CAIRO: While no one can deny that the investment climate in Egypt has significantly improved since the government undertook a few bold measures starting in 2002, the year that Egypt opened its economy to the private sector, investments in Egypt have yet to reach their peak.
In an exclusive interview with The Daily Star Egypt, Ahmed Naim Badr, managing director of Naeem Holding, a free zone investment banking company in Egypt, expresses his viewpoint that while the government has succeeded in building an export-led, high-growth economy, one remaining factor prevents foreign direct investments (FDIs) from reaching their full capacity in the country.
“We should see more political transparency, says Badr. “There should be a clear political hierarchy. This is the only issue that could be worrying investors. It’s not economic issues or reform issues.
What the country lacks is something that cannot be determined with a calculator.
It has become common knowledge that Egypt is trying to attract more FDIs, attempting to eat away from the Gulf’s appealing FDI pie. Yet, as long as the country does not address the issue of political transparency, their efforts to lure some of the foreign currency injected in the Gulf will be wasted.
Badr is quick to point out that while political transparency remains a big threat to the success of investments in Egypt, in all other aspects, the government is doing a good job.
“To me, it’s perfect the way things in Egypt are now. It’s all about confidence, and I consider what has happened in Egypt since 2004 a pure boost in confidence. It’s confidence boosted in people due to real figures and a cabinet which came and knew what they wanted to do with the economy and privatization, letting people inject more into the economy and invest cash in it, says Badr. “Reforms happened a year and a half ago. During that time, it was a case of building confidence. There was GAFI, but if there wasn’t confidence, no one would have showed up. If they (the government) were not putting their money where their mouths were, they would have never gotten investors to come into this country.
“But things have changed. We have seen commitment, we have seen their interest to privatize and to really develop things on the right track, and that’s why we are working closely with them on privatization, whereby on any transaction where there should be a privatization issue in place, we are there promoting it to our customers in the Middle East, explains Badr.
Naeem Holding, with a presence in Saudi Arabia and the U.A.E., has gotten into a few privatization deals since they came into the Egyptian market in 2005. The very first private placement that they took part in was Sidi Krir Petrochemicals Company (Sidpec), the sole producer of ethylene in the country. Currently, Naeem Holding owns 17 percent of Sidpec and sits on its board.
“Petrochemicals and energy is where we are looking to in the coming years. Why? Because at the end of the day we are coming from Saudi Arabia, where our background and experience is related to oil and gas, says Badr.
Naeem Holding is in fact a Saudi company. Initially founded as Naeem Financial Services in Saudi Arabia in 2003, the company operated as a pure asset management company from the date of its establishment until 2005, when Saudi Investment Bank (SIB) acquired 37 percent of the company. Following the acquisition, the company became known as Naeem Holding, and all its existing satellite activities in the Middle East were kept out of the merger. Due to this, Naeem Holding is the holding company for all the non-Saudi business of the company.
“The main bulk of cash is in Saudi Arabia, says Badr. “That’s where the real liquidity is. The main source of assets to be bought (liquidity in Saudi Arabia is looking for assets to buy) is in the privatization program in Egypt. That’s why we are open in Egypt, in order to find a way for this liquidity in the Middle East to come and invest in Egypt.
Currently, Naeem has $5 billion in assets under management in the region. This amount shifts from one country to another based on investment opportunities.
“Saudi Arabia is the main source of liquidity, Egypt is where we are looking for assets, Dubai is where we are directing our marketing and sales efforts, says Badr.
“Most of the Arab world is looking at Dubai now as the most strategic capital of the Arab world. Logistics-wise, it’s much easier. But in terms of assets, there isn’t much business to be done. There is no privatization, the liquidity is mainly coming from Saudi Arabia into Dubai, which is the final destination, where people would be buying assets from Egypt, states Badr.
“I think Egypt is the next financial hub once Dubai is saturated. Cost of operations in Dubai is very high and people will look for other centers where they can have their back up operations – Egypt should attract the back offices of multinational companies, adds Badr.
While Naeem is cashing out on the energy sector, it also has its eye on the real estate industry in Egypt. Currently, the company owns 60 percent of Coldwell Banker.
“There is a big boom in real estate in Saudi Arabia. There isn’t a real estate company in the Middle East that has real estate investments and real estate developments, said Badr.
The company is also a major shareholder in several banks within Egypt. Currently they own 17 percent of Al Watani Bank of Egypt, 18 percent of Egyptian Gulf and are planning to buy 40 percent of a local bank.
The company has also worked on many initial public offerings (IPOs) through private placement, such as a $1.5 billion heavy crude oil refinery in Ain El Sokhna, the very first private sector refinery in the Middle East. They have also bought an advisory deal in a company called IT Work, and are raising the capital of Smart Village, of which they own 12 percent.