Daily News Egypt sat down with Samir Radwan, who served as Egypt’s Finance Minister from January-July 2011, and is currently an adviser for the Supreme Planning Council of Oman. Radwan expressed his views on Egypt’s Economic Summit taking place from 13 to 15 March, where he also highlighted what it is that Egypt needs to do going forward after the summit. He also commented on recent decisions that were taken by the Egyptian government.
(AFP Photo)
How do you view the commencement of the Economic Summit with the security instability the country is currently facing?
The idea of the summit is very good, but with the circumstances that the region is going through, there will never be a perfect timing for the event to take place. However, stability in Egypt is very important and in order to reach that, the development process should not be postponed as the summit can be a cure for several problems that Egypt is currently facing.
What is your outlook on the summit? Do you think that it will really help Egypt attract billions in investments as it intends to?
The success of the summit will depend on the messages that Egypt sends to the investors, not necessarily that we have good projects. There is a book that gets released every year by the World Bank called “Doing Business”, and it evaluates the performance of countries and rates them according to 10 pillars. After the reforming measures the country announced it will be taking such as reducing bureaucracy as well as the issuing of a bankruptcy law for ensuring a safe exit for investors and other measures. Egypt’s order in doing business rose significantly and those are all good steps that can make a real difference. The point is that investors need to be reassured that the country is attractive for doing business and its competitiveness.
Thinking, however, that by just presenting a bunch of good projects to investors will lead them to bring out their cheque books to participate or invest in the projects, is not what is really going to happen. Arab, foreign and Egyptian investors are not ignorant, they will do their homework before attending the summit and they know whether or not they will be investing, so it is not about presenting the projects and expecting to fund them right away it is much more than this.
Because of this, don’t you think that the new investment law was late in its passing and didn’t give investors enough time to review and study it carefully thus make their decisions?
I can’t comprehend why it took so long for the government to pass the new law; they were really sluggish in their steps and didn’t give investors enough time to do their homework. A deadline should have been determined, I would say that from January the law should’ve been presented and finalised; not to mention that very small but crucial details haven’t been taken into consideration, like the fact that the law hasn’t been translated into different languages.
As a matter of fact the board of trustees of the Investment Authority has worked on the investment law from 2004, and all the flaws were clear and detected and they were 14 problems. In addition, there are investment laws in countries that have been able to attract investments for years, those have been tested and proven, so why don’t we benefit from their experience? It is not a rocket science, and it didn’t need all this time.
What does the government need to do after the summit?
Communicating and following up with those who expressed willingness to invest and even others who haven’t yet is also very crucial at this point; communicating with them however should be the responsibility of only one authority as the Investment Authority for example. Those who expressed willingness to invest or have more potential to do so should be re-invited individually, or if it’s a group then the group solely should be asked to revisit the country and they should be provided with all what they need and then take the right steps to seal the deal.
There are also things that should be done during the summit as networking and archiving each individual who is attending. Also during the summit attendees could be polled about the new investment law and the legislative reforms that have been taken by the government to see how satisfied they are with it. Prime Minister Ibrahim Mehleb should also create an office for following up on the summit and this is something that is done anywhere in the world after launching a big event like Egypt’s Economic Summit.
Which sides do you think will be more supportive of and investing in Egypt in the coming period?
I believe that various sides will be supporting Egypt in the coming period. The Gulf side will continue investing in Egypt as our relations with them is pleasant, plus they are still looking for investment opportunities. However for them to continue supporting Egypt, more efforts should be exerted. I would say that we need to establish an office for the Gulf with representatives who know various important figures from there to be able to further strengthen our relations with them.
Europe will also be highly supportive of Egypt; we already have 40% of our international trade with Europe and they are ready to invest.
China today is the biggest investor in Africa and it is ready. China, alone, can actually compensate Egypt from any other foreign investments, because China is distinct in several areas as infrastructure, railway, manufacturing and so on; but we need to exert a lot of efforts to actually attract them into investing in the country.
What are the sectors that you expect will attract more investments in the summit?
Egypt’s greatest advantage is its diversified economy, unlike other countries that only have to focus on one thing or two. I believe that the sectors of infrastructure and logistics are the most important ones that will attract investments. Further the Gulf side will most probably be willing to invest in the construction and development and tourism sectors as well as hotels.
What sectors or project ideas do you believe should be given more attention by the Egyptian government?
Egypt needs a huge container terminal at the Suez Canal, one like the one available at Jebel Ali in the UAE. Logistics services are very important for Egypt because of its location, and since we have the Suez Canal, more services should be implemented for ships that pass. Some ships stay in transit for hours and others could stay for days, those should be offered different services as food, drinks, fuel and a duty free shop. Providing them with no services what so ever is making us lose a huge opportunity. We don’t have a single free high way in Egypt, and it should be established as it will open doors for establishing new cities and will definitely attract investments in the country as infrastructure is a great attractor. Aggregate industries as well as the ICT sector should also be given more attention, as those products could be exported to Arab and African countries.
Do you think the projects that the government will be presenting at the summit have been well marketed?
Honestly I don’t see that, it required much more effort.
How do you evaluate the recent decisions taken by the Egyptian government in matters as cutting energy subsidies and the depreciation of the EGP against the US Dollar?
Those decisions are totally correct; however they should be part of a comprehensive vision, with a timeframe that should be presented to the Egyptian people. Furthermore, cutting of subsidies should be done gradually with people knowing the government’s plan, every step of the way and they shouldn’t leave matters open for rumours that people tend to hear and believe because those who are responsible aren’t clarifying the bigger picture.
Egypt is facing a very difficult equation, as on the one hand the government should improve the situation of its fiscal and external accounts for macroeconomic stability, and on the other hand it needs to raise standards of living – how do you think this problem could be solved?
What makes it harder is, the longer you leave the problem at stake as it gets bigger and more difficult to handle. The issue should be considered as a whole not fragmented. For instance, when subsidies are cut, prices increase, thus the 40% of people living under poverty line will suffer. However, it is well known that what the needs of those people are and what they normally consume; reports from CAPMAS outlining those family’s expenditures is already made available and subsidies shouldn’t be cut from the poor but from the higher classes of people.
But then comes an even bigger issue, and that is that the country applied the system of subsidies on products and not on families, making the handling of subsidy cuts harder leading to discrimination against the poor as everyone buys products at the same price; thus the government should target families instead of products. Another issue that should be taken into consideration is that the country has approximately EGP 60bn worth of taxes that haven’t been collected yet. But for people to pay, the government should provide them with incentives; for instance they can tell the people that if they pay they will get a percentage off their amounts due.
Egypt needs to change its fiscal and tax policies to finance its budget deficit; the issue has solutions but real steps aren’t being taken fearing protests from people. However, people protest when they are surprised by sudden decisions taken by the government without explaining their reasons and without providing explanations in advance. Furthermore, the government should control the prices of the market, create policies that everyone should follow and make sure that taxes get paid. Those who do not follow the rules should be held accountable for their faults and the government has to increase its supervision and inspection over institutions and traders. With no supervision, no accountability and with the failure in paying taxes, traders tend to increase their prices tremendously without good reason.
The government should be clear and transparent on its decisions and most importantly let the people know what is coming ahead. The building of trust between the government and the people by meeting the promises and explaining the changes in policies and reasons behind those changes are all very important factors; people are smart and they can understand if the government addresses them correctly.
Last June, external debt reached $46bn and is expected to rise in the coming period – do you think that this could lead the country towards witnessing prosperity on the medium term and then a sudden gap when it has to repay its debts?
I’m glad that you brought up the time element to the discussion, as this amount of external debt doesn’t worry me. However, if debts were just taken to fill in a gap without investing them correctly, paying back becomes a very big issue. A gap can definitely occur, and a recent example is when the government had to repay Qatar, something similar to this could happen again with another party. Debts should be run in investments, creating job opportunities and exporting so that the country would be able to repay its amounts due when they need to pay them.
Foreign reserves have been decreasing from October to December, what does this indicate? Do you think it will be further decreasing in the coming period?
It indicates that the country is filling a gap, whether it’s a debt that needs to be paid like repaying Qatar; it could also be for paying for imported goods or a budget deficit. The main issue is how to build the foreign reserves which could be done through receiving investments, not grants, and when we export more than we import, which is not the case currently as our imports are double our exports. There is definitely a chance that it might decrease further. For instance, Egypt is one of the biggest wheat importers in the world, so when the bill comes and it has to be paid, it could be deducted from the foreign reserves if the country’s productivity is not sufficient or if it doesn’t have enough liquidity to import its basic goods.
