Thursday,20 September, 2018
Current issue | Issue 1237, (12 - 18 March 2015 )
Thursday,20 September, 2018
Issue 1237, (12 - 18 March 2015 )

Ahram Weekly

All eyes on Egypt

The Egypt Economic Development Conference, marketed as the key to Egypt’s future, kicks off on Friday amid much anticipation

Al-Ahram Weekly

The Egypt Economic Development Conference (EEDC) brings together 2,000 Egyptian, Arab and foreign dignitaries and businessmen. Representatives from 80 countries and 23 international organisations will participate in the three-day event at the Red Sea resort of Sharm El-Sheikh.

The conference, which has been months in the making and on which many hopes for Egypt’s economic future hang, begins tomorrow evening.

Egyptian ministers and investment bankers have been touring the world to promote the conference. Most recently, Foreign Minister Sameh Shoukri was in Tunisia, Paris, Russia and China to drum up support. Both China and Russia, during his visit, promised to send high-level delegations.

Shoukri received a similar promise from Saudi Arabia. Bahraini monarch Hamad bin Eissa Al-Khalifa has confirmed he will come to Sharm El-Sheikh, where he will be joined by US Secretary of State John Kerry and Russian Minister of Foreign Affairs Sergei Lavrov. Though the conference’s focus is economic, it also offers an opportunity to discuss cooperation in the war against terror.

“We have to show political support because of two things: the crucial role Egypt should always play in the Arab world, the Middle East as a whole and in Africa, and because we realise that Egypt — despite the many reservations we share with our Egyptian friends about human rights — faces a serious challenge defeating militant radical groups,” said a Cairo-based European ambassador.

On the economic front, the conference aims “to place Egypt on the global investment map, where it has been missing for the past four years,” says Minister of Planning Ashraf Al-Arabi. He estimates that Egypt needs $60 billion in investments over the next four years to achieve a seven per cent growth rate.

The government intends to use the event to showcase investment opportunities and planned reforms to improve the investment environment, as well as to push specific projects.

Conference speakers include Mohamed Al-Erian, chief economic advisor of Allianz and chair of US President Barack Obama’s Global Development Council, and Christine Lagarde, managing director of the International Monetary Fund.

Attendees at the event will be pitched more than 35 investment projects in the oil, gas, mining, housing, tourism, information and communications and manufacturing sectors.

The government will also showcase the megaprojects it hopes will feed growth and create new job opportunities, which will require some $12 billion to $15 billion of new investment.

“The conference is not when investors will decide they are going to invest in Egypt. They will arrive with an open mind and want to hear what is on offer,” says Ahmed Galal, former finance minister and managing director of the Economic Research Forum, a regional think tank.

“If they go away with a positive impression of Egypt they are going to think seriously about investing and then come back to figure out what the prospects are.”

Given the size of its population, strong demand and a growing middle class, Egypt offers tremendous investment opportunities, says Ahmed Badreldin, partner and head of MENA at Abraaj Group, an Emirati private equity firm.

Compared to many other countries, Badreldin adds, Egypt’s investment laws make for simpler regulation and greater ease in doing business, and barriers to free trade are minimal.

The government has already amended the investment law to improve the business climate. The changes include a new system for land allocation and a new mechanism for out-of-court settlement of disputes arising between investors and the state.

In the eight-month countdown to the conference, Egypt also introduced a number of structural reforms aimed at correcting distortions in the state budget. Energy subsidies have been slashed and new taxes introduced and the pound has been left to depreciate, losing almost 6 per cent of its value.

On Tuesday the ministers of the economic group (including the ministries of international cooperation, finance, planning, trade and industry) decided to unify the income tax rate on individuals and corporations at 22.5 per cent.The decision has yet to be approved by the cabinet and ratified by the president.

This is compared to the previous maximum rate of 30 per cent for those with income above LE1million. While the move is an incentive for investors, it presents an extra burden for the majority of taxpayers.

The reforms have already been credited by Prime Minister Ibrahim Mehleb’s government for increasing growth and lowering unemployment. Jobless figures shot up to 13.4 per cent following the 2011 revolution. The latest figures, for the second quarter of the current fiscal year, show a fall to 12.9 per cent.

Improved indicators — the government is targeting 4 per cent growth for the current fiscal year — have been helped by generous Gulf aid, which has reached $20 billion since July 2013.

Major hard currency earners such as tourism and foreign direct investment have been hit hard over the last four years, and though recent statistics show an improvement in the influx of tourists, figures remain well below pre-2011 levels.

Ten million tourists generated $7.5 billion in revenue in 2014 compared to 15 million tourists and $12.5 billion in revenue in 2010.

The conference was the brainchild of the late Saudi monarch King Abdullah Bin Abdel-Aziz who saw it as a way to help Egypt to overcome its economic difficulties. Originally conceived as a donors’ conference, it was remodelled into an investors’ conference.

“I do not think Egypt needs help from other Arab economies. We need to change this mentality. We should talk about how to achieve sustainable economic growth. Egypt is the most promising economy in the world,” Talal Abu-Ghazaleh, chairman of Talal Abu-Ghazaleh Organisation, an investor in Egypt since 1978, told Al-Ahram Weekly.

He believes that Egypt now possesses a leadership that “has the vision and the will to make things happen.”

“Egypt is a growing market with a strong economy. It is the largest market in the Middle East and North Africa region. We are excited to be building up our business here,” says Amr Farghal, US food producer Kellogg’s vice president for Central and Eastern Europe, Middle East and North Africa. Kellogg recently bought local confectioner Bisco Misr for LE1 billion.

Kellogg was not deterred from its purchase by the news that Egypt’s parliamentary elections, a cornerstone of the political roadmap announced following Mohamed Morsi’s removal, have again been postponed.

The delay, says Florence Eid, CEO and chief economist at the London-based research firm Arabia Monitor, will not have a negative impact on investors because currently the country is politically stable and the investor climate is favourable.

But achieving higher growth rates is easier said than done, especially when regional unrest and domestic security challenges threaten major hard currency earners such as tourism.

More than 5,000 police and soldiers from the Second and Third Armies are being deployed alongside Special Forces to secure the conference.

According to South Sinai’s security director, General Hatem Amin, 260 surveillance cameras have been installed in the streets of the coastal city. “The cameras, which will provide 24-hour monitoring, are directly linked to the system and operations room of South Sinai Security Directorate,” says Amin.

Economists and observers see the conference not as an end in itself but as evidence that the government is committed to continuing on the path of reform, a message that will cheer the domestic and international business community.

“To think that Egypt will be different after the conference is not realistic. We should not be counting on the conference as a saviour. Nothing can save you other than what you do internally by way of reform,” says Galal.

As President Abdel-Fattah Al-Sisi said on Monday, in a speech marking Martyrs’ Day in Cairo, “Development is not just about foreign investments but for Egyptians to rely on themselves, even if we have to starve ourselves to build our country.”

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