The World Bank aims to eliminate poverty and promote social inclusion in Egypt, already providing technical assistance to the Suez Canal Area Development project, said World Bank Director for Egypt, Yemen and Djibouti Hartwig Schafer.
Schafer sat with Daily News Egypt to discuss the World Bank’s current and future projects in Egypt, mentioning that their partnership with the country has strengthened throughout the past three years.
What is the value of the current World Bank portfolio in Egypt?
We currently have a portfolio of 27 projects and they account for around $5.5bn. Around half of these 27 projects are in the energy sector, because we believe that reliable power supply is absolutely critical for the development of the country, it is important for the private sector and the people as well. In the energy sector, we are supporting power generation as we are financing Giza North Power Project with $840m that aims to generate 2,250-MW, which is huge and accounts for around 10% of the nation’s needs, we also have Ain Sokhna and Helwan South. In addition to generation, we are also supporting and we will do much more in the areas of renewable energy and energy efficiency, and we very much like that the Egyptian government has introduced the feed-in tariff to encourage private investors to invest in solar power and wind energy.
Do you think the government can achieve its goal to produce around 20% of its needs through new and renewable energy by 2020?
The initiative will encourage private investors to invest in renewable energy and in innovative technologies. It happens when you have a feed-in tariff you give investors security of how much they will get for the power they are producing. You will see that with such policy, you will have the private sector go very strong. I saw that in other countries, and Egypt is in a much stronger position to exploit solar energy. So, I see this is a huge potential. The same thing with the wind along the Red Sea, because there is a steady wind that provides a very high efficiency in wind energy.
Do you think Egypt needs investment in the infrastructure to be ready for these kinds of projects?
It needs private sector investment but on a global scale, and I would think that this is one of the areas, which is investment in renewable energy and energy efficiency, that the government will focus on for the economic summit in February. They are global investors who are going into these technologies on a large scale, and actually it is a simple technology. By setting the 2020 target, the government is providing the framework for the private sector to invest. With regard to energy efficiency, the existing power plants need upgrading to be efficient with the same use of gas to produce energy. A World Bank team is coming this week and their focus is on providing support to make sure that investors are coming into the areas of energy efficiency and renewable energy.
What are the other sectors the World Bank is focusing on?
The most important sector, in terms of the size it has in our portfolio, is energy. One of the last energy sector things that we approved, four months ago, was a project to connect 1.5 million households to the national gas grid, this is a very important project that accounts for $500m, and it will connect households that are currently not connected to the gas grid and also to help those women who used to carry empty gas cylinders in long lines to replace them with filled ones. So this project will take off the burden of lifting gas cylinders and waiting, and also will make people get national gas at the price that has been advertised. This project is applied in Cairo and Upper Egypt, and the World Bank is trying to focus on the underprivileged areas.
Other than the energy sector, we focus on transport as we have a number of big infrastructure projects as a huge investment in the railways to replace the tracks and also to put much better system to enhance the efficiency of transport but also to increase the safety issue as we hear every year people get killed on railway crossings because it is not safe. Then we are engaged in the sanitation, and this is an area we plan to do more in, particularly rural sanitation as in rural areas, around 3 out of 20 houses have safe sanitation so this might lead to a huge pollution issue. We also have a couple of operations to support small and micro enterprises, to give credit to allow those small firms that cannot access the formal banking sector for loans to expand their business.
Can you provide us more details on the World Bank’s 2015-2019 Country Partnership Framework in Egypt?
The support of the World Bank to Egypt is defined in what we call the Country Partnership Framework, which is a strategy, business plan that defines the areas of where the World Bank is going to engage in. This process takes around a year and a half, from the initial design to the finished product because in this process we look into the sectors that we have supported in the past and how much they actually benefited the poor. The second thing is that we look into the current constraints, and generally the World Bank has two goals; to eliminate poverty, and this is present in Upper Egypt, and to encourage social inclusion, which is to make sure that those who are not participating in the economic development are actually participating; it could be unemployed youth and women, or micro projects. So we look into these goals and see where the World Bank can be supportive. We met with the government and asked them what they think, and then we met with stakeholders in Cairo, Alexandria and Aswan. These discussions have included civil society organisations, academia, professors and also the private sector. It was nice having these various views in a discussion. We are now working on a kind of a draft to this framework, after that we will come back again to meet the same stakeholders to see if the plan meets what they aspire.
Did the views of the private sector meet the views of the government?
If you look at what are the top priorities, everybody wants education and jobs, and I think the private sector as well as the government and civil society are interested in creating jobs. But how you get them is where education comes in, to improve skills when people graduate.
Tell us more about the technical assistance that the World Bank is providing the Suez Canal Area Development project.
The World Bank provides financial assistance, however, we also have different interventions, one of them is bringing expertise from another part of the globe to benefit Egypt. We are doing that in areas of social safety net and cash transfer, this is something we very much work on and the government is doing this to transfer the subsidy on fuel into much better category through a cash transfer programme that the Ministry of Social Solidarity is launching to reach the poor.
With regard to the Suez Canal, we are providing technical assistance to the Suez Canal Authority, and we are providing advice from projects we were engaged in other parts of the world, so we have people who have worked on the Panama Canal that went through the same thing in creating industrial clusters along the Canal Zone.
What do you expect from the Suez Canal Area Development project?
The project has a huge potential in terms of economic growth, in terms of creating jobs for the fast-growing population, and also for diversifying the production structure in the economy. What I see is that throughout the years, along the Suez Canal we would have huge employment centres that provide jobs to unemployed people. The canal is also located in a very privileged place; between South Asia and Europe.
Will the World Bank participate in Egypt’s economic summit in February 2015?
Yes, this is an extremely important event and it will highlight the opportunities that Egypt provides for private investors and for international institutions like the World Bank, it will highlight the areas that we support Egypt. We are definitely preparing for it.
How do you prepare for the summit?
We are looking into our portfolio, and we will also present our Country Partnership Framework, as it will be done by that time. We are in touch with the government in areas where we can actually support the government’s plans. We look into the areas of energy, rural sanitation and agriculture.
How do you assess the government’s measures that aim to reform the economy?
We very much support the measures that the government has taken in the last four months in terms of creating macroeconomic stability, and that the Ministry of Finance has been very clear to bring down the fiscal deficit and to move expenditure from one part of the budget to areas that are more productive and reach the poor directly. I think the government understands that additional steps will have to follow and it is a programme that is going to be implemented gradually in 3 to 5 years. The other thing that the government is committed to do is to improve the business climate as the private sector has number of areas that they would like to see to ease the policies and procedures of doing business. This is something that the ministries of investment and industry are working on, and these areas have to be prepared for the economic summit.
What are the other measures that the government should do?
The first thing right now is to make sure that the cash transfer programme is being implemented as this will have a huge impact particularly among the poor. The second thing is move speedily on simplifying business procedures and make it easier for investors to set up the company because that will create the jobs as Egypt needs to create around 700,000 jobs every year just to absorb the new graduates who are entering the labour market, and this can only be done through the private sector.
Do you think Egypt still needs the $4.8bn IMF loan?
The first important thing about the IMF, is that the government has invited them to review the economic situation in the country, and I think this is important as it gives an assessment of the macroeconomic level. I don’t think we need to focus on the programme as what matters is that the IMF is coming the next month, according to the finance minister, to review the economy and that is important for the economic summit. And I think then we will hear from the government and the IMF about the deliberations and what is needed in terms of additional resources, these resources can come through partners in the Gulf, the private sector or other different sources.
Does Egypt need grants from Gulf countries?
In the last year, these grants have been of tremendous help because they have been funding a number of activities in the stimulus package. If the resources are not growing as fast as the expenditures then clearly there will be a need for support from partners, which is not an unusual thing and it has always given the government a space to develop its own agenda.
How do you evaluate Egypt as a World Bank member compared to other MENA (Middle East and North Africa) countries?
At the World Bank, we have a very long standing partnership with Egypt and particularly this partnership has been strong throughout the past three years. The World Bank in Egypt has been able to continue the collaboration despite political ups and down. Our programmes have been expanded through the past three years, and we have been able to implement our own portfolio, without interruption, as our current 27 projects have been 20 projects three years ago, but over time we have added more important projects. We have been able to move our projects to emerging priority areas in Egypt. For example, after the revolution, the first project approved for Egypt was the Emergency Labor Intensive Investment Project for$200m to create short-term employment opportunities for the unskilled and semi-skilled workers.
As for the value of financial assistance that Egypt received from the World Bank, is it high or low compared to MENA countries?
It is the largest portfolio in the MENA region and I would say without doubt that Egypt is the most important partner in the MENA region. We stand ready to scale up our support to Egypt as we see that Egypt is the engine of growth in the Middle East region. A nation with over 80 million people in population has an enormous economic power.