balances, blocs and axes  resulted from the war between the international powers, in addition to the massive prevalence of weapons and the qualitative development witnessed by the latter, which led to modifications in the global defense system and its traditional inherited constants and imposed a new vision of security, and a new definition of the security area of countries. This concept in its Western American inception is fully loaded with political goals, as it featured prominently the core of the foreign policies of the Great Powers during the Cold War and polarization.

b) Although the national security term has been popularized after World War II, however its roots date back to the seventeenth century, especially after the Peace of Westphalia in 1648, which established for the birth of the national state or the State - Nation and, the Cold War era has been the perfect environment which in attempts to formulate approaches, theoretical frameworks and institutional access to the use of the term "national security strategy", and prevailed in the cold war terms such as containment, deterrence, balance and peaceful coexistence as  a prominent addresses in these approaches in order to achieve peace and security and avoiding the devastating wars of the first half of the twentieth century.

c) Accordingly, academic institutions concerned with national security issues have been established: their sources, their components, the procedures ensuring their protection are all from institutes and research centers belonging to universities, scientific and media institutions, specialized journals and institutions affiliated with the official political decision. The National Security Council of the United States is the first and best example of these institutions. The Council embodied Walter Lieberman's definition of national security as "a nation has security when it does not have to sacrifice its legitimate interests to avoid war, and is able, if challenged, to maintain them by war".

d)  The institutional structure of the term national security began with the promulgation of the National Security act of 1947 by the US Congress. The rest of the world put another title which is "Strategic Studies," on the literature that dealt with it as a jurisprudence of active political planning about the future. Instead of jurisprudence implicitly attempt to formulate answers or reactions with a view to protecting sovereignty.

National security concept declaration:

A) As any term or concept, the national security concept declaration can’t be precisely defined beyond the place and time which it’s moving through; it’s always subject to modification and development harmonizing with the variables and factors which affects its prominence to circulation.

B) Thus, national security has become a new branch in the political science, as it has a culture and has been provided with the science and the scientific objective (achieving security) and the possibility of submission to scientific research methods, in addition to being a link between various sciences, national security is a complex phenomenon with different aspects connecting between sociology, Economy and international relations and governance system, etc. And it demand benefiting from different aspects and a higher degree of systematic integration.

C) Despite its widespread use, the “national security” concept has different meaning to different peoples. Traditionally, the national security term was defined as the protection from external attack, so it was considered as it means military defense facing military threats. This vision was proved to be very narrow. National security involves so much more than preparing and using armed forces.

D) Moreover, a vision like this could make the one thought that the best way to increase security is by increasing the military power. And although the military power is a very important main component of security, but it's considered as only one aspect of security. History is rich with examples of arms races that have weakened security rather than strengthened it.

E) And these led to the need for a broader definition of national security that involves the economic, diplomatic and social aspects, in addition to the military one. Arnold Wolfers has provided this definition when he said: “Security, in an objective sense, measures the absence of threats to acquired values, in a subjective sense, the absence of fear that such values will be attacked”.

F) Lack of confidence in the real level of threat leads to the planning of the worst alternative because of the harsh consequences of security failure. And even if the concepts are accurate, it challenges the absolute measure, because it is a relative situation. Security is measured according to existing and potential threats, and because it is impossible to achieve absolute security against all potential threats, the levels of insecurity that could be acceptable must be identified. Finally, it is important to recognize that national security is not a static position that exists in a space, but it is determined in the light of both international and domestic environments, and each of them is permanently changing.

Trager and Kronenberg define national security as "that part of government policy aimed at creating favorable conditions for the protection of vital values." Henry Kissinger defines it as "any actions by which society seeks to preserve its right of survival." Robert McNamara believes that "security is development, without development there is no security can exist, and countries that do not actually grow cannot simply remain safe.”

Circumstances and factors that drive to care about the national security phenomenon:

First: the conversion in the concept of national interest to the issue of ensuring luxury, which means securing the sources of resources.

Second: the increased number in the violence rate and the escalation of direct conflicts that may develop into wars.

Third: there is a growing feeling among the countries of the South with two types of threats related to their national security. On the one hand, external debt is a threat to its political and economic security and necessarily limits their freedom to make strategic decisions. The debt is worth more than $ 2,000 billion, as well as the cost of servicing debt, which is higher burden on most small and medium-sized cities.

On the other hand, small countries fear the possibility of big countries misusing the employment of international organizations, especially the United Nations, not only for their own interests, but also to harm the national interests and self-security of small countries. Perhaps what the United States did in Iraq, Afghanistan and others under the umbrella of the United Nations from the colonization and destruction of its military capabilities, defensive and offensive and the destruction of economic resources is a good proof of that.

Fourth: the increased feeling of anxiety and internal tension, which can turn into many manifestations of instability and insecurity in small countries.

Fifth:  as attention is paid to the phenomenon of national security while transition from a nation-state system to a broader and more inclusive one such as the federal system, or international economic groupings such as the European Community, the North American Group, the Pacific Group, or South-East Asia, In either way a questions arise about the fate of National Security for the nation-state and its relationship to the national security of state or established community, and how security responsibilities are distributed, and securing citizens within the new entity and the achievement of their feel of security.

Sixth and finally: the subject of national security is raised in the case of the disintegration of the great powers, especially the federal ones, into sovereign independent national states. National security is raised here from several aspects, including those who control the national security components, especially the military one which means armies and equipments especially if it is nuclear equipments or weapons, and who protect the republics or newborn states, especially if they are racial undertone, and how prosperity is achieved in new countries, and whether the process of decomposition is peaceful, violent or conflicting. And it is clear from past and recent experiences of disintegration and decomposition, the extent of the threat some of them posed to national or regional security, whether it concerns with the republics formed of Soviet Union or those resulting from the division of Yugoslavia or the threat to Yemen, Iraq and Palestine.

And there is no doubt that all these circumstances make the study of national security a very important issue.

National security and its economic aspect:

Aims at providing the appropriate environment to afford people’s needs and affording them with means of progress and prosperity. National security field is the high national strategy that keen with development and make the best use of the state resources to achieve its political goals, as well the economic growth and technological development are the two main and crucial ways to achieve the security benefits for the country and building strategic deterrent force, developing commercial exchange, labor export and lateral transfer of technology and localizing it especially high and bio- technology.

Challenges facing the local economy and affecting national security:

1. The raise in the funding gap of the national economy and the need to fill this gap to achieve the targeted growth.
The low domestic savings rates have led to back off in the state ability of funding the required investments, as well as emerging a funding gap that requires providing the necessary funding as a prerequisite for meeting the local economy needs of energy imports, capital goods and production inputs needed for growth and economic expansion without putting pressure on foreign exchange resources of the country, resulting in an unfortunate defect in the country's external sector situation.

Despite of the contribution of the sister states in the last few years in supporting the economy to overcome the delicate stage of the transformation of the Egyptian economy, it is necessary to recognize the temporary nature of this stage and the impossibility of continuing to rely on such assistance, especially if the goal is to build a strong economy that will have sustainable, peer- to- peer and competitive performance.

Furthermore, the targeted growth rates impose a corresponding increase in the funding needs of the Egyptian economy for the medium term. The funding gap is estimated at $ 25-27 billion over the next three years. This means that it is important to manage this amount from unusual sources so that the economy can keep growing and overcoming the structural imbalances it is suffering from.

2. Continued high general budget deficit and increased debt service burdens:
Despite the low rate of public budget deficit during the previous financial year, the ratio of this deficit to GDP (Gross Domestic Product) still high according to international standards, and it is determined as one of the highest globally recorded rates, and the sources of funding available are not sufficient to fund. Furthermore the decline in the budget deficit was not sufficient enough to reduce public debt rates. The ratio of public debt to GDP still high and it leads to great burdens on recent and future generations, limiting the ability of policy-makers to reorient spending on more effective aspects of citizen’s lives.

3. Balance-of-payments deficit
The balance of payments during the period of political transition had a deficit of about 10 billion dollars annually during the years 2010/2011 and 2011/2012 due to higher deficit in the balance of current transactions affected by the decline in tourism revenues and the increase in service payments, in addition to the outflow of capitals abroad and the decrease in the volume of direct investments. There has been an acute shortage in foreign exchange reserves, thereby relying heavily on Gulf countries’ assistance to close the gap in the following years. The current deficit is 3.7% of GDP in 2014/2015, and it is estimated to continue in the medium term to 4 - 4.5% of the outcome.

4. The global economic scene and its risks that may reflect on the speed of the Egyptian economy recovery:
Recent developments in global markets have raised concerns about China's economic performance and its reflection on further prices declines in world commodity markets, disturbance in global financial markets in both advanced and emerging countries, and pressure on exchange rates in emerging economies.

5. Continued decline in the quality of public services and the need to pump more resources to improve them:
While the economy needs to pump more investment to boost growth and create job opportunities, there is no dispute over the community’s need to allocate more resources to provide and improve the quality of basic services, which suffer from either low levels or poor geographical distribution.

6. Low competitiveness of the Egyptian economy and the need to accelerate structural reforms that enhance competitiveness:
The Egyptian economy faces considerable competition from other emerging and neighbouring countries seeking to attract foreign investment and access the global export markets by increasing their competitiveness and improving their investment climate, which means that Egypt should be equal with those economies through seriously reform the Investment climate and business in order to attract funds to finance the desired development process.

7. Inflation:
Due to the limited production base, Egypt has been and still widely experiencing long periods of inflationary pressures, which have deepened by the weakness of the general revenues of the states base, causing continuous deficit in the general state budget, which was partly financed by the new cash version and was boosting inflationary pressures. And owing the exceptional circumstances in which Egypt is currently experiencing, it is expected that these pressures will deepen further in the next phase. Unfortunately, combating inflation at this particular time will be very difficult, given the currently unfavorable local and international climate as the food prices are increasing worryingly domestically and globally.

8. High unemployment rates:
One of the most serious challenges facing Egypt today and in the future is the high unemployment rates, due to several reasons,  the lack of suitable education strategy for the current labor market requirements, especially university education, on the other hand, the current investments in the Egyptian economy does not create enough jobs for new entrants To the labor market, investment strategies were supposed to focus on the labor-intensive activities of the business component. A large number of new entrants to the labor market from all sources currently spend long periods of time unemployed searching for the work that they do not often find. Faced with these pressures many young people are either forced to migrate abroad or take jobs that do not match their qualifications and skills, or working in the informal sector of the Egyptian economy, which is a waste of the huge resources spent by the state on their preparation process. The problem facing the policy-maker in Egypt is that the proportion of young people is very high, and every year the number of new entrants to the labor market rises, and every creation of an additional job requires investment spending based on what is called in the economy the marginal product of labor which means the level of capital expenditure needed to create an additional job. Baring in mind the current levels of unemployment, dealing with the problem of unemployment in the future will require the need to make huge investments beyond the current potentials of the Egyptian economy, and there is no doubt that Egypt's economic stability in the future will require the need to create enough jobs for millions of currently unemployed, and the entrants To the labor market. This is a task that will not be easy and requires the formulation of integrated work plans for developing various productive sectors of the Egyptian economy, accompanied by effective policies to attract foreign investment in labor-intensive industries.

9. Prevalence of corruption:
The business environment in Egypt faces a serious obstacle, represented in the widespread corruption, which is negatively impacting the allocation and distribution of resources between different parties in the country. Corruption also threatens investors desire to invest in Egypt, especially foreign investment. A transparency International report indicates that Egypt has dropped in its international ranking in anti-corruption field. There is no doubt that One of the most important challenges facing Egypt in the future is how to win the battle against the widespread corruption which is deeply spread in all parts of the country's administrative apparatus, especially with the low salaries that the state employees get and the former system continuous ignorance to this fact and not working seriously on improving the situations for those employees. Considering the fact that state’s employees have to manage their daily lives somehow, Bribery and other forms of administrative corruption have spread widely.

10. Poor infrastructure:
Finally, the weakness and degradation of the infrastructure is one of the most serious challenges facing Egypt in order to raise its production and competitiveness levels. Sectors such as health, education, water, electricity, roads, transportation, communications, airports, ports, etc., need a huge improvement to raise its current very low efficiency. Which Lower Egypt’s position as a recipient country of foreign investment or a provider of services in particular tourism services, Egypt needs to invest in its weak infrastructure, a task that will require huge budgets that Egypt may not be able to afford at the mean time. Egypt will need international and regional financial institutions help to raise its capacity to invest in the infrastructure field which is needed so badly for growth, other else the weak infrastructure will remain the most important constraint on the progress and growth and raising levels of competitiveness of the Egyptian Economy.

Second part of this paper can be found here.

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