Global Policy Forum

by Gamal Essam El-Din

No sooner had the Shura Council concluded its two-week debate on globalisation and market capitalism than it began debating a report on the predicted impact of recent world economic and financial changes on the future of industry in Egypt and the developing countries. The 204-page report entitled "The Opportunities and Risks Facing National Industry in the Context of a New Commercial World Order" before the council this week warned of the hazards resulting from the opening up of developing countries' national industrial sectors to foreign competition too fast.

The report emphasised that the new commercial world order, which resulted from the 1947 GATT agreements and the establishment of the World Trade Organisation in 1995, has been in favour of industrialised countries. Although these agreements have led to the gradual liberalisation of world trade, most industrialised countries still resort to protectionist policies against Third World products. "Not only do they refrain from meeting their commitments in the framework of the GATT agreements, but they also give themselves the right to manipulate development and investment policies in Third World countries," said the report.

The United States tops the list in terms of getting maximum benefit from the post-GATT globalisation age. "It is estimated that the US earns an annual $36 billion increase in its trade quota, the European Union $61 billion, China $37 billion, Japan $27 billion and the former eastern bloc $37 billion."

Developing countries' earnings, on the other hand, are currently at a low of $16 billion per year, the report said. Even worse is the fact that the sub-Sahara African countries will suffer losses estimated at between $1.5 billion and $3 billion a year, while the Arab countries are fated to be burdened with an additional cost of $875 million on their annual bill of imports.

Elaborating on the dangers of post-GATT globalisation to developing countries' industrial sectors, the report underscored the recent flurry of industrial mergers emanating from the giant industrialised countries. "Today, as another century draws to a close," the report said, "a wave of mega-mergers is in progress. The past year witnessed nine mega-business mergers -- estimated at a total of $2.4 trillion -- in telecommunications, automobiles, pharmaceuticals, banking and other industries. Daimler-Benz and Chrysler made a $40 billion merger, Exxon and Mobil an $86 billion merger, British Petroleum and Amoco a $55 billion merger and AT&T and Telecom a $70 billion merger."

"The most ambitious companies are making use of the post-GATT globalisation mood to become even bigger in order to obtain the scale that will forever set them apart from their rivals. Their slogan is merge now, or die," the report said. The world markets are controlled by only 40,000 multinational corporations. As many as 172 out of the largest 200 industrial multinational corporations are based in the five highly industrialised countries -- the United States, Japan, France, Germany and Britain. The volume of trade among these transnational corporations is estimated at $4.4 trillion.

In their hectic post-globalisation moves to gain greater access to larger markets at the expense of Third World countries, the report argued, industrialised countries also resort to forming bigger economic blocs. "In 1993, these blocs numbered 85, 28 of which were set up in 1992 and 1993. The most significant of them are the European Union (EU), the North American Free Trade Agreement (NAFTA) and the Association for Southeast Asian Nations (ASEAN). Besides, members of the giant economic bloc, the Organisation for Economic Cooperation and Development (OECD) control 66 per cent of world exports," the report said.

In the regional and domestic realms, inter-Arab industrial and commercial cooperation falls far short of the desired goals. Egypt, Morocco and Syria are the most industrially advanced Arab countries. According to the report however, their industrial sectors suffer from grave administrative, bureaucratic and financial shortcomings. Besides, while Arab countries' industrial exports were estimated at $31.2 billion in 1995, their industrial imports amounted to $93 billion in the same year.

Investments allocated to Egypt's industrial sector have reached LE76.7 billion over the past 15 years, LE7.2 billion of it in the past two years alone. In the current five-year socio-economic development plan (1997-2001), the industrial sector is slated to receive LE92.1 billion. Out of this sum, the report revealed, the private industrial sector will receive LE84 billion in an attempt to raise the annual rate of industrial growth in Egypt to 10.8 per cent and industrial output to LE185.8 billion. The report said that these investments will be allocated to industries in the areas of food production, chemicals and petrochemicals, engineering, textiles, metals and small-scale enterprises.

As a large number of Shura Council MPs are industrialists by profession, they seized the opportunity to lash out at what they perceive as the bias of industrialised countries against developing countries' industries. Abdel-Hakim Haggag, chairman of the Holding Spinning and Weaving Company, emphasised that Egypt's attempts to raise its quota of T-shirt exports to the US were faced with tough protectionist measures. "Even the efforts of the US-Egypt Presidents' Council -- part of the US-Egypt Partnership -- to raise this quota by a mere 10 per cent were to no avail," said Haggag. Besides, he said, some EU countries are fond of filing dumping cases against Egypt, although many of them have proved to be entirely unfounded. "The cases against Egypt were won, and have succeeded in reducing our cloth exports to Europe from 400 million metres to 200 million metres last year," Haggag said. He called on the government to stiffen the penalty for smuggling from free-trade zones.

Joining forces with Haggag, Galal Ghorab, chairman of the Holding Company for Drugs and Pharmaceuticals, said that US pharmaceutical companies are exerting "huge pressure" on the government to give up the GATT-prescribed transition period agreement on intellectual property rights and to liberalise the pharmaceutical sector before its due date in the year 2005. Industry Minister Suleiman Reda agreed that the domestic drug industry could face great risks in case liberalisation is carried out too early. "This could raise the prices of some drugs to astronomical rates. We should also consider if early liberalisation will actually generate more flows of overseas investments into the drug industry, as some foreign countries are promising," Reda said. However, he urged local drug producers to gear up for the future by upgrading their industries and improving their competitive edges. "For that purpose, the Ministry of Industry has received a LE1.5 million grant from the EU to implement an ambitious programme aimed at revolutionising the Egyptian pharmaceutical industry and keeping it abreast with its advanced counterparts in industrialised countries. We have also joined the COMESA (Commonwealth of East and South African Countries) and will soon conclude a free trade zone agreement with the EU," said Reda.

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