By Nehal Munir and Mustafa Fahmi
Mohammed Al-Suwaidi, chairman of the Federation of Egyptian Industries, believes that increasing the role of the private sector in the Egyptian economy will contribute towards resolving the current crisis.
He stated in an interview with Al-Borsa that bureaucracy and red tape serve as deterrents to investments. Government bureaucracy makes obtaining approval to establish a factory or investing in a new project highly burdensome.
Government bureaucracy and red tape deter investments, said Mohammed Al-Suwaidi, chairman of the Federation of Egyptian Industries. He noted: “Bureaucracy has forced small scale investors to flee to the informal sector.”
He then pointed out that the main joint undertaking between the government and the Federation is to develop industrial zones tailored towards small scale investments and microfinance by renting units, which allow investors to build and eventually own the rental units outright.
Al-Suwaidi explained that the Department of Industrial and Real Estate Development within the Federation introduced a marketing plan for those areas. He said that the Federation, in collaboration with the Ministries of Commerce and Industry, plans to draft the necessary legislation to make this a reality. The Department of Industrial and Real Estate Development is negotiating with industrial development companies operating in the local market to develop and equip the land.
He said that the usufruct land allocation system operates between a 30 and 40 year time-span. Developers invest in building up the land, leasing it, and maintaining it in order to achieve a reasonable return, which could range between 9% and 10% per year.
He added that those areas are distributed among the timber industry in Upper Egypt and the plastic industries in Alexandria, which is expected to open for business this September. There is also an area belonging to the Ministry of Investment in Mit Ghamr in which the aluminium industry is active. He pointed out that the Federation is negotiating with the Industrial Development Authority to authorise the establishment of new industrial zones in the provinces of Qaliubiya and Fayoum.
He explained that there are several factors which determine the allocation of industrial zones, most important being the availability of raw material for the development of these areas. He added that the industrial development companies negotiate funding options with certain entities in order to complete the development of the industrial zones.
Al-Suwaidi believes that the energy crisis will be resolved by coming to an agreement to allow the private sector to import energy from abroad.
He said that the Suez Cement company has invested $200m towards creating a wind power plant to solve the energy crisis. He stressed the need for factories to import energy from abroad to ease pressure on the national electric grid.
He added that the state is required to act boldly and enact legislation to double the investments, curb bureaucracy and avoid international dependency by adopting international standards on environment and health.
He demanded the establishment of a unified framework for cement investments and the same for oil investments, which would then be expanded out to other sectors after the experimental phase which will encourage small scale investors.
Al-Suwaidi emphasised that the Egyptian market is still able to attract new investments, especially after the passing of the law that favours domestic products. He added that the law will attract foreign investors to participate in local manufacturing and take advantage of the market’s many benefits.
He said the incentives include the prime location, human resources, and raw materials. Investment opportunities in the industrial field are highly sought after, and much of the recovery will be shouldered by this sector during the coming period.
He explained that the industrial areas most capable of attracting investment are industry developers and quarries, as well as factories that provide added value.
He pointed out that investment opportunities in the Egyptian market are not limited to industry. There are opportunities in tourism, real estate development, energy, and infrastructure. “Egypt’s weak infrastructure is an opportunity to invest in Egypt. Infrastructure size will double in area in the near future,” Al-Suwaidi said.
He added that the government has taken steps to attract new investments and to exploit Egypt’s many advantages. These steps include halting the export of raw materials so as to force the investor to enter the Egyptian market.
Al-Suwaidi expects the Egyptian market will attract large Arab investments in various fields. He stressed that Arab investments are welcome, even if tailored to support Egypt’s political position.
Al-Suwaidi praised the aid that the Gulf gave to Egypt last period, and criticised those who refuse such aid, saying, “Egypt did not receive assistance from the Zionist states, Egypt receives aid from Arab states. They are mindful of Egypt’s importance and want to help it to stand on its own feet. These countries were witnessing the collapse of the Arab region, so they decided to help the only steadfast state.”
He said that the participation of the armed forces in the economy in competition with the private sector is necessary at this time to create a balance in the domestic market. He went on to say, “It’s best that the military has investments to create a balance in the market. We have sectors that have problems and there must be a balance.”
Al-Suwaidi stated that the army allows the participation of the private sector in large projects. Companies from the private sector work on these projects under military supervision.
He also stressed that the army’s participation in the economy is very positive in the short term. He expects that it will withdraw from the long-term economic landscape and cease making investments because the armed forces have a policy of self-sufficiency.
He pointed out that the army is the sole source of confidence in the current circumstances. He said the Arab states are supporting its initiatives because the government is suffering from management problems.
On the other hand, Al-Suwaidi said that the relationship between the current government and businessmen is positive yet occasionally contentious. He is confident that this competition will ensure the best results.
Al-Suwaidi called on Egyptians to buy certificates of investment in the Suez Canal Project, explaining that the investment certificates are the best way to finance the project and that he preferred to use the equity towards projects surrounding the canal.
Al-Suwaidi said that the Federation is preparing three new bills, including the GDP law scheduled for completion by the end of this month. The preparations also include the draft law on industrial zones that have recently been established in addition to the draft law on accreditation bodies and the one-stop shop.
He revealed that the Swedish Ministry of Industry approached the World Bank for EGP 700m to complete the project of transferring the tanneries from Magra Al-Aoun to Alrubiky, a project which requires about EGP 1bn to be completed. He pointed out that the Federation in collaboration with the ministry agreed with the World Bank on the financing for housing units for workers in the city.
He stated that the IMC aims to formulate programmes to support small and medium sized industries and labour-intensive factories to solve the current crises.
He stated that the office of the presidency and the government did not force businessmen to donate to the Long Live Egypt Fund, saying, “Nobody is being forced to pay. And those who don’t pay aren’t being punished. Sisi’s quote that ‘All will pay’ was said with no such malice.”
The Federation continued to collect donations worth EGP 100m from members of the Chambers of Industry for the Long Live Egypt Fund. The state goal of ‘A Billion’ aims to collect EGP 1bn towards the fund during the year. He expects to collect EGP 1bn by the end of 2014.
Al-Suwaidi said that the Federation will send the collected donations in instalments. He said that, “EGP 1bn is very doable for industrial companies.”
He stressed that donations from industry to the Long Live Egypt fund will increase by a large margin if the government issues new economic legislation to improve the investment climate. He said that donations will not be all in cash, with some donating various industrial raw materials for the benefit of the state.
Lastly, Al-Suwaidi pointed out that some industrial partners have already begun gathering donations, such as the building materials and food industries. Other sectors’ contributions will be announced soon, he said.