Egypt's workers still await benefits of peace with Israel

Each morning as light breaks over this crowded city of more than 5 million people, hundreds of unemployed Egyptian peasants in turbans and loose, flowing robes gather in front of the Iraqi Embassy in the shadow of new luxury high-rise apartment buildings.

Two years after the signing of a peace treaty with Israel which their leaders told them would lead to prosperity at home, these men are seeking visas to join millions of Egyptian workers who have fled poverty by working abroad.

These workers are a living reminder that the success of President Anwar Sadat's peace policy at home may depend on whether he can deliver the economic benefits he promised that peace would bring

And popular support for his alliance with the United States also may depend on whether the Egyptian people see visible evidence of American economic aid.

On the surface, peace has brought some conspicuous signs of affluence to Cairo. Sleek new airline offices and banks, shops full of once-unavailable electronic and household goods, boutiques, new cars, and a smattering of fancy European-style restaurants now pepper Cairo's faded downtown streets.

Egypt's economy showed a record balance-of-payments surplus in 1980 as well over $1 billion, due in large part to increased foreign currency earnings sent home by its workers abroad ($2.8 billion in 1980), increased oil revenues ($2.9 billion in 1980), and to rising income from tourism, the Suez Canal, and cotton exports.

Not only did Arab threats to expel Egyptian workers or curtail their remittances not materialize after Mr. Sadat's peace actions, but also the number of Egyptian workers flooding the Arab world actually has increased.

Moreover, the cutoff of economic aid by wealthy Arab oil states has been replaced by large-scale economic aid from the West. United States economic assistance to Egypt has been averaging roughly $1 billion per year over the last six years, making the aid program for Egypt the largest that the US administers anywhere.

And Mr. Sadat's "open door" policy to attract private foreign investment to Egypt drew about $800 million in foreign investment in 1980, the bulk of it into oil exploration.

But the glitter of conspicuous consumption on Cairo streets has only whetted the expectations of Egypt's millions of poor, who are badly hit by a 30 percent inflation rate and have yet to taste economic benefits from peace. The result: President Sadat has continued a massive program of government subsidies to keep down prices of basic commodities, housing, and fuel, accompanied in 1980 by new price freezes on meat, dairy products, and other food items.

These subsidies drain the government's budget -- they will cost an estimated

They make rational economic planning almost impossible. But the Egyptian leader does not dare cancel them. He is haunted by memories of the food riots of January 1977 --the closest the Sadat regime has come to being toppled -- when thousands took to the streets after bread subsidies were lifted under pressure from the International Monetary Fund.

Mr. Sadat's hopes for placating the poor and escaping this dilemma are based on achieving agricultural self-sufficiency, as well as on rebuilding woefully deteriorated infrastructure and solving Egypt's critical housing shortage. But Western economic experts here believe his emphasis on massive land reclamation schemes is unrealistic and uneconomical.

They also note that any progress toward agricultural self-sufficiency requires tackling head-on Egypt's 2.9 percent annual birthdate, a task so far hindered by government sensitivity to orthodox Muslim religious attitudes.

Analysts in Egypt believe that Egypt's long-term development prospects will depend heavily on the degree to which egypt can become a manufactured goods exporter and stem the decline of industrial exports that has continued since 1975. Sadat has tried to push Egypt away from massive reliance on inefficient public-sector industry toward a mixed economy. He has sought to attract foreign investors into joint ventures and, through new foreign-currency regulations, to entice Egyptian workers to invest their earnings at home.

But many Egyptians have preferred to use their foreign-exchange holdings to import luxury goods for resale or to invest in building luxury housing. "Import-export or speculation in foreign currency bring the fastest returns ," explained one Egyptian businessmen.