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Egypt needs exports increase to become global transport, aviation hub: Mahmoud Mohieldin - Daily News Egypt

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Egypt needs exports increase to become global transport, aviation hub: Mahmoud Mohieldin

COVID-19 pandemic revealed importance of focusing on scientific research related to health sector

Digital transformation, sustainability, and technology are the most prominent recommendations of Mahmoud Mohieldin, Executive Chairperson of the International Monetary Fund (IMF), representing the Arab Group.

These will ensure that the world not only overcomes the pandemic, but it will also allow the Egyptian economy to unleash its full potential and move to the next level.

In an interview with Daily News Egypt, Mohieldin used his great economic experience to draw a road map for developing country economies to pull themselves out of the current crisis. The road map is based on international cooperation and prioritisation in spending, and localisation processes and achieving sustainable development goals (SDGs).

Where are investors focused in 2021? How can Egypt exploit the current crisis to create more opportunities to attract foreign investment?

Investors’ attention during the current year 2021 is directed towards developing the investments that already exist in traditional sectors, in addition to investing in digital transformation. Some investors look for participation with the state in some projects, such as the programmes adopted by many countries, especially the European Union (EU), to accelerate the recovery process. The EU launched a special programme to pump investments worth $750bn.

There is investment in the fields of sustainability, especially with the variables and requirements of the climate change and the Paris Agreement, in what is known as the investments that support and contain climate change or that address its variables as well.

This is the approach that Egypt has taken recently, as it entered into a huge group of investments in those areas, such as the renewable energy sectors, the Benban project, and the carbon footprint reduction project.

With the conditions that some countries are going through to increase food production while reducing water losses, there is a great trend towards modern irrigation and changing traditional methods.

Investment in these sectors is mainly based on the state’s efforts to be a catalyst and supportive of private investments, as these sectors revolve around the system of energy, water, and food necessities.

The International Monetary Fund (IMF) conducted a study based on data from several developed and emerging countries. The study indicates that every increase in public investment at a rate of 1% of GDP is expected to lead to an increase in private investment by up to 10%.

What is your vision of the foundations on which to attract foreign investments to Egypt’s healthcare sector due to COVID-19?

Investment in the health care sector depends mainly on the state in the provision of a comprehensive health care system. I expect Egypt’s Universal Healthcare to be activated quicker than announced.

Also, there must be a focus on the scientific research and development sector related to the health sector, especially after the pandemic has highlighted the importance of its role, and the need for huge cooperation between government and private agencies and international companies in the manufacture of medicines and health systems in general.

The pandemic indicated that the important source of information and data is not limited to the Western world. We have found various advanced medical innovations from China, India, Korea, South Africa, Brazil, and a large number of countries with which cooperation has become inevitable, which prompts us to work to intensify investments in this sector, especially with the growth of individual incomes.

What is your vision for the Egyptian economy in 2021? Does the start of vaccine distribution herald a better year than last year?

Controlling the epidemic is the main focus of the world’s attention to drive economic growth, as every step towards controlling the pandemic has a positive impact on people’s lives and their job opportunities, and their resumption of economic activities.

The coming period requires supporting the sectors affected by the pandemic impact, such as the tourism sector, by pumping more investments in this vital sector. This is especially in light of the currently low occupancy rates of tourism facilities, with the need to take into account these affected sectors through social support programmes.

On the other hand, there are sectors that were not affected by the pandemic, such as the agricultural, industrial, and transport sectors, which maintained their balance during the past year, while the technology, telecommunications, and services related to remote work witnessed a great recovery worldwide, which indicates that diversity is the strong advantage of the Egyptian economy.

What do developing countries need to recover from COVID-19?

To recover from the effects of the pandemic, developing countries must follow a prescription consisting of seven basic elements.

The first of these is to take all necessary measures to deal with the pandemic. The second is to ensure support from the institutions of the international community.

The third element is related to the need to reduce the financial burdens and prevent the debt problem from turning into a debt crisis, especially since some developing countries suffer from high rates of international debt, and the budgets of these countries must be supported locally by setting public spending priorities over the next two years in order to achieve the maximum possible return from this spending.

The fourth component is achieving SDGs, which requires a mix of local and international investments to achieve sustainability in those countries.

With regard to the fifth element, which I consider the most dangerous and the saddest at all, is cooperation to prevent illicit cash flows from countries. At a time when developing countries, especially African countries, seek to attract foreign investment and aid, we find that the illicit cash flows that leave them exceed $90bn annually.

As for the sixth element, with the change in the paths of globalisation, especially after the pandemic, there is a need to increase regional cooperation, which is capable of increasing exports.

The seventh element is the need to localise development, which confirms that the most important projects at all during the coming period are the Egyptian village and the various neighbourhoods in small cities. This is because it achieves a shift in services, educational opportunities, and health care, which contributes to the improvement of the quality of service.

This is particularly since the citizens in the villages expect to get services that are not less distinguished or efficient than these provided in the city.

It must be pointed out here that the importance of the projects and initiatives that are launched in rural areas and villages, especially since nearly 58 million people live in them, some of which have high poverty rates. With the activation of social support programmes and the provision of job opportunities, the poverty rate in these areas will decrease, which creates an increase in Income, which is reflected in increased demand and contributes to achieving higher economic growth rates.

We also need to intensify the development and innovation processes during the coming years, so that the citizens can feel the rate of development. It is imperative to use market mechanisms in monitoring and regulation, and the need to amend legislation in line with the development of the industry without affecting the industry negatively.

What elements does the Egyptian economy have to recover from the pandemic? What is the role of governments in this regard?

Egypt has an existing balance of large-scale productive companies and projects. The country imports about 30% of its income, while total consumption takes about 90% of income, which means that 60% of the gross domestic product is local production that meets consumption.

It has sufficient production, and even realises excess in some areas such as vegetables and fruits, as Egypt is the foremost exporter of citrus fruits during the past year. It is also distinct in some transformative industries such as manufacturing garments, furniture, and wood industries.

Egypt needs to intensify exports and exploit the geographical location. The delay in this has led companies to relocate to other countries, but I see that there has been interest recently to focus on this field.

The new projects that connect the country with each other are considered a major component of the structural diversification process, as the country has farms in Upper Egypt that produce exquisite and sought-after commodities.

However, the waste, which amounts to about 40% of them, leads to an increase in the cost and a weakening of the product’s ability to compete. It prevents it from accessing local and foreign markets, which makes the improvement of the transport and road system one of the most important ingredients to support these areas and create economic diversification, which requires an industrial policy in harmony with the digital age.

The culture of saving must be localised among individuals and the savings outcome should be used in financing investments. I proposed the “Account for Every Student” initiative, which aims to open a financial account for every student in a school.

With the beginning of the school year, new students in their schools register their names, they also register automatically in the banks by opening an electronic financial account in which they can deposit $10 in local currency.

These deposits are financed from banks in cooperation with central banks using a limited margin of reserve. This initiative will make a quantum leap in the financial and savings culture of students and their families, and open up prospects for financial services such as credit, investment, stock exchange, business, and insurance.

The banks will win large numbers of new depositors with long-term savings, as they will not spend these savings until they reach the legal age. Rather, they and their families may add to these savings over time.

This initiative, if properly implemented, would use an integrated database and coordination between banks, thus achieving financial inclusion.

Will international institutions’ view of emerging economies change in light of the second wave of the pandemic?

There are periodic reviews of international institutions on the basis of which economies are evaluated. For example, when reviewing international institutions’ control of global growth rates, we find that they were expecting a growth rate at the beginning of 2020 of about 3%. However, these expectations changed in April – that is, after the outbreak of the pandemic – to become a contraction of 5%.

With the slight improvement and partial control of the pandemic, international institutions changed their forecast to a contraction of 4% or 3.5%. However, expectations for economic growth this year reached about 4 or 5%, which means that the loss of 2020 is compensated by the improvement of 2021 assuming that the pandemic is controlled.

The main governing factor out of the recession is controlling the pandemic, as it causes a decline in investment, exports, and weak consumption in some sectors due to poor incomes of individuals, especially since the epidemic has caused the loss of about 250 million jobs around the world.

How can developing countries provide financing for healthcare and education in light of the growing loans owed by these countries?

The solution lies in the priority of spending policies. When countries want to spend even in light of development restrictions, they can direct spending priorities. Every 1% increase of public investment attracts about 10% of private investment, which prompts us to look at areas that need investments such as energy, utilities, and sustainability. Some sectors cannot rely on private investment, such as education, healthcare, and utilities.

To what extent is Egypt committed to implementing the 2030 Agenda, and what are the goals that should be focused on?

One of the most important elements for achieving sustainable development is combating poverty. Egypt, through its current projects, seeks to increase the income rate and increase employment opportunities.

What is your response to speculation regarding global market stocks such as GameStop?

What is happening now is a kind of extreme speculative exaggeration that approaches the point of gambling. This is due to the availability of digital platforms available for trading at costs close to zero, as well as social networking sites that direct groups of small investors to target specific stocks. Some of those investors have had access to financial flows at low or no cost through the process of monetary easing.

On the nature of these investors, it turns out that a number of them are willing to lose their money. But there are others who have pushed them with vengeful motives against hedge funds or political motives against the existing institutions, thinking of the possibility of achieving large profits.

The message here is that the supervision has two responsibilities. The first is to develop its rules in the supervisory issue to deal with the opportunities and challenges of the digital age, and the second is the continuous awareness of some investors.

What is the reflection of fluctuations that occur in global stock exchanges on emerging markets?

Looking at what happened in the past weeks, we find that the highs and lows that occurred in some global stock exchanges did not cause a comprehensive or global crisis, but rather a crisis for specific stocks. But if these matters are multiplied in a manner that forms a kind of increase in anxiety, risks, and a promise of certainty to which investors are exposed, there will be a degree of tension in the markets.

I would like to point out that stock exchanges are undertaking an urgent correction wave in stocks, whether partially or sectorally, as the absence of correction waves leads to problems and anxiety that creates bigger crises, so the more stock exchanges correct their conditions.

What is your view of the recent fluctuations and huge hikes in Bitcoin prices?

With regard to Bitcoin, it must be emphasized first that it is not a currency in the generally accepted sense. It can be called a crypto asset that can be used in economic and commercial transactions provided that the parties, authorities, and supervisory authorities within the country are satisfied. There are a number of countries that have approved dealing with Bitcoin.

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