CAIRO: “Egypt is going to end up stronger, freer, a better place to do business and more attractive [to investors],” Karim Helal, Group CEO of CI Capital, told Daily News Egypt.
The immediate effect will be a short-term lull as investors pause to see how ongoing protests will play out, but at the same time, “there are already people calling wanting to see what they can invest in now,” he added.
Muhanad Awad, CFO of Al Hokair Group — undertaking the construction of Mall of Arabia — said that the group’s “investments are safe in Egypt,” adding that they “just transferred cash to Egypt to boost equity for construction of projects here.”
As mass nationwide protests calling for the ouster of the current regime continue into week three, businesses have been slowly coming back online since Sunday after several days of a complete economic standstill.
An internet blackout, spotty mobile services and a tight curfew made it almost impossible to do business at the time, but banks reopened on Feb. 6 and the stock market is gearing up to resume trading on Feb. 13.
As banks reopened, the prevailing fear was that the Egyptian pound would spiral downwards against the US dollar. While indeed falling, it was not the impending crash many anticipated, and so the feeling is that the stock market will perform in a similar manner when trading resumes, especially after the tightened measures announced by the stock exchange to mitigate the effects of a possible panicked selloff.
Buy, don’t sell
Many young Egyptians aware of the dire effects of a possible stock market crash are rushing to form initiatives calling on people not to pull out of the stock market unnecessarily, while at the same time asking people to invest with even as little as LE 100.
CI Capital is calling for the same, under the slogan: “No to selling.”
Commercial International Bank — the parent company of CI Capital — created an investment fund in which any one can invest as little as LE 67, “building on youth initiatives calling on the Egyptian youth to stimulate and revitalize the national economy and support the stock market,” according to a statement.
The fund will be open for investment starting Thursday, with the aim of raising the volume of trading on the stock exchange “to protect it from the negative effects that may result from the current crisis, drawing from a Facebook initiative calling on every Egyptian to invest LE 100 or more in the stock market.”
Brokerage firms are to facilitate trading operations by exempting costumers from commission charges or expenses, “to support the positive trend shown by the youth of Egypt,” the statement read.
Helal told Daily News Egypt in an interview: “We all want to protect Egypt. If you look at the 2008 financial crisis, the stock market lost 75 percent of its value in little time and that was not of our own doing, but we paid the price.
“Retail investors went into panic mode and started dumping when they saw foreign investors dumping, not thinking that the foreign investor was dumping for reasons that had nothing to do with us. They were going bankrupt and needed cash.
“Today we have learned our lesson. The only one who will protect our capital market is us, and now everybody is asking how they can help. There’s an incredible sense of patriotism.”
Back to basics
What’s important to remember is that the fundamentals of Egypt as an investment destination remain unchanged: a massive consumer market of mostly youth, skilled labor with a lot of unrealized potential, a strategic geographic location — as well as control of the vital trade route through the Suez Canal — and ample tourism aspects to boot.
As Helal said, “Egypt is not going to go anywhere, the population is not going anywhere, the location is still the same…all the drivers of the Egypt story are there. If anything there are bargains [for investors] now.”
Speaking about the youth-led protests, Helal — whose company resumed operations on Feb. 6 — saw plenty of positives resulting from the spontaneous movement that led masses to the streets.
“Egypt is not going to be the same, what happened was bound to happen. Maybe many people did not expect it to happen so fast and at such magnitude. The entire fabric of Egyptian society actually came together with one common theme: Egypt,” he said.
Another positive is that the protests have had no specific religious flavor. “The main theme was totally secular, totally Egyptian, purely spontaneous.”
Residents of every neighborhood took to the streets to protect their communities, to regulate traffic, to collect garbage, and be of service in whatever way they can. “The true hidden mantle of the Egyptian people actually came out and it will never go back. That to me sends a very strong message if it is properly conveyed [about] that the human capital, the youth of this country.”
Before and after
Many around the world agree that January 25 caused a seismic shift in Egypt, whether the politics, the economy or people’s attitudes. Already many conversations start with “before January 25” or “after January 25.”
Helal said, “Pre-January 25 we had a very strong Egypt story that we were promoting with investors and that story hinged on a number of things: one of them was the demographics of the country and the population, which represent fantastic investment opportunities. Now this demographic has shown something we did not see before.
“We are all very proud of what the youth did [and] we’re a little bit embarrassed because you guys did what my generation and the one before couldn’t do. We did not even dare to think, [but] you broke the fear barrier and that is unbelievable. …The way it was done sends a very strong signal that this country has come out of the dungeon, never to return.”
One glaring negative aspect of the past two weeks is the flight of tourists and some foreigners living in Egypt out of the country. Some of this was a result of uncertainty over safety concerns, but much of it was prompted by numerous reports of attacks against and the detainment of foreign correspondents — both because they were foreign and also journalists.
“One of the side effects of too much information everywhere is that people get confused and you end up not knowing what is credible and what is [not]. The last week or so there was a growing misconception that the streets of Egypt have become hostile to foreigners and that is not true and it’s very bad.
“We have a number of foreigners working with our organization, here in CI Capital and at CIB, including Americans and others. A number of them have left the country because they have families, which is perfectly understandable. Others are still here.
“Yes there were incidents, but those incidents mostly happened around Tahrir, mainly with journalists. It is important to put this into perspective and to reaffirm that we have always been extremely friendly towards foreigners and nothing has changed. Those individual incidents part was triggered by terribly distorted media and by equally distorted media from the state. They have no credibility, the official apparatus has no credibility,” Helal said.
From CI Capital, two expats have stayed while three have left this week and all are eager to come back, and will be back to work next Sunday.
Succession, corruption
As an immediate effect, businesses in Egypt will see “considerable, immediate cost,” as witnessed already in tourism, which has completely stagnated.
“Investors will take a pause now so the flow of FDI is bound to suffer. I don’t think it’s going to disappear at all but capital by definition is a coward, so they will take a pause to assess the situation,” according to Helal.
As investment bankers, when speaking to potential investors, Helal says there have always been two main concerns: the political scenario, mainly the succession issue, and corruption.
As for the first, the succession issue and the politics are being resolved. “We all know the regime as we know it is gone forever. It will never be the same again,” he said.
Corruption is also set to abate. “There’s a very fervent purge for corruption, it may be a little bit over the top, but it’s there and it’s not going back.”
In the end, two of investors’ main concerns and what may have kept some from coming to Egypt are essentially being addressed, and hopefully, will be fixed.
At the heart of the protest, along with demanding more freedom and democracy, have been valid economic concerns: unemployment, inflation, low standard of living and low incomes.
What’s the solution? According to Helal, it’s more economic development, increasing productivity and output as well as creating jobs to increase levels of income and purchasing power.
“Political stability rests on social contentment,” said Helal.
And while a lot is set to change, two things in his view should remain the same: infrastructure development and supporting small and medium enterprises.
Both have been the focus of officials and the business community over the past two years, and Helal says they now need an even bigger push. Much of the government’s economic stimulus packages to deal with the global financial crisis were geared towards infrastructure spending, which is now being carried out more and more under public-private partnership schemes.
“You cannot aspire for double digit GDP growth with [bad] infrastructure…and people in the finance ministry’s PPP Unit says all projects are going ahead as planned,” he added.
“All this economic development has an even heightened sense of urgency. Subsidies are a short-term aspirin, not sustainable — you end up paying for it a lot down the road.”
Support for SMEs, a pillar of the economy, needs to be “accelerated and be more actionable.”
As for the ever controversial privatization plans, Helal says they have already been stopped. “I don’t think it will be something that we will see in the near future. The focus should be on improving productivity, and that means industry, agriculture, above all infrastructure, and real concrete support for SME to realize their potential.”
Also key is creating a fair environment and wage structure for the labor force, with the objective of increasing and rewarding productivity. Meanwhile, “education and work discipline need to be tremendously enhanced.”
