The return on investment in Egypt is among the highest in the world, and the Egyptian economy is on the right track, said Managing Director and CEO of ABC (Arab Banking Corporation) Bank-Egypt Akram Tinawi.
He advised investors, especially foreign ones, to invest in Egypt before they miss the chance.
Tinawi explained in an exclusive interview with Daily News Egypt that there is now a clear economic vision in Egypt, and planning for tens of years ahead. There are also giant projects waiting for an investor to take the opportunity and invest in them.
He added that ABC group is ready to finance any projects presented in the upcoming period, especially energy and Suez Canal projects. He added that the bank has allocated $300m as a first segment, to be pumped into the Egyptian economy within a year, and this number can be increased if necessary.
What is your vision on the future of the Egyptian economy?
To begin with, we should remember that the Egyptian economy has been through a tough four years, as there was almost a halt of economy, and lack of security, which affected the most important source of foreign currency, which is tourism, thus affecting national foreign currency reserves.
In short, all indicators of the Egyptian economy during the past four years were low, affecting Egypt.
However, now we can assert that following 30 June, the Egyptian economy is now on the right track. This was all felt by the international ranking institutions, which increased Egypt’s ratings.
Also, we now have a clear vision for the future of Egypt, and its economy for decades ahead, and I believe that the mere existence of this vision is beginning to jumpstart the Egyptian economy.
Another reason why I am optimistic is that we have seen inflation and unemployment in Egypt decreasing together, and the budget deficit retreat to 10.8% of the GDP by the end of fiscal year (FY) 2014/2015, and is expected to decrease to 9.9% in FY 2015/2016, according to the estimated budget of the government. This is a very good number, especially if we compare it to neighbouring countries like Saudi Arabia, in which the budget deficit is expected to increase after the decline in petroleum prices.
Does this mean we are on the verge of achieving leaps in economic growth rates?
It is a mistake to assume so. As I mentioned, we have started to and we are on the right track. But total recovery and the achievement of high growth rates will take some time.
There are giant projects presented in various economic sectors, and there are external visits by the president that will result in other projects. Despite that, achieving leaps in the growth of Egyptian economy in the near future is extremely difficult.
In your opinion, what kinds of projects does Egypt need in the upcoming period?
Egypt is in great need for major projects in various sectors, including the Suez Canal Axis Development and the new administrative capital. We also need projects in the energy sectors in order to be able to achieve industrial development.
In my opinion, we in Egypt need two main factors, energy and trained labour. These are the first factors that investors ask about, because without energy they cannot operate their factories, while having trained labour is very important so that investors wouldn’t bring labour from abroad, leading us to continue suffering from unemployment.
I believe that these two factors will take time to provide.
How ready is the banking sector to finance projects presented in the upcoming period?
The banking sector is strong, and has enough capital and liquidity to finance projects, especially in local currency liquidity. As for providing foreign currency liquidity, it is available with reasonable amounts, but not as much as the local currency liquidity.
Does Egypt not require attracting foreign currency from abroad?
Definitely, but there are investors who bring foreign currency with them from abroad, and others who do not.
It is always said that banks that finance the budget deficit have their liquidity affected; liquidity which could be directed towards financing projects. What is your response to that?
First, we should agree that the main role of banks is financing, not filling the gap in the state budget. However, the difficult years that Egypt has gone through in the four years after 25 January Revolution imposed this role on banks and made them carry the burden of the budget deficit.
However, I assure that this will definitely change over the upcoming years, with the return of economic activity, decrease in budget deficit, and thus the decline in government dependency on banks to finance such deficit.
What role does the ABC plays for the Egyptian economy?
ABC has been present in the Egyptian market for about 15 years, and has a noticeable and clear role in financing various economic activities. ABC seeks to increase this role over the upcoming period.
This is not just talk, but a reality. For example, ABC has recently contributed $133m to a loan for the Egyptian General Petroleum Corporation (EGPC), out of $525m, which is the total value of the loan. Most of this amount was covered by the parent group in Bahrain, as it contributed $188m, against $25m by ABC-Egypt.
The group also organised a $300m loan for Banque Misr, to provide it with foreign currency. This loan might become a syndicated loan, through instruments, or bonds.
These examples, and other, prove that the parent group stands by the bank in Egypt, as it believes in the importance of the Egyptian market and that it is a promising market.
But has the bank determined certain projects in Egypt to finance?
After the Economic Summit that was held in Sharm El-Sheikh last March, a group from the parent bank came to Egypt to study a number of projects that were presented at the summit, and did in fact finance some of them. The bank is ready to enter into financing all the projects that will be presented, as they will all be investment-attracting projects, and no bank will hesitate to finance them, especially projects related to the Suez Canal, or various energy projects.
Has the bank allocated liquidity to be pumped into upcoming projects?
We have in fact allocated about $300m to pump into projects within a year. This is a first phase, as more sums will be provided whenever we are done pumping every sum we allocate.
Is there an intention to increase the bank’s capital in Egypt?
No, the current capital of the bank is enough, especially under the umbrella of the parent group in most of the loans we grant. So, we do not need to increase the bank’s capital in Egypt at the moment.
What are the bank’s aims over the upcoming period?
We are considered among the fastest growing banks in the Egyptian banking sector, and our policy is illustrated in what is called 100-100, which means that we target achieving profits of EGP 100m, and we have actually achieved this purpose. We also aim to increase the number of the bank’s retail clients to 100,000 clients, from the current 65,000. We aim to achieve this within three years.
What is the bank’s loans portfolio?
The bank has a loans portfolio of EGP 3bn, EGP 2bn of which are corporate loans, and EGP 1bn for retail loans. The size of the deposits portfolio currently approaches EGP 6bn. We aim to increase loans by about EGP 1.2bn, and deposits by EGP 1bn by the end of 2016. We are keen that the increase in deposits be in foreign currency, to increase the bank’s foreign currency resources.
In order to achieve this target, for the increase in deposits to be in foreign currency, the bank plans to introduce certificates that are neither conventional nor similar to other banks; whether in terms of duration or the rate of return on them.
We are also working on introducing insurance services in the bank, and will soon sign an agreement with one of the largest foreign companies in this field, in addition to further expanding in car and personal loans.
How many branches does the bank have?
The bank currently has 28 branches, and we aim to redistribute two branches to two new regions next year, in addition to opening two new branches.
Do you have a plan to aid the Central Bank of Egypt (CBE) plan to open small branches?
I personally am very convinced of the importance of this initiative in achieving fiscal integration, which the CBE targets. However, our target, as a bank, is to expand in big branches first, and when we reach the geographic expansion we seek, we can then think of opening mini branches.
Finally, what is your advice to local and foreign investors participating in the Euromoney conference?
My advice to investors in general could be summarised in one sentence; invest in Egypt now before you miss your chance. The return of investment in Egypt is among the highest returns on investment in the whole world.
If there is someone who talks of the possibility of a terrorist attack in Egypt, I tell them that they are very limited operations and we are on our way to eliminating them. Also, there isn’t a country in the world that doesn’t suffer from instability in its security, and in Egypt there is political stability and security, and we are waiting for investors and are ready to support them.
