Daily News Egypt interviewed Amr El-Ganainy, president of global customer relations at the Commercial International Bank (Egypt), on the occasion of the 2016 Euromoney conference.
At the moment, what is your vision for the Egyptian economy?
The Egyptian economy is facing external and internal challenges; however, given the positive structural changes undergone by the current government, I am optimistic about the economic outlook. One has already felt the extensive efforts of the current management to accelerate the wheel of growth, by launching many mega infrastructural projects, including the petrochemical complex, 1.5m feddans reclamation project, the New Administrative Capital, the recent gas discoveries of Eni and Shell, in addition to the development of a road network that would facilitate internal trade and movement of goods, which is anticipated to positively contribute to a better regulated market.
Another notable stride is the current management’s support and focus directed towards the untapped areas of growth opportunities, such as the SMEs. This dynamic sector, which symbolises a leading driving force for the economic uptick, will definitely expedite its ability to recover and achieve the annual planned growth rates by the government.
What are the current strengths of the Egyptian economy?
I perceive lots of strong areas in the economy, the most important of which stems from its population that generates high demand in the Egyptian market, thus creating wide opportunity for any new goods/services produced. This encourages new investments and expansions. Moreover, the new oil and gas sector and new gas discoveries by Eni will increase Noras field gas production to 1bn cf/d in 2017 from 700m cf/d in 2016, which will be linked to the national grid, boosting the total output and reducing our import requirement.
Another key strength is the launch of mega projects. The commitment of current management to initiate such projects, as the ones I mentioned earlier, will not only stimulate the country’s economic development as a whole, but will as well create new job opportunities, build new cities and contribute to achieving the targeted GDP growth rates.
I have confidence in Egypt’s ability to attract capital inflow as we can see that, in the present and on the short-term level, the interest rates are likely to lure foreign investors, provided the successful adjustment process for the Egyptian pound.
What would you say are the economy’s weaknesses?
Similar to any other economy, we do have many challenges that need to be addressed to ensure the sustainable development of the country’s economy. At present, in my perspective, the biggest hurdle for the economy is the high inflation rate expected at 14.3% for the fiscal year (FY) 2016/2017, which could negatively affect the demand. Besides, the budget deficit, trade deficit, and reliance on imports, even for most of the raw materials used in the manufacturing sector, are the main hurdles and weaknesses of the Egyptian economy. However, the administration is fully aware of the situation, implementing much-needed structural reforms, in addition to considering ways to stimulate the growth of the domestic economy, in cooperation with the private sector.
What are the main challenges facing the Egyptian economy right now?
In my opinion, the dual exchange rate constitutes a main drawback to any new or existing investment. Also, the unclear ownership of land required for industrial, service and agricultural activities of the Industrial Development Authority. Investment authorities and governorates are serious barriers for any expansion or new project, being the first step prior to obtaining the required permits.
How could these challenges be overcome?
As I mentioned earlier, the government is fully aware of the situation and has been implementing some corrective measures to resolve these challenges. The first steps that have been rightfully taken by the government is encouraging local production, export business activities, and cutting unnecessary import activities. Another important step, in my opinion, is to encourage SMEs via proper legislations in general and the Central Bank of Egypt’s (CBE) guidelines in specific. We also have to capitalise on the retail market and encourage financial inclusion to maximise revenues. Proper legislation has to be issued to incorporate the grey economy into the formal one to maximise tax returns and economic efficiency and thus availing more resources to be directed to the required investment items in the budget. Proper training is also necessary for quality improvement and increasing productivity.
What activities or projects can help the Egyptian economy grow?
Education, either technical or university-level, is the key for any sustainable economic growth for the long-term. More investments should be allocated to the development of education in the country. On the other hand, we have to encourage SMEs, export-based activities, manufacturing, and tourism, which will lure in positive, promising returns for the medium-term.
How can the government overcome the shortage in foreign currency?
The move towards a more liberalised exchange rate regime is one of the tools to solve this shortage; however, it must go hand-in-hand with other reforms. These include improvements to foreign investment regulations, infrastructure, and the system of land deeds.