SUBSIDIESGROUP 4 PROJECTECON 199: ECONOMICS FOR EVERYONE

Mira Samy

Amr Mostafa

Ahmed Hassan

Mohamed Sameh

Ahmed Nabil

Outline

Introduction Critique of the current Egyptian

governmental subsidy program? Overview of the most successful subsidy

programs in the developing countries Does the Egyptian subsidy program help

alleviate poverty? The role of leading international

organizations and firms in subsidizing the poor people among the developing countries

Conclusion

Introduction

Introduction What are subsidies?

What is the meaning of subsidies History of Subsidies The evolution of the cost of living subsidy

Introduction

What is the meaning of subsidies Subsidies are simply forms of subsidies given by

the government to the poor people (e.g. bread)

Introduction

History of Subsidies Subsidies were introduced after WWII in

order to help Egypt’s citizens overcome the price hikes that occurred due to the negative impact of the war.

The subsidy scheme was designed to assist both the rich and the poor

Introduction

Different forms of subsidies Food Energy Health & Education Housing Transportation

Introduction

The evolution of the cost of living subsidy The cost of living subsidy included cooking

oil, sugar, as well as wheat to make bread Only 9 million pounds in 1950s 20 million pounds in 1970 1.611 billion pounds in 1980/1981 2.909 billion pounds in 1986/1987 4.165 billion pounds in 1996/1997

Introduction

Problems of subsidies Clip

I chose this clip to emphasize the opportunity cost of removing subsidies. These problems are encountered by Egypt’s citizens, especially the poor people.

http://www.youtube.com/watch?v=aFrLbGB2CxA (00:00 till 0:43 43 seconds)

Problems of subsidies Clip

I chose this clip to emphasize the opposing viewpoint of subsidies and the actual problem we are currently facing.

http://www.youtube.com/watch?v=rXxeX0Bb7Io (1:22 till 1:50 28seconds)

Critique of the Egyptian subsidies program Subsidies as a problem of policies. Subsidizing the poorest 1000 villages in

Egypt.

What makes the Egyptian subsidy program inefficient?

The Economic Reform and Structural Adjustment Program’s targets economic stabilization, economic growth and GDP growth.

The economic stabilization is supposed to be achieved through decreasing public expenditure, subsidies and government spending on public services.

What happens if the government decreased subsidies?

Poverty rate is going to be higher. Concerning the food subsidies, large

number of people would hardly have access to the very basic food commodities, subsidized by the government.

Cancelling the subsidies in health and education would lead the society to witness serious problems of diseases and illiteracy.

Poverty ( A new concept)

Poverty is considered a new concept to Egypt, since researchers started to use it only in 2007.

According to some data by the World bank :

1. (20 to 30) percent of the Egyptian population live below the poverty line.

2. 8 percent of the Egyptian population lives on less than 1$ per day.

3. The wealthiest 20 percent of Egyptians controlled 39 percent of wealth, while the poorest 20 percent controlled 9.8 percent.

Efficiency and Targets

The stabilization and structural adjustment, which are the main two targets of ERSAP, has not yielded the expected sustainable economic growth and poverty reduction (Yamada, 2008).

Egypt is using the self-targeting method in distributing the subsidies which means that all the population can benefit from the subsidies.

The subsidies cover the majority of the poor (73%) but also go to most of the non-poor (72%) lifting (5%) of the population above poverty line. (Adams 2000).

Reform methods

Rural areas in Upper Egypt have the biggest percentage of the poor (55.2%), so by giving the subsidies to people only in upper Egypt, we can assume that half of the poor is getting the subsidies.

Better selection of the subsidized goods needed, so that the government could guarantee that only the poor are benefiting from the subsidies.

Improving the ration cards system, in order to know who still deserve the subsidies.

Reform methods

Government should consider other successful subsidies programs applied in other countries.

Ex: Mexico’s subsidy progarm

Conclusion

The Egyptian government is trying to help the poor by providing food, health, energy, education and transportation subsidies, yet the Egyptian subsidy program is considered inefficient and needs reform.

References

World Bank. 2007. Arab Republic of Egypt: Poverty Assessment Update. Washington, D.C.: The World Bank.

Yamada, Toshikazu. 2008. Sustainable Development and Poverty Reduction under Mubarak's Program. Japan: Institute of Developing Economies.

<http://ir.ide.go.jp/dspace/bitstream/2344/733/1/ARRIDE_Discussion_No.145_yamada.pdf>

Questions

Thank you