Briefs

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On solid ground

"EGYPT'S economy is strong and capable of withstanding crises," Egyptian Prime Minister Ahmed Nazif told parliament this week. "Egypt has a diverse economy which can adapt to multiple conditions," he added, referring to the strength of the Egyptian economy and its ability to face up to the ongoing global financial crisis.

Addressing the People's Assembly on Monday, Nazif highlighted that the backbone of Egypt's economy has been strengthened by reforms implemented over the past three years. These reforms were drawing upon President Hosni Mubarak's electoral programme, he said.

Nazif assured MPs that the current crisis is of temporary nature and is being fought by the world at large. Further, he stressed that there will be no going back or on economic reform. The end target for Egypt, he said, is to create jobs, invest in human resources by reforming education, health services and infrastructure projects that support growth such as utilities, transportation and energy, all this while keeping an eye on the social dimension. He stressed that subsidies are here to stay despite the financial crisis.

Growth during the past three years, Nazif said, has kept the Egyptian economy going strong, even during the current financial crisis. Egypt's economy had been growing at 7.2 per cent in fiscal year 2007/08, up from 6.8 in 2005/06. However, initial indicators show that the growth rate of 2008/09 is likely to slow to around 5.5 per cent.

Although the crisis will lead to zero growth rates in some countries, he said, in Egypt it will slow down growth, not bring it to a halt mainly due to the damage that will be suffered by exports, foreign investments, Suez Canal and tourism revenues.

He also said the Egyptian economy has succeeded in overcoming international price hikes by increasing salaries, increasing the number of subsidised products on ration cards, raising government subsidies on food items, including bread, from LE9.5 billion to LE21.5 billion, and allowing new entrants into the subsidy system.

He also reminded the audience of steps taken by the government to help the economy cope with the crisis. These mainly include procedures aimed at increasing public spending, promoting investments, support to industries and exports. In addition, some LE15 billion will be pumped into the economy during the coming six months. These will be targeted at public investments in a number of infrastructure projects.

Emerging opportunities

LEADING equity investor in emerging markets Actis announced early this month that it has successfully closed its $2.9 billion private equity fund, Actis Emerging Markets 3 (AEM3). The new facility underlines the commitment from a well-diversified group of 100 investors from across the globe to invest in emerging markets.

AEM3 will be used to build a diversified portfolio of between 30 and 40 investments across Africa, China, India, Latin America and South East Asia, typically investing a minimum of $50 million of equity capital in buyout and growth transactions.

According to Rick Phillips, partner at Actis, Egypt is a core market for Actis. "We want to invest $50 million to $250 million per deal in well-managed, high integrity businesses in Egypt," said Phillips, adding that Actis can help in situations where existing shareholders want to sell all or part of their shareholding in their business, or in situations where existing shareholders seek expansion capital for their businesses, and in this case, benefiting from Actis international network and good record of institutionalising family businesses around the world.

Paul Fletcher, senior partner at Actis, underlines the fact that an outstanding group of investors continue to recognise the opportunities for private equity investment across the emerging markets, despite the current economic situation.

"We believe that underlying economic growth remains resilient in many emerging markets. Much of this growth can be linked to businesses benefiting from consumer demand and increased investment in domestic infrastructure," said Fletcher, who added that an on-the-ground investment team and the ability to understand and manage risk in a local context help Actis identify attractive investment opportunities across those emerging markets.