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AfDB, Egypt to prepare new five-year strategy soon - Daily News Egypt

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AfDB, Egypt to prepare new five-year strategy soon

‘We financed three operations worth $506m in 2018,’ says AfDB Egypt’s Country Manager


Malinne Blomberg, Egypt’s country manager at the African Development Bank (AfDB), said that the bank’s current five-year strategy for interventions in Egypt revolved around the government’s, as well as the bank’s, priorities which will end in 2019.

She added that the bank financed three operations in 2018 worth about $506m, noting that the projects were the last tranche of the three-year budget support plan, titled the ‘Economic Governance and Energy Support Programme III’, and the ‘Tanmiawa Tatweer’ regional entrepreneurship platform, as well as the ‘Enhancement of Entrepreneurship Ecosystem’ grants.

“A new strategy will be prepared and will run for another five years starting from 2020. A thorough engagement with the government on the preparation of the new strategy will be launched soon,” Blomberg informed Daily News Egypt in an interview to reveal 2019’s cooperation with Egypt, in light of President Abdel Fattah Al-Sisi’s presidency of the African Union (AU).

And now to DNE’s interview of Blomberg, the transcript for which is below, lightly edited for clarity:

What are the bank’s main priorities in 2019?

The AfDB will continue its widespread support for Egypt’s inclusive and sustainable growth. This includes financing the infrastructure as it is the backbone of the economy, and supporting the various reforms in order to enhance equity and inclusive growth, while harnessing the great potential of the youth, as well as supporting the private sector to maximise its contribution toward the country’s growth and job creation. 

How do you assess the cooperation with Egypt over 2018, and how many projects did the bank finance during the past year?

The AfDB’s cooperation with Egypt has always been strategic and fruitful. In 2018 in particular, the bank financed three operations which are the last tranche of the three-year budget support titled the ‘Economic Governance and Energy Support Programme III’, and the ‘Tanmiawa Tatweer’ entrepreneurship platform, as well as the “Enhancement of Entrepreneurship Ecosystem” grants. All the three projects are worth about $506m.

Noteworthy, the financed operations merged around key government priorities. The priorities target the deepening of economic and social reforms, in addition to boosting investors’ confidence in order to catalyse small and medium enterprises (SMES) and entrepreneurs, as well as to enhance job creation and social stability.

The bank also supported a number of critical studies and advisory services, which triggered important reforms such as the Actuarial Study for social health insurance, which led to the approval of the Health Insurance Law.

Malinne Blomberg, Egypt’s country manager at the African Development Bank (AfDB)

Can you tell us more about the conferences which you will organise in 2019?

The first Africa Investment Forum, hosted by the AfDB in Johannesburg in November 2018, proved its success as it offered a market place for project sponsors in order to showcase their private sector projects and public-private partnerships to identify partners and financiers. The second forum will be even bigger.

The Egyptian participation at this pan-African forum in 2018 was amongst the most prominent, including the forum’s largest private sector transaction, as well as a strong participation from the Egyptian ministries of electricity and renewable energy, and the investment and international cooperation with the purpose of promoting investment in Egypt.

The AfDB also intends to support the 2019 Africa Forum in Sharm El-Sheikh, which we expect to be significant this year, with President Al-Sisi being the chairperson of the AU.

I read that the AFDB mulls investing in an Egyptian public sector project, are there any further details on this project, the amount of investments, or the timing?

The bank has an active pipeline of potential investments in both the public and private sectors.

For 2019, the AfDB will be a close partner during Egypt’s leadership of the AU. In terms of the projects’ pipeline during 2019/20, the bank expects to continue its long-standing support of Egypt’s energy sector, including operations of regional impact and interconnections with neighbouring countries, and water supply and sanitation, particularly in the poorest areas, as well as SME/entrepreneurship development with a focus on social inclusion. This is in addition to jobs’ creation for the youth, the empowerment of women, and the private sector’s development, including improving the business environment, as well as enhancing the infrastructure for a private sector-led growth.

Our continuous dialogue with public and private sector stakeholders may also result in financing additional sectors. The bank’s current five-year strategy for interventions in Egypt revolve around meeting both the government’s and the bank’s priorities in 2019. A new strategy will be prepared and will last for another five years starting from 2020. A thorough engagement with the government on the preparation of the new strategy will be launched soon.

Do you have any joint efforts with Egypt in light of its presidency of the AU?

As a key stakeholder of the AU, the AfDB will closely work with Egyptian authorities throughout its presidency period. We are very keen to share the Egyptian experience which is characterised by being enforced on a large-scale, and includes fast moving reforms in order to provide valuable lessons to many countries.

The bank welcomes the swift implementation of the Investment Guarantee Fund and intends to collaborate with the government and the private sector for its success. This fund was announced by President Al-Sisi in Sharm El-Sheikh in December 2018. The funds aims to foster Egyptian investments in the African continent, and extends African investments in Egypt. Furthermore, it should also enhance Egypt’s regional integration, and hence its potential growth. The bank is also exploring ways to enhance collaboration amongst the youth in Africa, particularly entrepreneurs. The bank’s regional entrepreneurship platform will be critical in this regard.

Regarding the budget support funds, did Egypt recently request additional financial support from the AfDB?

After the completion of the three-year support with a $1.5bn budget provided by the AfDB in 2018, the bank and Egypt are currently discussing how the bank could most optimally continue its support to the country’s reform agenda. The previous support was deemed to be very successful, based on the ownership and results witnessed by the government, therefore we might continue our budget support.

What is the value of the fund to be allocated for green growth, such as a waste project?

The bank has an ongoing industrial waste management project, which was piloted with the ministry of trade and industry, and led to the establishment of a waste-exchange platform with over 160 registered companies, and a number of successful transactions, as well as an increase in entrepreneurship in the industrial waste sector. The bank is currently preparing a project for rural sanitation in Upper Egypt, with funds estimated at about $150m.

The project includes a potential financing for the establishment of a ‘sludge-to-energy’ facility at the Abu Rawash waste water treatment plant, and will enable the treatment plant to use the wastewater to produce its own electricity to reduce operating costs, while also contributing to improving the environment. This is a scale-up of the ongoing AfDB-financed expansion of the treatment plant, the ‘Sustainable Abu-Rawash Wastewater Treatment Project’. This expansion aims to protect the environment and water resources from pollution and reduce health risks. It addresses risks due to the discharge of untreated, and enhances water reuse through improving the quality of existing primary treatment systems, as well as expanding the treatment plant’s capacity from 1.2m cubic metres to 1.6m cubic metres per day. The treated wastewater can be used in agricultural activities, and will accordingly contribute toward the surrounding communities’ improvement of livelihood, and a better income generation, in addition to a significant positive impact on health.

During the course of our continuous dialogue with the state and the private sector, the bank might be requested to fund additional green-growth-related projects.

How do you assess Egypt’s efforts to integrate with African countries, such as hosting the 2018 African Caucus annual meetings, and Africa 2018 in December?

From the AfDB’s perspective, we have seen an increased interest and dynamism over the past year or so from the Egyptian companies’ side which are seeking to expand their operations in Africa. This makes us, as an African bank, very excited. Regional integration is an important aspect of the bank’s strategy.

The AfDB is currently preparing a report on the regional integration of North African countries, which is to be published by mid-February as an integral part of the bank’s flagship North African outlook. The report highlights the progress of the intra-regional trade, the capital flow, and the movement of people. This is true for Egypt, and for the other countries present in the region. Moreover, Egypt’s recent achievements, in terms of electricity interconnection and the upcoming Investment Guarantee Fund, should help foster further integration which allows for better efficiency and productivity, hence potential GDP growth.

What do you think of the free trade agreements (FTAs) with African countries?

The FTAS are a great opportunity to further enhance potential growth through increased efficiency and productivity, in addition to offering a larger market for Egyptian companies.

Do you conduct any feasibility studies on specific projects? Do you carry out any reports on Egypt and Africa?

Feasibility studies are essential in order to accelerate and scale-up the implementation of investment projects. The bank’s-financed pre-feasibility studies would be project-specific. The current preparatory studies funded by the AfDB include: the waste-to-energy facility at the Abu Rawash wastewater treatment plant; an analysis for the establishment of a navigation line between Lake Victoria and the Mediterranean; support for upgrading of informal settlements; as well as the use of renewable energy for pumping irrigation water, and finally a study for the skills needed within the Suez Canal Zone.

As for the reports, the bank has two flagship publications, which are the African Economic Outlook, which was published in January, and The North Africa Regional Economic Outlook, to be published by mid-February. This former includes a note on all African countries, including Egypt, while the latter conducts a regional economic outlook on each of the African regions. The North Africa Regional Economic Outlook includes an overview of the economy of the region, with a special chapter on regional integration.

What are the new projects which the bank plans to finance, with the aim of supporting infrastructural development in Africa?

Over the past three years, the AfDB has delivered nearly $11.8bn worth of infrastructural projects in several fields to include energy; transport; water supply and sanitation; irrigation; industry, as well as mining.

What are the latest investment programmes which support and promote trade between Egypt and the African continent?

Regional integration is crucial for Africa’s economic and social development, and is at the heart of the bank’s five priorities. The AfDB is particularly interested in the establishment of Egypt’s Investment Guarantee Fund which was announced by President Al-Sisi during the Africa Forum in Sharm El-Sheikh in December 2018, as this would complement the bank’s pan-African efforts which aim to increase regional integration, as well as the private sector’s contribution toward the continent’s growth.

Furthermore, the bank has an array of instruments which can support Egyptian entities wishing to extend their lines of business to the rest of Africa. They include loan products (at competitive terms);,  guarantee products such as partial risk guarantees and partial credit guarantees; trade finance lines of credit, funding trade-related transactions; soft commodity finance facilities which supports exports, and import of agricultural commodities and inputs.

Finally, what is your opinion regarding the recent reforms taken by Egypt?

A little bit over two years ago, Egypt was on the verge of a crisis given the macro-economic imbalances. The risk of the crisis is over now. Over the past two years, the government has managed to reduce the fiscal deficit and the debt over the GDP ratio through increasing taxes and reducing expenditures (subsidies reform). At the same time, the impact of fiscal consolidation on the poorest segments of the population is being tackled through targeted transfer programmes.

The move to a floating exchange rate implied a devaluation then a depreciation of the Egyptian pound in 2016 and 2017 which increased the price competitiveness of Egyptian exports. Moreover, the discovery of the Zohr gas field and the reforms in the energy sector are turning Egypt into a gas hub and an exporter as well. Consequently, the current account deficit is on a downward trend, with net international reserves increasing to a present amount to eight months and half of imports.

It is true that inflation remains high which could hamper private consumption, but inflation has also been on a significant downward trajectory. Over time, it could enable monetary policy to be less tight and allow private investments to increase.

Furthermore, the government undertook business-friendly reforms by passing numerous laws. Egypt’s ranking in the ‘World Bank Doing Business’ indicators went up by 8 notches. The real GDP growth is gaining momentum. Most importantly, the government anticipated the risks of reforms on the low-income segments of society and has mitigated these risks, and is currently managing them through critical and well-targeted social programmes and initiatives such as the improvement of the food subsidy system;, the increase in cash transfer programmes; the eradication of unsafe informal settlements;, and increased financing for micro, small and medium enterprises.

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