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Al-Ahram Weekly 7 - 13 October 1999 Issue No. 450 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 7 - 13 October 1999 Issue No. 450
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Interview Features Profile Travel Living Sports People Time Out Chronicles Cartoons Letters Private sector seeks IFC money
By Niveen WahishAn increasing number of Egyptian private projects are seeking financing from the International Finance Corporation (IFC), the private sector arm of the World Bank. Foremost among these projects is the construction of a container port in the new industrial zone in East Port Said estimated to cost $175 million. Another project in the pipeline is a factory for the extraction of oil and production of fodder from soya beans.
The IFC provides long-term loans and makes equity investments. The demand for IFC financing has resulted in more IFC funds being directed to Egyptian projects. During the last fiscal year, the IFC approved more than $500 million worth of investments in 18 Egyptian companies, compared to around $300 million the year before. Almost two/fifth of the $500 million went into financing the country's first private power generating plant in Sidi Krier on Egypt's north coast.
Other projects which the IFC has approved include equity investment in the Commercial International Life Insurance Company and financing for HC Securities and Investment (HCSI), an Egyptian investment bank. Morgan Stanley Middle East Incorporated, an affiliate of Morgan Stanley-Dean Witter, one of the largest investment banks in the US, is currently a 30 per cent shareholder and strategic partner in HCSI. This investment is part of the IFC's policy to encourage specialised financial institutions, to develop the stock market and support the Egyptian government's efforts to encourage greater private sector participation in the banking and insurance sector.
The IFC is also offering a $6.7 million loan to a company in the dairy production business. This project is expected to generate 1,640 jobs.
The increased demand for IFC financing in Egypt may be attributed to several factors. As a result of the improved economy and the investment grade given to Egypt by international rating companies, as well as low interest rates, there are more private sector projects in Egypt than at any previous time, said Sami Haddad, regional IFC representative in the Middle East. "This has led to a situation in which the local banks cannot meet all the demands for financing these projects," Haddad said. The IFC's financing helps ease the pressure on Egyptian banks which lately have been suffering from a shortage of liquidity, he added. "It is providing an alternative source of financing for the private sector."
This is not the only way the IFC is contributing to easing the liquidity crunch. For the first time it is also studying the possibility of offering Egyptian banks long-term loans so they will have the funds needed to finance their clients' projects.
IFC financing has changed not only in magnitude but also in the types of projects it supports. At the same time, the nature of Egyptian projects has changed, Haddad pointed out. For example, "infrastructure was not handled by the private sector in Egypt before."
This may be because, as the IFC's 1999 Annual Report put it, "demands on infrastructure, strained by rapid population growth and urbanisation, are considerable." The report projects that "More than $350 billion in construction funds will be needed in the Middle East and North Africa over the next 10 years. With treasuries stretched thin, some countries have begun to open their economies to private investment in infrastructure."
In the Middle East and North Africa, the IFC is focusing on financial sector development, the infrastructure and industries that create jobs and generate foreign exchange, the latest annual report said. In developing countries worldwide, IFC investments in the financial sector were as high as 40 percent last year, reflecting the important and fundamental role to be played by sound domestic institutions, such as stock markets or banks, in providing capital for local companies to start up and grow. Fourteen per cent of approved IFC investments went to infrastructure projects, whether telecommunications or ports, in fiscal year 1998/1999.
