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The COVID-19 pandemic saw two sets of policy responses: lockdown to limit spread of the virus, which was a huge demand and supply shock, and government support to firms and individuals to offset the effects of this policy-induced shock. This paper explores the allocation and effectiveness of government support to firms in Egypt. We consider both financial support measures which were by and large already being implemented pre-COVID, as well as tax- and loan-related exemptions and deferments. After controlling for the endogeneity of government support, our main findings show that the latter has helped mitigate the effects of COVID-19, with a significantly larger, favorable impact on smaller, younger and private firms. There is no equity-effectiveness trade-off. However, although these firms apparently make better use of government support, they receive a disproportionately smaller share of it. In line with the emerging ‘unsocial’ social contract, government support has been chiefly determined by political connections and a captured industrial policy. This ‘misallocation’ reinforces the ‘missing middle’ phenomenon which acts as a constraint as SMEs are unable to grow. Nevertheless, the crisis has presented a chance for the pattern of support to slowly shift towards the more vulnerable through the more frequent use of ‘exemptions and deferments’.

This paper examines the political economy of development policy through the prism of four country case studies (Egypt, India, South Africa and Turkey) of the automotive industry. The objective is not simply to examine the developmental impact of automotive policy, but to illustrate how the policy regime has been the outcome of a contested process. Early growth in the auto sector in the four case countries was enabled by rents from protected markets. The emergence of competitive firms is critically dependent on the nature of state–business relationships and the net outcome of the rent-seeking process in the sector. This hinges on the bargaining power of business, foreign or domestic, vis à vis the government. If firms capture subsidies in return for support to weak and vulnerable ruling coalitions, the auto sector in that country can become the classic case of an infant industry remaining stunted. Where the distribution of power is such that ruling coalitions are able to discipline firms in the auto sector, so that they become globally competitive, developmental outcomes have been positive.

ملخصيدفع التحول الهيكلي الدول نحو إنتاج منتجات أكثر تعقيدا وأعلى قيمة؛ وتقوم منهجية فضاء المنتجات (PSM) من خلال تحليل الشبكات بتوجيه البلدان نحو القطاعات التصديرية الرائدة. ويعتمد تحديد هذه القطاعات على ركيزتين هما: (1) الفرص المتاحة، أي المنتجات في فضاء المنتجات التي لم تقم الدولة بتصديرها بعد ولكنها فى الوقت ذاته أكثر تعقيدا من صادراتها الحالية؛ و(2) مخزون المعرفة الإنتاجية المتراكمة للدولة والقدرات الفنية التي تُمكنها من خلال التأثير غير المباشر - أو ما يسمى بالتأثير الجانبى spillover effect - من إنتاج منتجات أكثر تعقيدا إلى حد ما فى فترات مقبلة. وتشير منهجية فضاء المنتجات إلى مقايضة بين القدرات ومستوى تعقيد المنتج product sophistication ؛ حيث تُحدد المنهجية منتجات بسيطه جدا لتصديرها في المستقبل، تلك التي تتوافق مع القدرات البسيطه وغير المعقدة للدولتين. ويأتي في مقدمة هذه المنتجات، المنتجات الحيوانية البسيطة، مثل القشدة والزبادي، ومنتجات البلاستيك متوسطة التعقيد والمعادن مثل الأملاح والكبريت بالنسبة لمصر، ومنتجات أكثر تعقيدا بعض الشيء مثل الحاويات وبكر الخيط (البلاستيك) ومقابض المكنسات والمنتجات الخشبية بالنسبة لتونس، وهي الأكثر تقدما بين البلدين. ولكن من شأن اتباع نهجا للسياسة الصناعية أكثر تدخلا دفع الاقتصاد نحو أقصى قدر من التعقيد كالذى تحققه المعادن والآلات والمعدات والالكترونيات والمواد الكيميائية المعقدة عالية التصنيع والتعقيد. ورغم أن هذه القطاعات تدفع نحو تحقيق النمو الاقتصادي وتنويع المنتجات، إلا أنها تخلق فرص عمل في المناطق الحضرية وتتطلب عمالة مرتفعة المهارات، الأمر الذي قد يؤدي إلى سقوط العمالة منخفضة المهارات في البطالة أو اتجاهها إلى وظائف منخفضة القيمة في القطاع غيرالرسمي. لذلك، وكحل وسط يمكن وضع استراتيجية مستقبلية تأخذ في الاعتبار الأنصبة القطاعية في التجارة العالمية. وتأتى على قمة المنتجات التى يحددها لنا هذا المنهج الأدوية في قطاع الكيماويات، والمقاعد (مثل مقاعد السيارات والطائرات) في مجموعة "القطاعات الأخري عالية التصنيع"؛ والإطارات المطاطية في مجموعة المواد الكيميائية (البلاستيك والمطاط)؛ وأوعية وحاويات البلاستيك وبكر الخيط والأغلفة البلاستيكية أيضا في قسم البلاستيك والمطاط، ومصنوعات الحديد والصلب في قطاع المعادن بالنسبة لمصر. أما بالنسبة لتونس فإن المنتج الأول في السلع عالية التصنيع والتخصص والمصنعة لأغراض معينة هو الأثاث، يليه ثلاثة منتجات في البلاستيك والمطاط في الكيماويات، وأخيراً ثلاثة قطاعات للآلات., The structural transformation of countries moves them towards more sophisticated, higher-value products. Network analysis, using the Product Space Methodology (PSM), guides countries towards leading export sectors. The identification process rests on two pillars: (1) available opportunities, that is, products in the product space that the country does not yet export which are more sophisticated than its current exports; and (2) the stock of a country’s accumulated productive knowledge and the technical capabilities that, through spillovers, enable it to produce slightly more sophisticated products. The PSM points to a tradeoff between capabilities and complexity. The methodology identifies very basic future products that match the two countries’ equally basic capabilities. Top products are simple animal products, cream and yogurt, modestly sophisticated plastics, metals and minerals such as salt and sulphur for Egypt; and slightly more sophisticated products such as containers and bobbins (plastics) and broom handles and wooden products for Tunisia, which is the more advanced of the two countries. A more interventionist approach steers the economy towards maximum sophistication, thus identifying highly complex manufactured metals, machinery, equipment, electronics and chemicals. Despite pushing for economic growth and diversification, these sectors push urban job creation and require high-skill workers, with the implication that low-skilled labour may be pushed into unemployment or into low-value informal jobs. A middle ground is a forward-looking strategy that takes sectors’ shares in world trade into account. This approach identifies medicaments in the chemicals sector; seats (e.g. car and aeroplane seats) in the "other highly manufactured" sector; inflated rubber tyres in the chemicals community (plastics and rubber); containers, bobbins and packages of plastics also in the plastics and rubber section; and articles of iron and steel in the metals sector for Egypt. The top product for Tunisia is furniture in the highly manufactured and special purpose goods community, followed by three products in plastics and rubber in the chemicals community, and finally three machinery sectors., Discussion Paper

The structural transformation of countries moves them towards more sophisticated, higher-value products. Network analysis, using the Product Space Methodology (PSM), guides countries towards leading export sectors. The identification process rests on two pillars: (1) available opportunities, that is, products in the product space that the country does not yet export which are more sophisticated than its current exports; and (2) the stock of a country’s accumulated productive knowledge and the technical capabilities that, through spillovers, enable it to produce slightly more sophisticated products. The PSM points to a tradeoff between capabilities and complexity. The methodology identifies very basic future products that match the two countries’ equally basic capabilities. Top products are simple animal products, cream and yogurt, modestly sophisticated plastics, metals and minerals such as salt and sulphur for Egypt; and slightly more sophisticated products such as containers and bobbins (plastics) and broom handles and wooden products for Tunisia, which is the more advanced of the two countries. A more interventionist approach steers the economy towards maximum sophistication, thus identifying highly complex manufactured metals, machinery, equipment, electronics and chemicals. Despite pushing for economic growth and diversification, these sectors push urban job creation and require high-skill workers, with the implication that low-skilled labour may be pushed into unemployment or into low-value informal jobs. A middle ground is a forward-looking strategy that takes sectors’ shares in world trade into account. This approach identifies medicaments in the chemicals sector; seats (e.g. car and aeroplane seats) in the “other highly manufactured” sector; inflated rubber tyres in the chemicals community (plastics and rubber); containers, bobbins and packages of plastics also in the plastics and rubber section; and articles of iron and steel in the metals sector for Egypt. The top product for Tunisia is furniture in the highly manufactured and special purpose goods community, followed by three products in plastics and rubber in the chemicals community, and finally three machinery sectors., Discussion Paper