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 V.I.P. INTERVIEWS
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| EGYPTIAN BUSINESSMEN'S ASSOCIATION (EBA) |
Interview with:
Eng. Taher El-Sherif
General Secretary
February 8th, 2000
Contact
21, Giza street., Nile Tower, Giza, CAIRO - EGYPT
P.O.Box 265 Orman
Tel: (202) 573 60 30
(202) 572 30 20
(202) 572 38 55
Fax: (202) 573 72 58
E-mail: taher@eba.org.eg
Website: www.eba.org
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By way of introduction, could you provide us with a brief historical background of your organisation?
Our association is private, non-government, non-profit making organisation. It's almost 22 years old now and the mission of our association is to mobilise the efforts of the business community to further contribute to the economic and social development of this country and also to lobby to the interest of the business community at large. Our major objective is to participate with the government in drawing up the economic policy of Egypt and also to sell Egypt better in the international markets. To provide services to our members such as training, information, research, promotion. But on top of our priorities nowadays is to be more integrated into the increasingly globalised international community, Egypt being one of the largest countries in the Middle-East in terms of population, human resources, industrial resources, infrastructure and with a unique position as an Arab, Islamic and Mediterranean country. For us, the representatives of the business community in Egypt it is a very noticeable phenomenon that the new government headed by Dr. Atef Ebeid is in the correct direction indicated by President Mubarak in the sense that the role of the government should be specified in strategic objectives, taking care of the needs of the low income groups and leave the production and services responsibilities to the private sector. Therefore the role of both public and private sector are clearly identified. That is precisely what we have been trying to achieve ever since we were established. On the other hand the government has drawn up an ambitious privatisation program which is being successfully implemented. Our Prime Minister is the former Minister of Privatisation and he is adopting very sincere and ambitious decisions, not only am I referring to the 314 companies declared suitable candidates for privatisation in the industrial sector, but also in services like banking. And by the time the privatisation program is accomplished the role of the private sector will be much more important than it is now. If you look at the share of the private sector in the GDP let us say 25 years ago it was less than 15% and it was limited to a minor presence in sectors like agriculture, industry and today is very close to 80% and we expect it to reach 90% when the privatisation program is over. We've been previously calling for that, for a place in the decision making policy, but now we've placed more than a foot through the door, we have the whole ground paved and oriented for us, so now we are the major players in the field, next to the strategic role of the government which is mainly concerned with education, health care and low income groups needs, security and defence, foreign affairs as well as synchronising the requirements of the different layers and categories of the community itself and to harmonise between them. This is the role of the government. And Dr. Ebeid luckily enough is very much convinced of that and is used to calling and promoting this philosophy 25 years ago. The objectives of the EBA's agenda is first to maintain the actual position, secondly to strengthen the business community providing them with power, knowledge, and the right tools for the practice of their role in the decision making process; thirdly to encourage business community members to globalise with the support of the government. For instance, the Government is representing Egypt in the negotiations of the WTO (World Trade Organisation) and two months prior to the Seattle convention the Government asked us for a nominee from the business community to be included in the negotiating team. Myself and another member of the association went to Seattle participated, and witnessed how the future of the world is drawn up by the governments behind closed doors - "green rooms" as they are called - while the people who are really influenced by decisions are in the outside world demonstrating on the streets.
The report we compiled on our return from Seattle included a close study and research on the WTO, its implications and developing countries opportunities and draw backs, the contribution of the business community vis a vis the WTO thus explaining the reasons of demonstrations and clarifying the people's points of view.
What are the main challenges Egypt has to face when it comes to deepening or furthering the globalization process ?
The challenges Egypt has are not as tough as other countries are facing. Egypt has already managed to modify its position before the WTO as it went through a global economic reform program prior to signing the GATT Agreement in Marrakesh. Egypt's Global Economic reform program commenced in 1991 and by the time the Marrakesh agreement was signed in 1994 Egypt was well established financially. The restructuring of Egypt's economy started in 1996 followed by a total trade and services liberalisation, privatisation and modification of investment law so as to be a good recipient to international industries and services. New issues that are being introduced to WTO will definitely be tough challenges not only for Egypt but for the developed and developing world. The conflicts between "Giants" of the WTO resulted into a direct confrontation between the EU and the USA concerning the agricultural subsidy in which Egypt is not involved in any way as the agricultural sector has already been privatised, liberalised and all subsidies have been lifted. Moreover, services were liberalised - any company is able to operate in Egypt whether as consultants, engineering, IT, etc. However, this does not apply to importation yet, hopefully in 2005 according to the GATT Agreement, this situation will change as the road has already been paved for making us an ideal member of the WTO. Labour and environment standards, competition and investment, transparency of government procurement are new issues that represent a significant challenge.
Egypt has remained partially unaffected by the financial crisis which hit Asia, and analysts have suggested that one of the reasons for this is that Egypt was not yet fully integrated into the global economy. What are your comments on this speculation?
Effectively, the country was much less than being deeply integrated into the world economy. We wish to be more globalised in terms of trade. However, the private industries which started within the last 20 years are considered as "infant" industries, some of them being in the incubation process. Those industries are managed by new capitals, new investors of limited orientation and knowledge, therefore they are not much immuned against international risks. The manufacturers are worried about the globalization that would lead into borderless trade for which one must be ready in order to be able to compete and for that to happen all impediments and problems must be removed. Egypt's industry is utilizing the most up to date technology and mechanization, well trained and managed labor. In Saudi Arabia, Europe, Turkey, Israel, Italy or Germany, the industries are spoiled yet the local government grants much more than the Egyptian government. In Egypt, taxes are rather high, our corporate tax is 42% besides the income tax and the sales tax. On importing a production line a sales tax is to be paid. The production line is not re-sold but used to produce a product to be re-sold and receive the sales tax. We pay however a sales tax for the import of capital goods which competitors do not pay. The national private industries and manufacturers are worried about the borderless trade. We try to urge our government to ease the way for those manufacturers to be able to compete with the giants of the WTO.
The Egyptian government has traditionally resorted to the easier solution of building up impediments to imports rather than boosting exports by offering incentives, for example. Could this explain why Egypt has suffered from a balance of trade deficit for the last two decades?
Our national economy suffers from a severe trade deficit. This year we imported worth of about 17 billion US Dollars and exported 5 billion US Dollars. The gap is big and is increasing. The government is trying to remove impediments and solve problems to the benefit of private manufacturers and service providers by encouraging exportation, but the production cost is high and not competitive to others in the area. Furthermore, it is easier to operate in the domestic market than going through the hassle of exportation in addition to the turn-over being faster. On the other hand, the domestic market is saturated and cut-throat. The Egyptian consumer will not be able to absorb all what is produced. Thus the only possibility will be to develop new export markets for which quality and competitive prices are required. Labor force is also increasing. In 1999, there were 17.5 million people versus 18 million this year. Job opportunities must be created. This requires additional investment, production lines, service providers and projects, etc. Temporarily the competition is limited and manageable but in the future it will be very difficult.
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What are the concrete proposals that EBA would like to submit to the government in order to address the balance of trade deficit ?
Modifications should be made resulting from efforts of both the government and private sector together. Trust and confidence should be re-built to stimulate new investors. This is the role of the entire country and not of the government alone to overcome the foreign exchange shortage by taking a realistic view of the market.
There are some positive signs which indicate that the hard currency shortage could be alleviated in the future like the rise in oil prices, the recovering of tourism, and the increasing traffic through the Suez Canal. But some business people say that Egypt needs to find new and more stable foreign exchange earners. What is your opinion on this issue ?
The shortage of foreign exchange was due to the tourism crisis in 1997, the collapse of the world oil prices, the return of Egyptian workers from Arab countries and the inability to properly export. The decrease in the Suez Canal's revenues has also contributed to the foreign exchange shortage problem. This was due to several factors: the opening of Asian large heavy industry factories (automobiles and others) in Europe, the introduction of other competitors like SUMED Pipeline bypassing the Suez Canal, the resumed economic and political relations with South Africa which led into the usage of Cape Hope and Cape Town passages instead of the Suez Canal.
EBA has recommended that a new strategy has to be developed regarding the Suez Canal. This should include the maximization and increase of the earnings, better marketing, better approach towards users and clients offer them attractive deals and good prices. Development of projects around the Suez Canal (warehousing, services projects, maintenance projects, repairing of ships, shipyards). The Suez Canal is a national treasure, the symbol of sovereignty, a lot of efforts were made for this project and we have defended it at a very high cost in lives. The main purpose is to maintain the image of the Suez Canal and not to look at its financial aspect.
There is much criticism of Egyptian banks doing excessive lending to non-productive sectors, mainly the real estate sector. What are the reasons behind this phenomenon and how is it affecting the productive sectors of the Egyptian economy ?
This is not a phenomenon but only a few cases. The banking sector of Egypt is the real backbone of its economy. If some incorrect incidents not phenomena occurred over the past years by some irresponsible businessmen and bankers, which are merely counted on your fingers - not exceeding 10 in total - this represents a minority, to be considered a drop in the ocean and should not be taken into consideration. On the other hand there are many good examples of constructive investment that should be considered. Regarding the investment that is being directed to the real estate sector, this is a clear example of what I mentioned before, i. e., there is a saturation in the market. Thus, other channels of distribution must be found. All real estate projects are existing assets. If they are not utilized or inhabited at present, they still remain part of Egypt's assets and they can be marketed to foreigners. As an example, I can refer to Spain who has in the past marketed their houses and resorts all over the world and is now facing a problem of saturation in the real estate sector. There is a recession in all markets. Egypt's rate of growth in the past years has been around 5.5% to 5.7 % at large. But in other sectors like tourism and real estate, the percentage of growth is more than 22%. Nevertheless, in the latter sector the demand is lower than the supply. In the past the inflation factor was prevailing, contrary to the present time where the supply is high and services are available but the demand is low due to the existing recession.
Some experts say that the reason for the existing saturation in several sectors of the Egyptian economy is either the lack of imagination of Egyptian investors or the fact that Egyptian businessmen rely on traditional ways of marketing and do not realize the importance of investing in rigorous market surveys and other conscientious market studies. What is your assessment on this issue ?
We as Egyptians are very good manufacturers and farmers but we are not good promoters or traders. We believe in marketing but are not good in that. We are not as good as the Lebanese, Palestinians, Moroccans or Syrians, yet we care about quality and productivity, we have solid industrial bases, although this is insufficient. A country's production should not rely on the domestic market only but it should also find its way to the outside world.
According to you, which sectors of the Egyptian economy represent the greatest potential for growth in the near future ?
We are in the manufacturing service and we are doing our best but the potential and the hopes are held in the service, namely transportation, contracting, consultancy, telecommunications and information technology, medical, pharmaceutical, insurance, in addition to tourism and all services and investments related to tourism.
What is the final message that you would like to send to our international readers ?
Here is a message to those who live away from Egypt be it Egyptians or non-Egyptians: we are very optimistic in the business community as Egypt is ranked on the top of the competitiveness reports and is highly evaluated by many governments specially European governments. We have a new government of which we are very optimistic and I am certain that the future will be much better than the past. Whatever minor rumors around the world is just a drop in the ocean that the dishonest competitors are trying to highlight. We trust our government, we trust our leadership and I do invite all those people to analyze and evaluate Egypt versus any country in the region, before any investment decision is taken. In terms of stability and security, Egypt is number one. In terms of rate of return on investments it is highly assessed and highly evaluated. In terms of political risk there is no way that it can be compared to any other country in the region. There might be some minor problems like bureaucracy but I bet it is everywhere. Changes in rules and regulations are heading to more stability and flexibility and meant to adjust negative points and irresponsible acts. Before coming to Egypt it is recommended that one finds his honest, sincere partner before even finding a lawyer, an accountant or a consultant and EBA is an appropriate venue to find that local partner. It is also recommended that communication prevails. We call on the media to be more realistic and more transparent and wiring the news rather then commercializing them. |
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© World INvestment NEws, 2000.
This is the electronic edition of the special country report on Egypt published in Forbes Global Magazine. August 7th 2000 Issue.
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