Accompanying Investment on his week-long visit to Beijing, Assem El-Kersh finds out whether China will be Egypt's convoy back to Africa following a period of economic disengagement What did you hope to accomplish by your visit to China? I came to China with a number of objectives. One major aim is to present new developments in the Egyptian economy and the new business opportunities they have opened up for Chinese companies in Egypt. We have already keyed the Chinese factor into our own investment plans -- "the Chinese dimension" -- and we hope to promote this and extend the scope of cooperation through a number of Chinese projects all across Africa; further meetings will be held in Egypt under the rubric of the Africa- China Development Fund. The visit also provides an opportunity to understand recent development in the Chinese economy, which is one of the few world economies that continued to grow despite the financial crisis, and where sustainable development has not stalled as a result of it. How well are the Chinese authorities responding? Our counterparts have total understanding of our policies and they appreciate how our reform efforts have opened the door to Chinese investment in Egypt. One simple piece of evidence for this is the fact that over 82 per cent of the Chinese companies now operating in Egypt -- a total of 856 -- were established in the last five years, and many in the last two years. It is safe to say that this is the result of newly introduced facilities and improvements in the business environment. Since being here I have noticed that the Chinese are eagerly anticipating further opportunities, they are inquiring about the details of our plans and scheduling meetings with us -- many of which are to be held in Cairo directly after Ramadan. So there is a great deal of positive interest nurtured by the China Development Bank and the Africa- China Development Fund -- not to mention that the Chinese authorities are presenting Chinese companies with promotional packages to encourage investment abroad. Is China to take part in Egypt's 52-Project Scheme, which the government recently put forward to improve the infrastructure of all governorates? We presented some projects, many of which are based in the economic zone to be established west of Suez. So we presented the Suez economic zone as well as opportunities in Upper Egypt where projects include medical compounds and a giant theme park. Last month you spoke of how tough it is for Egypt to do business in Africa in the face of competition from China and India. Can this visit be seen in the context of a change of tactics with Egypt attempting to penetrate the African market through cooperation with China? The issue of competition is not confined to China and India, since many other parties now have an interest in Africa: Turkey, America, Europe and Japan all have a stake. It can only be a positive development that the continent is fast maturing as a place to do business since it means that job opportunities are being created without compromising limited national resources. I think Egypt's comparative advantage and its proximity to some African countries might give it an edge in this respect -- and Egyptian companies should take a much more aggressive approach in Africa in terms of speed of movement and effective scheduling, not only to keep up with the competition but also in response to the economic ambitions of the continent and what they increasingly require. Along with credit risk and repayment risk, of course, some issues that have to do with the protection of Egyptian properties and investments in African countries still need to be addressed through a legal framework. Why would China need Egypt's help in Africa? Is it not easier for Chinese companies to deal with the Africans directly? They already are. China and India have not been waiting for partnerships with Egypt. The possibility that companies will bypass Egypt in their approach to the continent is not something either party has ruled out. But according to the Chinese authorities themselves speaking in 2006, Egypt is a country with continental and strategic interests in Africa and a presence which enables them to join forces effectively while applying the same principles they would apply were Egypt absent from the equation. All we are saying is that partnership with Egypt could lead to more interesting opportunities and enhance the viability of certain projects. Does it surprise you that Egypt, once so influential in Africa, is now attempting a comeback through Chinese mediation? Once again, China is not the only gateway to Africa. We already have our own channels of communication which are either there or in the process of being revived. The Common Market for East and South Africa (COMESA), for example, is one such channel; and many bilateral links are opening up besides. It needs to be taken into account that in terms of trade profiles, the potential for business and the kinds of projects required, 21st-century Africa is a wholly different place from the Africa of the 1950s and 1960s. The Egyptian business sector is adapting accordingly, repositioning itself to do business with Africa; and several task forces from various parts of the government have been focussing on the continent. A movement as yet in its preparatory phase, in addition, is aiming to join forces with South Africa and other states to cooperate and promote trade and investment especially in the field of infrastructure. The resulting organisation should also benefit from international financial institutions for technical support and help with the financial requirements for the success of a given project. So here you have a wholly new model, a new world opening up -- and I think we are up to it. How do you see Egypt's prospects a year on from the international financial crisis? I see the crisis from a different perspective. We had problems before the crisis, and we have had problems during and since. What we need to do is minimise the risks associated with its consequences, and to keep its possible costs to a minimum. It should not matter to me as a policy-maker from a developing country to be told that the crisis is over with some indicators of recovery, unless these indicators have a direct positive bearing on my economy. As I put it almost a year ago in an article I wrote for Al-Ahram Weekly, my concern is less with the crisis than the solutions put forward to deal with it. The question for me is what policies and measures will help enhance the growth profile of Egypt. Last year, despite the crisis, we grew by 4.7 per cent; this year we are aiming for 5.5 per cent, which hopefully we can exceed; what we need to be on track for sustainable development is seven per cent. How close are we to this target? We made the seven per cent mark three times in the last five years; last year we were affected by the crisis and this year we may not reach seven per cent for the same reason, but we are going to be close. We are aiming for as much foreign direct investments as possible to help with growth: last year [2008/09] we managed some $8 billion in FDIs, and this year we are aiming for $10-11 billion. Would you agree that the worst is over? As far as the panic and the drama associated with the bad news is concerned, you could safely say that it is. But this does not rule out surprises here and there. In the end good or bad news from the financial sector concerns us here in Egypt only insofar as we can internalise them to formulate policies with which to control inflation and combat poverty. In the year before last [2007/08] FDIs were $13 billion. How do you plan to make up for the drop? Until 2004, you mustn't forget that private sector investment was no more than LE34 billion; last year, before the crisis, it reached LE136 billion and is now LE113 billion. FDIs and investments in general are a flow, and by definition a flow is subject to fluctuation. What concerns me is the trend, and the trend is positive. I always say that Egypt still has opportunities to offer; we have FDIs because of opportunities to offer despite the obstacles and costs of doing business with us. It is encouraging that in its latest report, which was published only last week, in the area of doing business the World Bank picked Egypt as one of the top 10 reformers worldwide. By the number of new companies established, too -- an important indicator -- we rank 24th, ahead of many developed countries. So, to answer your question, the plan is to make available opportunities for doing business, especially in infrastructure which I think will be the winning sector in the future. As far as supply is concerned, we have a very well designed list of projects; and there will be no shortage of demand. What are you marketing in order to promote Egypt, which as I understand is the most important part of your job as investment minister? We are marketing what we have: a diversified economy with a skilled and trainable labour force and a young population eagerly seeking a place in the labour market whose aptitude will be readily reflected in greater productivity and efficiency; multinational companies have come to appreciate Egyptian personnel. We are also marketing a unique geographic position whose advantages are clear despite worldwide improvements in communication and transportation. What new approaches have you experimented with to attract foreign investment? I think the principal factor in this process is effective targeting. Today it's a long way from the sweeping approach of promoting the country as a whole. Now we have very specific investment targets in well identified potential clients, with specific projects earmarked for precise timelines and clearly defined incentives over and above the usual demand-driven approach. This translates to flexible implementation as well as a responsiveness to demand that avoids bureaucratic bottlenecks. What results do you expect from this new approach? For five years now annual results have exceeded estimates, even during the financial crisis. So let us hope for the best. Different departments in the government are making a collective effort, and pushing the issue of decentralisation. Now we have five main groups representing the governorates of the Suez Canal, the East and West Delta, Greater Cairo and Upper Egypt -- not only do they meet regularly but competition between them is actively encouraged. What has become of the ever controversial privatisation programme? Following the critiques directed at it, has the idea of public ownership of state assets been buried for good? What is being applied is the Asset Management Programme, not just privatisation. I have never said that I have a privatisation department. What I have is an asset management plan. Privatisation has actually made up the smaller proportion of our work. The noise that has accompanied some cases of privatisation must be ignored -- it simply does not reflect reality. We are channelling more investment into companies that we sell. We have also bought or reacquired some assets sold in the past, which did not prove very successful with their new owners. I want to make it very clear that privatisation was never a target in itself but simply an instrument we are using. Public sector companies make up only five per cent of our GDP, so they are not the monsters they are made out to be, dominating the market and inhibiting competition. They are not disrupting economic progress. This is one thing. The second thing is that these companies are not subject to any form of favouritism in terms of deals or loans. The issue was never just to sell. The end is far more important than the means, and this is what I am talking about: efficiency, maximum returns, and the right of future generations to a prosperous life. It is issues like these that we have to consider, so privatisation must be put in context as one of many instruments or means that we have been using to these ends. Even the issue of a strategic investor acquiring any of the 150 companies owned by the state should not be a matter of concern in an economy were 6,000 companies are yearly established. Yes, I would agree that some sectors -- sugar, tobacco, container handling, for example -- are still significant. Yet this does not apply to other sectors: textiles and clothes, for example. My conviction is that they have no significance. What should concern us is how to maximise efficiency while keeping the workers on incomes that make them more productive, safeguarding their rights at the same time as maximising returns. To this end we introduced the new public ownership proposal which has been subject to debate since last November. When you present a new idea to 80 million people, disagreements and conflicting views are only to be expected. Are you giving up on the whole proposal, then? We have not taken a decision. Such a decision requires a new law to be approved by parliament. What we proposed was a programme with a set of principles and framework for discussion, calling for a public debate. We have since received various opinions from opposition and independent MPs as well as hundreds of experts and commentators. We even put up a website for the benefit of the discussion ( almasry.gov.eg ). All of which was eventually transferred to the economic committee of the National Democratic Party, which is now finalising a policy paper taking all those remarks and comments into account in addition to changes resulting from the 2008 crisis and its impact on the market as well as the very significant change in the portfolio of public enterprises from a negative to a positive net worth, with the debt dropping from LE32 billion to LE6 billion. Mark my words, this problem which originated in 1974 is going to be eliminated, hopefully before the end of this calendar year. If you had the final say would you give the public ownership plan the go-ahead? After the due amendments and adjustments, I believe we will have an effective programme for modernising public assets. The principle here is that we need to broaden the scope of Egyptian ownership, protect the rights of future generations and ensure efficient management of publicly owned companies. Is there a timeframe for achieving this? We are in the process of formulating the instruments with which to achieve these targets. Timing is to be decided by the party and the cabinet. I want to be very clear in stating that we have never specified the final format for public ownership in this country. It was only a proposal, not a decision. What will come out of it will reflect public choice. Gone are the days when you could dictate a policy of that sort. Egyptians have the right to choose, to change, fine-tune or completely reject what is presented to them.
