I have had several discussions with friends about the lackluster state of industrial development in Egypt. Most of those whom I talked to seem to think that the privatization drive that occurred in the last couple of decades is to blame for this.

They cite several examples of businessmen who bought factories, only to shut them down or restructure them to produce something not as “industrial” as their original output. It’s almost as if they are using the same set of talking points.

Personally, I think that the idea of privatization itself is extremely valid, it’s the execution that was botched up. Instead of selling government owned factories to the highest bidder, the corrupt Mubarak regime sold these properties to their cronies at below market value.

Rather than being an indictment of privatization and capitalism, with their emphasis on minimizing government interference in the economy, this is actually an indictment of the corruption of the Mubarak regime — distorting the market by selling at below market value to their cronies undermined the concept of fee market economics.

Anyway, I do not subscribe to the “privatization is to blame” mindset that seems so popular with some of my friends. I believe that government run businesses are inefficient and that private industry is our only hope to join the ranks of industrially developed countries.

However, that does not mean that I believe that the government has absolutely no role in nurturing an industrial sector. There are several things that the government can do. First, it can offer incentives for the establishment of industry — tax breaks and other financial incentives should be used to encourage investment in this sector.

Of course, these incentives need to be applied without bias to all wishing to invest in industry. The government should set up appropriate oversight committees to ensure that corruption and cronyism do not mire this idea.

Second, and more importantly, IMHO, the government should make industrial development a national goal. However, this should be done in a subtle way. If the government can set a high profile national goal and thereby create demand for local industrial products, private businesses will try to take advantage of this opportunity by investing in industry.

For example, the space and nuclear programs were responsible, IMHO, for rapid industrialization in several countries. By setting one of these as a national goal, and encouraging investment in the field by offering grants and other similar financial assistance, the government can accelerate the pace of industrial development.

A space program seems rather impractical at this moment in time, but a peaceful nuclear program seems to be a very good idea. Why not set the development of a complete nuclear fuel cycle as a national goal? That would galvanize the public and encourage industry to invest in precision industry to serve the nuclear program.

I think Egypt has all the components necessary for becoming an industrial country, all we need is motivation to reach our true potential. What do you think? Can Egypt become an industrial country? And if so, how?


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