Market given free hand
Representatives of international enterprises attending a roundtable discussion in Cairo were pleasantly surprised by news of the pound's floatation, writes Wael Gamal
The first Economist Business Roundtable between Egyptian government officials and representatives of international companies was held in Cairo last week. Conference Chairman Nenad Pacek of the Economist Corporate Network said the dialogue was necessary with the government because the Egyptian economy was "going through the most difficult era in its modern history".
The Egyptian side had a different perspective. "Although 2002 was a difficult year for all of us, we can claim we have a success story in Egypt," Prime Minister Atef Ebeid said.
Differences in viewpoints aside, 130 people representing top multinational and local companies from eight countries, as well as Egyptian government officials, including the prime minister and the central bank governor, brought their heads together at the roundtable.
A number of key questions were posed. What were the government's spending priorities? What plans were there for changing tariffs and tax rates? Is bad debt in the banking system reaching crisis proportions? Is privatisation of the largest four banks imminent? Where will government spending on industry be focussed? What are the government's plans for local company restructuring?
The high point of the proceedings was Ebeid's sudden announcement that Egypt had decided to float the pound, which dramatically changed the course of discussions.
"The news of a fully market-driven exchange rate for the pound was very encouraging and enthusiastically welcomed by the delegates," said Fiona Moffit, author of the Egypt Country Reports at the Economist Intelligence Unit.
Moffit said it was too early to judge the effects of the floatation on the economy, but that "taking into consideration it was the number one concern for international investors", she believes the move will be successful.
"The move is one element of a growth recipe that also includes lower interest rates and market-driven reform of the banking sector, which are all witnessing positive changes," she said.
Similarly, Anne Cobb, president of Visa International Central and Eastern Europe, the Middle East and Africa region, expressed her institution's commitment to back its member banks and partners in Egypt.
Meanwhile, the expected war on Iraq is inhibiting investors' willingness to embark on new initiatives, especially in the Middle East.
Two days earlier, Minister of State for Foreign Affairs Fayza Abul-Naga declared that the war on Iraq will cost Egypt at least $8 billion.
"Of course investors are nervous," Pacek told Al-Ahram Weekly. "But the war is not going to affect Egypt that much and everybody is expecting it to be very short."
He said Egypt was "a very stable place and what happened in the last [ruling National Democratic] party congress was recognised by the delegates as a real push for reform."
The conference did not produce recommendations or deals of any kind. Its purpose was the exchange of views between the government and representatives of international businesses.
A second roundtable is due to be held in a year's time.
