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Maintaining momentum key, say Egypt officials at EGY Finance

CAIRO: “There will be both winners and losers from this global financial crisis, and it is very difficult at this stage to bet who are going to be winners and losers, Minister of Trade Rachid Mohamed Rachid said. “We are doing our best to make our country one of the winners in this crisis, Rachid …


CAIRO: “There will be both winners and losers from this global financial crisis, and it is very difficult at this stage to bet who are going to be winners and losers, Minister of Trade Rachid Mohamed Rachid said.

“We are doing our best to make our country one of the winners in this crisis, Rachid added in his keynote speech at EGY Finance Conference on Monday.

Egypt recently announced a LE 15 billion stimulus package for the current fiscal year.

Since the deepening of the financial crisis in mid-September, several governments across the world have unveiled fiscal rescue packages that featured cutting taxes and increasing investments in an attempt to breathe new life into deteriorating economies.

Egypt’s rescue package aims to pour in LE 15 billion on infrastructure projects including transportation, healthcare and water treatment as an economic stimulus.

“There is a problem in our region: It is difficult to finance huge infrastructure projects that require millions. . So governments [should] play a role in ensuring financing is available and that projects are going forward, Rachid said.

“Our stimulus package will throw a lifeline to the economy by increasing government spending on infrastructure projects such as utilities and transportation as well as industrial and commercial zones infrastructure, he added.

The Egyptian government announced Monday it plans tax exemptions and tariff cuts worth LE 2.2 billion as part of its stimulus package.

Finance Minister Youssef Boutros-Ghali told local press that LE 1 billion would go to exempt investors from sales tax on capital goods for a year starting in January. The other LE 1.2 billion would go to reducing tariffs on intermediate and capital goods “to encourage investors to expand and pour new investments.

Investment Minister Mahmoud Mohieldin said on Friday that the government is planning to reinstate free-zone status for energy refineries after it removed tax and custom perks for these firms last May.

The move is part of a series of planned government measures to help the country maintain an average annual investment of $10 billion, he added.

“The keyword is to keep the momentum across the economy, Rachid said.

“There are countries that will be at a better position [despite this crisis], and for that reasons we see a possibility for Egypt to attract investments, both local and foreign.

“Emerging markets are moving faster than developed economies, namely Europe and the US where clear indications point that their growth rates are shrinking, he added. “Emerging economies such as China, India, Egypt and Brazil will continue to grow and will contribute to global growth but obviously at a slower pace.

A United Nations report released on Monday found that world economic growth will slow to 1 percent in 2009 from 2.5 percent this year. Global economy may even contract if stimulus packages prove too little too late, the report read.

Egypt’s economy is set to expand 5.25 percent this fiscal year, down from 7.2 percent a year ago – its slowest annual growth in half a decade, a recent Reuters poll showed.

“I’m not saying that we won’t suffer from impacts of this crisis . but we have to work very hard to ensure that at the end of the crisis, we stand in a better position than when it started, Rachid pointed out.

For Egypt to accomplish that, the minister stressed on both the international and business community to work hand in hand with the Egyptian government to counter growing impact from the financial crisis.

Towards that end, Ambassador Klaus Ebermann, head of the delegation of the European Commission (EC) to Egypt, said that the EC has pledged to spend ?558 million in bilateral cooperation for the period 2007-10 earmarked to modernize Egypt giving special attention to education, health, transport, tourism, agriculture and regulatory reform.

“This [package] places Egypt among the highest beneficiaries of EC grants.

This demonstrates the EC’s commitment to support Egypt in its national priorities and reforms, Ebermann told the conference on Monday.

He added that before the end of 2008, the EC would be giving ?149 million under this program, with the main bulk targeting infrastructure transport (? 80 million) as well as education and water treatment.

“Within this cooperation package, the EC Delegation always paid a particular attention to the financial sector due to its importance for the overall economy, economic development and – in the long term – poverty reduction, he explained.

“Financial markets, or, more broadly, the financial system, matter for growth as they can produce an efficient allocation of resources from savers to productive investors.

EGY Finance Conference, which opened on Monday, presented over $2 billion of grants, technical assistance instruments, lines of credit availed by various donors. It also displayed novel financing instruments such as factoring, leasing, and mortgage finance, seeking to enhance the country’s economy at times of global financial turmoil.

“Our goal is to help SMEs convert their ideas into bankable projects, said Marco Potecchi, head of UNIDO’s Investment Promotion Unit (IPU) in Egypt.

Funded by the Italian government, the IPU was established 10 years ago under the mandate to attract foreign investment and financially support Egyptian companies, particularly SMEs.

It offers technical assistance, soft loans, and lines of credit in all industrial sectors such as innovative and clean technology, agribusiness, textiles, and renewable energies. “We were able to attract $160 million in foreign investments in the last 10 years, Potecchi pointed out.

“Total amount of lines of credit available since April 2006 reached ?10 million. Half of that has already been utilized and the other half is still available.

The IPU’s lines of credit begin at ?150,000 up to ?2 million, with grace period ranging from one to three years.

Topics: FJP

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