At long last, the Wall Street Journal saw fit to publish an
article written by an Egyptian discussing Egypt 's economy. She is Sahar Nasr
who is the country's minister of international cooperation.
She wrote: “Egypt Is Charting a New Economic Course,” a
piece that also came under the subtitle: “Unlocking the country's potential
through private-sector-led growth free of the heavy hand of the state.” It was
published on November 24, 2016 in the Journal.
With a few exceptions, most of the article should be clear
even to those who are not familiar with that country's economy. Since the
intent of the minister's article is to invite potential investors to
participate in the opportunities opening to all, it is important to shed light
on the areas that may need clarification.
One area that may confuse some people is this quote: “Access
to affordable housing and expanding the natural-gas-pipeline network are also
features of the package.” It must be said there are two kinds of natural gas
pipelines. There is the network which connects the gas fields to the processing
plants, the reservoirs and the main distribution centers. And there is the
network which connects the distribution centers to private homes and other end-users.
The first is the concern of the oil companies. Nasr is talking about the
second, which is the concern of governments at all levels.
Why did she lump that network of pipelines with affordable
housing? The answer is that to alleviate poverty you must be efficient. There
are many ways to do that, one being to make the right choices. So let's take an
example. You are in your kitchen where you have two stoves. One uses
electricity, the other natural gas. You get two identical pots, fill them with
equal amounts of water and let them boil to make pasta. Half an hour later your
two pastas are ready. How much fuel did each system consume?
The electric stove uses an element that consumes 2,000 watts
of electricity per hour. In the half-hour that it took to make the pasta, it
used 1,000 watts or one kilowatt-hour. Whatever the fuel that's used by the
electric company to generate electricity, you can think of it in terms of
natural gas equivalent. So, how much of that did the electric stove consume?
To supply your house with one kilowatt-hour of electricity,
the power plant would have used approximately 10 cubic feet of natural gas. Is
that high? Yes it is. It is high because it is inefficient. That's because the
generating unit is a complex piece of machinery. It uses the fuel to boil
water. The resulting steam runs a turbine that drives a generator. This
converts the mechanical power into the electricity that goes into one or
several cascading transformers before reaching your house. And each step of the
way, the converted power loses a percentage of what it started with.
If, on the other hand, the natural gas had come directly to
your house, and you used it in your gas stove, you would have consumed only 3
cubic feet instead of the 10 that the electric company consumed. The rule of
thumb is that when you avoid converting power from one form to another, you
practice the best kind of efficiency there is. This is why the effort in Egypt is to
supply every new subdivision and every existing one with natural gas. The last
I read is that one third of the homes in that country are already connected to
the natural gas network. The government wants to make it 100 percent.
It costs money to do that, which is why in Egypt ; they
created public-private partnerships to finance the project. This is a long term
undertaking in which every subdivision that's connected to the natural gas
pipeline ends up rewarding those who invested in it handsomely. This happens
each time without fail because the endgame is efficiency, and nothing rewards
more than a project that is truly efficient.
Before the first revolution five years ago, the poverty rate
in Egypt
hardly surpassed the first quintile, defined as the bottom 20 percent of the
income levels. Two revolutions bumped that rate to 27.8 percent, a historic
high. To reduce that level, it is not enough to grow the economy horizontally.
They already do that in Egypt ;
they must now grow the economy vertically as well. This means they must become
efficient everywhere they can.