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Coverage Report Euromoney- Minister of Investment & Minister Finance Media Interviews Coverage
September 17th, 2014
Publication: Reuters Date: 16 September 2014 Link: http://reut.rs/YS9nWw
Finance minister hopeful reforms can revive Egyptian economy
By Michael Georgy and Stephen Kalin
Egypt's newly appointed Finance Minister Hany Kadry Dimian talks during a news conference in Cairo March 12, 2014. CREDIT: REUTERS/MOHAMED ABD EL GHANY
CAIRO, Sept 16 (Reuters) - Egypt will press ahead with plans to cut costly energy subsidies and introduce further tax reforms to boost the economy and halve the budget deficit within seven years, the country's finance minister said on Tuesday.
President Abdel Fattah al-Sisi raised fuel prices by up to 78 percent shortly after taking office in June -- a politically-sensitive step that his predecessors had shunned.
Finance Minister Hany Kadry Dimian said the move, along with tax hikes, had boosted confidence in Egypt's economy, hit by political turmoil since the 2011 uprising that ousted Hosni Mubarak. He said past mistakes would be avoided.
"Nobody touched the core, nobody had the political guts and the political will to take the bold decisions," Dimian told Reuters in an interview.
"That tells you something, that this government, this regime has a determination to reform, has a determination to move the Egyptian economy, has the determination and the will to boost economic growth."
Egypt has struggled to meet soaring energy demands, which have resulted in daily electricity cuts around the country of 86 million people, and is trying to keep the deficit at around 10 percent of output over the next three years.
Cairo has received billions of dollars in grants, loans and petroleum products from Saudi Arabia, the United Arab Emirates and Kuwait since former army chief Sisi overthrew President Mohamed Mursi in 2013 following protests against his rule.
The aid has kept Egypt's economy afloat but the government is also seeking to make long-awaited reforms in a country where business is often stifled by bureaucracy and corruption.
FOCUS ON THE DEFICIT
Egypt expects to cut its budget deficit to five percent within five to seen years, said Dimian, adding that energy subsidies would be completely removed within five years.
"By streamlining those subsidies we will have better economic efficiency and capital would be better allocated," he said.
The government is walking a fine line between trying to cut its deficit whilst luring investors and restoring growth.
Egypt introduced painful cuts in July, slashing energy subsidies by 40 billion Egyptian pounds ($5.6 billion), which has led to steep rises in the price of fuel and electricity. Fuel subsidies have in recent years cost Egypt's government around $15 billion a year, a fifth of the state budget.
The government has also introduced new taxes including a temporary, additional five percent tax rate on the wealthy over three years as it seeks to shore up its finances.
Dimian said the government was working on designing a value-added tax but declined to provide a timetable.
"By this we intend to improve the entire tax system, ease the tax procedures, make sure that our tax refund system is functioning better. People won't wait for 6 months in order to get their tax refunds," he said.
Last week, the International Monetary Fund provided Egypt with technical assistance on the VAT issue, said Dimian.
Cairo will ask the IMF for a long-delayed economic assessment in the hope of improving the country's image before a February investment conference in Sharm el-Sheikh.
Mursi failed to secure a $4.8 billion IMF loan while in office and was unwilling to impose unpopular reforms that Sisi has set in motion.
Dimian was the crucial point man in Egypt's negotiations with the IMF during Mursi's rule.
A senior technocrat appointed to the finance ministry in 2007, he worked alongside five finance ministers following the 2011 uprising that deposed Mubarak.
"The informal talks with the IMF never stopped and the teams are in continuous discussions, exchanging data, looking into the macro framework, so nothing has stopped," said Dimian.
He would not be drawn on whether Egypt would resume its bid for an IMF loan package.
"Tapping IMF resources through a programme, we're open to all the alternatives, but we're going to have to choose the right time if there is a need to," he said.
Dimian predicted economic growth of 3.5 percent in the current fiscal year which began in July and said it could reach up to six percent or even higher within three years.
"So in fact if you come and talk to me three months later you may find that my curve has inched up a little," he said.
Asked if Egypt will depend on more financial support from oil-producing Gulf Arab states, Dimian said Cairo would now look to those allies for direct investment instead of aid.
"For example, in the renewable energy there is a great appetite not only from the Gulf states but also from Egyptians and other European and Asian companies," said Dimian.
Last month, Egypt's oil ministry said the United Arab Emirates would provide "about $9 billion" worth of petroleum products to Egypt over the next year. (Editing by Crispian Balmer)
Publication: Reuters Date: 17 September 2014 Link: http://reut.rs/1wD1ou9
Power cuts biggest hurdle to investment in Egypt: minister
(Reuters) - Power cuts dogging Egypt have become the biggest obstacle to luring back foreign investment after three years of political upheaval, the country's investment minister said on Tuesday.
Electricity shortages mean the country often has intermittent outages for hours a day, hitting factory production, frustrating many Egyptians and raising questions over whether foreign firms can operate here effectively.
Although he did not offer short-term solutions, Investment Minister Ashraf Salman said the government hoped foreign investment would help alleviate the problem in the long run.
"It's a top priority for investment attraction," he told Reuters in an interview, promising that the government would soon unveil solar and wind power projects that he hoped would draw in foreign funding.
Blackouts deepened discontent with Islamist President Mohamed Mursi before then army chief Abdel Fattah al-Sisi ousted him last year following mass protests against his rule.
Sisi has since taken over as head of state and although his supporters credit him with a magic touch, there is no quick fix for the decrepit power grid, which, like much of theeconomy, has suffered decades of mismanagement.
Most officials cite political turmoil and militant violence as the biggest impediments to foreign investment, but Salman, a former investment banker, appeared more worried by the daily blackouts. "Energy. The gap in energy," he said, when asked what was the biggest challenge facing the nation.
GRAFT AND BUREAUCRACY
Before an uprising toppled Hosni Mubarak in 2011, foreign direct investment in Egypt stood at about $8 billion a year. It subsequently tumbled to some $3 billion, before recovering to $6 billion in the last fiscal year, which ended in June.
Salman said he was hoping for $10 billion in foreign investment in the current fiscal year and hopes Egypt will attract $18 billion a year by 2018 -- highly ambitious targets.
For that to happen, Cairo must tackle longstanding problems, such as Egypt's notorious bureaucracy and corruption.
"The second (challenge) is the bureaucracy and inconsistencies of policies. We are trying very much to work on that on the presidential and cabinet level," said Salman.
When it comes to tackling graft, Salman says major work was needed. "We are fighting it everywhere. It's not easy. It is even an impediment for the local investment not just foreign investment. We are putting this at top of the agenda," he said.
Foreign investors have also been unnerved by legal challenges to deals. In April, Egypt's cabinet approved a draft investment law that prevents third parties from challenging contracts between the government and an investor.
Investors are also watching the case of billionaire Egyptian businessman Nassef Sawiris, who is locked in a tax dispute dating back to Mursi's year in office. An Egyptian court is due to issue a final ruling on Oct. 28 and the case has raised concerns in the business community. "These are people who put big investments into the country. And they can invest more. They are international players," said Salman, appearing to express concern that the trial might deter others from investing in Egypt.
Salman said the cabinet was also expected to consider in about three weeks a new law that was designed to lure foreign cash and would tackle issues such as bankruptcy and labour.
"The unified investment law will not solve problems like a crystal ball. We have to work on simplifying business procedures," said Salman.
Economic reforms could make it easier for Egypt to secure an International Monetary Fund loan if needed. Mursi failed to seal a $4.8 billion deal because he was unwilling to implement politically-explosive reforms.
"No doubt we need the IMF. ... The IMF is a signal of restoring investor confidence," said Salman.
Earlier on Tuesday, Egyptian Finance Minister Hany Kadry Dimian would not be drawn on whether Cairo would resume its bid for the loan package.
Publication: AP Date: 16 September 2014 Link: http://bit.ly/1s6rrsI
Egypt minister projects 6% growth in 3 years By MERRIT KENNEDY
— Sep. 16, 2014 2:37 PM EDT
CAIRO (AP) — Egypt's finance minister on Tuesday predicted growth rates of up to 6 percent within three years, which would mark a major turnaround following three years of political turmoil that has crippled the economy. Hany Kadry Dimian told The Associated Press he expects growth to increase from 2.5% to 3.5% this quarter, as Egypt pursues several mega-projects -- including an expansion of the Suez Canal -- and seeks foreign investment and a revival of the vital tourism sector. "Having all these projects in place, having investors already knocking on the door to be placed and well-situated with the development projects we have, with the Suez Canal, the 5-6% in 2-3 years is very doable," said Dimian. The Suez Canal linking the Red Sea to the Mediterranean is a major world trade corridor and a key source of revenue for Egypt, bringing in about $5 billion annually. The expansion project, which also includes six tunnels beneath the canal and a rail line, could boost revenues to $13 billion, according to government projections. The government says it has financed the $8.5 billion project by selling investment certificates with a maturity of five years and a 12% interest rate to Egyptian nationals. Investment Minister Ashraf Salman said the fact that the certificates were sold in just eight days sends a message that Egyptians are "believers in the regime." However, experts say the high yields were also a draw. The expansion project is billed as a precursor to the Suez Canal Development Zone, a mega-project aimed at transforming the five Suez Canal ports into magnets for foreign investment. Egypt has struggled to attract investment since longtime dictator Hosni Mubarak was overthrown in a 2011 uprising. Egypt's first democratically elected president, Mohammed Morsi, was ousted by the military last summer amid massive protests demanding his resignation after a turbulent year in power. Since then more than a thousand of his Islamist supporters have been killed in street clashes and thousands more arrested. Egypt has also been rocked by militant attacks, primarily targeting security forces in the Sinai Peninsula.
But after three years of unrest, Egypt's economy may be turning a corner, says analyst Angus Blair, chairman of the Signet Institute. He says Egypt is working on a "multi-dimensional approach," including plans to broaden the tax base, stimulate investment, reform commercial law, and improve relations with the IMF. "They're behaving as if they're a long-term government as opposed to the last few years when people kept saying: 'We're a temporary government.'" He said it will be critical for the government to maximize employment as quickly as possible. "People on the street have got to feel like something's changing," he said.
Publication: Wall Street Journal Date: 17 September 2014 Link: http://on.wsj.com/1uTmCA1
Egypt Eyes Foreign Investments to Boost Growth
CAIRO—Egypt will need at least three years to restore its ailing economy to prerevolution levels after introducing reforms aimed at re-attracting foreign investments and boosting domestic growth rates, the Arab country's investment minister said Tuesday.
Egyptian officials told a financial conference in Cairo of their plans for further tax reforms, including a fresh value-added tax law, and the need to tackle issues such as an over-sized bureaucracy and often inconsistent legal frameworks that deter investors. They said their plans were already bearing fruit and that the current political stability has helped bring back confidence to the market.
But officials acknowledged that changing the country's economic system will require many years before it can achieve the same growth levels witnessed before the Egyptian revolution in 2011 that ousted strongman Hosni Mubarak. "It's a difficult mission. We have a lot of challenges, but we're bullish that this is achievable," said Investment Minister Ashraf Salman. He said Egypt expects to attract $10 billion in foreign direct investment, or FDI, for the coming fiscal year but that it will take three years to reach the precrisis levels of $14.5 billion. These investments would mainly stem from the energy and industrial sector and be led by the Gulf countries, China and Russia.
"These good times will come again but it needs commitment and an honest facing of challenges," said Mr. Salman. He also called for social reforms including programs aimed at Egypt's very poor to run parallel with other changes or the country risks suffering unrest again.
"This time we are trying to learn from our mistakes and to put into consideration an integrated economic social reform program," Mr. Salman said.
The investment minister said it would take up to five years to witness gross domestic product growth levels of more than 6% again. The International Monetary Fund expects gross domestic product growth to be 2.3% this year, barely enough for the country to keep up with its population growth and budgetary needs.
"We need to get to Chinese levels of growth to get Egypt back," said Angus Blair, head of Signet, a Cairo-based regional forecasting consultancy firm.
For much of its recent recovery, Egypt has been reliant on Gulf allies Saudi Arabia, Kuwait and the United Arab Emirates, which have been backing Mr. Sisi's government with billions of financial aid.
"Egypt is doing a lot of right things but will still need some financial support for a long time," said Chris Jarvis, the IMF's mission chief for Egypt.
Egypt Finance Minister Hany Kadry Dimian said the country has asked the IMF for an economic assessment, the results of which it hopes will improve its image among investors ahead of a major economic conference the country is hosting in February. Such specific consultation hasn't been held since 2010. Separately, and in another sign that Egypt is receiving fresh external support, the government said it obtained a $500 million loan from the World Bank to help fund a natural-gas project.
"We are now at the point of a very significant economic takeoff," Mr. Dimian said. "There is a full turnaround compared to six or nine months ago."
Publication: The Washington Post Date: 16 September 2014 URL: http://wapo.st/1uJNbsr
