Bureaucracy, complicated investment legislation, and administration corruption are the main stumbling blocks to economic reform, several heads of banks said during the People and Banks Conference last Wednesday.
Participants in the conference discussed how to work to restore investor confidence in the Egyptian market in order to transform it into a magnet for Arab and foreign investments, and to encourage the private sector to share with its public counterpart in implementing greater projects through a legally sound environment.
Chairman of the Board of Directors of the National Bank of Egypt Hisham Okasha said that foreign investment is the most important factor in supporting economies and contributes to an increase in savings growth rates. These rates are currently between 6-8%, while they should hover around 18-20%.
He pointed out that it is time to amend legislation that impedes investment, productivity, and diversity, and he stressed the presence of the bank liquidity necessary for financing new and existing projects.
Okasha stressed the significance of the role of collaborative projects between the public and private sectors in the coming years, pointing out that this is a prerequisite for stimulating the stock and bond markets and contributing to attracting more investments.
Chairman of the Board of EFG-Hermes Securities Mona Zulficar asserted that it is incumbent on the state to meet certain requirements to attract Arab and foreign investments, the most important of which are institutional reform and removing all legislative obstacles that hinder investors from breaking into the market.
She stressed the need to restructure state institutions to interact directly with the investor, as this is the most important obstacle in the way of the flow of investments. She pointed out that investors are hindered by the need to visit multiple administrative centres in order to start a project, ensure licenses are issued for the company, and put the plan into action.
She pointed out that despite proposals to have a single window for laws and regulations, it has yet to be implemented, and she stressed the importance of an orientation toward local investors for pumping funds into the country. This would encourage Arab and foreign investors to increase large investments in Egypt.
She praised the role of the Gulf in supporting Egypt, but said investors from that region have voiced the need for highly efficient institutions with which to interact, as well as the speedy passing of resolutions supporting an element of competition in the domestic market.
Zulficar pointed out that applying the justice system and rule-of-law would permit all citizens to attract investors’ funds and to establish projects through self-financing by obtaining loans from banks.
She added that one of the most crucial aspects taken into consideration by the investor is the speed of litigation and obtaining judicial decisions. She noted that although the Economic Court was recently established, it does not meet their needs.
Head of the Egyptian Bank for Export Development Mohammed Ismail described a need to restore confidence in the economy and investment in the near future by developing complete and clear strategies that enable investors to identify the most important aspects of the economy.
He said that the Egyptian market lacks a strategy clarifying the features of the government economic policy, governmental procedures, and a timeframe for implementing strategy. He cited a need to identify the strengths and weaknesses of the Egyptian economy and to address shortcomings by further strengthening the bourse.
Ismail said that despite the bank not having obtained export support from the government, it continues to support exporters, who have come to reach approximately 65% of the customer base.
Ismail confirmed some changes to the current infrastructure, such as the entanglements within the state apparatus being solved and certain laws being fixed for a specified period so as to avoid investor confusion and consequent reluctance to enter the market.
Vice President of BanqueMisr Mohammed Abbas Fayed pointed to the crucial role of legislation for attracting investment. He stressed the need for a revolution in the legislative and legal environment so as to facilitate business and investment in the local market.
He pointed out that many individuals do not realise the importance of foreign investment and its returns for the economy, nor the impact on their daily lives and stressed the need to increase financial education and awareness of anticipated returns for foreign investment.
Fayed believes that foreign investment is characterised by long-term stability, which helps develop individuals’ lives and achieve comprehensive development as well as a sustainable vision for the future of both individuals and enterprises.
“The state must improve the environment for new land provision, achieve a one-stop investment environment, confront bureaucracy, and increase the qualifications of workers on the market,” Fayed said. Political and security stability have motivated the realisation of almost 100% of the roadmap, a critical factor in restoring the confidence of international markets.
Fayed touched on the development of foreign direct investment throughout the past few years, which rose from $337m in 2003 to $11.5bn in 2007. These numbers dropped after the 2008 global crisis to $6bn and further declined after the 2011 revolution as a result of political instability.
Vice Chairman of the Board of Directors of Arab International Bank Hassan Abdel Magued said: “It has been observed that a number of foreign investors followed the situation in Egypt and hoped to invest. This required a change in the image of the Egyptian market and communication with foreign investors.”
Chairman of Executive Administration Affairs at Barclays Egypt Shady Kamal said: “Our bank works 100 metres from Tahrir Square, the heart of the revolution and a constant flashpoint for demonstrations, but we are stable and our economic business continues despite the media’s incitement and focus on heated political events. We work as an international group in Egypt to deliver an accurate portrayal of the situation.”
Kamal said that his bank performs many actions and has entered into several transactions with numerous visits to clients and investors, a fact reflected in the bank’s size. He pointed to their continuous communication with their parent group to deliver a realistic portrayal of events in Egypt for both the bank’s shareholders and foreign investors.
He emphasised that this type of financing provides low-cost loans to investors, which includes returns on the low investment cost of the project. He noted the possibility of an interest cut from 6% to 4%, which represents a third of investment costs.