New role for CBE

CENTRAL Bank of Egypt (CBE) governor, Mahmoud Abul-Oyoun, is sounding out the market for feedback on the general framework of the CBE's proposed future monetary policy. This week, he met with businessmen and economists at the Egyptian Centre for Economic Studies, reports Niveen Wahish .

As the Unified Banking Bill will make the CBE in charge of monetary, credit and banking policies and of supervising their execution, Abul-Oyoun said a number of monetary tools that were not put to use in the past would be utilised. The goal of the bank is to achieve stability of inflation rates, safety of the banking system and contribute to achieving economic development within the framework of the general economic policy of the government. He said he believes there is great potential in the Egyptian economy that must be put to use. Plans to make the most of this potential by developing the banking system and monetary policy are underway.

While, in the past, he said, the CBE's role was "accommodative" in that it only intervened in the monetary market in order to maintain the bank reserves level, this must now change. "The Central Bank now has to play a more positive and active role, which would affect the direction of interest rates," Abul-Oyoun said. He stressed that Egypt must learn from other countries whose experience has proved the difficulty of maintaining the exchange rates and fixing interest rates while keeping foreign reserves untouched. "Thus it is important to activate a more flexible interest rate and prevent any institutional or administrative restrictions from hampering its flexibility in the long or short terms," he said.

The CBE governor said the main role of central banks worldwide has been to control inflation rates rather than foreign exchange rates. This may be an indicator of where Egypt's monetary policies are heading. However, Abul-Oyoun did not divulge how the CBE plans to deal with the drop in the value of the pound, especially in light of its continued scarcity in both banks and forex companies, and the subsequent increase in the value of the dollar on the black market.

"A new monetary policy without specifying the exchange rate policy is an incomplete monetary policy," said Ahmed Galal, ECES' executive director.

Abul-Oyoun declined comment, saying that he feared his comments might affect market directions.

Tapping into Egypt

CAIRO hosted a Franco-Egyptian seminar on Public-Private Partnership (PPP) this week, during which representatives of French multinationals looking for opportunities in Egypt's services sector met with Egyptian businessmen and officials. A partnership delegation of 25 firms and the French minister of equipment, transport, housing, tourism and the sea, Gilles de Robien, attended the two-day seminar, along with more than 350 Egyptian and French businessmen and technocrats. They discussed means of implementing France's experience in Egypt.

"Egypt is a fertile ground for a close cooperation between the public and private sectors and offers tremendous potential for the implementation of PPP projects," said Hassan Behnam, director of the French Embassy's Technical Information Office . "Among others, we can mention the potential in the environment, housing, irrigation, wastewater treatment, seaports and airports, tourism infrastructure, public services and transport sectors."

Jerome Guiraud, the managing director of the National Societe Generale Bank, adds other favourable elements. "The vast population factor and the government's commitment to the participation of the private sector in development are quite promising," he said.

Large French multinationals have been facing financial troubles recently. Vivendi, one of the most important companies participating in the seminar, has faced severe financial difficulties during the last two years. Its debts have climbed to nearly $20 billion and, last year, it racked up the largest loss in French corporate history. As a result, its share price in Paris and New York is a fifth of what it was at its peak.

Just as much as troubled French companies can benefit from Egypt's promising market, PPP projects can boost French investments in Egypt. As was shown in detail by French officials and company representatives, PPP is a way to overcome the problems of financing big projects. These problems stem from the fact that, in all countries, government financing is not enough for infrastructure projects, the French minister said at a press conference.

French direct investments in Egypt lags behind their European counterparts. France accounts for only 0.024 per cent of all foreign direct investment in Egypt and only eight per cent of European direct investments.

The French speakers demonstrated the past successes of PPPs in Egypt. The electricity plants in Suez and Port Said, built by Electricite de France (EDF) and ONYX, a company operating in the waste management field in Alexandria, was one good example.

However, the concerns raised by middle-rank Egyptian technocrats revealed some disagreement. Nearly all the Egyptian speakers used the word privatisation instead of PPP in their comments, which showed a difference in perspective on PPP projects. The argument against applying PPP to strategic services, such as water supply, was raised based on the ground that what can be applied in France cannot necessarily be applied in Egypt.