Briefs

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MEDA support

FIGURES released by the European Commission (EC) reveal that EU aid to its Mediterranean partners, the bulk allocated within the framework of the MEDA programme, will exceed 850 million euros by the end of this year.

"Nowhere in the world do we have a better record. Our assistance to our Mediterranean partners is very substantial, underlining the importance we attach to our relationship with these neighbours," said Benita Ferrero-Waldner, EU Commissioner for External Relations and European Neighbourhood Policy.

Egypt, a major beneficiary of the MEDA programme, received 110 million euros in 2005 of which 80 million is earmarked for supporting institutional and legal reform of the water sector and 25 million to upgrading the institutional capacity of the Egyptian administration in dealing with all aspects of the Egypt-EU Association Agreement.

Total funding to Egypt under MEDA since 2000 is now in excess of 463 million euros.

The figures were released against the backdrop of the 10th anniversary celebrations of the Barcelona Process and the Euro-Mediterranean partnership, launched in 1995.

Investment growth

MINISTER of Investment Mahmoud Mohieddin predicted this week that foreign direct investment in Egypt will increase by between 20 to 30 per cent in the next 12 months. The estimated increase, he added, excludes portfolio investments and investments in the oil sector.

Direct and indirect investment in Egypt reached $4 billion last year (2004/05). Of that figure, Mohieddin revealed, $3.9 billion was direct and $800 million indirect investment. That represented a $3 billion increase over 2003/ 04.

Mohieddin argued that economic and political reform is now beginning to show results, with growth exceeding five per cent. Figures for new companies reflected this upward trend. Between July 2004 and June 2005 some 5,880 new companies were registered compared with 2,608 during the same period the previous year.

Garment industry takes off

EGYPTIAN exports of ready-made clothes increased by 21 per cent over the last 12 months to reach $1billion compared with $800 million last year.

Further growth in the export of ready-made garments has been forecast. A report issued by the Export Council for Ready-Made Garments predicted that the total value of exports will increase by 60 per cent increase in the next year to reach $1.6 billion. The report attributes the growth to deals made within the framework of the Qualified Industrial Zones (QIZ) protocol as well as new investor provisions.

Since the application of the QIZ agreement in February 2005 exports to the US of the 80 factories operating within the zone have increased significantly, said the report. It added that the QIZ had had a significant impact on investment in the ready-made garments sector. Six foreign companies, encouraged by the application of the QIZ, are establishing new factories for the ready-made garments feeding industries. In addition 13 of the foreign ready- made garment companies operating in Egypt have expanded their operations to capitalise on the benefits provided by the QIZ protocol.

Manufacturing within the framework of QIZ enables companies to export duty free to the US.

The Ministry of Foreign Trade and Industry is seeking to increase exports of ready-made garments to $3.5 billion within four years.

Banking targets

THE BUSINESS Studies and Analysis Centre of the American Chamber of Commerce in Egypt (AmCham) has said the September 2004 five-year plan for banking sector reform is being effectively implemented and is expected to increase the competitiveness of the banking sector.

A recent report issued by AmCham identified opportunities for growth, innovation and development in Egypt's relatively underdeveloped banking system. Although Egypt has a population of 72 million the report showed there are only seven to eight million bank accounts. The figures for credit card holders are even lower, with only 1.5 million Egyptians opting for plastic. The report points out the potential for a range of products and services aimed at small and medium enterprises (SMEs), retail banking, private banking, investment banking and project finance. In view of the market's long-term potential the report also predicts foreign banks will continue to show interest in gaining a foothold in Egypt.

The retail market, says the report, offers substantial opportunities for banks to attract millions of new deposits at relatively little cost. The market is currently underserved, particularly in the lower income segment.

While the report sees ongoing reforms in the regulatory structure of the Egyptian economy as favourable to the growth and development of the banking sector it also identifies opportunities abroad, with local banks yet to explore the potential offered by regional markets such as Sudan and Libya. Current modest levels of Arab banking assets could, the report says, be consolidated by mergers. At the moment total Arab banking assets are less than the capital of CitiBank.

The report did, however, warn that restrictions on foreign entry to the local banking sector have led to inflated valuations of local banks, a major obstacle to foreign acquisition.

Continued public sector domination of the market, said the report, will hamper reform and the pressure to improve efficiency and financial performance will remain low.

Public sector banks continue to dominate the local market with the seven state-owned banks accounting for 59.9 per cent of all deposits and 61.3 per cent of loans.

Although the report assumes that public sector dominance will continue for some time, "new products should be developed quickly", a process that continued economic growth could kick-start.

The report cites a Business Monitor International (BMI) estimate of average annual growth in assets, loans and deposits of 10 per cent during the period 2004 to 2007.