Daily News Egypt sat down with Janet Heckman, the managing director of the southern and eastern Mediterranean (SEMED) region at the European Bank for Reconstruction and Development (EBRD), to talk about the bank’s strategy in Egypt and its opinion regarding the Egyptian economy.
What projects has EBRD financed in Egypt?
Since the beginning of our operations in Egypt, we have invested over €2.6bn in 51 projects across all the sectors. In 2017 alone, we have invested €665 million so far.
Our landmark this year is the approval of a $500m framework to finance renewable energy projects in Egypt, which includes 16 photovoltaic plants, expected to deliver a photovoltaic capacity of 750 MW. The plants will be constructed on one large site near the village of Benban in Upper Egypt and will bring significant investments and job creation to this region. They are also expected to reduce carbon dioxide emissions by 900,000 tonnes a year.
Another project I’m proud of is a €290m loan to support the Egyptian National Railways (ENR) for the renewal of the locomotives in its fleet, which will benefit millions of commuters across Egypt.
Furthermore, for the first time, one million inhabitants in the Fayoum governorate will have access to sanitation services with the support of a €186m loan to the Fayoum Water and Wastewater Company. In addition, reducing the level of pollution in Lake Qarun will help restore tourism and boost agricultural and fishing activities.
Will you increase the portfolio regarding Egypt in 2018?
We are a demand-driven bank, so we invest in viable projects through which we can add value and create benefits to the people of Egypt.
Which sectors is the EBRD most interested in?
Based on our country strategy, which is the result of a thorough assessment of sectors throughout the economy and dialogue with the authorities and other key stakeholders, we have identified key challenges and opportunities in Egypt. We have also determined the priority sectors to develop.
Supporting the competitiveness of Egypt’s private sector is one of our main priorities. The bank is committed to supporting the private sector by improving access to finance for small and medium enterprises (SMEs), better economic integration, and increased opportunities for women and young people.
Modernising the country’s infrastructure and services by improving the quality and sustainability of Egypt’s public utilities, including through the private sector’s participation, is also a main priority. This includes the development of a more efficient power sector and the promotion of gas market reforms, contributing to the country’s energy security.
Under the bank’s Green Economy Transition approach, we will support Egypt in its efforts to diversify its energy resources by financing renewable energy projects and energy efficiency investments across sectors, including energy efficiency credit lines for SMEs. We will also work on improving water efficiency through modernising water supply and wastewater management.
We have also launched our Green Economy Financial Facility for Egypt, a programme that combines loans, grants, and technical advice to promote investments in energy efficiency and renewable energy projects in cooperation with local banks.
Creating a favourable business climate requires good governance and regulations. To achieve this goal, we will cooperate with international financial institutions to improve governance in the public and private sector.
The EBRD will continue to provide capacity building for relevant institutions to improve competition and promote investment and policy delivery.
The EBRD supports some Egyptian banks in financing SMEs. What are the recent requests you received, the bank’s decision, and how many loans did you give?
We work with nine banks in Egypt at the moment, with a total exposure of approximately €700m. The facilities we have with these nine banks include trade finance facilities, SME financing facilities, Women in Business financing facilities, energy efficiency credit lines, and subordinate debt. We hope to expand our cooperation with banks in Egypt.
In addition, what is the volume of the SME financing portfolio?
Supporting SME’s is one of the bank’s main priorities, as we consider them the backbone of the economy and a source of employment. We have provided six dedicated credit lines to the local banks for on-lending to small businesses, in addition to advisory services to over 600 small enterprises. Of these, 140 are headed by women. Besides, we have the Women in Business programme, which helps female entrepreneurs access financing and energy efficiency credit lines.
What are your expectations about Egypt’s economic growth by the end of the current year?
Following the implementation of reforms, we have seen continuous strengthening of investment and improved competitiveness, and we are expecting a 4.5% growth in the current fiscal year.
What is your opinion regarding the current economic reforms taken by the government of Egypt related to the liberalisation of the exchange rate, oil subsidy cuts, and raising the interest rates at banks?
The liberalisation of the exchange rate is a step in the right direction. Of course, it is a painful step, but in the long run, it will improve the functioning of the foreign exchange market and help unlock private sector activities. This will also increase the economy’s flexibility in response to external shocks, and it will builds buffer, strengthen the official reserve position, and boost investor confidence.
Do you think that Egypt’s rating will improve from B in the coming period due to the recent economic reforms?
This is a question for the rating agencies. However, continuing on the reform path will help improve the environment for international investment.
Egypt is committed to repaying its debts. Do you think the country has the creditworthiness to repay loans from the EBRD, while the public debt currently stands at 110% of GDP?
Significant progress has already been made by the Egyptian authorities, indicating commitment at the highest levels to structural reforms to unlock the Egyptian economy’s potential.
Supporting Egypt and the private sector in their efforts to improve the investment climate is important for us; it is a pillar of our strategy in Egypt, and successful implementation of reforms is key to moving forward.
What are the criteria of selecting projects to fund? Does it depend on the EBRD’s agenda or does the government of Egypt request funds for specific projects and sectors?
The selection process of projects follows various steps. Our projects are selected based on the priority sectors to be developed that we have identified in the country strategy. We work on developing the private sector.
Is the bank interested in funding projects and sectors characterised by intensive employment in Egypt?
Almost all the projects that the EBRD finances in Egypt have positive effects on employment. This is particularly the case for infrastructure projects, which create many jobs during the construction phase.
Furthermore, will the bank hold new promotional conferences for investment opportunities in Egypt?
I’m happy to announce that we are organising the second business forum for the southern and eastern Mediterranean region in Cairo this year on 14 November. This event will bring together key policymakers, government officials, investors, and prominent businesspeople to discuss business in the region and to consider the obstacles impeding increased foreign investment.
Through your promotional activities, what are the main challenges for the investment climate in Egypt, and what are the main complaints you receive from foreign investors? How can the government of Egypt overcome the problems related to the investment environment?
It is important for investors to have a good business environment in a country. The government’s decision to create the investment services complex, implementing a single window, and reducing bureaucratic obstacles facing investors are very important steps.
In addition, what is your opinion regarding the merging of the ministries of international cooperation and investment? Did it serve the investment profile in the country?
The merger of the ministries will likely have an effect on the attraction of foreign investment to Egypt, since it will be one port of call for investors. It will facilitate the process for foreign companies entering Egypt, and this is a positive development.
EBRD is organising the second business forum for the southern and eastern Mediterranean region in Cairo on 14 November
EBRD has provided six dedicated credit lines to the local banks for on-lending to small businesses, in addition to advisory services to over 600 small enterprises