7 -13 December 2000
Issue No.511
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Al-Ahram Weekly On-line 7 -13 December 2000 Issue No.511 |
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| Published in Cairo by AL-AHRAM established in 1875 | Current issue | Previous issue | Site map | ||
Untapped sources of financing
By Fouad Sultan*
I cannot understand why the government insists on an unreal exchange rate. This policy, in my view, lies at the root of our economic problems. The situation is aggravated by the current inflation rate, which at around 3 per cent, is high relative to the rate in advanced economies. Interest rates on loans are also high -- 10 per cent compared to 5 per cent in other countries.
I mention these figures because they have had a negative impact on economic sectors most in need of investment, one of which is maritime transport.
Because of the impediments to efficient financing, Egyptian maritime companies are turning to international institutions for funding and insurance -- a move that represents an obvious loss of revenue for the national insurance sector.
This loss comes at a time when insurance payments and pension deposits are needed for the financing of large, long-term investments. Such sources of funding are more appropriate for this kind of investment than that provided by banks which tends to be offered for shorter periods.
Currently, some LE110 billion lies dormant in pension funds, when financing is desperately needed by the private sector.
Given the right direction, the insurance sector has the potential to make a positive contribution to the economy going beyond simply generating revenue for insurance companies.
Our maritime sector needs to accrue profits to pay its debts. Another problem for this sector is that Egyptian ships are currently only transporting Egyptian cargo, returning home empty.
Egypt's location should have positioned it to be a contender in international maritime competition, but numerous constraints continue to fetter its potential.
* Former CEO of Misr-Iran Bank and former Minister of Tourism Fouad Sultan speaking to the Egyptian Businessmen's Association on "Upgrading Maritime Transport."
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