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The economy tiring us: What after the presidential election? - Daily News Egypt

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The economy tiring us: What after the presidential election?

There is no alternative to focusing on investment and stopping debt

Egypt is currently in the run-up to the presidential election after President Abdel-Fattah Al-Sisi’s four years in office between 2014 and 2018, in which he is seeking another term. Frankly, he will win, in light of the absence of a real competitor. The election is a mere procedure that will end with another term for the incumbent. But what then? What is the situation of the Egyptian economy during the coming period? Will it move at a better pace and faster than before? These are questions imposed on the political and economic arenas. Will citizen life improve? Will public services, like education, health, and transportation become better? Will prices fall? Will the wheel of production turn, exports rise, and tourism improve? Will the dollar exchange rate stabilise or shift slightly throughout 2018? Will Egypt stop borrowing and set clear plans for repayment? Will we go back to the International Monetary Fund? Will the real estate sector fall into a recession and move towards a bubble after the price increases, or will it resist for several years? Will the stock market see another rise? Will some public companies be listed on the stock market in the last quarter of 2018?

Many questions arise in our minds. In my opinion, the economy will witness remarkable movement in the last quarter of 2018 because after the end of the presidential election period and Al-Sisi wins a new term in office, political and security stability will inevitably be enhanced for the coming four years. The major projects that the state embarked on will be completed. On the other hand, the private sector should be encouraged once again to promote sustainable development alongside the government. The path should be paved for it and partnership with the government should be stimulated, especially in the fields of infrastructure, transport and utilities, as well as in education and health. The private sector should be encouraged to produce and export, as wages, interest on loans, and subsidies account for over 75% of the Egyptian budget.

Ratio of private investments to total investments

There is no alternative to increasing private to total investment to about 70% (now between 50-55%), which is at least 20% higher. Foreign direct investment should rise to 25-30% of the gross domestic product. There should be foreign missions to target specific companies and expand the establishment of economic zones developed by certain countries such as the Russian zone. There should also be a Chinese and a Korean zone, so the companies of these countries will develop and attract their companies in various fields to work in these areas. Egypt should become a centre for attracting investments as it seeks to be a regional hub for logistics and financial services in light of the development of the Suez Canal Economic Zone.

Government efforts should be intensified to encourage domestic and foreign private sector investments as they are a powerful catalyst for growth along with production and trade. They are also a major source of increased employment and a way to increase the state’s resources of duties, taxes, and foreign currency, as well as raising the transfer of knowledge and technology. Hence, improving the environment of the economy and investment are very important during the coming period, along with explaining the developments and economic vision of the government in local and international forums.

We should be aware that increasing debt and interest, coupled with poor resources, could create additional pressure on hard currency resources and could push the pound to depreciate against the US dollar. There is speculation that the value of the pound will fall by 10-15% throughout 2018.

We should also quickly set up a sovereign fund for the state to benefit from the expertise of the countries that preceded us in this regard. The fund should manage the assets of the state and, to maximise the benefit from them, they should be exploited in the best aspects that generate income for the state and increase its resources. The priorities of spending should be reviewed and rationed.

The Investment Law, capital market amendments, Bankruptcy Law, and communication with local and potential investors at home and abroad should be accommodated with investment expansions or new investments, explaining the advantages of investing in Egypt and the state’s commitment to encouraging investment and investors through the system of incentives and guarantees approved by Egyptian laws, while continuing the reform efforts. The platforms of businesspersons’ associations and chambers of commerce should be used as allies to encourage investments in Egypt during their promotional campaigns. This should be along with increasing coordination with ministries concerned with the investment climate and investment opportunities.

What we need is reform and awareness.

Ibrahim Mustafa is a co-founder and partner at Masarat Business Investment and Development

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