Egypt Daily News – Numerous demands and proposals were presented by a number of major investors in Egypt, during their meeting yesterday evening, with Dr. Mostafa Madbouly, Prime Minister, which constitute a road map for reviving the Egyptian economy, achieving targeted growth rates, and eliminating various crises.
The meeting was characterized by frankness regarding concerns about inflation rates, the dollar deficit, interest rates, domestic and external debt, in addition to competition from the state, energy provision, etc. The Prime Minister’s responses and comments were also very frank and clear about the plans to deal with all these files and which are as follows:
Businessmen’s demands:
Ahmed Ezz: Building permits must be restored urgently in cities and villages
Engineer Ahmed Ezz, Chairman of the Ezz Steel Group, called for the necessity of reconsidering policies aimed at increasing growth rates in various sectors, including the construction and real estate development sector, which in turn will contribute to increasing the activities of the building materials industries.
He said, “It is not possible for a country the size of Egypt to have its construction sector grow by only about 3.5% next year.” Taking the iron sector as an example, where the average annual consumption of iron in 2010 was approximately 9.9 million tons, while in the last three years it reached 6.5, 6.4, and 6.2 million tons, respectively. While a country like Vietnam, similar to Egypt in terms of its population, its iron consumption exceeds 13 to 14 million tons annually.
Ezz blamed this decline in iron consumption on “harsh” building controls and requirements, which prevent 70% of citizens from being able to build their own homes. Explaining that he does not demand the return of random construction; but “by setting rules that stimulate the return of construction activity again.”
He also called for opening the door to appointments in the state’s administrative apparatus. “To introduce a new generation and new ideas,” especially since we have 40,000 Egyptian students studying at foreign universities.
Hisham Talaat Mostafa: To form a committee which includes the Central Bank to review the impact of high interest rates on the private sector
The CEO and Managing Director of Talaat Moustafa Holding Group, Hisham Talaat Moustafa, confirmed that the hard currency crisis is the biggest challenge that Egypt is currently facing, due to its serious effects on inflation, in addition to the rise in interest rates.
Mustafa stressed the need for the government to seek specialized expertise that has proven successful in certain sectors, noting that the private sector will not be able to bear the high interest rates, which have reached 32%.
He explained that the private sector bears burdens for which it is not responsible, noting that the liberalization of energy prices and increased liquidity were among the main factors behind the rise in inflation rates, which requires radical solutions.
He also pointed out that corporate financing structures were established based on interest rates ranging between 13-14%, while doubling these rates within one year puts great pressure on companies, raising questions about their ability to continue.
Mustafa called for the formation of a ministerial committee that includes the Central Bank to review the impact of high interest rates on the private sector, and to follow up on the sustainability of companies’ financing structures in light of these challenges. He stressed the need to also look at the state budget and the problems of the banking sector, which were exacerbated by the high interest rates.
He added that the dollar deficit crisis is considered one of the biggest economic obstacles facing Egypt, explaining that international investors are looking for stability in the local currency to ensure their returns. He stressed that the continued decline in the value of the Egyptian pound negatively affects the internal rates of return (IRR) in foreign currency, which weakens confidence and hinders attracting foreign investments.
Mustafa stressed the importance of developing sustainable solutions to the hard currency crisis through thoughtful financial and monetary policies that ensure macroeconomic stability, which restores confidence to investors and contributes to achieving long-term stability for both the private sector and the national economy in general.
Yassin Mansour: Incentives to double Egyptian remittances and tourism revenues
Yassin Mansour, President of Palm Hills, described the exchange rate of the dollar against the pound as “the basis of the inflation problem” in Egypt, calling for ideas “from outside the box” to solve this dilemma.
He focused on the need to strengthen the country’s two most important sources of hard currency, the first of which are remittances from Egyptians abroad. “Incentives must be introduced to double it, including unifying the exchange rate.”
As for the second source, tourism, he pointed out the importance of conducting more comprehensive studies of international markets, to attract more visitors from them. He also considered that granting residency, or even citizenship, to foreigners in exchange for buying a property in Egypt is “insufficient.” Rather, priority should be given to canceling some taxes to attract buyers mainly from Europe and England.
Ahmed Al Suwaidi: Obligating infrastructure companies to rely on local products
Ahmed Al-Suwaidi, Managing Director of El-Suwaidi Electric Company, called for focusing on industrial investments, setting clear goals for industrialization and providing a stable investment environment by installing laws and regulations for a period that allows investors to plan.
Al-Suwaidi pointed out the availability of competitive advantages enjoyed by industrial investment in Egypt, such as low production costs, considering that not requiring companies implementing infrastructure projects to rely on local products missed an opportunity to localize the industry, similar to the experience of Saudi Arabia, which was able, for example, to attract investments exceeding $30 billion wind turbine industry.
Hani Berzi: Reconsidering the export support program and high interest rates
Hani Berzi, Chairman of the Board of Directors of Edita Food Industries, in turn stressed the danger of high interest rates on investment, calling on the government to find a mechanism to provide low-cost financing to the private sector.
He said: “Absorbing the high interest rates has become very difficult for us and the food industry sector, and placing these burdens on the consumer by increasing the prices of products has also become difficult because it affects purchasing power.”
Berzi pointed out that there was a shock to the export sectors due to the reduction of the budget for reimbursing export burdens this year to 23 billion pounds instead of 40 billion pounds according to a previous government promise. He expressed his objection to this reduction, and called for a new program to support exports starting in the next fiscal year.
Hassan Heikal: Transferring state assets to the central bank may be one of the solutions to local debt
During the meeting, businessman Hassan Heikal criticized the increase in local and foreign debt rates, and the state’s general budget bearing a greater interest.
“The local public debt on the budget reached 10 trillion pounds. When an interest rate of 30% is added, the interest on the debt becomes 3 trillion pounds. In my opinion, there are no resources for the Egyptian state that can convince a financial man that there will be a balance in the next visible term,” according to Heikal.
He pointed out that the Egyptian state has $140 billion in debt in the budget, with an interest rate of 6%, which means that the state has a dollar debt interest of about $15 billion annually, and the ratio of external public debt to gross domestic product may be low, but with regard to our net dollar resources, there is a problem.”
Heikal presented several proposals during the meeting, including transferring state assets to the Central Bank of Egypt, zeroing out debts in pounds, and establishing a sovereign fund affiliated with the Central Bank that includes companies, real estate, and lands of all governmental and sovereign agencies.
He said: “The state’s general budget sells these assets to the central bank, which leads to the zeroing out of its debts and interest on them, and the central bank owns this fund by a majority percentage compared to a percentage of the sovereign entities that place their private companies in it.”
Heikal added: This fund can be exploited to achieve the goal of budget unity at the state level, and benefit from the returns to finance development projects and state plans. This idea was implemented before in a similar manner in Spain, Italy, and Greece to save them during the debt crisis.
Sherif El-Kholy: Adding representatives of the Egyptian private sector to the Supreme Investment Council
Sherif El-Khouly, partner and regional director of ACTIS, pointed out that there are opportunities to attract international investors to manufacture in Egypt for the purpose of export, especially with a geopolitical situation that represents challenges to major global economies, following the new US administration.
Al-Kholy called for the inclusion of representatives of the Egyptian private sector in the Supreme Council for Investment, and suggested focusing on manufacturing components of renewable energy plants.
Mirna Arif: Giving priority to the private sector in any projects proposed by the state
Mirna Arif, General Manager of Microsoft Egypt, called for giving priority to the private sector in any projects that will be proposed, and pointed out that the investor needs to deal with a single port whose parts are controlled by modern technology, such as the “one-stop-shop” mechanism, which needs major development to overcome the surprises that arise. The investor meets her on his way.
Arif stressed the importance of reconsidering any new laws that may create sudden financial burdens on investors, hindering their ability to properly plan financially for their projects.
Omar Mohanna: Accelerating the state’s exit from economic activities
Omar Muhanna, Chairman of the Board of Directors of the United Bank, said that the private sector’s share of credit declined to 24% due to the economic crises to which Egypt was exposed, including the rise in interest rates.
He added that the challenges facing the private sector must be addressed, noting that it represents 70% of economic activity in Egypt. He explained that the investment climate in Egypt still faces many problems that prevent attracting investments, such as the slow implementation and application of decisions issued by the state.
He stressed that Egypt needs to accelerate the pace of the state’s exit from many economic activities, especially in specific sectors.
He stated that despite the efforts made to support foreign investment, foreign investors are still hesitant to enter the market, due to concern about competing with the country, which enjoys advantages that the private sector may not obtain.
He said that despite the efforts also being made to deepen the industry, such as improving industry licenses and developing industrial zones, the current trend towards import substitution must be re-evaluated. “We focus a lot on deepening the industry and it has improved a lot over the past period, but this does not have to be at the expense of the policy direction.”
Industrial products are for export, not to replace imports. We have been saying for a while that we will do import substitution, and this does not make any difference in the end, because an essential part of my imports is an essential commodity, and the part that I replace Imports are very simple, it will not make a difference at all, and it will not have any positive effects.”
Muhammad Al-Etrebi: We expect interest rates to fall between 3 to 6% during the year 2025
Mohamed Al-Etreby, CEO of the National Bank of Egypt, said that 2,360 companies left Egypt for the Emirates in the first half of this year 2024, due to the facilities in the business environment there.
He added that Egypt is a country that has all the capabilities, and that inflation will decrease and interest rates will fall between 3 and 6% during the year 2025.
He stressed that two foreign exchange rates cannot be allowed again, because of its negative repercussions on dollar resources and the investment climate in Egypt in general, he pointed out that the unification of the exchange rate contributed to a tremendous growth in the National Bank’s proceeds from waiving the currency during the past months, in addition to a significant growth in remittances from Egyptians abroad.
Khaled Abu Al-Makarem: Accelerating the solution to the problem of supplying gas to factories
Khaled Abu Al-Makarem, Chairman of the Export Council for Chemical Industries and Fertilizers, confirmed that achieving the state’s goals to reach Egyptian exports to 145 billion dollars requires working to double the allocations for the Export Burdens Refund Program by no less than 50 billion pounds as a minimum.
He said that what happened this year in terms of reducing allocations for reimbursing burdens to 23 billion pounds, including 20 billion pounds in cash support and 3 billion pounds in support for exhibitions, missions and other services, is insufficient, and that reducing support rates by 70% may have a negative impact until the end of June and the beginning of the new fiscal year.
Abu Al-Makarem pointed out that Egyptian exports, despite the challenges facing the export sector, including reduced support, were able to achieve an increase of $4 billion during the first 11 months of 2024 to reach $36.3 billion, compared to $32 billion during the same period in 2023, and there is an opportunity to exceed $38 billion. dollars by the end of the year and achieving a good growth rate of 10% compared to last year.
He noted that there are some challenges that can be solved quickly that will contribute to increasing Egyptian exports by an additional 5% during the first quarter of 2025, the most important of which is solving the problem of supplying gas to Egyptian factories and its regularity, especially since there are a number of industries that depend on it as a main raw material for industry, and what happened There is a supply deficit during 2024, which is expected to continue to some extent during the next year, causing a contraction in production.
Abu Al-Makarem called on the government to have a clear vision regarding gas supplies to factories, saying, “We are aware of the problem and we are all trying to deal with it, either by importing or by being content with what is currently available, but a clear vision is required that reveals to us the extent to which the problem will remain.”
He also called for the necessity of activating the decision to cancel vacations at customs ports to facilitate customs clearance operations, stressing the burdens that businessmen bear as a result of delays in customs clearance, amounting to half the value of the exported or imported counter or letters, stressing the necessity of working 7 days a week in Customs ports because until now the decision has not been implemented in some ports.
Statements of the Prime Minister in replying to the demands of the businessmen
Growth rates over the past two years were not as hoped and targeted, but the state’s vision and continued implementation of steps for economic reform gives more hope for achieving growth rates exceeding 4% next year and then reaching 6 and 7%.
-We, as a country, were destined to exist in a very hot and very turbulent region, which imposed on us many major direct and indirect repercussions on the Egyptian economy.
We are keen to maximize the role of the private sector in the economy, as a greater regulator of markets, while the state is present in some strategic sectors in which states adhere to a clear and specific role.
-The Egyptian state attaches great importance to the debt file, whether domestic or foreign, and Egypt is committed to that and is working to continue the downward trend of the debt.
The dues for refunding late export burdens have been settled until January 2023, and we have set the start of the new program from July 1, 2024. Currently, the numbers have been tentatively estimated at around 60 billion pounds.
The Cabinet approved a contract from the International Finance Corporation to offer all Egyptian airports for management and operation in partnership with the private sector.
-There are proposals to offer infrastructure, such as roads, treatment and desalination plants, to the private sector for management and operation.
We expect gas production to gradually return after it was affected by the economic crises, and in 2025 we will be able to meet not only needs but also expansions.
-Customs will work for 7 days starting from the new year to facilitate customs clearance operations.
Local gas is sold at less than the real market value, and the state prefers to sell gas locally to the Egyptian industry that supports the economy through job opportunities and economic growth rates, even if at a price lower than the export price, which brings greater returns to the state.
-Forming advisory groups from the Presidency of the Council of Ministers, to discuss each of the investors’ proposals, and the government will follow up on the implementation of those decisions and overcome any challenges.
-Regarding the dues for refunding late export burdens, the settlement was made until January 2023, and we set the start of the new program from July 1, 2024, and currently the numbers have been tentatively estimated at around 60 billion pounds, and the Minister of Finance obtained the approval of the Council of Ministers today to pay in more than one way. Between two and three years for all those eligible, and we will announce this in detail.
-This year, despite the current crises, we will reach about 15.5 million tourists in the tourism sector, and we aim to reach 18 million tourists next year.
-We expect growth in the tourism sector this year to be in the range of 10 to 11%, but we want this rate to reach 15% next year.
-The final touches are being put on two very large projects in the tourism sector, with the aim of doubling the number of tourist rooms in the area surrounding the Pyramids Plateau, the Grand Egyptian Museum, and the old downtown area. The Council of Ministers approved a contract with the International Investment Corporation (IFC) to offer all Egyptian airports to the private sector.
-We encourage the private sector to enter the field of establishing airline companies, through alliances or partnerships with the state, to implement this proposal, which contributes to increasing the Egyptian aviation fleet.
-Terminating all licenses for tourism projects within a period not exceeding one month by granting them a golden licence
-We are working on two new initiatives, the first to finance working capital for expansions of new lines and factories, and the second is another initiative to create hotel rooms.
-2024 is the heaviest year for debt repayment, and despite this, nearly $39 billion has been repaid.
-We aim to increase tourism revenues to break the usual figure of $20 to $22 billion, which represents the dollar deficit in the country.
