Can Mubarak put 'made in Egypt' label on economy?

By , Staff correspondent of The Christian Science Monitor

The smell of overripe mangoes and the whine of Arabic music drift past Tewfik Gomaa's watch shop in Cairo's Khan Khalili souk. Although he has been in business since 1929, Mr. Gomaa's sales have taken off only in the past five years. Toying with a new Seiko quartz watch, a clerk explains: ''Before, we could only sell Swiss watches. Now, Japanese. For the last five years we have sold many, many Japanese. They are very good. . . .''

Down the dusty alley past two frightened turkeys bobbing their heads, and a cart laden with boxes of Finnish herring, is Hassan Ashour's appliance shop. Mr. Ashour does a brisk business in Japanese videos and Korean radios, even with import duty doubling the price. Six years ago, none were allowed in the country.

Here in the Turkish bazaar are some of the fruits of Al-Infitah, the open door - a set of measures instituted by Anwar Sadat to encourage Egypt's private sector and give Egyptian, Arab, and foreign businessmen a free hand after two decades of socialist protectionism. Al-Infitah has made merchants and acquisitive Egyptians - not to say Japanese corporations - quite happy.

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But is it strengthening Egypt's creaky economy?

If the door were fully opened and the rest of the country brought up to speed , perhaps the policy would be a clear success. There are many new businesses popping up in Cairo. But too many seem to be importing watches and videos, not enough exporting Egyptian products.

Most Western economists and Western-trained Egyptian businessmen believe President Mubarak should try to stimulate productivity, spread private-sector employment, and take the government out of the marketplace.

The difficulty,of course, is not in the theory but in the practice - as both Mubarak and Anwar Sadat were aware. The Egyptian people are patient, but drastic economic solutions can make them decidely restless.

''The problems are so monumental,'' sighs a Scottish engineer. ''Inefficiency in the biggest one.''

''There is plenty of work,'' says an American in the oil industry, ''but it's hard to find Egyptians who want to start at the bottom with the dirty jobs.''

''Forty, 50-year loans are common in agriculture,'' says an agronomist. ''Here we have a hard time convincing a farmer he should take a one-year loan.''

An economist tells this story: He called on a government bank and while waiting in the reception room observed ''secretaries making personal phone calls or walking around chatting.'' When he was finally ushered into the office, the director ''began telling us that the big problem was that they were swamped with work, they didn't have enough people to handle all the work.''

To both Sadat and Gamal Abdel Nasser before him, Egypt was a big family, employment practically guaranteed, food and fuel prices kept artificially low.

''That was good in promoting social stability,'' says an economist, ''but it is bad in causing tremendous underemployment and inefficiency. In the long run that policy itself will contribute to instability.''

Economists say the biggest sacrifices will have to be made in the area of government subsidies: Instead of giving rich and poor alike cheap bread and gasoline, a system of food stamps for the poor should be initiated.

But that conjures up worries about the period of changeover, unpleasant memories of the 1977 ''bread riots,'' when students and workers took to the streets to protest the overnight doubling of bread prices. It is a sobering recollection - especially to a government shaken by an assassination and a major civil disturbance (in Asyut) in the past three weeks.

''Don't expect Mubarak to do the unpopular, at least not right away,'' says one Egyptian.

Most economists do not believe the situation is so critical that he will have to act fast. But there are signs that the cushion that allowed the status quo to exist - growing revenues from oil, from Suez Canal tolls, and from worker remittances - may be getting thinner. This is due to the current leveling off of world oil prices.

Still, economists are not pessimistic about Mubarak or Egypt. So far, so good , they say, pointing out that:

* Calm within the government in the days following the assassination nipped any tendency toward flight of capital or foreign workers.

* The new government has given every indication it intends to continue to keep the economic door open, thus reassuring foreign investors.

* The state-controlled press has adopted what one economist calls ''a much more realistic attitude about economic problems'' than it had under Sadat: ''There is talk in the press that sacrifices are going to have to be made.''

What Western and Egyptian economists hope someday to see is strong light industry here - Japanese televisions and radios in the souk perhaps, but possibly assembled under license by Egyptians.

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