The government is set to reveal a number of major projects in the upcoming period, which are scheduled to be presented to foreign and local investors.
In the view of a number of prominent banking leaders, Egypt needs, at this stage, giant projects. These would move the economy quickly, push growth rates, and generate revenue in foreign currencies, to help Egypt rebuild its foreign exchange reserves.
Bankers, who were surveyed by Daily News Egypt on this matter, identified examples and models for projects that could lead to a major shift in the Egyptian economy.
Mohamed Abdel Aal, Vice President and board member of the Arab Sudanese Bank and Suez Canal Bank Board Member, notes that building a comprehensive development plan for Egypt would require determining the vision and mission of such a plan. This would summarise and visualise the form of the Egyptian state when its objectives are realised.
He adds that on the other hand, the necessary “big push” should be provided to ensure the achievement of this plan, and realise its goals. He said that by using the term “big push”, he means finance. This would also fit in with major national projects, which, if achieved, could realise Egyptian citizens’ dream of a better life. According to Abdel Aal, these projects are now being planned, and their estimated cost is $200bn and will last until 2020.
According to Abdel Aal, the state’s vision and its strategy for the upcoming period had already been decided by President Abdel Fattah Al-Sisi at the opening ceremony of the new Suez Canal on 6 August. The President followed that statement with another one, saying that the new Suez Canal is only one step among many.
10 national projects that will achieve a leap in Egypt’s economy
According to Abdel Aal, there are 10 large national projects that will soon be launched, to improve the national economy’s overall indicators. He explained that the first of these projects is the East Port Said project, which is the first of many development projects planned for the Suez Canal Axis.
He added that this project’s philosophy is based on Egypt’s actual need for strong and large-scale economic projects to support the Egyptian economy, for the current and future generations to benefit from. He noted that projects similar to this one could guarantee that Egypt becomes a global logistics economic centre for industry and commerce.
He added that this project will provide a desert hinterland that includes an industrial free zone for heavy, medium and light industries. These would include energy, alternative energy industries, textile and petrochemical services industries, and most importantly, a logistical area to serve complementary industries.
The second project, which Abdel Aal believes to be important to Egypt during the current and upcoming period, is the national project to reclaim 1.5m acres.
Abdel Aal also said the project aims to establish new urban, residential and productive communities, for the production of export crops. It will fulfil approximately 80% of Egypt’s wheat needs, in addition to the development of agricultural industrialisation projects, such as the beet sugar industry and horticultural crops.
EGP 8bn to dig 6 tunnels linking Sinai to Port Said and Ismailia
The third project, according to Abdel Aal, is building 4,000 km of roads. This new road project will connect old and new communities, whilst also providing road services. In addition, the new roads will lead to the fourth project, which is the construction of six strategic tunnels connecting west Sinai to Port Said and Ismailia.
Abdel Aal explained that these six tunnels will play a pivotal role in the development of the Egyptian economy, and increase international trade movement between Egypt and the outside world. Not only this, but it will be a gateway for the development of Sinai. According to Abdel Aal, this project is estimated to cost EGP 8bn.
The fifth project, according to Abdel Aal, is the national project for aquaculture, which is the largest project of its kind in the world. He said that this project is expected to give Egypt self-sufficiency in certain types of fish, while its infrastructure is estimated to reach EGP 65m.
The sixth project is the national project of the new El Alamein city, which will see a new integrated city constructed on Egypt’s North Coast, on an area of 77,000 acres.
Abdel Aal said the city is expected to accommodate 5 million people, and will rely on the existence of the current city of El Alamein, and its proximity to the resorts along the North Coast.
He added that the seventh project is the establishment of the strategic Rod El Farag corridor. It will start from East Shubra, extending westwards to cross the Nile, and connecting the ring road, the Mariouteya and Mansuriyah corridors, the Industrial Zone in Abu Rawash, the Alexandria Desert Road, before proceeding to Sheikh Zayed and 6th of October City. According to Abdel Aal, the total length of the corridor will be 35 km, and is estimated to cost a total of EGP 5bn.
The eighth project, according to Abdel Aal is the Golden Triangle, which is the largest development project in south Egypt. He outlined that the project will include Qena, Luxor, and the Red Sea governorates, and aims to achieve the overall development of that region. These three governorates own all of the agricultural, industrial, mining and production elements and wealth in Egypt.
$20bn to develop 6 ports in Suez Canal area
The ninth national project on the table is the development of six ports in the Suez Canal area. Abdel Aal clarified that this project aims at improving these ports to match international standards, especially after providing them with a desert hinterland area to include industrial and logistic zones. The hinterland areas will also have facilities for ship fixing and maintenance, new container terminals, and new ship fuelling stations.
Abdel Aal added that this development will make these ports, along with their surrounding areas, attractive for international investments, and provide almost 1m employment opportunities. They will also make Egypt the largest maritime country in both the Red Sea and the Mediterranean Basins.
This project will cost approximately $20bn, with annual direct and indirect revenues expected to amount to about $100bn.
According to Abdel Aal, the tenth project is establishing the new administrative capital, which will be a symbol for Egypt’s renaissance. This project will be a great leap for Egypt, especially for its administrative body.
Abdel Aal pointed out that the new capital’s implementation will help in improving Egypt’s public services. It will also ease the overcrowding in Cairo, solve the traffic crisis, and develop a healthier environment for residence and work. In this new capital, smaller projects will be established, such as training centres, products developing and marketing, as well as a technological database for policy makers.
He added that these projects will be financed by several means and tools, depending on each project’s nature in terms of the fund size and financing period. However, it is expected that the financing of these project will be shared between the government, and local and foreign investors.
We need productive projects which could export their products
Amr Tantawy, Misr Iran Development Bank’s Managing Director, believes that Egypt is in great need of foreign currency generation projects. These will increase the country’s foreign currency resources, and rebuild its reserves of them once again, instead of depending on aid or external loans.
Tantawy clarified that, based on his analysis of the country’s needs, Egypt seems to need tourism projects as well as projects that could export their production abroad. He added that tourism and exportation are the main resources for obtaining foreign currencies.
He said the opportunities for attracting more tourists and exports have increased since the Egyptian pound’s decline against most foreign currencies over the last period. These circumstances have provided the Egyptian tourism market and Egyptian products, especially food and textile products, a stronger chance to compete in external markets.
According to Tantawy, foreign investments could play an important role in some projects related to the Suez Canal Axis development, thus increasing Egypt’s share of foreign currencies.
Regarding whether or not banks are ready to fund these major projects, Tantawy answered that banks are thirsty for pumping the required funds to establish any project, and have enough liquidity to play this role.
He concluded that the banks only have one condition to fund any project, which is the ability to prove its utility and importance to the Egyptian economy. The Suez Canal projects met this condition, alongside other major projects expected to be launched during the upcoming period.
Attracting multinational and intercontinental companies to invest in Egypt
Banking and economy expert Ezz El-Din Hassanein noted that Egypt needs to attract investments from major multinational and intercontinental companies to increase foreign currency resources in the country.
He added that such companies could include Matsu, Siemens, IBM, Samsung, and General Motors, amongst others. He added that some international companies operating in the construction, housing, petroleum, petrochemical and oil refining sectors would also be beneficial to Egypt.
According to Hassanein, the projects important to Egypt that banks tend to fund are those related to manufacturing industries of all sizes, both large and medium, and of various kinds, including steel, cement, petrochemicals, fertilisers, plastics, household items, medicines, food and beverages.
There is no doubt that the Egyptian banking sector is one of the strongest economic sectors in Egypt and the wider Arab region, Hassanein affirmed. He added that loans-to-deposits ratios in banks operating in the Egyptian market are estimated to be around 45%, which is low compared to global rates that reach about 60%. Therefore, there is a huge liquidity in the banking sector ready to be injected into various economic sectors.
Despite the strength of Egyptian banks, some of them face problems in financing large projects, due to their low capital base. Such banks resort to syndicated loans. In addition, some private banks refuse to finance infrastructure projects, forcing public banks to play this role.
Small- and medium-sized projects are the solution to eradicate poverty and unemployment
Hamdy Azzam, Executive Board Member of the Industrial Development and Workers Bank of Egypt (IDBE), outlined that Egypt should consider small- and medium-sized projects during this period to eradicate unemployment and poverty in Egypt, in addition to the major national projects.
Azzam explained that there are some essential projects to boost the economy, such as the Suez Canal Axis development projects and infrastructure projects, including electricity and roads.
He added that small- and medium-sized projects are more capable of providing job opportunities for youth and aid in the eradication of poverty and unemployment.
According to Azzam, small- and medium-sized projects represent about 97% of Egypt’s total projects, about 50% of its total exports and 75% of GDP. They employ about 75% of Egypt’s labour force.
He elaborated that those projects are also characterised by their ability to provide jobs at acceptable costs, and employing labour with little experience. He added that they do not need large capital, in addition to their short construction period and the fast cash flow yield that can support the economy, and that their failure rate is extremely limited.
Azzam stressed that launching major, small-, and medium-sized projects requires that the state provide a suitable environment. This can be done through reviewing draft laws related to investment and associated with disputes between the state and local investors.
He explained that it is inconceivable for Egypt to seek foreign investment, when it still has problems with local investors.
Azzam called on the government to pay attention to developing education and public health on the long-term, so that young graduates can be scientifically qualified and healthy enough to enter the labour market.
Azzam believes that the banking sector is strong and able to finance various projects to be launched in the upcoming period. He also believes that it has a very adequate liquidity to play this role. Moreover, it can even attract more deposits in case of lack of liquidity.
The volume of deposits in banks is estimated at about EGP 1.6tr, while the volume of loans is only approximately EGP 650bn. This entails a huge volume of available liquidity ready to be injected in any project that needs funding.