By Ahmed El-Adly and Mostafa Fahmy
Hossam Farid, President of the Association of Young Businessmen, believes the crises Egypt is currently experiencing represent a great opportunity for infrastructure investment despite political instability and security issues.
He said that the Egyptian market is one of the most attractive places in the region for investment especially since it is a large consumer market. Farid said: “Despite the instability facing the economy since the 25 January Revolution, the government will still be capable of attracting major local and foreign investors.As long as it confronts the main obstacles, most importantly the lack of energy and economic legislation, it won’t even need to persuade investors to pump their investments.”
Energy represents a top priority for any investor willing to pump in new investment, especially since Egypt is witnessing a significant power supply deficit of up to 15%, said Hossam Farid, the Association of Young Businessmen President. At the same time, the energy crisis does not have a significant effect on factories in light of the government’s commitment to supply fuel to industrial zones.
Farid stressed the need for the state to move in the direction of developing alternative sources of energy like sun, wind, and waste. It must also encourage investment in these fields through urgent economic legislation that are well-organised and stimulating. He explained that the most significant challenge facing any investor willing to invest in Egypt is the lack of economic legislation governing the work environment in Egypt.
In the same context, Farid said that Egypt suffers from the vulnerability of infrastructure such as roads, airports, ports, and annexed land.This could establish new investments, but the bad condition of infrastructure could prevent new investments reaching up to EGP 20bn in the coming stage.
He claimed that poor infrastructure in Egypt is due to the fact that the government is now responsible for the development of land through public sector companies that implement these projects very slowly and inefficiently.
He explained that an industrial developer was able to develop about 6m-square-metres during a year’s timeframe, while the government was only able to develop 1m-square-metres during the same period. The significance of this is that the private sector operates at a rate of 5 times the speed of government companies.
Farid further added that infrastructure in Egypt is in need of new investments in roads, bridges, water systems, sanitation, and social services by implementing new projects so as to not repeat the Toshka Project crisis. He explained: “The movement of inland cargo is in a difficult situation due to the absence of security which led to bandits attacking drivers. Additionally, the price of transportation increased significantly during recent months.”
In another context, Farid said that the Egyptian private sector is able to meet the needs of the Egyptian market in goods and services despite the crises that hindered it during the three years that followed the 25 January Revolution. This is especially true with the rise of wages and the increased number of labour strikes as well as the breakdown of the decision-making process by successive governments. Farid added that the “private sector works in an entrepreneurial fashion since 25 January 2011.”
He explained that the private sector is in need of legislation that would regulate the work it carries out.It is important to examine other countries like Turkey which processed approximately 6,000 legislative amendments supportive of the private sector in just one year when it wanted to join the European Union.
Farid added that the private sector is the most capable entity to reduce employment and is the sector that most capable of managing foreign currency because it heavily depends on the export of its products.
According to Farid, there are roughly 120,000 private sector companies, of which 43,000 operate in the industrial sector alone.
Farid criticised the government’s continued support for public sector companies with large subsidies despite evidence of their continued losses, saying “The government supported Ghazl El-Mahalla Company with around EGP 1bn but the company is still reporting losses.”
And on privatisation, Farid said: “I completely agree with the idea of privatising state-owned companies as long as this does not harm the interests of the state. It is possible for the government to sell 70% of the companies and keep the remaining 30%.”
Regarding funding, Farid discussed the need for the current government to adopt clear policies that oblige banks to lend to small and medium enterprises in accordance with binding laws and regulations, which would encourage entrepreneurship as well.
He also emphasised that the slow pace with which banks grant funding to the private sector is one of the main factors that plague the sector, pointing out that banks often create obstacles for small and medium enterprises and require that their budgets show a profit during the last three years.
Finally, Farid noted the fact that banks lend money to the government at a total of about EGP 200bn per year while the amount they lend to the private sector does not exceed EGP 24bn.