Nasser's Economy

...The stage was set for the next step in Nasser's drive to channel money into industry...

...The Communists also had an annoying trick of delivering their goods after Egypt had paid for them with its cotton, thus leaving Cairo a creditor but without goods or cash to put to work...

...Indeed, the socialist leaders of the Syrian Baath party have fallen out with Nasser over the latter's refusal to allow the rapid socialization of Syria's traditionally free-enterprise economy...

...Under the inheritance system bequeathed by the Koran and hence inviolable to Egypt's simple fellahin, a piece of land is steadily split into smaller units as heirs inherit the deceased owner's estate...

...Though the peasant has required almost infinite persuasion to part with even 10 piasters a month, the scheme is gradually spreading throughout the villages...

...To plug this loophole and prevent unsound speculation in stocks, Nasser's Government in effect froze the stock market by requiring that no company could distribute dividends higher than five per cent of the market value of its stock...

...Extremely significant is the changed marketing pattern of Egyptian cotton since Nasser's arms deal with the Soviets in 1955...

...The next great job is to prevent continuing fragmentation of the land from reducing its productivity...

...He has also written a children's book called The Arabs...

...In return he receives free medical care for his buffalo and, should the animal die, 75 per cent of the purchase price of a new beast...

...On July 17, 1960, trading in pharmaceuticals, medicines and medicinal chemicals was nationalized, as well as trading in tea...

...To discourage this trend the Government arbitrarily cut rents—first by 15 per cent, then by 20 per cent more...

...Of the roughly $650 million worth of overseas credits so far advanced to satisfy the foreign currency component of the program, about 60 per cent has been furnished by the West, including West Germany, Japan, Italy, the United States and the World Bank...

...To grapple with this and a host of other problems, officials of Egypt's Agrarian Reform Organization have come up with an insurance scheme whereby each peasant pays 10 piasters (28 cents) a month into his village cooperative bank...

...To what degree this ambitious development program will succeed is not vet clear...

...While this interim plan was in effect, the Government's Economic Plan Organization was working out a coordinated framework for the 10-year industrialization program...

...Looming behind all these factors in the Egyptian economy is the stark fact of overpopulation...

...Instead, the Soviets and other Communist bloc nations bought on barter deals which introduced Communist machinery, grains and other goods into Egypt, but not necessarily the types or qualities Egypt would freely have chosen...

...Many responsible Egyptians, on the other hand, concede that their Government had reason to nationalize trade in pharmaceuticals, medicines and tea to put an end to widespread profiteering at poor people's expense...

...There the nationalization process rests at the moment...

...Even critics of nationalization—and there are many in Egypt—agree that the program to date has been pragmatic, for neither Nasser nor his immediate advisers are considered doctrinaire socialists...

...Prior to that time cotton sales to Western Europe amounted to about two-thirds of the total Egyptian crop, while sales to North America and the Far East swelled the free world total to three-quarters...

...This whole trend was worsened by a general slump in the world cotton market which left cotton producing countries with surpluses they could not move...

...Less than five per cent of Egypt's total land is arable, and into this narrow strip of green along the Nile and in the river's delta are packed 26,080.000 people, according to the official census of September 1960...

...This giant concept sprang from two years of rather haphazard planning in 1958 and 1959, which succeeded in creating about 30,000 new industrial jobs in Egypt at an investment of 2,000 Egyptian pounds per job...

...If Cairo had been able to sell its cotton to the free world as before, it could have escaped from this Soviet trap once the Communist arms had been paid for...

...Under the concession granted to a private bus contractor, the latter was required by the Government to own 550 buses and to maintain 434 of them always on the road...

...In many cases the water buffalo even receives better quarters than the peasant children—they can be replaced and the buffalo cannot...

...Among his close advisers there is sober realization that even achievement of the regime's mighty goals—completion of the Aswan High Dam and fulfillment of the 10-year development program—will barely suffice to maintain the status quo, unless the process of human reproduction can somehow be controlled...

...One of the few Americans who knows the area first hand, through extensive travel, he also knows its leaders, having had personal interviews with Kings Saud and Hussein, the Shah of Iran and Gamal Abdel Nasser...

...Currently the United States buys most of its cotton import quota from Egypt, but this forms only a miniscule part of Cairo's total sales...

...This step was nationalization, and the first target chosen was Bank Misr, most powerful single organ in the country's investment structure...

...He is the author of Heritage of the Desert, Israel and the Middle East and the recently published Challenge in the Middle East...

...To Egyptian economists it has seemed clear that the only way out of Egypt's financial dilemma was rapid industrialization of the country, thereby reducing Cairo's dependence on Western imports...

...During the marketing season from September 1, 1957, through August 31, 1958, according to the National Bank of Egypt, 63.4 per cent of Egypt's cotton exports went to the Communist bloc...

...Egyptian lacks in gold reserve, foreign credits and domestic investment funds have led to nationalizations to meet Nasser's 10-year industrialization plan Nasser's Economy By Harry B. Ellis BEIRUT RECENTLY A COLORFUL scrap of intelligence was available in Cairo: Water buffaloes are now being insured in Egypt...

...Egyptian experts have been implementing the Agrarian Reform Law of September 9, 1952, one of the first and most far-reaching moves enacted by President Gamal Abdel Nasser's military regime...

...No longer could cotton be counted on to produce immediate hard currency...

...Egypt had no reliable standard of comparison...

...Britain, formerly Egypt's single largest customer, switched its major buying to friendly Sudan...

...Neutral observers believe nationalization in Egypt results primarily from the urgent need to pump funds into the nation's industrial plant and Nasser's conviction that Egyptian capitalists were unwilling to do so...

...This massive concentration has contributed to one of the world's lowest living standards...

...When Cairo mortgaged its cotton crops to pay for Communist arms, however, this pattern changed abruptly...

...One impulse behind agrarian reform in 1952 had been the hope that the capital thus made liquid would be channeled into industry...

...in short, to go from its 1960 level of one billion Egyptian pounds to two billion pounds a decade later...

...No one, least of all the harassed officials of the Agrarian Reform Organization, would argue that the job is any more than begun even though redistribution itself has been completed...

...Possibly Nasser and his advisers failed to foresee the strength of adverse public reaction to a move widely interpreted as the Government's intention to ram its policies down citizens' throats without possibility of dissent...

...This was followed on May 24, 1960, by the Government's seizure of Cairo's public bus system, and on the same day by the nationalization of the major part of the Egyptian press...

...Excluded from these figures are Soviet financing of the Aswan High Dam, a separate project, and the World Bank's $56.5 million loan for widening and deepening the Suez Canal...

...Its only alternative was to dip into its reserves of gold and foreign exchange...

...Instead, disgruntled landowners began investing in real estate, a classic form of Middle Eastern investment...

...All of this nationalization is internal, and quite apart from Egypt's seizure of British and French assets at the time of the Suez crisis in 1956, and of Belgian assets this month...

...By then whatever small confidence had existed between the Government and Egyptian capitalists had vanished...

...Specifically affected were the newspapers and magazines published by the Al-Ahram, Al-Akhbar, Rose el-Youssef and Dar al-Hillal publishing houses...

...Even this figure is inflated, since it is computed at the official exchange rate of $2.88 to the Egyptian pound, whereas the bulk of Cairo's commercial transactions with the West are conducted through the 17.6 per cent cheaper export pound...

...At the date of nationalization, according to the Government, the concessionaire had only 479 buses in all, and was failing to provide the service which Cairo's 2,500,000 people needed...

...But this is only part of the story...

...Nonetheless, land reform in Egypt has been successful insofar as a social evil has been removed while cotton—the nation's prime export crop—has continued to furnish the Government the financial wherewithal to keep the country running...

...Nor has the Government yet found it possible to bring new lands under cultivation without enormous and wasteful expense...

...Expanding at the rate of nearly three per cent yearly, Egypt's population will double in roughly 30 years...

...Hence Nasser's emphasis on what is now termed Egypt's 10-year industrialization plan, scheduled to double national income by 1970...

...The following year this percentage rose to 64.2, and today it still ranges around 60 per cent...

...To date no conclusive answer to this fragmentation has been devised...

...For this machinery Cairo was obliged to pay hard cash—cash which it no longer earned from cotton...

...The Egyptians also had little way of knowing what prices they were paying for Soviet bloc goods...

...The process started on February 11, 1960, when Bank Misr—a large private banking complex which controlled much of Egypt's business and investment structure—was nationalized...

...Lest this sound facetious, it should be noted that to the Egyptian peasant a buffalo is an absolute necessity, as power for plowing and for lifting water from roadside wells...

...Though resale statistics are hard to pin down, West Germany, for example, is believed to pay about $25 million a year for Egyptian cotton which it buys from Communist sources...

...Here is another example of the zeal and imagination with which For almost a decade Harry B. Ellis has covered the Middle East as the Christian Science Monitor's Assistant Overseas News Editor, and Mediterranean and Middle East correspondent...

...Translated into American terms this would mean that a worker earning $5,000 a year would have to pay $25,000 for his automobile, which isn't even a necessity...

...Stock companies also were required to invest 10 per cent of their declared profits, before distribution of dividends, in Government bonds...

...Although the Communists appeared to be paying premium prices for Egyptian cotton, Cairo suspected that artificially high price tags were often attached to the goods which it got in return...

...Subsequent nationalization of Cairo's public bus system was for a different reason—the Government's decision that private enterprise was failing to do its promised job...

...The workers at Al-Akhbar astonished the Government by momentarily surrounding their publishing house in demonstration against the nationalization edict...

...Since each such deal was removed from the normal give-and-take of the marketplace...

...During this period Nasser's Government continued to buy the American and West European machinery it needed for its vast industrialization program, scheduled to cost at least $750 million over the next few years...

...Since passage of the law, 565,000 feddans (a feddan equals 1.038 acres) of land have been requisitioned from 1,768 landowners and distributed to landless peasants and small farmers in units no larger than five feddans per family...

...Here is the terrible and basic compulsion underlying the economic policies wrought by Nasser's Government since 1952...

...During 1960 Egypt's foreign exchange reserves halted their downward skid, thanks to a booming tourist trade and enlarged Suez Canal revenues, currently running at about $125 million per year...

...But Egypt's need to channel local money into the plan already has given rise to a significant phenomenon—nationalization of segments of the Egyptian economy...

...Even more irritating to Egyptian leaders was the known resale of Egyptian cotton by Communist buyers on the Western European market at prices lower than Egypt itself was charging at Alexandria...

...But this turned out to be impossible, because Western countries, willing to punish Egypt for its purchase of Communist arms, found new sources of cotton supply...

...This brought in hard currency with which underdeveloped Egypt bought the American, British, German and other European machinery and hard goods which it needed...

...Nationalization of the Cairo press was openly resented by many Egyptians, even those who normally supported the regime...

...Money then began to flow not into industry, but into the stock market...

...Major sales of American surplus wheat to Egypt for Egyptian pounds, lessening Cairo's need to spend hard currency for grains, have also been helpful...

...Soviet credits for the High Dam are expected to total about $380 million...

...But Egypt has done this so drastically that, according to International Monetary Fund figures, gold and foreign exchange held by the National Bank of Egypt dropped from $957 million in 1951 to $214 million by December 1959...

...But the price of a water buffalo is 100 Egyptian pounds—approximately $280—and the average annual income of an Egyptian peasant is only 20 pounds—$56...