Egypt, new dimensions, new frontiers

New Dimensions... - Economy - Banking - Investment - - Fueling the Region -
Privatising Power - Building for the future - The Past as Present - The next step

The Next Step

Measures taken over the last year to strengthen the country's macroeconomic pillars have restored confidence that strong growth will continue. Prospects for the period ahead look set to improve, especially if privatization continues in earnest. Many Egyptian public companies are reaching out to the outside world in an effort to prepare for increased competition at home.

"We are able to compete in open, international markets, and in fact we do so already," says Moustafa Shaarawi , chairman and CEO of Petrojet , the state-owned construction concern. "Privatization poses no serious problems for us."

H.E. Dr. Mokhtar Khattab, Minister of Public Business Sector

Egypt is likely to maintain its cautious divestiture approach, however, as the government remains committed to minimizing the plan's social costs. Minister of Public Business Mokhtar Khattab notes that early retirement incentives and pensions have been used to compensate workers who lose their jobs. "We provided our people working for public companies with a solution," adds Khattab.

A future model for restructuring will certainly be last year's successful divestiture of much of Egypt's state-owned cement concessions to foreign investors. "We have to make significant structural changes before we sell companies," explains Metallurgical Industries ' Adel El-Danaf , who oversaw the cement sector's reorganization. "Most of our companies have heavy debts and over-employment. Our compensation package allows our workers to start their own businesses."

As the 2005 implementation of the GATT agreements approaches, bankers say their sector will continue to evolve to meet the challenge of increased competition. "Local banks will definitely be larger, better able to compete," says EAB 's James Vaughn . "There will also be a need for international financial powerhouses, possibly for a client of capital market activities and large transactions."
The specter of competition is also forcing large and diversified family-owned business groups to mature. "Competition is now the name of the game, and with the WTO regulations you have to compete not only locally, but against exported goods as well," suggests Salah Diab , CEO of Pico . "So most of the existing Egyptian institutions are only now reaching puberty."

Mr. Tim Watkins, President of Nortel Networks

Egypt is evolving in the use of IT innovations that will help Egyptian businesses run smoother and compete better in the years ahead. "Internet-wise, the market is not yet mature, but that presents opportunities to develop the new model of the Internet with Egypt Telecom and upcoming Internet Service Providers (ISPs)," predicts Nortel's Tim Watkins . "There are big opportunities in optical, IP and ATM infrastructure and e-commerce applications."

Large-scale efforts to develop information media to be carried by the bolstered IT infrastructure is already attracting much attention from international media, as well as from Egyptian capital markets. "The Egyptian Media Production City is one of the up-and-coming developments, and its stock market rating is exceptional," says Ismail Osman, chairman and CEO of Arab Contractors. "I think this project, and similar projects like it, will lead to capital injections which will help the government with the liquidity problem."

With this growth in mind, more investment houses are likely to establish funds to allow investors to take advantage of the IT takeoff on the Nile. EFG Hermes Chairman and Managing Director Mohamed Taymour , whose company recently invested in the Internet startup, has adopted the concept of investing in ideas with the creation of a regional, high-tech-focus private equity fund.

Egyptian business executives are enthusiastic that the years ahead will bring greater economic prosperity and development. "Egypt is experiencing a new dimension for a new millennium," says Salem Group Chairman Hussein Salem. "Like all my colleagues, I am enjoying this renaissance, the developments in the economy and the stability."

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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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