CAIRO: Although Egypt’s economy has improved immensely over the years, some industries must expand and others must be founded for the nation to sustain its progress, Tarek Mansour, PricewaterhouseCooper (PwC)’s Country Senior Partner said.
“There is a lot of foreign direct investment coming into the country from different sources, but there is no real added value in industries and sectors, Mansour told Daily News Egypt. Investments from Gulf countries (GCC) have focused primarily on the real estate sector and Egypt’s agreements with the US, Turkey and India have focused on textile exports.
“If we assume that real-estate development is considered an added value for the workers and materials used, it’s still not a long term solution to our problems, which is a major drawback, he says. The country needs new investments in the industrial base.
It seems that the main new heavy industries being established in Egypt are cement, petrochemicals and steel -sectors that are rife with “hanging issues. Mansour calls on Egypt to target agri-businesses in its new investment plans, a sector that can see high levels of job creation and which has been the centerpiece of Egypt’s economy for centuries.
Although we might be hearing news that food business deals are underway, this is usually a “false sense of activity, said Mansour, “It’s basically companies changing hands. So for example, there is a need for food manufacturers to get better control of the source of their raw material and invest in agriculture.
Mansour hopes that with private equity houses directing efforts to create divisions or larger holding companies with agri-businesses, “the economies of scale can work their way through the revenue chain.
Nevertheless, Mansour acknowledges that the government has taken strides in improving the investment culture and regulations in Egypt. “It’s an achievement to break down some of these red tape barriers, it used to take six months to register a company, now it takes days and people recognize this improvement, he said.
The GCC nationals have been wary of doing business in Egypt mainly due to the bureaucracy, but now a number of them like what they see. “Egypt is doing well because of the excess money in the GCC, he explained.
However, because by nature the GCC money goes into trade and real estate, we might not see a shift in investment trends in the near future.
Tax reforms are also another example where the government was able to make a dent in bureaucracy. “The sense of what we got from sophisticated investors was not that they have to pay 30-40 percent in taxes, what people hated was the bargaining and the time it took to bargain. They [the government] have made all the right noises to tackle this issue, he said.
Nevertheless, he is still unsure of the extent of the tax reforms because the Ministry of Finance is finalizing the pre-2005 files, so that they can focus their attention on the 2005 onwards files. The new tax audit system is similar to the US-model, “with random selection and some indicators (if a company is losing a lot of money) but they still seem to be stuck in the 2004 files and we haven’t seen their attitude towards the new files, he said.
“The whole mentality supposedly changed, but we haven’t really experienced it yet. We need to see a full year where they really implement the new approach, he said.
Voicing the concerns of every sector, Mansour said the accounting field lacks efficient, well-educated caliber. “People cannot find the right skill sets, which goes back to the education system that spits out people in quantity, not in quality. The business community needs to go back and establish linkages with institutions, helping them out with programs, trainings and internships, he said.
Mansour argues that even with the increase in number of foreign universities, the shortage of skilled human resources is still an issue. They have found that “in the accounting profession the best accountants are from public universities and everybody is competing for that same pool, he said.
Mansour does not deny that PwC has benefited from the economic boom, doubling in size in the last three years. However, he still argues that independent growth is not as important as ensuring that the reform reaches the average man on the street – which is the government’s biggest challenge.
“The government’s biggest challenge is to make sure that these reforms trickle down to the average man on the street. The upper class is benefiting from this boom, but the majority of the people are dissatisfied, he said.
