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Al-Ahram Weekly 18 - 24 February 1999 Issue No. 417 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 18 - 24 February 1999 Issue No. 417
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Features Special Travel Living Sports People Time Out Chronicles Cartoons Letters Prescriptions for progress
By Sherine NasrThe National Bank of Egypt (NBE) recently organised a seminar that addressed, among other topics, means for Egypt's free-market economy to survive through turmoil such as the recent Southeast Asian one, the euro's role in the coming phase and the challenges national banks face in a fast-oriented, open-market atmosphere.
"Egypt, Chile and Argentina were the only three developing countries that were not affected by the disturbances in the Southeast Asian economies," said Mahmoud Abdel-Aziz, chairman of NBE and head of the Egyptian Federation of Banks. "Moreover, Egypt is among five countries classified by international financial establishments as being promising investment markets. That is why we have to act quickly and efficiently if we want to secure a fair share of the international market," he added.
Participants were in two minds on whether the government should have a role to play in supporting or controlling the Stock Exchange. Mohamed El-Haj, chief executive of Horizon Investment Services, strongly objected to the idea. He recalled to the time when US President Bill Clinton suggested that the government may interfere in the stock market. "'Be prepared for a financial disaster' was the answer he got," said El-Haj.
Yet, Abdel-Aziz argued that it is unfair to compare Egypt's emerging stock market with the United States' sophisticated one. "They have very strong tools of supervision that we still lack," said Abdel-Aziz, adding that the Central Bank and the Capital Market Authority have a very important role to play. "The type of rumours that market players in Egypt may spread makes government interference imperative," he said. "Such is the case in developing countries."
In an attempt to upgrade Egyptian banks in order to cope with an ever-growing economy, Abdel-Aziz announced that the NBE will spend LE200 million to connect the networks of different banks. "By doing so, cashing money will take seconds instead of hours," said Abdel-Aziz, adding that other measures will also be taken to improve banks' performance.
Jim Silvestee, a senior banker, believes that upgraded banking services is one of the pillars of a successful economy. He wondered if the current processing system insures banks against repetitive disasters. "The answer to this question may be, for some banks, very doubtful," he said.
Silvestee said that banks will face great challenges in the next century. "For one, the business is a great deal faster. Currency conversion to the euro, new business needs such as global coverage for clients and higher levels of automation are among the factors that will determine which banks are to survive," he said.
Paul Arthur from the Thomson Corporation -- a Canadian-based company with large scale activities in the Americas -- underlined that risk management is another clue to success in business. "How to identify a risk, how to measure it and how to manage it are all very important tools to prevent financial disaster," he said. According to Arthur, lack of risk management cost a number of European banks $1.8 billion and the Union Bank of Switzerland $700 million in losses last year.
As for the expected domination of the euro, Yves Perreard, a partner of Perreard Investment, one of the strongest Paris-based financial establishments, believes that the euro is steadily moving ahead to conquer the international market. "Ninety per cent of the world's trade is carried out by the 11 euro countries," said Perreard.
Speaking of the possible reserve transfers into the euro, he said that the estimated adjustments could lead to euro purchases of up to $180 billion within the coming two years.
According to Perreard, the biggest demand for the euro comes from Central Asia. "Emerging Asian countries with their high foreign reserves have the highest potential for euro adjustment," he said.
