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Egypt's "Economic Apartheid" By The Numbers

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Why are so many ordinary Egyptians ready to put their lives on the line for reform?

Hernando de Soto, president of the Institute for Liberty and Democracy, has laid out the economic figures that can help answer that question.

In a Wall Street Journal essay published today , he tells of a report commissioned in 1997, when the Egyptian government, with funding from U.S. AID, hired de Soto's agency to "get the numbers on how many Egyptians were marginalized and how much of the economy operated 'extralegally'—that is, without the protections of property rights or access to normal business tools, such as credit, that allow businesses to expand and prosper."

The ultimate goal, he says, "was to remove the legal impediments holding back people and their businesses."

As is obvious by today's news, the recommended action plan that grew out of de Soto's agency's research was never introduced. "Hidden forces of the status quo blocked crucial elements of the reforms," writes de Soto. Here's some of what the agency reported to the Egyptian government in 2004:

• Egypt's underground economy was the nation's biggest employer. The legal private sector employed 6.8 million people and the public sector employed 5.9 million, while 9.6 million people worked in the extralegal sector.

• As far as real estate is concerned, 92% of Egyptians hold their property without normal legal title.

• We estimated the value of all these extralegal businesses and property, rural as well as urban, to be $248 billion—30 times greater than the market value of the companies registered on the Cairo Stock Exchange and 55 times greater than the value of foreign direct investment in Egypt since Napoleon invaded—including the financing of the Suez Canal and the Aswan Dam. (Those same extralegal assets would be worth more than $400 billion in today's dollars.)

Read the full piece, here.

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