Sunday,23 September, 2018
Current issue | Issue 1230, (22 - 28 January 2015)
Sunday,23 September, 2018
Issue 1230, (22 - 28 January 2015)

Ahram Weekly

Promoting Egypt

President Abdel-Fattah Al-Sisi is presenting Egypt’s investment case to the international community in advance of the March conference, reports Sherine Abdel-Razek

Economy
Economy
Al-Ahram Weekly

President Abdel-Fattah Al-Sisi’s January to-do list included visiting Kuwait and the UAE, followed by a short stop in Riyadh before heading to Davos in Switzerland to attend the World Economic Forum.

At the end of the month he will travel to Ethiopia. All of this must be accomplished as essential preparation for the international conference on Egypt’s economy planned for March.

“Al-Sisi and his administration consider the conference to be the deadline they have to work towards in order to present Egypt as an appealing investment destination,” said Gamal Abdel-Gawad, a political science professor and former head of the Al-Ahram Centre for Political and Strategic Studies.

Preparations for the March gathering have been going on since last July, when King Abdullah of Saudi Arabia called for a donor’s conference to support Egypt as soon as Al-Sisi was elected president.

The idea has been to complete as many economic reforms as possible in order to convince international donors and rating agencies that the country is dealing with the budget deficit, the overvalued Egyptian pound and the bureaucracy that has been crippling investment potential.

Egypt has slashed the energy subsidies that used to eat up 20 per cent of the budget and rationalised food subsidies by introducing a new smart-card system for distributing bread and more than 20 other commodities.

A new unified investment law will be ready before the conference, and the Central Bank has been acting to devalue the pound, starting on Sunday.

However, the decline in international oil prices by more than 40 per cent and the escalation of the confrontation with radical Islamist movements following the Charlie Hebdo attack this month in Paris have cast a shadow over the conference.

The developments have led to the visits to Egypt’s economic partners in the Gulf and to Davos, where the World Economic Forum brings together the world’s chief economists and heads of state, according to Abdel-Gawad.

While falling oil prices have reduced the cost of the energy subsidies bill in Egypt, they have also tipped the budgets of oil-producing Gulf countries into deficit, thus reducing potential investment in Egypt by the governments and sovereign funds of the three Gulf countries of Kuwait, Saudi Arabia and the UAE.

The three countries have together offered Egypt almost $20 billion since the ouster of former president Mohamed Morsi in mid-2013. This has included soft loans, bank deposits and oil shipments to ease the country’s energy crisis.

Cumulative international efforts to combat the Islamic State (IS) armed Islamist movement have also caused the region as a whole to be seen as risky, possibly impacting on the March conference.

Al-Sisi’s visits to the Gulf have focused on meeting with businessmen, the president wanting to meet directly with investors in order to convince them that Egypt is serious about reform.

“He met with businessmen, but no deals were reached as it is not the role of the president to seal deals. He presented his case, pledged to guard investor interests, and is now waiting to see results during the conference,” Omar Al-Sheneety, managing director at Multiples Group, a regional private equity firm, said.

There is a belief that the visit to Kuwait was not as successful as that to the UAE, however. “In Kuwait, unlike in Saudi Arabia and the UAE, the sovereign funds where the government invests its money mainly focuses on investment in Western economies, leaving little surplus to invest in Arab countries,” Al-Sheneety said.

As for private, well-known family businesses in Kuwait, many have been investing in Egypt for some time and have encountered problems, including legal disputes, a fact that might make them reluctant to invest more funds, at least until outstanding cases are resolved. Kuwaiti investors threatened to resort to international arbitration against Egypt in November last year over a dispute about 26,000 acres of land purchased in 2002.

In the UAE, Al-Sisi gave a speech to the World Future Energy Summit (WEFS) in Abu Dhabi, where he revealed Egypt’s plans to rely more on renewable energy as a means to bridge its energy supply deficit.

The plans would see renewable energy sources make up 20 per cent of Egypt’s energy production by 2020, compared to only one per cent currently. The president said that the scheme includes generation, over the next three years, of 4,300 Megawatts of electricity by power plants using solar and wind energy.

“The energy problem has been worrying investors willing to invest in Egypt, which is why Al-Sisi is trying to calm investors’ fears in this regard before the conference,” Al-Sheneety said.

Following his visit to Saudi Arabia, Al-Sisi will head to Davos, an essential port of call for the presentation of Egypt’s economic plans before the March conference.

It is the first time for an Egyptian head of state to attend the economic gathering, and is a positive step, according to Al-Sheneety. “Davos is the podium where the new leaders of different countries go to present themselves. This was the case with Tunisian leader Rashid Al-Ghanoushi in 2012.”

Also, the timing of the forum could see attendees more receptive to the Egyptian take on the economic and political developments as it comes in the wake of the international community’s expression of solidarity in the global fight against terrorism, a goal that was high on Al-Sisi’s agenda after his election. “Now they are adopting his agenda,” said Abdel-Gawad.

The high expectations surrounding the March conference, however, are a concern for Al-Sheneety. “The hopes we are putting on the conference may be exaggerated, especially after the decline in oil prices and the increase in risk in the region as a whole due to the war on terrorism,” he said.

“While the government initially said it was targeting investments of $100 billion, I believe that if we get pledges of $30 billion to $35 billion of investment, to be injected within the next four years, that would already be great,” Al-Sheneety said.

Foreign direct investment inflows during the first quarter of the current fiscal year reached $1.8 billion, or almost $7 billion over the entire year.

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