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By Andrew Raven and Lara el Gibaly

The symbols of wealth are all around Mohamed Mahmoud Ali, a laborer in his mid-20s who works in the booming Cairo suburb of New Maadi.

Not far from the small warehouse where he has spent the last eight years carrying boxes, new condos are rising from the desert sand. Down the street, construction crews are laying the foundation of what is rumored to be a mini-mall. Two blocks away, workers are soldiering on with a massive LE 100 million call center.

But despite the building, a testament to five years of strong economic growth in Egypt, Ali says he’s no better off than he was a decade ago. “We have not benefited from development,” he says, pointing to his worn t-shirt, a symbol of the failure of Egypt’s new wealth to ‘trickle down.’

A new study has revealed that Ali is hardly alone. He is one of many of poor Egyptians who have been shut out of the country’s economic revival. The boom, spurred by private and foreign direct investment, has paid off primarily for the country’s richest, according to the new report by the General Authority for Investment (GAFI).

“The average citizen did not benefit from growth,” says Ahmed Kamaly, one of the report’s authors and an economics professor at the American University in Cairo. Kamaly sits on GAFI board of trustees, the independent body that issued the report and sets the strategic direction of Egypt’s investment authority.

Kamaly says the two decades of economic growth ushered in by the open-door economic policies that began in the 1990s have actually widened the gap between the rich and the poor.

Between 2005 and 2008 a red-hot investment climate drove GDP growth rates to over 7% annually. But the overall poverty rate increased as inflation drove down the purchasing power of most Egyptians. About 44% of the people in this country live on less than $2 (LE 11) a day as of 2008, according to the United Nations.

Government critics have seized on the GAFI report as evidence that trickle down economics do not work and are lambasting the state for exacerbating income disparities.

Proponents of the trickle down theory argue that reducing tax on businesses and high income earners will stimulate investment, thus creating jobs, increasing supply of goods, and lowering prices. In this model, economic growth will flow from the top down to benefit both those at the top and at the bottom.

While the study, authored by prominent members of the business and academic communities, steers clear of any definitive pronouncements on government policy, it is the first comprehensive, locally-produced analysis of investment and its consequences.

The study found that most of the foreign investment that poured into the country went into sectors that produce relatively few jobs, like finance and oil and gas.

What’s more, when private investment picked up earlier this decade, the government — seeing an opportunity to trim its deficit — reined in spending on social services like education and healthcare.

“They are not substitutes,” Kamaly says of public and private investment. “The private sector will not invest in health [] or services for the needy. The government should cater to those people.”

The roughly 90 percent of Egyptians workers in the informal sector — which can include anyone from small farmers to shop owners — saw few of those investment dollars come their way.

The GAFI report blamed official corruption, underdeveloped infrastructure, low literacy levels and lack of professional training for the shortfall.

Other experts say that the desperately low minimum wage, which stands at LE 35 per month for non-university graduates, a number that has not changed in 25 years, has helped hold down wages (see Tips for Survival page 58). And where wages have risen, they say, the increase hasn’t been enough to compensate for inflation, leaving many poorer in real terms.

For more Egyptians to benefit from investment the government has to pour money into infrastructure — especially in Egypt’s underdeveloped south — as well as into primary education, skills training, healthcare and the judicial system, the GAFI report said. According to the 2007-2008 UN report on human development, Egypt’s health expenditures amounted to just 2.2% of GDP.

But may Egyptians say they are resigned to the order of things. A bawab living in a half-finished apartment building in New Maadi said he had not heard about the LE 100 million call center going up two blocks away. When asked whether he thought he would benefit from investment, the man shook his head. “If you’re poor, you eat fuul and tameyya,” he said. “If you’re rich, you eat turkey. That’s the way it is.”  bt