There is no doubt that the massive investments poured into Egypt’s public sector during the years of its socialist experiment failed to achieve the desired result, which is an annual return on investment of not less than 15% after the deduction of inflation rates. To those who point with pride to the huge industrial plants and institutions established during that period, we say that modern management sciences have taught us that when it comes to economic performance, pride is not measured in terms of the size of factories and investments, because financial outlays are not an end in themselves. Rather, pride is measured against the economic return on investment. A dictum of modern management sciences is that the greatest disaster which can befall any economic enterprise is when the thinking of its senior management comes to be governed by considerations of scale rather than of return on investment.

     As to those who maintain that even if the return on investment was modest the social benefits were enormous, they would do well to remember that there can be no viable societal role in the absence of high economic returns. How is it possible in the context of meager economic returns to continue guaranteeing high levels of employment for citizens and ensure that they receive decent salaries and humane treatment in the areas of medical insurance, pensions, etc.? In other words, the economic role is the only guarantee for the continuation of the social function of investments, business and projects. The fact that the projects set up during Egypt’s socialist phase failed to realize good returns on
their investments meant that after a while they were unable to continue performing their important societal role, as represented in providing a large number of citizens with employment and health care.

     When the collapse of the socialist world proved beyond the shadow of a doubt that the failure of the socialist model was not confined to Egypt but extended to all the other countries which had applied it, Egypt realized that to continue basing its economic life on a model whose shortcomings were now visible to all was to court disaster, not only in the economic sphere, but also, and in consequence, the social.

     This realization brought home the need to embark on a process of fiscal and economic restructuring in the aim of moving Egypt out of the framework of a command economy in which the public sector plays a pivotal role and placing it within the framework of a market economy in which private enterprise is the main driving force behind most economic activities. It was hoped that this would enable private sector enterprises to achieve the positive economic results necessary for economic growth, which is the groundwork for the societal role of economic life, as represented in the creation of real job opportunities, particularly for young people, one of the most important prerequisites for social peace.

     There can be no denying the fact that the impressive efforts made during the restructuring programme were extremely important and, indeed, instrumental in sparing Egypt from the fate of other societies whose socialist experiment not only caused them to suffer financial ruin, but exposed them to dangerous social upheavals.

     However, that is not to say that Egypt can afford to rest on its laurels or to assume that all is best in the best of all possible worlds. All major human endeavours, including, even, especially, those that are successful, require constant revision, reevaluation and objective self-criticism. It is on this aspect of Egypt’s restructuring endeavour that the present article will focus, without in any way belittling the significance and magnitude of the results achieved in this connection or of the efforts made to allow the formation of private sector economic institutions that contribute both to the realization of economic success and to the translation of that success into a societal role.

     Any attempt to reevaluate economic performance entails a greater degree of self-examination in respect of the public sector experiment, in the sense that every effort should be made to convince society that the public sector, however noble the intention behind it may be, is an institution that is doomed to fail for one specific reason, namely, management. The Egyptian public sector failed to achieve the targeted 15% annual return on investment because its management was incapable of reaching that target. It must be emphasized that management is always the weakest link in the chain of the public sector. Even if there are a few cases where the management of a public sector enterprise is successful, they are merely exceptions that confirm the rule. The public sector experiment in eastern Europe and in many Asian, African and Latin American countries proved that no public sector enterprise is capable of producing a cadre of executive managers comparable to those who have scored impressive successes in private sector economic enterprises in the West.

     The main reason is that a public sector enterprise functions in the absence of a property owner who has a personal stake in the success of his property and hence closely supervises its performance. This is in the natural order of things. On the other hand, those who represent the ‘owner’ in the public sector are mere employees who do not and, indeed, cannot, fill a role that is not theirs. And so the general meetings of public sector enterprises, which are assumed to represent the owner, in this case ‘the people’, are transformed into assemblies of employees accountable to no one for their failure to achieve the projected economic returns.

     Parallel with this is the fact that the working environment in economic enterprises of the public sector is closer to the culture of a government bureaucracy than it is to an economic management culture. Thus in most cases we find these enterprises run by paper-pushers or glorified foremen rather than managers in the true sense of the word as defined in the lexicon of modern management science. The natural result is that economic enterprises of the public sector give priority to aims other than what should be the main aim of any economic enterprise, which is to realize a return on investment of not less than the interest accruing on bank deposits. Failure to achieve this target ultimately leads to economic bankruptcy which in turn leads to the suspension of any societal role for the public sector.

     At this stage in the process of economic reform, emphasis must be placed on this particular aspect of the public sector. The people should not be led to believe that the public sector is being privatized in order to expand the scope of private ownership; they should be given the real reason for the shift, which is that management in public sector enterprises proved to be a failure and privatization aims at placing projects in the hands of those who can run them according to efficient management techniques capable of achieving the desired return on investment in order to guarantee a vigorous economic climate that will in turn guarantee a societal role.

     To recognize the pivotal role of management is to recognize the importance of promoting management education by introducing curricula in various academies and faculties designed to serve this aim, as well as by a massive influx of investment into training academies for middle and senior management teams. For without the formation of a cadre of modern and efficient executive managers who are well versed in contemporary international management sciences, methods and techniques it will be impossible to maximize the impact of the efforts that have been made in the area of fiscal and economic restructuring, because management is what translates sound economic systems into tangible results.

     The same degree of concern accorded to management should also be directed to the domain of marketing. For the world is not interested in the production of a given commodity or service but in its marketing. What is the point of any production process, whether of goods or services, that is not crowned by the successful marketing of the product put out by such process? Marketing takes us straight into the heart of the globalization process. When it comes to marketing any product in the world today, no one can afford to ignore globalization and the new dynamics it has generated. It is a fact that people will not buy good or services unless they conform to the specifications that meet their demand and unless they are more competitively priced than their available alternative. The consumer is not overly concerned with other factors such as where the goods or services he is buying were produced. Indeed, these factors are expected to play an even smaller role in the world of marketing in future. It is a world in which there will be no room for those unable to speak the language of the age or to understand its realities, those who stand on the sidelines contemplating in bewilderment the rapidly changing landscape in which they find themselves and plaintively questioning the legitimacy and fairness of the new rules of the game. They cannot turn the clock back, and success in the world of marketing will come only to those who ask themselves how they can achieve the best results for their products in the context of a new reality that is here to stay.

     It is also necessary to study the real reasons behind the weak flow of direct foreign investments into Egypt, by arming ourselves with the ability to objectively scrutinize our shortcomings and to engage in constructive self-criticism. The question of why the volume of direct foreign investment has been extremely limited in the last ten years will be the subject of the next article in this series. There are reasons for the phenomenon and they can be overcome, but only if we first overcome our excessive sensitivity to self-criticism. We must recognize that self-criticism is a healthy practice that does not require us to deny the very real achievements already made while at the same time spurring us to ever greater successes.

     Our next article will deal with this important issue, particularly in relation to the role of the government. Among the questions we shall be addressing is whether the role of the government apparatus in economic life will continue to be as pervasive as it now is, and whether individuals, highly competent though some may be, will continue to play such a decisive role. We shall discuss whether the role of the government will shrink in terms of size and ubiquity to become concentrated on laying down policies and ensuring their implementation, and whether the central role now played by individuals will come to be filled by institutions.