The economic crisis has impacted foreign direct investment (FDI) inflows into Egypt, Minister of Trade and Industry Rachid Mohamed Rachid said Wednesday at the closing of the Euromoney conference in Cairo, which focused on competitiveness and investment.
Prime Minister Ahmed Nazif, meanwhile, said that notwithstanding the negative impact, the country was able to attract $15 billion in FDI, and overall “not one area of the economy shrunk” during the crisis.
“The numbers are 80 percent compared to the peak year” of Egypt’s economic activity, he noted.
The challenge is not attracting FDI, Rachid said, but rather being able to drive them internally. Certain areas of the economy need more attention, he said, with a particular emphasis on education, infrastructure, energy, public-private partnerships (PPP) and fostering a healthier business environment.
Egypt can anticipate significant investments in the areas of health and education, specifically. “If we can get these right, we can grow the economy by 10 percent,” Rachid said.
With regard to PPP laws and, what some have called the privatization of the public sector — which the trade minister refuted as being a misconception — he believes that “good management and utilization of assets” is key.
Such a policy proposal is “not easy to sell politically,” he said.
Both Rachid and Nazif spoke in separate speeches about the role of trade in the national economy.
Rachid affirmed Egypt’s support for free trade, despite having protected the local cement industry, as well as the rice and steel sectors, which he characterized as an “unfortunate” turn of events.
He confirmed that Egypt does not need to extend a ban on cement exports that expired on Wednesday, saying that "supply and demand mechanisms in the market ensure that our domestic needs are secured, and that there is no need to interfere in the market."
Such interferences occurred strictly when inflation or growth had been negatively hit, he said, and that these instances were limited in scope. In the context of the rice industry, he noted that this was due to issues concerning irrigation.
Egypt has reduced trade barriers by 70 percent, thereby creating more a competitive local market, which in Rachid’s view clearly demonstrates the country’s support of free trade.
Egypt signed a free trade agreement in August with Mercosur, the South American trading block, which includes Brazil and Argentina, Paraguay and Uruguay. Similar discussions are underway with Russia as well as the Asian region.
Despite the relative openness touted by ministers, Richard Ensor, managing director of Euromoney Institutional Investor, said that Egypt’s economy remains closed.
The trade and industry minister riposted by pointing to the 70 percent barrier reduction figure, and added that the government has committed itself to doubling non-oil related trade every four years.
Ensor hooked the issue of poverty into the discussion by underscoring that the progress achieved in trade has had little positive impact on the country’s downtrodden.
Nazif responded by saying that in any discussion regarding the poor, it is essential to recall the government’s subsidy programs, which, if considered, will demonstrate that real income of the poorer segment of society has increased.
As such, he stated that while the subsidy programs would remain, they are set to see reforms in 2011. Internationally recognized indicators demonstrate that poor Egyptians are faring better than they have in the past, he contended.
Nazif continued by saying that although neither the poverty levels nor the growing income gap are ideal, they are nonetheless “normal” during a period of economic transition such as the one Egypt is witnessing.
Nazif admitted that inflation, which had been fueled by the international financial crisis, had seriously touched this precarious segment of society.
