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Wednesday, 19 September 2018

Saudi Arabia’s economic reform program is bad news for Egypt?

**#3 Saudi Arabia’s economic reform program is bad news for Egypt, and we need to act now by upping our own reform game, the American Enterprise Institute’s Karen E. Young writes for Bloomberg Opinion. Recent months have seen a “steady exodus” of expats from the kingdom as authorities there take steps to boost national employment levels at the expense of the foreign workforce. “There is no breakdown of the nationality of foreigners who’ve been forced out of jobs, but it’s fair to guess that Egyptians make up a high proportion,” according to Young, who says that some estimates place the number of Egyptian expats in Saudi at 2.9 mn. This could mean a slowdown in remittances a top source of foreign currency for Egypt (40% of total remittances to Egypt are from workers in KSA) — and rising unemployment as laid-off expats in Saudi return home.

Saudi may also also choose to cut back on aid to Egypt if it takes its reform program further. “Already, many of the grand plans by Saudi Arabia and the UAE to invest in new cities, infrastructure, and housing development in Egypt are being scaled down,” especially with Saudi planning to develop its portion of the Red Sea coast, which may pose a threat to Egypt’s tourism industry.

So what’s the solution? “The goal should be to remove the necessity for so many to leave Egypt at all.” That would entail less reliance on external borrowing and more government support for sustainable private sector growth, which can create jobs and boost the country’s overall economic performance. Reducing the military’s role in the economy would also help boost market competitiveness, she suggests.

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