Egypt The Future
The Egypt Economic Development Conference (EEDC) won’t simply provide Egypt with economic impetus but most importantly it will reposition it at its leading status on the regional level.
Held between the 13 and 15 of March in the Red Sea resort of Sharm El-Sheikh, hopes are elevated that the conference will generate critically needed investments to restore Egypt’s economy, negatively affected by four years of political unrest.
According to Prime Minister Ibrahim Mehleb, the summit aims to support the development of the Egyptian economy, adding, “Egypt is moving steadily toward economic recovery under its roadmap to improve the business climate.”
The goal is to bolster investor confidence in Egypt’s economy and establish the implementation of authentic, extensive and comprehensive economic and social reforms.
He elaborated saying there will be a focus on three main points as the summit date approached.
The first is proper summit organization and consultation with international and local companies specialized in conference organization.
As the first step on the reform roadmap, it will also include cooperation with international institutions and partners.
The second comprises of resolving investment problems and overseeing investor rights and the state.
The third is revising all legislation through a higher committee, most importantly enacting laws which will attract investment, launch more companies, fight corruption, revive the “one-stop shop” investment window, combat bureaucracy and develop administrative reforms and increase transparency.
Investment Minister Ashraf Salman states that the economic summit is a milestone in the economic reform programs targeting the reduction of the deficit over the next five years. Restructuring energy subsidies, amendments to the value-added tax, and plans to increase the tax base are initiatives that have already been announced by the government.
The government is also discussing IMF initiatives.
Mehleb emphasized that the government reforms underway are not just limited to attracting investment, but shall also support social security networks. Expanding health care centers and developing education services are measures which will assist in furthering the human development index to ensure improved life satisfaction for Egyptian citizens.
Reducing bureaucracy and ensuring investor rights have already been addressed by Egypt through various initiatives, including developing new bids and investment regulatory laws as well as the formation of a commercial dispute rapid resolution committee.
The success and both number and level of attendees at the Egypt Economic Development Conference is a direct vote of confidence and obvious support for the political and economic future role of the country post 30th June.
Egypt’s foreign policy took center stage when then foreign minister Nabil Fahmi delineated its objectives which were to depict the accurate and appropriate picture of Egypt to the world community as well as repositioning Egypt’s role in the Arab world and international community.
Egypt’s economic requirements and political objectives are closely related to its foreign policy thus a diversification of its strategic economic relationships is a must, Fahmi added.
Representatives from 80 countries and 23 international organizations attended the EEDC according to the Foreign Ministry, reflecting the tremendous efforts exerted to ensure the conference delivers the necessary economic drive and demonstrate how Egypt is heading in the right direction on both economically and politically President Abdel-Fattah Al-Sisi and government officials went to extreme measures to guarantee the largest possible participation, foreign ministry spokesman Badr Abdel-Ati stressed.
Abdel-Ati added “The wide-scale participation also indicates the determination to take advantage of investment opportunities in Egypt, in light of the important measures taken by the government during the last period to resolve the problems of investors and restore confidence in Egypt’s economy, including the government’s approval of the unified investment law.”
Former assistant to the foreign minister Hussein Haridi said “The high level of participation, including US Secretary of State John Kerry, is a strong indication that Egypt is on the right track. It also gives a positive signal to the government. The participation of some 2,000 private companies is another positive sign.”
Both President Abdel-Fattah Al-Sisi and Foreign Minister Sameh Shoukri exerted tremendous efforts and amplified the importance of the conference for Egypt and the region in all their meetings with high-level officials and heads of state, extending and renewing invitations to the conference with Shoukri’s senior assistants visiting ambassadors in Cairo to ensure their countries participated at high levels in the EEDC.
Participation included a number of international and regional organizations including officials from the World Economic Forum in Davos, royalty, heads of state and government, ministers, deputy ministers, senior officials and ambassadors to Cairo.
Not only that but it included the World Bank, International Monetary Fund, European Investment Bank, European Bank for Reconstruction and Development, European Commission, the Arab League, African Development Bank, COMESA and the Union for the Mediterranean, United Nations Development Program, International Telecommunication Union, United Nations Industrial Development Organization, Kuwaiti Development Fund, Arab Monetary Fund and Arab Fund for Development.
The substantial participation opens many avenues and possibilities such as the introduction of new technologies as well as improving participation, cooperation and investment in the conventional fields.
Sir Martin Sorrell, chief executive of WPP, the world’s biggest advertising company suggested the “Egypt the Future” conference become an annual event. According to Sorrell, it is important to have a “focal point” and to track development.
“It is very important for there to be a focal point for industrial development and investment and this could very well become a regular event,” he said.
The unprecedented conference scale for Egypt aimed to assure potential investors that the rewards of investing in Egypt, the Arab world’s most populous country, outweigh the risks. It shows that the country emerged from four years of political chaos and stagnation following the 2011 uprising which ousted Egypt’s long standing president, Hosni Mubarak.
Sorrel added,“This year continues to be tough, so you look at a country with 90 million people that have good education rates, good consumer demographics and good GDP growth.That is something companies will find very attractive. It is rare to find opportunities of this size from a fast growth market.”
WPP was involved in the event organization through its stake in Richard Attias & Associates.
A few highlights from the conference are that Egypt needs $300 billion to economically recuperate, the UAE is to build Egypt’s “New Cairo”, energy deals are set to charge up Egypt’s economy and Mashreq are among the would-be buyers interestedin Citigroup’s Egyptian consumer banking unit.
Luring foreign investment to Egypt highly depends on whether investors are willing to wager they will procure funds out of Egypt quickly amid a scarcity of hard currencies and capital controls.
What has rendered foreign investors wary of investing in the country, particularly in the stock and bondmarkets, are the controls implemented in 2011 preventing Egyptians from taking money out of the country as well as gridlocks in the past couple of years which delayed foreign investors from getting their capital out.
As with many emerging market currencies, the Egyptian pound has been victim of the strong dollar in recent years.
What has also deterred foreign investment are the difficulties surrounding the conversion of the pound, though in recent months Egypt’s central bank attempted to quell the black market in foreign currencies through devaluation of the Egyptian pound against the dollar. Up till now, however, it has not resulted in a substantial influx of cash.
The country’s foreign reserves stand at about $15 billion, less than half of what they were before the 2011 political protests.
The chaos that followed in the ensuing three years has taken its toll on the economy.
Factories have shut down and unemployment levels have risen sharply. Hence the Egyptian pound lost more than 35 percent of its value since 2011, with $1 retrieving 7.63 pounds.
According to the biggest Egyptian investment bank, EFG Hermes, as of January, foreign currency assets at Egyptian banks have dropped to a decade low of $5.4 billion.
The devaluation seems not to concern most investors as the dollar has risen against all major currencies.
Though parallel market activity has been taken away, however, due to the scarcity of dollars there hasn’t been supply in the banking market and there are still companies facing problems sourcing dollars.
“The problem that we have as investors is the uncertainty. What would inspire me with confidence is a normal market for currencies,” said Sherif Salem, portfolio manager at Invest AD, an Abu Dhabi-based asset manager.
As for Dubai-based head of investment for Middle Eastern and North African Equity at Franklin Templeton Investments, Salah Shamma, “Liquidity has been improving in the banking sector, although still not at a pace to clear the backlog of companies. As such, we will be eyeing any financial support announcements from the GCC. Such funds are expected to support the central bank of Egypt’s ability to inject fresh liquidity into the market.”
Egypt’s investment minister, Ashraf Salman, declared he believes investments will exceed $8bn this year in Egypt.
Undoubtedly economic targets will take time to yield results, yet improving political and economic relations will boost Egypt’s regional role and in the international community which most certainly will reap positive results in the near future.