Euromoney ‘17: Stability and Cohesion

Noha Mohammed interviews Euromoney editor Richard Banks

E uromoney has run its annual investment conference here, in Egypt, since 1995. Tell us more about the economic conditions that led you to choose this year’s theme and choose your conference agenda.
One of the strengths of the Euromoney Egypt conference is its consistency. With one exception (2011) we have held at least one conference in Egypt every year since 1995. Our engagement with Egypt is strategic and long-term. We cover the market when conditions are tough and when they are good. In this context, it is clear that, after a number of very tough years in Egypt, that 2017 is looking far stronger economically. Much of this is down to difficult decisions taken by the government in previous years. So, the background is brighter and more stable and this means we can focus on how Egypt can begin to attract international capital at the scale it needs to move its economy forward to the next phase.

What new features and key areas will Euromoney be offering this year?
We’ve brought a lot more interactivity to the conference than ever before. Primarily this is through use of technology (social media integration, polling and so forth) but also through new styles of moderating, interviewing and debating. We’re excited by how it’s looking but you’ll need to attend to see all the new features we’ve developed!

In addition to traditional investment segments. This year’s convention will look at SMEs and real estate. Why have you singled out these two in particular?
Good question. SMEs are the future of the Egyptian economy in so many ways. From integration into the fiscal landscape, through agile solutions to Egypt’s challenges to addressing the employment issue – SMEs are key. On the other hand, real estate is a major institutional investment opportunity. Those international investors who need scale in their investment and who prefer to have real assets in their portfolio (particularly those from the GCC) want to see the real estate market become more transparent and more institutional and to deploy their capital into different opportunities, governates and sub-sectors. This means we need to cover it.

You’ve been with Euromoney for several years now, with an extensive background in the MENA region. How has the investment climate changed in the Middle East and North Africa in the past couple of years?
I have been with Euromoney in one form or another since 1994. In Egypt, I have seen the wheel turn from attractive investment climates in the first decade of this century to a very challenging climate in the past few years. However, I think that 2017 is a signal year for investment into Egypt and that the climate is attractive now and improving. The challenge is to maintain the momentum and ensure that the hard-won gains in competitiveness are cemented. I believe this will happen but there is no room for complacency.

Egypt has seen several years of political stability recently and is applying a stringent set of reforms outlined by the IMF. At last year’s Euromoney event, speakers concluded that key to Egypt’s economic recovery and bringing back investor confidence is the conclusion of the IMF agreement, the resolution of the FX problem and sustained action by the policy makers. What progress do you believe has been made?
There has been progress on each of these three factors. What’s impressive is that the goals outlined by the policy-makers at our event in 2016 have been broadly achieved in the form and within the time-frames promised. What this gives to the government is credibility. In recent years, for understandable reasons, the markets have been a little skeptical that the policy makers were going to make really big, really tough decisions. After all, most of the previous administrations had shied away when the challenges became too great. So we applaud the courage and tenacity of this team. But this has to be the start, not the end, of the process. The policy-makers have created a far more attractive environment for investment and growth – now it’s a question of getting that investment to flow and ensure that it’s benefits are felt by a wide range of the Egyptian people. The credibility that the policy-makers have earned will serve them well in this next stage.

Given the government’s current trajectory, do you think the reforms will be effective in the long term?
Yes. The reforms have been fundamental. I believe they will stick and provide a strong foundation for the next phase.

In line with the reforms a New Investment Law has been ratified as well. How effective can it be in attracting FDI?
We’ve already seen encouraging signs, particularly in the energy sector, of a return of confidence from international capital. However, it’s good to remember that investors don’t invest in laws, they invest in projects which give them a strong risk-adjusted return. As far as is appropriate, the government now needs to support the creation and development of these projects and ensure that the benefits of these projects are clearly shown to the people. To be successful and to do the new law justice, policy-makers need to act as problem solvers and conduits through which strongly beneficial international investment projects can be quickly realized.

How would you say last year’s currency float has affected the foreign investor in the country?
It is the single most important demonstration of Egypt’s renaissance as an investment destination.
How would you say the recent economic reforms have affected imports in Egypt?
So far, so good. However, Egypt imports too much of the wrong things. Specifically sectors such as agriculture need to be upgraded to reduce dependence on imported food. More basic goods need to be made in Egypt to take advantage of the huge domestic market. Egypt’s trade flows need to be rebalanced.

What do you think are the main challenges the Egyptian government needs to address to attract more FDI?
The government needs to continue to stress the importance of rule of law, transparency, fairness and pragmatism. Foreign investors are highly sensitive to red tape, opacity and the perception that local interests have an unfair advantage. The government must be a neutral facilitator and treat all parties with fairness. It must move quickly to resolve disputes and act as a catalyst to ensure that foreign and local capital can invest without unnecessary impediment. It also, and this is exceptionally important, must act as a regulator to ensure that all investors adhere to environmental, social and governance responsibilities. The obligations exists on both sides (investors and government).

In your experience, what are the main legal and procedural obstacles have investors come up against and are they now being addressed?
Each sector and project will have legal and procedural obstacles that are specific to that investment. What is universal, however, is the perception that Egypt is a ‘difficult’ place to invest. This perception can be best addressed by having central authorities who are genuinely responsive to investor needs and problems. There is no ‘magic bullet’ and investors must be held accountable too. Transparency and responsiveness are the key and that’s where I believe that much effort needs to be placed.

If you could step back and look at Egypt’s investment opportunities, which sectors do you feel hold the most attractive opportunities and what advice would you give foreign investors looking to commit capital to in Egypt’s economy?
Egypt has a wealth of opportunitie. Any investment that focuses on meeting domestic demand and improving the lives of the people would stand out to me. On a large scale this means infrastructure like power and transport. On a smaller scale this means social infrastructure like education and healthcare.