CAIRO: As Western governments scramble to nationalize their banks in the wake of the financial meltdown, Egypt has patiently continued to pawn its own. The paradox has not escaped notice.
In one of the most famous cases, an independent committee rejected the sale of the Banque Du Caire earlier this year, claiming the price offered was not high enough. Analysts and pundits have since criticized the rejection as a missed chance, particularly given the swiftly-drooping enthusiasm for banks now observed.
“When time allows, the state will reassess the sale of Banque Du Caire, Minister of Investment Mahmoud Mohieldin told journalists on Monday at the Euromoney Conference. But the reopening of recently-nationalized Western banks over the next two to three years may dilute the Egyptian bank’s attractiveness and complicate the process, he said.
“On Banque Du Caire, it’s not an issue of regret, Mohieldin said.
“Transactions are just about their merits, their circumstances and the kind of support they get to the end.
Mohieldin said he supported the deal and thought it had a good chance of success. “It was a very good transaction at the time, he said. But the sale of Bank of Alexandria in 2006 and the huge return it garnered – it fetched $1.6 billion from Italian bank Sanpaolo – deterred the deal’s independent assessment committee from approving the offer.
When Bank of Alexandria was sold, “it was clean, it was attractive, and it was a completely different world in terms of appetite for banking, said Mohieldin.
On a broader scale, recent reforms have put Egyptian banks in a good position, he said. “Fixing the house was basically the priority of the last few years, now the house is ready to accommodate whatever inhabitants.
The lingering issue is that the banks simply don’t loan very much. Deposit to lending ratios in Egypt are among the most lopsided in the world, Mohieldin said, citing rising interest rates and lofty reserve requirements of 14 percent as causes.
But the minister ruled out state action in the banking sector to ease this situation. “Under any circumstance, the government of Egypt is not going to be intervening directly or indirectly [in bank’s credit decisions], he said.
“We don’t have even the power of moral suasion to do it. We don’t have that and we enjoy not having it.
The government will not be entirely passive in easing the situation, he said.
The state “stands ready to help small- and medium-sized businesses secure loans, the minister said.
A meeting of cabinet top brass on Monday also affirmed that the state will pump more money into infrastructure, including roads, sewers and water supply systems to stave off losses from the global slowdown over the coming year, Mohieldin added.
“We are anticipating further injection of capital through public spending in this current year, ending in June 2009, and in the following year, in major infrastructural projects, he said.
A string of collapses and buyouts among Western financial firms since early September has sparked chatter about whether free-market systems are still viable and has directed some scrutiny toward Egypt’s privatization push.
“The typical citizens on the street are not very much concerned about mechanics or about ideologies or about targets or about databases,
Mohieldin said. “They are after deliverables: ‘Give us higher growth in our incomes, give us jobs’, he said.
“However we can achieve that, we are going to do that, he said.
“But we have to be flexible about the means, the minister added, referencing an axiom commonly attributed to Deng Xiaoping – the de facto leader of the People’s Republic of China from 1978 to the early 1990s – who began the “Reform and Opening process of economic liberalization in 1979.
Whether a black cat or white cat, the saying goes, so long as it catches mice it is a good cat.