Case#2 Egypt, the Troubled Giant

Topics: Investment, Macroeconomics, Economics Pages: 2 (610 words) Published: February 25, 2013
International Business
Case#2 Egypt, the Troubled Giant
Fei Du

Chapter#2 case tells us the Egyptian economic situation from 2004 to 2009. For a variety of factors, Egypt had different economic performances during these five years. From 2004 to 2008, the prime minister of Egypt built a more liberal market in Egypt. He used market economy policy to attract more foreign direct investment. Market economy policy can help the Egyptian growth rate because private individuals and corporations are allowed to own property and other assets. This right of ownership provides a powerful incentive for people to work hard, build livelihoods, as continue to invest in Egypt. More and more investment entered Egypt because the Egyptian government created a comfortable investment environment for investors. Thus, there a win-win situation appeared in Egypt; the growth rate increased and investors obtained a more open market. However, high inflation and wealth inequity are two conditions that may slow Egypt’s economic activity in the near future. Maintain high inflation rate decreases the actual value of Egypt’s currency and drains nation’s wealth. The inequitable distribution of wealth could wear down the social fabric, and then destroy the economic system in Egypt. Thus, the Egyptian government should devise a way to decrease the inflation and wealth gap among people. Based on the case described, Egypt’s political system appears to be totalitarian because opposition parties have no actual election rights. The totalitarian government may be unattractive to foreign investors, as it may confiscate their property at whim. Although Egypt is an important emerging market, political uncertainty may deter foreign investment. I think the best case scenario of Egypt’s political system would be to change from mainly totalitarianism to democracy, because democracy is good for economic progress. We know that innovation is the engine of economic growth, and a democratic political...
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