05/29/2012 11:13 am ET Updated Jul 29, 2012

Egypt's New President Must Hit the Ground Running or Face Tahrir

Egypt's new president will have to deliver -- and fast -- on a number of pressing economic issues. For one, he faces the mammoth task of creating jobs for the 3.38 million unemployed, 77 percent of whom are between the ages of 15 and 29, according to official government data. He'll also have to woo back foreign investors and boost economic growth, but this time around in a way that is inclusive and socially just.

Egypt's unemployment problem is rooted in the so-called private sector-led growth policies espoused by the former regime. Market based economic policies were applied within a vacuum of transparency and accountability in a politically corrupt system, resulting in years of unbalanced growth. Yes, GDP growth rates topped 7 percent in the heady days before the global financial crisis, but you wouldn't know it walking around the many deprived areas of the country because that growth didn't 'trickle down' as many predicted.

The boom years in Egypt saw a heavy investment focus on capital intensive industries like banking and finance that don't create nearly enough jobs (or the right kind of jobs) and a serious neglect of labor-intensive industries like agriculture, agri-business and food production. Also, the appalling public education system meant that graduates weren't qualified for the jobs available and even if they had diplomas, were forced into part-time or temporary work resulting in what is known as 'under-employment.'

The challenge today is to refocus the entire economy towards labor intensive sectors that both create jobs and provide much needed services to the 82 million inhabitants. Attracting investment to large-scale infrastructure and construction projects and supporting job generating sectors are ways of doing that in the medium and long term. More immediately, though, this can be done through basic service and public works projects like upgrading sanitation and water networks, paving rural roads and protecting agricultural irrigation canals.

The Social Fund for Development's raison d'etre is job creation and its director, Ghada Waly, explained their two pronged approach when we met in her Cairo office: creating immediate jobs through public service projects in the poorest governorates and also funding medium, small and micro enterprises, which represent between 70 and 80 percent of economic activity and jobs in Egypt.

"We're talking about 2 billion Egyptian pounds ($333m) currently available in our budget for small and micro projects in addition to 60 million Egyptian pounds ($10m) for basic infrastructure projects," Waly said. "That's money we already have available to us right now."

The fund is also currently in talks with the World Bank to receive a $200 million loan to fund labor intensive infrastructure projects in rural areas and, in order to ensure the money directly targets the millions of unemployed youths, the project stipulates any new hires be under 29 years old.

Although the jobs created by this type of public works projects are short term and temporary they are well suited to Egypt's current dilemma because they create immediate jobs (a project can be up and running within a month) and also provide a daily wage with physical cash in hand to millions of unskilled laborers who would otherwise be unable to find work.

That daily cash wage gets injected directly into the economy and boosts domestic demand -- a key component of growth in Egypt -- because it increases local consumption of goods and services and, experts say, the positive effects would be swiftly seen in the local economy.

Over the medium and long term, it is the private sector that is expected to step up and create more permanent and sustainable jobs. The key is to ensure that the private sector creates the kinds of jobs that suit Egypt's labor force and its economic make up.

This is essential not only to tackle the current rate of unemployment (12.6 percent, officially ) but also because nearly everyone I spoke to agreed that the bloated and inefficient public sector is in dire need of serious restructuring, which would undoubtedly lead to massive job losses, and experts are looking to the private sector to plug the hole.

The international business community touts private-sector-led growth as the key to economic prosperity and that was certainly the theme at a recent meeting of the European Bank for Reconstruction and Development (EBRD) I attended in London this month. The bank is tasked with funneling a chunk of the so-called Arab Spring investments into the region and is expanding its operations in Egypt with a mandate to support the private sector through lending and technical assistance to small and medium enterprises, or SMEs, seen as key to job creation.

Despite rampant skepticism of international financing institutions in Egypt after the IMF's much reviled 'structural adjustment program' and rising populism after the revolution, the Bank's newly appointed chief for the Middle East region told me they are 'strongly committed' to inclusive growth and 'absolutely convinced' they will succeed because they have clear rules about who benefits from their support.

"We have a very clear definition of what is an SME (small and medium enterprise) and which sectors we want to finance," Hildegard Gacek of the EBRD told me. "We are strictly obeying these rules and we will do a very focused follow up. We would not continue working with banks that are not following rules. This is the best tool, better control."

Still some, like Dr. Amr Adly, head of the economic justice unit at the human rights group Egyptian Initiative for Personal Rights (EIPR), is unconvinced. He is concerned that liberal economic policies will once again be applied in a political system devoid of checks and balances or accountability and, as a result, will create the same unbalanced growth of the Mubarak regime that enriched a few and impoverished millions.

"There is a lot of talk inside the parliament and in the government about fighting corruption, but all this talk is just propaganda because we haven't seen any legislation," Adly told me, citing the lack of proposed legislation on conflicts of interest between business and government or any regulation overseeing public tenders for government contracts.

"The most important thing is that the political system, which is currently taking shape, reflects the interests of the different segments of society. We don't have that right now," Adly said.

He wants to see a wide ranging national dialogue that includes all segments of society so "everyone can have a say in how to increase productivity and distribute resources."

Talking about liberal economic policies is a touchy subject in today's Egypt, partly due to the hangover from the Mubarak years, but also amid a wave of populist rhetoric which has only increased in the wake of the presidential race. Many I spoke to say the current narrative equating neo-liberal economic policies with corruption and injustice is simplistic and lacks nuance.

According to Dr. Magda Kandil, head of the Egyptian Centre for Economic Studies (ECES), liberal economic policies aren't the problem in and of themselves. The problem, she explains, is that they were not applied in an inclusive way, so only a few reaped the benefits, the economy didn't create enough jobs and the vast sector of small and medium businesses didn't get a fair shot.

Kandil believes it is important to strike a balance between market-based policies and social justice.

"There is a middle ground," she told me. "We need a free market economy that supports the private sector but in an inclusive way so that the wide range of the private that didn't get its chance before the revolution can be included and supported."

Regardless of who wins the election, the task ahead of Egypt's next president is gargantuan. Egyptians will want to see progress and they will want to see it fast, or it will not be long before they return to Tahrir.