How did the ministries of finance, trade and industry weather 2016?

Hisham Salah
12 Min Read

At the end of December, Minister of Trade and Industry Tarek Kabil and Minister of Finance Amr El-Garhy, the heads of two ministries vital to carrying out Egypt’s economic reform programme, announced what their ministries have accomplished during 2016.

On the tail end of a rough year, from the foreign currency shortage and subsidies cuts to the flotation of the Egyptian pound, did the ministries’ actions meet expectations?

The trade sector

In his year-end statement, Kabil said the Ministry of Trade and Industry set a strategy in place that aims to increase exports, which he considers the ministry’s biggest accomplishment. Kabil said that the strategy, which was launched last November, has thus far increased Egypt’s exports by 9%.

According to the statement, the value of Egypt’s exports recorded $20bn in 2016, instead of $18.6bn in 2015.

However, Egypt’s imports decreased by 9%, to record a value of $70bn, compared to $77bn in 2015, because of the strategy’s application.

The results of exports and imports reduced the deficit in trade balance by 9.5% in 2016 compared to the year before.

The minister said in the statement that the ministry opened new markets for Egyptian exports when the Eurasian Economic Union agreed to begin free-trade negotiations with Egypt.

The statement also said that the ministry implemented legislative reforms that improved the investment climate, such as limiting the country’s imports to registered factories and sources to guarantee high quality.

The ministry provided EGP 3.7bn as funds to increase exports, the statement said, explaining that any producer who achieves 50% more exports will be eligible for receiving the funds.

The statement showed that the Egyptian Export Promotion Center has signed four memorandums of understanding with Azerbaijan, Bahrai, Portugal, and Morocco that aim at increasing Egyptian exports and exchanging practical experiences.

According to the statement, the Egyptian Commercial Service signed exporting agreements worth $510m for fruits, vegetables, food, medicines, and chemicals products.

Egypt also signed a memorandum of understanding with Saudi Arabia to establish an international trade zone in Saudi Arabia.

Both countries have agreed to promote trade fairs in Egypt and Saudi Arabia.

Kabil said that the ministry arranged 69 fairs and exhibitions, 34 of them were abroad in the Africa, Europe, United States, and Asia.

The ministry is currently working on a one-stop shop system, which will allow the government to attract new foreign direct investment, and would help investors to export or import easily.

Abobakr Emam, the head of the research department at Prime Holding, said that the ministry’s efforts are good, but not necessarily what investors want.

He explained that the value of Egypt’s exports is still low, and the government has to help investors to solve their problems, such as the problems that exist within the foreign currency shortage.

He believes that the only way to rescue the Egyptian economy is to increase its exports.

Emam said that China, for example, provided $250 for each tonne of construction steel, which made producers export their products at $150 per tonne compared to the price of $400 for steel in any other country.

“We need such support to increase Egypt’s exports,” he noted.

Minister of Industry Tarek Kabil (DNE Photo)
Minister of Industry Tarek Kabil
(DNE Photo)

The industry sector

The statement said that releasing the strategy for industrial development was the most important thing the ministry accomplished during 2016.

Kabil said in the statement that the strategy aimed at solving investors’ problem and creating a better investment environment.

The statement stated that the ministry provided 22.3m sqm for industrial investment in Port Said, Minya, El-Sadat, and other cities.

The government also launched the initiative for providing licenses for ready-for-production factories for small projects through industrial zones in 10th of Ramadan and Port Said.

The ministry also sent laws about food safety, industrial licensing, and the automotive industry to the parliament for studying.

Kabil said that planning for the furniture city of Damietta has been completed, and is working on establishing a company to promote its products.

He added that, during last year, 605 new factories were established with a total investments value worth EGP 9.3bn and a production value of EGP 27.7bn.

The new factories created 210,000 job opportunities.

The government provided 2881 new approvals with a value worth EGP 69bn, which created 136,000 job opportunities.

The minister said that the government provided three licences for producing cement, with a total value of EGP 481m.

According to the statement, the ministry has finished planning for the industrial investments map, and will suggest investment opportunities in 12 governorates.

Kabil said that that cabinet also approved of establishing a new body to develop small- and medium-sized enterprises (SMEs).

The government has also issued 900 new standards to guarantee the quality of Egyptian products, which aims at increasing exports.

A total 9,734 inspections were carried out for that purpose, Kabil noted.

Similar to the actions taken in the trade sector, Emam said the actions taken by the ministry in the industry sector are not weak, but that, once more, they are not what investors need at the present time.

He believes that the licensing process is still very tiring and bureaucratic for all those involved.

The government has to change the laws to make it easier for investors to start production, he noted.

Emam said that the government should provide more privileges for investors in order to attract foreign direct investment.

He believes that the Supreme Council for Investment during its first meeting issued decisions that were much needed, adding that such decisions are what investors are looking for when questioning whether they should invest in the country.

It’s worth noting that the Supreme Council for Investment, headed by President Abdel Fattah Al-Sisi, held its first meeting on 2 November after announcing the first draft of the new Investment Law, in order to discuss attracting new investments.

The council decided to lift taxes and offer free or discounted land in a bid to attract investors amid economic and political instability.

“It’s not possible to keep the current situation without changing in the current year if Egypt wants to get better,” Emam said.

Minister of Finance Amr El-Garhy
Minister of Finance Amr El-Garhy

The finance sector 

With regards to the finance sector, Minister of Finance Amr El-Garhy, announced what the ministry has accomplished in 2016.

In the statement, El-Garhy said that he had worked on nine different issues in which he wanted to implement development.

The first issue regards modifying the ways monetary policies are managed.

According to the statement, the second issue was the implementation of legislative reforms. The ministry implemented new laws within the economic reform programme, such as shifting to the value-added tax (VAT).

The third issue was the impact of economic reforms on the international reputation of the Egyptian economy, which witnessed a serious improvement.

He added that the fourth issue was focusing the government’s attention on the poorest segments in society.

El-Garhy stated that the ministry improved social protection programmes, which represents a major focus in the government’s economic reform programme.

The fifth issue the ministry worked on in 2016 was about expanding the cooperation with private sector.

The minister noted that the government is planning to cooperate with the private sector in 12 national projects.

He said in the statement that the sixth issue of the report deals with the attention of the Ministry of Finance towards community outreach and promoting transparency.

The seventh issue was about dealing with the institutional and technical development of the ministry to enhance its efficiency.

The minister added that he focused on holding meetings with international institutions and organisations, which constitutes as the eighth issue.

He emphasised the positive results of cooperating with international bodies, adding that efforts of the Ministry of Finance successfully improved the way the world views Egypt.

Negotiations with the International Monetary Fund led to securing a $12bn loan, which will be an important step forward for the Egyptian economy, the statement noted.

The last item of concern was the social responsibility the Ministry of Finance focuses on upholding.

Hani Tawfik, an economic expert, said that he cannot blame El-Garhy for the modest performance, adding that he is in charge of the most incompetent ministry of all the Egyptian ministries.

He believes the Ministry of Finance has the ability to change Egypt’s budget deficit into a surplus if it makes the right decisions.

“If the ministry would uphold tax payers to the global standard it would change everything for the better,” he noted.

Tawfik explained that all other countries have incomes from taxes that average around 25% of GDP. He added that if Egypt would have the same rate, it would earn EGP 700-750bn instead of the current EGP400bn.

“Such a great amount of money could end the budget deficit and create a surplus, which is why the government went for the IMF loan,” he noted.

The expert believes that parliament has the power to issue the decision. However, it needs a push from the ministry, he added.

Tawfik said that a large segment of the population, which has a 50% share of the income earned within the country, does not pay taxes for their incomes, such as doctors, private clinics, lawyers, and construction contractors.

He said that other than the tax problem, the ministry’s performance was no different than previous years under other ministers.

However, the IMF’s approval of the $12bn loan was a successful step forward, he noted.

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