A simple explanation of why the recent price increases in Egypt’s natural resources is necessary.
1. Egypt’s economy is currently held together by foreign loans
2. There are four types of resources or Factors of Production: Raw Materials, Land, Labor and Capital. They teach you in Economics that to achieve growth you have to use up these resources to their fullest extent.
3. Egypt is blessed with a huge population, making labor a crucial factor of production.
4. Egypt is also blessed with vast unpopulated and unindustrialized land, making land the other important FOP. To give you an idea of how cramped up we are, here is a population map of Egypt.
Note that the majority of the country is either under-populated or just plain desert.
“3eish, horreya w 3adala egtema3eya”, right?
5. Obviously, the current tax system is not providing enough income to sustain the economy, not to mention industrialize the country. Egypt has been constantly rated as one of the cheapest places for gas, petrol, etc.
The point is by making these things more expensive, they are providing job opportunities and paving the way for industrialization. How?
The income provided from these facilities will definitely surpass any taxation the government imposes. Instead of borrowing money and increasing the already enormous deficit we hold, we are taking the first steps to internally financing our country.
This is the first step towards an economic independence from foreign powers.
If the income gained from this enterprise is directed successfully towards factories and domestic production, we will benefit greatly. These factories would be built and operated in remote areas. These areas would soon be flooded with workers. A government backed project to provide proper communities (schools, hospitals, clinics, shopping centers, etc.) would be necessary.
These little communities would soon add up to form a city and then another city and so on. If domestic production increases, there would be less need for imports, thus decreasing our yearly balance of trade deficit.
For those who are unaware, a high amount of imports opposed to a low amount of exports is bad for the economy. The exchange rate is directly related to the number of imports and exports. As imports rise, you are selling your currency to buy another so you can pay for the goods. Per the laws of demand, your “price” – or in this case, the actual currency value – falls due to low demand.
In short, no da3m = good for the economy.
WE SAID THIS: There are a lot of “if”s in this… Meanwhile, check out petrol prices around the world for some perspective.