Tag Archives: Egypt

[The wandering economist] Does Egypt run on hyper-Schumpeter?

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In this period I am consulting for the United Nations Development Programme and United Nations Volunteers. What it is I am doing exactly is a story for when I have finished doing it. But an interesting (for me, and for this blog) feature of this job is that it requires me to get a broad idea of employment and social inclusion policies in six countries (Armenia, Belarus, Egypt, Georgia, Morocco, Ukraine), and to do it in just a few days. To do this, I read policy documents and check statistics; and visit each of these countries, walk into government offices and ask civil servants questions; then talk to businessmen, NGOs and international development organizations and cross-check the information I get.

It will not make me an expert, but it seems like a great way to learn about these countries and what they are trying to achieve, and to do so very quickly. And there is an added bonus: by looking at how different countries, with their different economic fundamentals and policy styles, approach the same issues, I can learn much about what these issues really look like, when seen from different angles. I thought others might be interested, too, so I will be posting occasional notes from the journey – starting from my impressions of Egypt. As with everything else in this blog, views expressed here are my own and may differ from my employer’s.

Egypt seems to run on a hyper-Schumpeterian ideology. Entrepreneurship is seen as the silver bullet that will solve everything. Social problems will be solved… by social entrepreneurship. There are even talks to teach entrepreneurship in schools, in the curriculum.

Treating entrepreneurship as the critical tool towards improving Egypt’s overall social and economic health appears to be, according to interviewees, a logical move. Every year, 600,000 young Egyptians join the labour market (CAPMAS, 2013). The public sector is already bloated with more people than it can use, and cannot absorb but few of those young people. 70% of job creation is driven by the private sector; and private sector has its own labor needs, which are similar to those of most countries: more “cream of the crop” highly qualified people with specific skills that happen to be in need at this point in time, not so many middle-of-the-road graduates. Labour demand – supply matching and retraining policies can help a little, but they are already being done, so they cannot be expected to bring any additional benefits. That leaves new business as the most likely candidate for creating new jobs.

Two labour policy asides (not directly relevant to the project, but useful as part of the background):

  1. Labour policies seem to be, in some cases, overengineered. A scheme that was reported to us is a scheme of demand-supply matching for apprenticeships and internships directed to boys and girls who are still in school, and therefore are _unqualified_. The thinking behind it is that having a summer job can help youth develop personal and relational skills that will be useful when applying for, or holding, a job. But is there really any need to match schoolboys with farms, and paying the overhead cost of the matching structure?
  2. Entrepreneurship policies have reached the point where they risk distorting the incentives for the budding entrepreneurs. One of the interviewees reported that some young, obviously smart people perceive it as viable to just go from competition to competition, from grant to grant, and stop business when the grant or award dries up.

The Egyptian government appears to be working with the main stakeholders to build an ecosystem conducive to entrepreneurs reaching their full potential. Many efforts are directed towards building funnels that find entrepreneurial ideas and bring them to market in the form of startups. We heard of several startup programs (Injaz Startup Incubator Programme, Misr el-Kheir’s Gesr Programme, Nile University’s NU100 competition). Microsoft offers online coaching for startuppers. The main tools in use seem to be competitions, mentoring, coaching, and incubators. Most of this effort focuses on nano-bio, ICT, greentech.

There are many remaining challenges for the full potential of entrepreneurship to bear fruit. Specifically:

  • the regulatory environment for new business is stiff and unfriendly.
  • regulation on key areas pertaining to startups (patents, IPR, data protection, openness of public sector information) is still missing.
  • university research is subpar.
  • services for tech startups are expensive or missing. There are only two law firms serving startups, and no specialized accountants at all; very few consultants on the specifics of startupping.
  • angel investors are there, but they do not appear to be having a large impact.
  • private sector companies get involved in entrepreneurship competitions, but they tend to recruit the smartest competitors rather than invest in their business.
    incubated firms struggle to move forward and scale.

As a consequence, the funnel is missing pieces both at the beginning (pre-idea) and at the end (second and third round, post-incubator). There are signals that the government is working on improving regulation to make Egypt more business-friendly, but some of the interviewees expected that this would not really accelerate until a parliament is elected.

Social entrepreneurship/social innovation is attracting attention, but it does not feature as prominently in Egyptian policy as it does in Europe. We know of one already active pipeline for social entrepreneurship (Misr el-Kheir), and of another one being considered. (Injaz). The active one, however, insists on “high profitability”, so that the term “social” becomes a bit diluted (and could even be interpreted as a constraint). The Egyptian legal system does not have a specific legal form designed for social entrepreneurs, like the CIC in the UK and the cooperativa sociale in Italy.

Over the past year, we at Edgeryders have met many Egyptians involved in social entrepreneurship and other grassroots initiatives. They seem to have two main focuses. One is greentech (solar, water sanitation, waste recycling etc.), which is supposedly cared for by the fledgling ecosystem of policies directed towards entrepreneurship.

The other one is reclaiming and repurposing public spaces for the common good, with the Al-Mutamidiya ring road ramps story being the most impressive example of self-organization we found so far. UNDP itself has been involved in this scene, with a successful initiative to have young people contribute to designing the renovation of a central street in Giza (the governor of Giza turned out to have urban planning background, which makes him a potential champion for these initiatives). This line of work does not appear to be part of the startup ecosystem.

Other examples include the many coworking spaces that flourished in Egypt (many of which do not appear to have a viable business model, but they do signal a drive of youth to claim spaces), like Mesaha, Rasheed 22. Megawra and Cairo Hackerspace (learn more). Of these, at least the first one is fully grant-free, surviving on a very community oriented “pay what you can” model. The Darb al-Labbanah initiative, currently in its planning stages, strives to revitalise Historic Cairo by adaptively reusing long neglected properties as a hub for social enterprises and cultural businesses.

Cairo is also home to Cluster, an urban planning studio that achieved international fame for doing work on informal settlements and “tactical urbanism” – another sign of societal interest in the matter and a reservoir of high-level technical expertise.

Overall, there seems to some space for Egyptian social entrepreneurs to leverage the hyper-Schumpeterian ideology now prevailing in the country to gain a more central position in society. I certainly wish them my best!

 

 

Lections from Egypt: moving on from prediction to early warning

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Daniel Kaufmann had some fun compiling a list of the authoritative commentators that predicted that – unilke in Tunisia – in Egypt the disgruntled population would not take to the street, or anyway not in such a way to threaten the regime. Everybody seems to have fallen for it, from Foreign Policy to the BBC, from Time magazine to the Economist.

Forecasting was always tricky business, and is getting more so. In a society as complex as ours, even the best analyst are lousy at prediction. In an entirely different context, David Lane and others (yours truly included) are suggesting that in some cases prediction might be replaced by a system of early warning, that spots emergent social dynamics in its early stages, when correction is still possible. This would be done by combining and filtering large masses of data, many of which collected on the web. The idea — which might ring familiar to those who use the Internet as a social filtering device for information, is that the global conversation is an entity that exists at a level superior to ours, and as such might know things that none of us, mere participants, know.

To describe this hypothetical system, David likes to quote post-marketing surveillance on pharmaceuticals after the Thalidomide scandal. This drug used to be prescribed to pregnant women in the 1950s, and it could induce terrible deformities in newborn children, but only combining in exquisitely nonlinear ways with other agents: it was cleared for rollout because the lab tests did not allow to discover the problem. It was the doctors treating the mothers of deformed or sick children that discovered, in the ocean of statistical noise, the weak signal of taking Thalidomide during pregnancy. As a consequence of this story, pharmaceutical companies now work with physicians to spot correlations to weak to be spotted in the lab, but that might be revealed by processing the mass of data obtaiend by tapping all doctors.

It is a fascinating topic, at least for me. And — going back to Egypt — it leads to an unexpected conclusion: it suggests another way that Wikileaks might be a good thing. Laks feed the global conversation, and thereby increase the probability that bloggers, citizens and activists poolf their knowledge and discover emergent trends. It has been argued that Wikileaks is nefarious, because it might hinder the work of diplomacy: but without better analysis, diplomacy cannot do an acceptable job anyway.

Lezioni dall’Egitto: dalle previsioni all’early warning

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Daniel Kaufmann si è divertito a elencare gli autorevoli commentatori che hanno previsto che, a differenza che in Tunisia, in Egitto il malcontento della popolazione non ci sarebbe stato, e comunque non avrebbe messo in seria difficoltà il governo. Ci sono cascati tutti, da Foreign Policy alla BBC, da Time all’Economist.

Fare previsioni è sempre stato difficile, e lo diventa sempre di più. In una società così complessa come la nostra, anche gli analisti migliori sono pessimi previsori. In un contesto diverso, con David Lane, stiamo ipotizzando che in alcuni casi le previsioni si possano sostituire con un sistema di early warning che individui le dinamiche sociali emergenti al loro stadio iniziale, quando si può ancora intervenire. Questo si farebbe combinando e filtrando grandi masse di dati, molti dei quali raccolti sul web. L’idea, che suonerà familiare a chi usa Internet come meccanismo di filtraggio sociale per le informazioni, è che la conversazione globale sia un’entità di livello superiore, che sa delle cose che nessuno di noi che vi partecipiamo può sapere.

Per descrivere questo ipotetico sistema, David fa sempre l’esempio della sorveglianza post-marketing introdotta nel mercato dei farmaci dopo lo scandalo del Talidomide. Questo farmaco veniva usato dalle donne incinte negli anni Cinquanta, e poteva indurre terribili deformità nei neonati, ma solo combinandosi in modo nonlineare con altri fattori; fu messo in commercio perché i test di laboratorio non permisero di scoprire il problema. Furono i medici curanti delle madri che avevano generato bambini malformati a scoprire, nell’oceano di rumore statistico, il debole segnale dell’assunzione di Talidomide durante la gravidanza. Ora le case farmaceutiche lavorano con i medici per cercare correlazioni statisticamente molto deboli, ma che è possibile scoprire facendo ricorso alla massa di dati ottenuta dal mettere insieme le conoscenze di tutti i medici.

È un argomento affascinante, almeno per me. E – tornando all’Egitto – ha anche una conseguenza inaspettata: che acquisisce ancora più importanza sociale il lavoro di Wikileaks. I leaks alimentano la conversazione globale, e così aumentano la probabilità che bloggers, cittadini e attivisti mettano insieme le loro conoscenze e scoprano tendenze emergenti. È stato detto che Wikileaks è dannosa, perché ostacola il lavora della diplomazia: ma con un’analisi così carente, viene da chiedersi come è possibile che le diplomazie possano compiere un lavoro accettabile.