Reducing subsidy system expenses in the 2014/2015 fiscal year (FY) budget will help drive Egypt’s economy forward, economic analysts said at the Euromoney Conference, currently being held in Cairo..
It is essential to reduce public expenses for Egypt’s economy, especially with regards to the energy situation, said Managing Director of Qalaa Holding Hisham El-Khazindar.
El-Khazindar said gradually increasing energy prices up to global levels will benefit Egypt’s investment climate in the long run.
The cabinet has reduced allocations for petroleum products subsidies by approximately EGP 43bn, to a total of EGP 100.3bn for the FY 2014/2015 budget.
El-Khazindar said that a large portion for investments in his company were directed to the energy sector in light of Egypt’s shift to becoming a net importer of oil
The company executed investments worth $300m to set up an energy project expected to be completed in 2017, he added.
“We were working under a waste disposal policy in the past, but with the rise in energy prices, we had to reconsider these waste again and reduce production costs,” he said.
El-Khazindar said that many investment opportunities are available in Egypt, particularly in the energy and infrastructure sectors. He added that efficiency represents a huge obstacle and forms one of the main problems for those investing in the energy sector.
He requested that the government remove obstacles to investment and lift restrictions on new energy sectors, adding: “Egypt must encourage direct investment.”
El-Khazindar said the current government is working on issuing policies conducive to foreign investment by amending laws and the tax climate.
The impact of power shortages on the cement industry over the past two years have been large, as production dropped by 50%, he said. El-Khazindar added that the situation has now changed in light of the current government’s new policies.
He also called for the relationship between the public and private sector to be altered in a push for new investments.
Hazem Badran, managing director of CI Capital, believes that the consumer sectors are the most capable of creating traffic at present and in the future. Their strength has been tested in light of their ability to withstand the past two years.
According to Badran, the food industry has continued to achieve growth in recent times, and is among the sectors most able to attract investors.
“The other sector that is regaining its previous levels is the energy sector, followed by sectors that are dependent on energy,” according to Badran.
He said some obstacles and problems exist pertaining to resettling investments and with laws that require amendment, and the government has to face these challenges during the FY 2014/2015.
He also said that transparency and fighting corruption are important for kick-starting the economy, as Egypt lacks both in some sectors. The country’s private sector is large and employing the principle of transparency is a requisite for kick-starting the economy.
“We received messages from the government addressing issues relating to transparency, especially problems relating to energy and government employees,” Badran said.
Hisham Ezz El-Arab, managing director of Commercial International Bank, said the bank is working to develop an economic plan for government policymakers to work with. He asserted that an economic map must be put in place for ministers to work with, and ministers themselves should coordinate so that no one is forced to start from scratch and waste time.
This measure will improve the government’s executive efficiency, Ezz El-Arab believes.
He explained that an economic council must be formed to serve as an advisory body that makes recommendation to officials. The council must be separate from the government, he said.
Egypt’s economy is diverse and an economic roadmap must be put in place in order to guide it, he said.
