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Egypt's economic reforms to increase efficiency, transparency and accountability

Interview - February 20, 2015

Though the Egypt Economic Development Conference is garnering a much talked-about "buzz" in its lead-up, the numbers speak for themselves.  Minister of Investment, H.E. Minister Ashraf Salman, cultivates an improved investment climate through the formation of a one-stop-shop, investment promotion agency and amended investment law. 


There is a sense of optimism regarding Egypt’s future. How optimistic are you and how prepared do you think Egypt is to cooperate with the foreign investment that you’re planning to receive?

I am optimistic because I have confidence in our people; in our youth and in the large Egyptian Population of 90 million. These past few years, the people have proven that they can change the country. Egyptian people are the name of the game. The outstanding fact is that the people chose the current political and economical road map by trusting the Egyptian system.

Their first vote of confidence was for the government’s investment certificate for the expansion of the Suez Canal. It was an unprecedented bond transaction, raising USD $8.5 billion in 8 working days from the Egyptian people.  The second vote of confidence came when the government started to make brave and disciplinary economical reforms that no government had the courage to undertake in the past 6 years. When we removed the petroleum subsidies, the Egyptian people were unexpectedly supportive of the president and the government, acknowledging that they have to pay the price for the reform in order for a better future.

This gives me confidence that we are heading in the right direction with full commitment from the Egyptian people. We are on a learning curve, but progress is sure-footed and steady.

You initiated economic reforms in June to resuscitate an ailing economy.  Can you elaborate on the main points of action?

When we began the reforms on June 30, 2014, we had a very clear vision based on 3 main pillars:

Structural adjustment of fiscal consolidation: This entails narrowing the budget deficit and working with very delicate areas such as subsidies, taxation, and incorporation of the informal sector to formal. Also, widening the umbrella of taxpayers and utilizing all the assets of the country to generate more cash flow into the budget.

Investment stimulus plan by launching mega projects and incentivizing the private sector to be part of the gross game. This includes the Suez Canal expansion, 3,400 km of roads to be built, the new capital city for the country, and the energy and electricity plan of Egypt.

The last pillar was improving the investment climate. This has to do with legislation, simplifying procedures of doing business, corruption, and solving historical investment problems.

Since the start of the reform process, Egypt has changed significantly.  Could you elaborate on the key figures and growth of the economy?

The past 7 months have witnessed an exponential amount of change in a relatively short duration of time.  Thereby, it is hard not to be optimistic. For instance, unemployment decreased from 13.4% to 13.1% in Q1 2015. Foreign Direct Investment was recorded at USD $1.8 million in 2015’s Q1 versus $4.2bn in the entire 2013 financial year. GDP growth was 6.8% in Q1 2015 versus 1% in the same quarter last year. Looking at budget deficit to GDP, we are approaching 10% versus 14% last year. We are also enacting legislation such as the Mining Law, Industry Law, Protection of Local Product law, Investment Law and the Microfinance Law. This is important legislation that will affect the foreign direct investment in the coming three quarters.

Do you think these changes have led to a change in perception from the international community?

These numbers were taken into account by many institutions, such as Moody’s, who updated their investment outlook from negative to stable. Fitch, another ratings agency, upgraded Egypt’s rating for the first time since 1997 from B- to B.  Above all, we have managed to control inflation under 10% in 2015.

These are figures that make me optimistic about this economy. Egypt turned its trends around and I’m very happy to say this is one of the few economies in the world that is exponentially growing. The capital market performance of Egypt was the best capital market performance of the world in 2014.

Do you expect the capital markets to continue to grow?

I believe the capital markets will continue to perform very well in 2015. More reform, financial discipline, mega projects, and participation of the private sector will be key to maintain the growth we currently are experiencing. 

You have been working hard on the new investment law that should be finalized in the few weeks.  What do you feel are the most attractive aspects of the new law and how has the private sector responded to it?

It is a matter of removing the existing impediments for foreign and domestic investment. The impediments are bureaucracy, procedures, permits and licenses. It takes an unnecessary length of time to open a business from entry to operation.

We are introducing a one-stop-shop in the form of full automation by linking this window with all the government bodies responsible for permits and licenses. This is a major change in the law and will take some time in implementation but we need to include it in the law to facilitate its execution.

Due to different capacities, we are proposing to spin off the promotion activities to IPAs.

We want to have the Dispute Resolution Committee empowered and embedded in the law so it can apply all its decrees to all other governmental and administrative bodies.

We are creating mechanisms to develop low-income areas like Upper Egypt and the border regions, among others. There has been intent to take action for a while but now we are finally acting. These amendments will be made into law by the end of February.

What are your expectations of the upcoming EEDC?

The conference is a building block. It is not a goal in itself but an important element of our reform story. My main goal is the storytelling of Egyptian reform, presenting the real competitive edge of the Egyptian economy.  A greater international vote of confidence into our reform process and our political roadmap should follow. We want international consensus on the success of what we are doing, reflecting the efforts that have been made, and that will continue to be made for the entire reform program over the next 4 years. We are inviting the global scene to join our plan and contribute an international flavor to our program.

Second, we aim to introduce Egypt in a professional manner. Investment banks are packaging the projects in order to present them to international investors in their language. I am guaranteeing continuity of deal closing during and after the conference as a continuous investment promotion process. We already have deals in the pipeline that will be signed during and after the conference. We expect the deals closed during the conference to give the Egyptian people confidence that we are indeed moving in the right direction.