The government, in coordination with the stock market’s regulatory entities, is preparing the Egyptian Stock Exchange (EGX) to play a vital role in funding public enterprises and pumping capital. This will occur within the government’s plan to boost the state’s public investments through structuring companies, said Minister of Investment Ashraf Salman.
Salman told Daily News Egypt Monday that the EGX is the fastest tool to attract more foreign investments to the Egyptian market to fund public projects, provide job opportunities, and increase gross domestic product (GDP). He added that the Ministry of Investment is negotiating with all regulatory entities to face EGX’s development issues.
The ministry is doing a comprehensive review on all investment regulations in the EGX, Salman added. Postponing the capital gains tax for two years proves that the government is serious about reforming and developing the EGX. He added that some negotiations are held with all ministries and public entities which aim at funding their projects through the EGX.
The main reason behind postponing this tax, besides the exhausted market’s lack of readiness, is the government’s tendency to increase some of its companies’ capital through the EGX, structuring other companies and funding new ones. No doubt this tendency was not possible with the application of this tax. The battered market was also not ready for it, which was another reason behind the delay of its implementation.
Former EGX Vice President Mohamed Farid said: “The government should look comprehensively and thoroughly into all legislatives regulating investments as well as funding through EGX which currently needs inducements not challenges.”
Farid believes that the government’s delay in applying the capital gains tax reveals its understanding of the EGX’s role in collecting more savings. He added that increasing the capital of some public companies in the EGX should be implemented professionally through experts in the market.
Over the past few years, some public companies exited the EGX, due to the low trading level of their shares, and the unstable economic and political circumstances in Egypt since 2011.
“The government should answer several questions, most importantly, what are the mechanisms that can allow the market to attract new investments categories,” Farid said.
He added that there should be communications with the major direct investment funds and reassuring them about investing in the stock market. This would then mobilise more money that funds the huge governmental projects that would be executed in the next period.
“Listing public companies in the stock market will raise their efficiency, and allow them to expand as well as increase their production rates, with low price in comparison to banks’ funding,” said Farid.
He added that funding public investments through the stock market will relieve the pressure on the debilitating state budget. It would also settle the culture of disclosure, transparency and social responsibility that is missing in a large number of government companies.
Ahmed Abou Saad, Chairman of Rasmala Egypt Asset Management, believes the petroleum sector is the most ready to benefit from stock market funding. It would initiate petrochemicals companies and fund their capital through the stock market.
Abou Saad preferred the government to work on proposing companies that are not listed in the stock market to provide a commodity that excites the investors’ appetite and attract a new category of traders. However, the more important question is: “Is the government ready to list its companies in the stock market or initiate companies through public offering?”
Abou Saad advised government officials to communicate with private sector experts to prepare government companies to benefit from the stock market as a funding mechanism. This would be along the lines of what occurred in March’s Economic Summit, where the government assigned the mission of preparation and processing the projects, as well as promoting them, to the private sector.