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Rantings of a Sandmonkey

Be forewarned: The writer of this blog is an extremely cynical, snarky, pro-US, secular, libertarian, disgruntled sandmonkey. If this is your cup of tea, please enjoy your stay here. If not, please sod off

Thursday, June 09, 2005

The Numbers tell the story!

Reading stuff like that, just pisses me off: Egypt's ministerial cabinet said that the state budget for the fiscal year 2005/6 is expected to total approximately 187.7 billion Egyptian pounds ($32.3 billion). The figure represents a 5.8 percent jump on last year's 177.4 billion pound budget, which will make the upcoming fiscal year - in terms of state spending - the heftiest in Egypt's history. The new expenditures are attributable largely to the government's stated intention to boost public sector salaries and pensions at least by 10 percent, effective as of the new fiscal year July 1, in a bid to offset rising costs of living. Please note that the rising costs of living is due to the devaluation of the Pound, which lost about 50% of its value thanks to the recession caused by “wise” ( also see: dumb as hell) government projects like Toshka . This means that every pound you get is now worth half a pound, so you can imagine how much a 10% increase will help people out, especially that government monthly wages on average wouldn’t get you a dinner for 3 at Chillis in Cairo. But whatever, I know, this is about the poor, right? Wanna see how much better they will be off? Last week Prime Minister Ahmed Nazif announced that 600 million pounds would be added to the budget of the Social Insurance Fund, raising average monthly pensions to the poorest to between 60 to 80 pounds instead of the current figure of 50 to 70 pounds. The increases will affect more than 600,000 families. It is worth to note that the difference is 10 EGP, which equals less then 2 dollars, and that’s how much the government is giving out to help families cope with the effects of their failed economic policies. Ohh, and to help kids stay in school, the government allocated 20 pounds monthly to be given to every school-age kid. I don’t know, maybe it’s just me, but wouldn’t it be a better plan to take that money and I don’t know, IMPROVE THE DAMN SCHOOLS? Like Hire better Teachers, or build more schools or something crazy like that? It seems to me that bribing kids to stay in school just won’t work, because they are either not going because the school sucks, or because they need to work to help their families survive, and are likely to make more then that lousy 20 Pounds a months doing so. So, I can't help but wonder : What’s the point behind that policy exactly, you know, besides wastting money? Anyway, as my accounting teacher told me, the Numbers usually tell the story. So I figured- against my better judgment and at risk of raising my blood pressure- that i should take a more Macro approach into the whole evaluating the government Budget thing and try to keep things is some kind of persepctive. Let’s see: out of the 187.7 Billion, the government is allocating 90 Billion to “meet the primary needs of citizens”. That means that more then 46% of the Budget is going into subsidizing stuff, like our “free education” , “healthcare” and “food”. The sad thing is, most of this money is wasted already and will not accomplish anything. You disagree? Let me explain: Take the Free education thing for starters: It’s a myth. It doesn’t exist. I know, you could enroll in a government school for free, but you can’t pass unless you take private tutoring lessons from your teachers. The reason why the teachers do that is because they don’t get paid enough to live or survive, and because the system enables them to do it ( we don't have school boards or anyway for the people to keep the school adminstration in check). So the parents end up paying lots of money every month- let’s say 100 EGP for argument’s sake, and for the poor people that’s a lot of money- in order for their kid to take private tutoring lessons and for the teacher to pass him. Now, if the parents agreed to pay that money to the school instead, the school probably would end up having enough money to pay the teachers a decent enough salary to do their jobs, like the private schools do. However, you can’t do that, because we are a socialist country, and we have free education, which amazingly, ends up costing each family per kid more then the 20 pounds the government is willing to give to them. This is why Private education is a booming growth industry in Egypt : everyone takes their kids to private schools these days. The same goes for Healthcare and Hospitals mind you: no one I know has ever been to a public Hospital, even though we pay mandatory health social insurance as part of our taxes. You can’t go there, because they never have good doctors, and they rarely will have medicine or good service, and if you are that poor that you have to go there, then god help you, because if the doctor misdiagnoses you or causes you death or permanent injury, there is little or nothing you can do. The court Justice system in Egypt is notorious for being slow, and any lawsuit will probably cost you more then any compensation the court may give you. It almost makes you wonder, where does all this money go to? Anyway, let’s revert back to the Macro view. What about the Deficit? How big is it this time? But Egypt's 2005-6 budget will bring a deficit of around 59.4 billion pounds, an estimated 9.4 percent of GDP, which is a noticeable decline from the past fiscal year's 10 percent of GDP. "We will spend [in the next fiscal year] 187.7 billion pounds and we will collect about 130.8 billion pounds in revenue but we also expect that the budget deficit could be lower in the final version of the state budget," said Hassanein. You do? By how much? And what makes you expect that? No answer? Ok! "These figures are quite shocking," said independent MP Hamdi Hassan. "Last year when we had a budget deficit of 52 billion pounds, up from 20 billion pounds in 2002-3 and 40 billion pounds in 2003-4 we were shocked and worried and now we are talking about a deficit of 59.4 billion pounds," he told the Middle East Times. So the deficit compared to the GDP declined 0.6% from Last year, yet in actual financial terms it has increased by 8 Billion pounds? Talk about Fuzzy math! Please also note that the deficit increased by 40 billion pounds in exactly 3 years. Nice for a third world country, isn't it? The government has previously tried to cover the deficit through social security, pension funds, borrowing from abroad and issuing government bonds and treasury bills. However, experts believe that some 35 billion pounds will not be covered and adds to the government's already-huge public debt, which is expected to jump to 407 billion pounds. 407 Billion pounds in Public debt. Hmm. That’s just lovely! We are so screwed! So regarding my question of “where does this money go?”, they seem to have the answer right here: In order to finance the budget deficit, say some analysts, the government has to control state spending. Last year press reports said that behind the budget deficit every year is the ministries' expenditures and the government's unnecessary five-star ceremonies. Let me give you an example: The President’s convey has 64 vehicles: 40 Mercedes, 10 Jeep Cherokees, and 10 BMW’s/ Discovery’s and 12 Harley Davidson motorcycles. I know that for a fact, because me and my friends have counted them once. That’s how many vehicles are on the road every time he needs to go somewhere. Just imagine how much one trip messes up Cairo Traffic. And mind you, we have 35 ministers, each with his own convey or motorcade as well, not to mention decoy conveys to escape possible assassination plots against them. Now add those to the equation, and you might just realize why there is always heavy traffic on Cairo's streets. But government officials assert that most of the increases in non-subsidy expenditures are earmarked for salaries and pensions, as there have been no increases in allocations for administrative expenses such as vehicles or furniture. Oh, of course! The government has also pledged to control spending in the new budget. According to the plan the state has only allocated 4 million pounds for government expenditures, much less, according to Hassanein, than last year. Only? LOL. That’s what I call being fiscally responsible. I said it before, I will say it again: we need to cut the waste, eliminate failed programs, eliminate unnecessary ministries and become fiscally responsible. In short, what we need is a small government. Can we get that please?

11 Comments:

At 6/09/2005 04:15:00 AM, Anonymous DNA said...

I won't assume I know the first thing about macroeconomic policy and accounting (although I've been taught enough about both to know my way around the jargon and the figures), but Hassanein is a top-notch numbers guy. I know this from first hand experience. If there is anyone capable of putting this economy back on track, it's him.

And, in spite of your sceptisim, I also have first hand accounts of people who know the economy is recovering - very, very slowly, and a lot of mistakes are being made along the way, but it is improving. This isn't a miracle - it's prety easy to see how its working.

There is one thing you seem to forget in your critique: taxes. I bet you - and every one else - that we don't pay NEARLY enough tax in Egypt. The public sector ends up paying their designated taxes, some of the private sector pay a measily amount of tax on pathetic salary figures, and the rest don't pay anything at all. Corporate tax isn't nearly high enough, and a lot of comapnies know how to abuse tax holidays by changing names every 5 yeras, relocating, registering abroad, etc. Public schooling, healthcare and transport cannot be funded through any other mechanism. That's not to say that wastage in the form of bribery, corruption and pure theft don't drain the gov.s budget - they do.

 
At 6/09/2005 04:32:00 AM, Blogger gbaikie said...

The US federal govt spends about 65 billion on education, but the individual States pay most of the tab, which about 500 billion. All that money per year and the schools still can't do a good job educating kids. What's becoming somewhat popular is for parents home school their kids. Also charter schools which get public funding but are privately run.

The Teacher Union in America is huge political force, and charter school's are mostly non-union. So of course the unions have been fighting these charter schools for a decade or so. But Charter schools are showing good results so the union has basically lost the political fight and to small degree are trying use some of "best practices" of the charter schools. On a TV show [Charlie Rose] which had a couple people who were running these charter schools, one said it would take 15 years to see a significant improvement in all American schools, the other one thought it would be more likely be 30 years.

 
At 6/09/2005 04:54:00 AM, Anonymous Anonymous said...

Right on the mark! We need tighter financial controls and less corrupt practices on both sides of the coin. To DNA, even if we assume Hassanein is a top-guy in economics, you have to see the people who are executing and applying the rules to see that it takes more than a good minister to make things better, let alone turn them around.

Egytian living in Germany

 
At 6/09/2005 05:10:00 AM, Blogger The Sandmonkey said...

Hellme,

I don't know who Hassanein is personally, atlough i do know and have met Mahmoud Mo7 eldeen(the minister of Investment) personally and who is , in my opinion, the only hard working minister in Egypt and the main reason why the economy is improving: His handeling of the privitization of government owned companies is the reason why they are vaulued correctly at their fair price, and the way they structure the deals ensures that those companies continue operating and making profit. If there is a reason why the egyptian economy is moving very slowly, it's because of that guy, and his efforts to get more foreign investment to egypt and get the private sector going, because at the end of the day, it's them who create new jobs and them who get this country moving. However, this isn't what this post is about.

This post is about government waste, plaiun and simple, and our insistance to keep funding programs and government apparatuses that we know have failed and following policies that don't yield any tangible results and don't improve anything. They keep those failed programs and policies without any plan or vision for a future and act like they will work if you put more money into them, which is clearly not the case. All that spending more money on those programs does is to keep them from collapsing for now. If you ask them what their plan for the future is, they will tell you that this is no time to worry about that, and that we need to act based on the "expediency of the moment" and "Rabena 7ay7elaha" when the future comes and we are out of money and are caught without a plan.

I mean doesn't it frighten you that our national debt is almost half a trillion EGP? I mean, sure, it's not much compared to the US national debt, but our economy isn't as healthy, functioning or robust, because of binding legislations, bureacracy, and corruption.

Now, we come to your point, and that is taxes. your soloution seems to be that we need to pay more taxes in egypt, ok, fine, and then what? Give it to the same people who have wasted all the otehr money we have given them over the past 24 years? Like they need to waste more? And not to mention, we do pay taxes in the private sector: I pay 20% out of my monthly salary in taxes, and unlike the american tax system, i will probably never ever see a refund. Not to mention, i don;t see where my money goes to, because the country has almost no infrastructure to speak of: The streets are unpaved, the trafic sucks, the educational system is in shambels, i don't use the healthcare, I rarely watch the egyptian national television, I can't even find a public bathroom if i need one, we get out National defense through US military aid, the cops always try to get me to bribe them, and government services are still stuck back in the 1960's. Nothing the government is involved in works, let alone works efficienttly. And yet, you want them to take more money? Even the greatest fortune in the world can be wasted if handeld by fools.

Not to mention, you always have to pay damghah, and tawab3 shorta, and Ma3onet shetah and kharah and all kind of shit that you are not counting. Ohh, and the next time you go renew your car registration, don't be surprised if they tell you that you owe 30 thousend in tickets and most of it is made up. They are doing that to everyone these days.My company has a car that had 3000 pounds worth of tickets on it from 2003, while the car itself is a 2004 model. Can you believe that shit? They are robbing us blatantly and we can't do anything about it!

And then you talk about corporate taxes, and you are right about the stuff that you mention, but you ignore the rootcauses for it : people have no incentive to be honest with the government that blatantly steals from them. The egyptian IRS doesn't deal with numbers and figures, but rather speculation. They don't operate from the principle of "tell me how much you've made and i will tell you what you have to pay", but more of "I will tell you how much you've made and how much you owe, and you have to prove that you didn't make that much!". Let me tell you a story that happend 4 years ago: El Haj Salam, the owner of the Olympic group, one day counted how much he has to pay in taxes, and found out that he has to pay about 10 million pounds. So he took the money and went to the IRS (Masla7ah el darayeb) and told them : "I've calculated my taxes, and i owe you people this amount of money, and here it is!" . Do you know what they did? They arrested his ass and audited him. They were like "If he came to give us 10 million, then he must really owe 100million". The man was just being honest and respectable and he got punished for it. That's the kind of people you deal with here.

I don't know, i say lower the taxes and take away all the red tape and let people work, form companies, create jobs, and make money. Give the people a flat tax and people will pay it. Stop trying to find new ways to rob people of their money in the name of "helping the poor and supporting the needy" when that money doesn't help the poor nor support the needy. Socialism and having a central government as a policy has reigned for more then 50 years in egypt and it has failed us all. It's time for a different approach.

 
At 6/09/2005 07:19:00 AM, Anonymous DNA said...

SM - you're talking about macroeconomic policy - a problem everywhere in the world: where does taxation money go to? There isn't a government in the world that has enough credit to find support from its people on where it spends that money.

I know, I know, Egypt is much worse than anywhere else. But, I still stand to my point that there's A LOT that's lacking about Egypt's taxation system for example, and eventhough you might pay 20% of your income in taxes (are you sure it's your true income, not some phantom amount, like 750LE with the rest of it made up in 'badalat which is tax free?).

Lower taxes, higher taxes - thats economic theory - that's a personal preference. There's no 'right way' of doing it. You might think that a more capitalist approach to Egypt's economy is the way forward, others will disagree. I never suggested that people need to pay 'more' taxes- I just suggested that those who evade paying taxes should be made to pay (but what's the point when there is no public service given in return, I hear you). Whether we lower taxes or increase them, it makes no difference if the government cannot collect that tax, and once collected, cannot spend it where it should be spent because it all goes in the pockets of a select few.

The point you raise that is spot on is this: before any taxation system can work, before the economy can recover, the finance ministry has to get rid of corruption and start rebuilding its reputation. Until people trust the system (not 100% trust, but any level of trust that money that goes in will somehow come out) - until that happens, there's no point in changing anything.

 
At 6/09/2005 07:26:00 AM, Blogger Jeffrey said...

Sam,

Just a quick note. You've been posting some MAD GREAT blog entries. Blog on, brother! Even though I haven't been posting as much lately over at IBC (and giving you your deserved mad props) I read your blog every day and you and GM are making your countrymen proud with both of your kick-ass blogging!

I simply tell my readers now: Forget about it! Go to Sandmonkey's NOW!

Hey, but today I clipped a really funny exchange pulled from Kurdistan Bloggers Union. Check it out.

*

 
At 6/09/2005 10:46:00 AM, Blogger programmer craig said...

I'd love to pay 20% taxes. I'm in the highest federal tax bracket in the US... 35% as I recall - and California state tax takes another 12% or so. That's 47% right off the top, without adding in all the value added, sales and other misc taxes.

Of course, I get a lot of right offs... especially on mortgage interest payments... but it still hurts like hell.

 
At 6/09/2005 11:40:00 AM, Anonymous Anonymous said...

Do you have VAT in Egypt? Nobody likes taxes, but if you must have them, VAT is probably the most efficient. Also, it is a tax on expenditure, rather than income, which IMO is a good thing.

 
At 6/09/2005 09:29:00 PM, Blogger Tina said...

If they are going to spend money, it should be spent on helping to establish small businesses. That will increase employment and in turn increase tax revenue without raising taxes.

 
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