CAIRO: As Egypt aspires to emerge as a business hub amid fierce competition from the UAE and other countries in the region, it is opportune to scrutinize the country’s reform agenda, track its growth rate, and pinpoint obstacles to progress.
This was the objective of last Tuesday’s Fifth Business Roundtable with the Government of Egypt, held under the theme of “Turning Egypt into a priority market for international business.
“Egypt has come a long way in the last four to five years in terms of progress, particularly on the corporate front, said Nenad Pacek, vice president of the Economist Intelligence Unit for Europe, Middle East and Africa. “Today, Egypt is the third fastest growing market in the Mena region in terms of corporate sales and ranks number two as a corporate priority market. Last year, Egypt was number five; and four or five years ago, Egypt was not even among the top 20.
The roundtable, organized by the Economist Conferences – a division of the EIU – brought top level government speakers, policymakers, as well as senior business leaders under one roof to engage in face-to-face discussions on recent economic reforms and future expectations from both the government and the private sector.
“Egypt is now enjoying the best business environment in about 15 years. Things have moved from high pessimism in 2003 to a growing optimism, Pacek stated.
He commended the Egyptian government on its tangible efforts to change the business environment and attract more foreign investors into the country.
“Economic growth in Egypt has been pushed by many items: corporate investment, private consumption, and exports, he added. “Egypt has recorded remarkable growth in GDP per capita since 2002/03. Back then; it was just over zero percent; while last year, it was over 5 percent, quite a significant growth.
Since 1956, the Economist Conferences has brought together corporate executives with presidents and ministers of states for similar roundtables around the world, with the purpose of exploring means to better enhance businesses and encourage investment.
“The world is now taking emerging markets more seriously than ever before. Emerging markets are growing over 7 percent a year, while developed markets grow at around 2 percent. Each year, around $400 billion is invested in emerging markets, Pacek pointed out. “What we are seeing today is that the Mena region and emerging Asia are leading the way in terms of investment. The Mena region, in particular, is growing 2 percent faster than the entire world.
He referred to Egypt saying that, “Our surveys show that essentially Egypt is now the fifth market in the region in terms of absolute sales the country is able to generate.
This year, the Economist Conferences led an independent off-the-record debate with Cabinet leaders including Prime Minister Ahmed Nazif, and the ministers of finance, investment, IT and trade alongside other bankers and international corporate executives.
Citing the government’s efforts to build foundations for progress and development, PM said, “Last year, in particular, was a year of change for the better. We were able to record unprecedented growth levels. In 2006, our GDP was 7.2 percent; and this year, it is projected to reach over 7 percent.
As for Egypt’s prospects as a favorable business location, he explained that Foreign Direct Investment was on the rise. “First quarter results place our FDI at $9.4 billion, up from last year’s $6.4 billion. By the end of this year, we expect the figure to have reached $10 billion.
While Egypt’s economy is evidently growing fast due to government reforms, particularly on the investment front, realities of doing business on the ground are still clouded by bureaucracy and weak human resources.
“Bureaucracy is a difficult thing to combat, and it will take us time to completely abolish it, said Nazif. “However, we have taken a step forward by establishing the Free Zone and several one-stop investment shops. Investors no longer have to [grapple with] 20 different entities to register a project in Egypt.
To develop a highly skilled workforce able to compete in today’s global economy, the government, Nazif added, allocated LE 500 million for capacity building and skills development, a major concern of several investors who raised it during the roundtable. “We will train our youth up to your [multinational] level and expectations so that you can find more qualified employees in our labor force.
Several attendees also highlighted Egypt’s current inflation rate and poor living conditions as negative indicators of the economy.
“We recently succeeded in bringing inflation down by three percent. It currently stands at 12 percent, a significant decrease since the floatation of the pound, Nazif clarified. “Our target is to bring it down to six to seven percent, a rate that will sustain growth.
Indeed, despite the high levels of recorded growth, the poverty rate is also increasing, and people continue to suffer from poor living conditions.
“Any reform program inevitably causes disturbance somewhere else, said Pacek, referring to recent price hikes. “You cannot eradicate poverty overnight. However, what the government is currently doing makes business people enthusiastic about investing in the country. And change will be tangible in the next five years.
To tackle poor living conditions, Nazif said that the government’s reform agenda aims to strike a balance between growth and an efficient subsidy system. “Our main target is low-income families, and this is where the ministry of social solidarity plays a major role.
The ministry plans to provide 3 million Egyptian families with subsidized services, particularly in food, health, and education, by the end of this year.
To further build foundations for international business and turn Egypt into a priority market, Nazif called for the need to transform the image of the government into a more profound and constructive one. “Partnership is our biggest challenge, and we will give it more attention in the coming years. We will accelerate our growth multiple times if we let the private sector join in.
He added that the government currently seeks more cooperation from the private sector and is opening opportunities to build schools, houses, roads, and highways as well as in developing railway, waste, and sewage systems.
