Trust reflects positively on nations’ rapid economic growth argues renowned political scientist Francis Fukuyama. To further illustrate his point, Fukuyama claims in his book, Trust: The Social Virtues and the Creation of Prosperity, that the high level of mutual trust and other shared positive cultural traits, such as hard work, have empowered Germany and Japan to become advanced nations. In the Egyptian business community, there is a noticeable shortage of trust that often leads to considerable business deceleration.
Nevertheless, the absence of trust in a given society could be compensated to some degree by the proper application of rule of law, which is also lacking in Egypt, either due to the ambiguity of our laws or to the extensively lengthy and bureaucratic proceedings of our courts. Egypt is known for its formidable government bureaucracy that can be circumvented by bribes whose sizes vary depending on the value of the transaction and the length of the bureaucratic procedure.
Some argue, correctly, that bureaucracy and corruption have been rampant and thriving in Egypt for decades. In the past, however, the Egyptian economy was mainly driven by cronies who were adept at overcoming both challenges smoothly and elegantly. Nowadays, Egyptian State entities are taking over projects from the famous Egyptian business cronies; while the timeframes of the projects they implement are admirable, these State entities certainly lack the entrepreneurship and the innovation that the private sector has the potential to offer.
Egyptians are generally individually driven creatures; rather than doing the right thing, they prefer to satisfy their personal egos by delusionally believing that they are always right! This behavior is plainly noticeable in most Egyptian family businesses wherein siblings immediately split inherited businesses to enable each family member to do whatever satisfies their personal egoism. Some families even tend to divide the business during the lifespan of the father to avoid any conflict in the event of his demise!
Furthermore, Egyptian society is formed of people with limited ambitions who don’t have any desire to expand their businesses internationally, or even regionally. I can’t think of a single Egyptian business enterprise that has a regional presence. By contrast, many Arab companies and banks are successfully expanding in the region, including in Egypt. Even products produced exclusively by Egyptians, such as our movies, are broadcast regionally, and successfully, by non-Egyptian media channels.
We are a society that easily settles for compromises. However, we are also an over-demanding society; werequire new employees to fulfill high-quality criteria that many of their present directors often cannot meet. Furthermore, the vast majority of Egyptian employees doesn’t work to advance their organizations’ productivity, which may directly affect their conditions of employment. Instead, they are constantly searching for new jobs, convinced that the professionalism that is lacking in their present workplace can be found in a new enterprise.
Moreover, paying millions of dollars to international TV channels to promote Egypt as an attractive investment or tourism destination will certainly interest the world in learning more about our investment opportunities, rules and business environment – which should have prompted us to work on addressing our business structure deficiencies prior to publicizing ourselves globally.
Egypt presently lacks the principal pillars for founding a sound economic platform that are needed to develop a truly modernized nation. Egyptian private enterprises will not be stimulated to modernize their entities on their own; our society is a naturally “static” society, wherein citizens prefer to prolong their respective enterprises’ status rather than risk changes that they can’t apply! This attitude is shared even by various Egyptian chambers of commerce and industry, who work to serve their members’ business aspirations.
The Egyptian government needs to expand its leadership role to fix our socioeconomic flaws, carefully addressing the private sector’s challenges by offering a bundle of scientific solutions. The government must immediately work on advancing rule of law, meritocracy and sound economic policy; these practicalities will help Egyptians to restore better socioeconomic norms. The sooner we tackle these issues, the better the results will be.
China’s economy showing resilience and potentials amid headwinds
Since the beginning of this year, the increasingly complicated international environment and weakened global economic recovery, as well as sporadic but multiple local outbreak of COVID-19 pandemic caused harsh impacts on China’s economic development.
Affected by both domestic and external unfavorable factors, China’s economic performance in the second quarter was less ideal than expected, which has resulted in some negative rhetoric against China’s economy on some media. In this case, I would like to share some views on China’s economy and its prospects:
First, China’s economy managed to grow in the second quarter despite downward pressure. In the second quarter of this year, the impacts from a new round of COVID flare-ups and other unexpected factors steeply increased the downward pressure on China’s economy, and major economic indicators tumbled in April.
However, the Chinese government responded with resolute and swift actions. We put stable growth higher on the agenda, held ground against a massive stimulus, worked to front-load the policies set, and introduced and implemented a policy package for stabilizing the economy. The effects emerged immediately. In May, the decline in major economic indicators slowed.
In June, the economy stabilized and rebounded. Major indicators picked up fairly fast and returned to the positive territory. As a result, the economy registered a positive growth in the second quarter. The gross domestic product (GDP) of China in the first half year was 56,264.2 billion yuan, up by 2.5% year on year at constant prices. In terms of specific economic indicators, industrial production was steadily recovered and the total value added of industrial enterprises above designated size grew by 3.9% year on year in June which is 3.2% higher than in May. The service industry production index also increased from -5.1% to 1.3%. The total retail sales of consumer goods bounced back from -6.7% to 3.1% in June demonstrating market sales improvement and fast growth in retail sales of goods for basic living.
Exports went up by 22% which is 6.7% higher than the previous month. By ensuring supply and price stability in the market, focusing on grain and energy production, and overcoming the impacts of imported inflation, the consumer price is also generally stable and the employment improved.
Second, China’s economy is expected to recover gradually and maintain steady growth. The risk of stagflation in the global economy is on the rise these days, thus raising the concerns of instability and uncertainty in China’s economic growth. However, China’s economy has strong resilience and great potentials and the fundamentals sustaining China’s long-term economic growth remain unchanged. With the implementation of a series of policies and measures to stabilize growth, China’s economic performance is expected to gradually improve. First, a major economy like China always has enormous resilience.
We should be aware of the considerably large scale of China’s economy and its advantages for having a solid material foundation and a huge domestic market. Second, the potentials of demand recovery are significant. Chinese government is determined to stabilize investment, accelerate the issuance and use of special-purpose bonds, speed up major projects construction, and encourage infrastructure investment. We expect to see further consumption recovery as the offline consumer services are reviving and the government policies to boost consumption are coming into effect.
Moreover, China’s foreign trade sustained great resilience. In May, China’s total import and export volume increased by 9.5% year-on-year, 9.4% higher than the previous month; and 14.3% in June, 4.8% higher than that in May. Third, there is a concrete foundation for production to rebound. Following the steady recovery of production, the industrial and supply chains have been gradually smoothed, and the promoting effects of key industries such as automobiles and electronics will further strengthen. And the service industry turned from a decline to an increase in June as the pandemic situation improved.
In addition, the promising recovery of transportation industry will also be of great help for the further production boost. Fourth, innovation will provide new momentum for economic growth. Under the pandemic, traditional industries have accelerated their transition and expansion towards digitization and intelligentization, meanwhile new industries continue to develop steadily and rapidly. Fifth, China’s macroeconomic policies are consistent and precise. The positive effects of policies such as large-scale tax refunds, issuance and use of special-purpose bonds, and increased financial support for the production will emerge, which will contribute to the steady recovery and growth of the economy.
Third, China’s economy has been deeply integrated into the global economy, and opening-up is one of China’s fundamental national policies. China cannot develop in isolation from the world, and the world also needs China for its development. Affected by factors such as the COVID-19 pandemic and the Ukraine crisis, the global industrial chain, and supply chain are disturbed. As a result, many countries are stuck in multiple crises in terms of food and energy. Rising prices have forced major economies to tighten their economic policies, and pushed the world economy into a substantial risk of stagflation. China, as the largest developing country in the world, has profound developmental potentials and can certainly provide a strong impetus for the global economic recovery.
China will deepen high-level opening-up, stay committed to free trade and fair trade, and help keep the two wheels of multilateral and regional trade cooperation running in parallel. Continued efforts will be made to foster a market-oriented, world-class business environment governed by a sound legal framework, and ensure foreign enterprises’ equal access to unlimited sectors in accordance with law in order to realize mutual benefit amid fair competition. China is ready to strengthen international cooperation against COVID-19 and willing to make its COVID control measures more targeted and well-calibrated under the premise of ensuring safety against the pandemic. We will steadily optimize the visa issuance and COVID testing policies and keep resuming and increasing international passenger flights in an orderly manner, and prudently advance overseas commerce and cross-border travel for labor services, so as to better promote personnel exchanges and China’s cooperation with the world.
In the first half of this year, the bilateral trade between China and Iran increased dramatically, consolidating China’s position as the top trading partner of Iran. We are sure that the steady recovery and growth of China’s economy will provide more opportunities for countries around the world including Iran. In the second half of this year, China will hold a number of exhibitions like the 7th China-Eurasia Expo, the 22nd China International Fair of Investment and Trade, the 132nd Canton Fair, and the 5th China International Import Expo which are great chances for Iranian merchants to learn more about China’s market and conduct cooperation with China. China will actively implement the Global Development Initiative and all countries around the world, including Iran, are welcome to benefit from China’s economic development, promote high-quality Belt and Road cooperation through greater openness and cooperation in trade, investment and other fields. In this way, we will be able to collectively build a community with a shared future for mankind.
From our partner Tehran Times
Seventh Package of Sanctions against Russia Presents Unaccounted-for Risks
The seventh package of the European Union sanctions against Russia in connection with the events in Ukraine will be remembered for its ban on the import of Russian gold, the expansion of export controls, as well as its list of blocked individuals and organisations. However, an important new feature hasn’t been thoroughly discussed. In Art. 9 Council Regulation EU No. 269/2014, a rule was introduced that sanctioned individuals are required to report to the competent authorities of an EU country about their assets in the jurisdiction of the European Union. The deadlines are stringent. Reports must be submitted before September 1 of this year. Those who are slapped with sanctions in the future must report within six weeks. In addition, blocked persons are obliged to cooperate with the competent authority in the verification of this information.
Let’s recall that the essence of blocking sanctions is that the assets of individuals and organisations that fall under them in the EU are frozen. In other words, they formally remain the property of such persons, but their use is forbidden. These assets may include bank accounts, real estate, capital goods, vehicles, etc. In addition, blocked persons are prohibited from providing “economic resources”. This essentially means a ban on most economic relations with them.
What is the meaning of this new feature? Most likely, the EU authorities want to facilitate the search for the assets of blocked persons. They specify that the sanctioned individuals themselves should do this “legwork.” If they refuse to comply by reporting their assets, then according to Art. 9 of the said Regulations, their actions will be regarded as circumvention of the sanctions regime. In turn, violation of the Regulations may lead to criminal liability and the confiscation of property obtained as a result of the circumvention of the sanctions. Article 15 of the Regulation obliges Member States to develop criminal prosecution measures for violation of the EU sanctions regime, as well as to take all necessary measures to confiscate the proceeds of such a violation. In other words, by failing to report their assets in the EU, blocked persons risk being sued, facing criminal charges, or losing their property.
The West has actively discussed the confiscation of the assets of blocked Russians since February 2022. Work on legal mechanisms is underway in the United States. In Canada, the forfeiture framework has been approved by the Senate.
Now that the seventh package of sanctions has been adopted, a similar mechanism is now being seen in the EU, albeit in the context of circumventing sanctions due to failure to provide information.
It is not yet clear how these rules will be applied. However, the existing legal mechanism may well be interpreted by the member countries in a way that is detrimental to the sanctioned individuals. To date, 110 legal entities and 1,229 individuals have been targeted by EU blocking sanctions over the Ukrainian issue. While not everyone has property in the EU, for others, the value of the assets may be huge, and attempts to confiscate or prosecute will inevitably cause new political tensions. For example, within the framework of the seventh package, Rossotrudnichestvo, which has a network of Russian centres of science and culture in the EU countries, was blocked. The same applies to the Russkiy Mir Foundation and its Russian Centres in the EU countries. It can be assumed that Sberbank and a number of other blocked Russian banks, enterprises and individual entrepreneurs have assets in the EU. Access to their property should be blocked by EU authorities anyway. The new rules of the seventh package also add the risks of confiscation in the event of a lack of reporting within the specified timeframe or a refusal to cooperate with the competent authorities.
The experience of the crisis concerning transit to the Kaliningrad region has shown that the authorities of individual member states can interpret EU sanctions very broadly. It cannot be ruled out that the new features of the seventh package will receive similarly broad interpretations. It is necessary to be ready for a scenario where the property of individuals and structures in the EU is confiscated, as well as their criminal prosecution in certain EU countries for violating sanctions legislation.
From our partner RIAC
The Assembly Lines of Grand Eurasia
The changing landscape of the global economy in recent years is increasingly characterized by a more active role of developing economies in building their own platforms for economic cooperation. In the process of assembling these platforms for the Global South one of the key issues is the algorithm of the aggregation process in Eurasia — the two other continents of the Global South already have their pan-continental platforms, namely the African Union and the African Continental Free Trade Area (AfCFTA) in Africa as well as CELAC in Latin America. In case a comprehensive pan-Eurasian platform for developing economies were to be formed this would open the gateway to the completion of the assembly of platforms that span the entire expanse of the Global South.
As is the case with the expansion of the BRICS grouping, the building of the Grand Eurasia as a platform for the region’s developing economies can proceed either along the formation of a core and its gradual expansion or via an “integration of integrations” route, whereby all of the main regional integration blocs of the Global South in Eurasia are brought together. There is also the possibility that both these tracks could be pursued simultaneously.
In the scenario involving the formation of the Eurasian core for the Global South, the main question is its composition and the resulting scenarios of further expansion. One possible modality would be the RIC (Russia-China-India) serving as a core, with further additions focusing on the largest Eurasian economies such as the G20 countries from Eurasia — Saudi Arabia, Indonesia or Turkey. This route would clearly result in the assembly process being slow and lacking connectivity to other smaller developing economies of the continent.
Another possible format for the Eurasian core could be the Shanghai Cooperation Organization (SCO) or its more extended version of SCO+. Such a core would have the benefit of comprising all of the largest economies in Eurasia (Russia, China, India), while leaving open the possibility of smaller economies joining this Eurasian “circle of friends”. Despite the more inclusive approach to forming the Eurasian platform, the country-by-country approach to expansion would still leave the assembly process too slow and ad hoc.
The only real way to expedite the construction of Grand Eurasia is via the “integration of integrations” scenario that may involve the aggregation of Eurasia’s leading regional integration arrangements (and their developing institutions) represented by developing economies.
Such a platform of developing economies across the expanse of Eurasia can bring together such regional arrangements as: South Asian Association for regional Cooperation (SAARC), ASEAN, Gulf Cooperation Council (GCC), Eurasian Economic Union (EAEU) as well as the Shanghai Cooperation Organization (SCO). In the case of SCO there may be the possibility to resort to an extended SCO+ format which would involve the addition to SCO of those Eurasian economies that are outside of the main regional integration arrangements. The resulting SAGES platform may represent the main assembly line for economic cooperation among the Eurasian developing economies that is based on the mechanism of “integration of integrations”.
Still another possibility would be an assembly process modelled on the UN, which would involve the creation of a forum for all the developing economies of Eurasia with a Eurasian Security Council represented by the largest economies of the continent (G20 members (China, India, Russia, Saudi Arabia, Indonesia, Turkey) as well as possibly Iran). Another possibility in this UN-type scenario is the SAGES Economic Council that brings together the main regional blocs of Eurasia as a more inclusive version of the UN Security Council.
In the end, there are multiple possible trajectories for the assembly process of the Grand Eurasia — the most attractive appears to be the “integration of integrations” track as it appears to be more expeditious and inclusive. At the same time, there are also risks and challenges involving this scenario as the domain of “integration of integrations” remains largely unexplored across the terrain of the Global South. In this respect, there may be important synergies in the innovation process of “integration of integrations” along the Eurasia track as well as the BRICS+ route that represents a global rather than regional platform for the cooperation across regional integration arrangements. The Global South is approaching a crucial point in its economic development, whereby a common platform for cooperation across all developing economies may represent the most important gateway to economic modernization in decades.
From our partner RIAC
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