8 - 14 February 2001
Issue No.520
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Al-Ahram Weekly On-line 8 - 14 February 2001 Issue No.520 |
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All eyes on the pound
WITH the convening of a meeting of the cabinet's economic group on Sunday by President Hosni Mubarak to discuss the new foreign exchange regulations, exchange policy continues to capture the limelight. Later that same day members of the foreign exchange division of the Federation of Chambers of Commerce met to discuss the implications of the new regime for their activities.Participants in the division's meeting expressed reservations about the requirement that foreign exchange companies increase their capital to a minimum of LE10 million -- ten times the amount required previously -- within the next three months. They resolved to request a meeting with prime minister Atef Ebied to discuss the possibility of amending this stipulation which they characterised as "impossible to apply."
Bilal Khalil, deputy chairman of the division, said that none of the currently operating exchange companies has the liquidity to increase its capital tenfold in three months.
While announcing these regulations, Minister of Economy and External Trade Youssef Boutros Ghali suggested that moneychangers merge so as to be able to comply with the new capital requirements.
Khalil said meeting participants were less than enthusiastic about this suggestion. Members of the foreign exchange division said that mergers are still uncommon in Egypt and that the processes for forming a board and selecting a chairman would be extremely difficult.
In recent months, members of the division were the target of accusations by state officials who claimed that exchange bureaus, through speculating on the value of the pound were responsible for its decline against the dollar. Just before the new regulations were implemented the dollar was traded at LE4.25, representing the lowest level the pound has reached since Egypt adopted structural reform measures in the early '90s.
Ghali referred to this decline in the value of the pound at exchange bureaus asserting that there were no developments in either the political or economic realms that justify such a sharp increase in the exchange rate in such a brief period of time.
Since the new regulations were put into effect on 30 January, the pound has stabilised at LE3.85. This rate, which was set by the Central Bank of Egypt, may fluctuate within a margin of 2 per cent.
Egypt maintained an exchange rate of LE3.4 to the dollar for the past nine years. During this period the Ministry of Economy intervened to stabilise the rate by injecting dollars into the market. This policy worked well until the level of foreign reserves declined from $20 billion in early 1998 to $14.4 billion last October
Cutting through red tape
MOHAMED El-Ghamrawi, Head of the General Authority for Investment and Free Zones (GAFI) has announced that the authority intends to establish "investors' service bureaus" in the industrial zones. These bureaus will be staffed by officials representing different government authorities such as taxes and customs, whose role will be to facilitate the issuing of permits needed by investors for their operations. The bureaus will be given full authority to implement decisions, El-Ghamrawi said during a meeting last week with the Al-Obour Investors' Association.He said that the government is looking into reducing the number of permits needed for industrial projects.
However, during the meeting with El-Ghamrawi several investors, while welcoming these announcements, noted that there are other problems which need to be tackled. These include the lack of direct public transportation connecting the zones, and Al-Obour in particular, with population centres. This, investors said, is one of the reasons Al-Obour has not developed to its full potential.
Some 24,000 workers come to Al-Obour each day from the governorates of Sharqiya and Qalyoubiya as well as Cairo. Transportation costs are borne by the investors, adding to their financial burdens. "I spent LE1,280,000 in transportation, including fuel and maintenance, during the past seven years," said Ali Kamel, owner of a textiles factory.
At present, El-Obour, established in the early '90s, hosts some 318 projects with an estimated capital of LE1.4 billion.
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