The Egypt Economic Development Conference (EEDC) delivered more than even the most optimistic commentators had predicted. Politically, the level of international support, led by the United Arab Emirates, Saudi Arabia and Kuwait, dispelled any lingering question marks over the legitimacy of the political road map Egypt adopted following the 2013 ouster of Islamist president Mohamed Morsi. Deals finalised during the conference are valued at $60 billion. Gulf countries offered a further $12.5 billion in aid. Memoranda of understanding and initial deals worth tens of billions of dollars were negotiated. The announcements have given people hope that the economy, which has been dragging its feet for four years, is at last looking up. The conference offered an opportunity for investors to familiarise themselves with what Egypt has to offer. “It was a great occasion for Japanese companies to find new business opportunities through presentations by the government of Egypt. Japanese companies are eager to take part in many of the projects that were showcased,” says Toyokazu Nagamune, commercial attaché at the Japanese embassy in Cairo. But the impact of new investments will not be felt overnight. Most projects are in the energy and real estate sectors, capital-intensive schemes unlikely to generate large numbers of jobs any time soon. It is an aspect of the conference that has attracted criticism, with some dubbing it a return to Egypt's pre-2011 revolution model when growth, fed by capital-intensive investments, reached 7 per cent, and the trickledown effect was negligible. Economists, however, argue that many of the infrastructure projects agreed during the conference are a prerequisite for the future expansion of labour-intensive industries. But for this to happen, they say, a number of elements need to be in place: the political will to continue with reforms, a reining in of bureaucracy, upgrading of labour skills and securing the supply of energy and financing. In the countdown to the conference the government embraced reforms aimed at reducing its chronic budget deficit and making the investment climate more attractive. It slashed subsidies, opened up the energy sector, loosened its grip on the pound to end the parallel market, issued a new investment law and, most recently, cut income tax. “Some very good work has been done by the government. As a major foreign direct investor in the country, we sense much progress is underway,” says Sherif Elkholy, African director of Actis, a company that invests in emerging markets, particularly in private equity, energy and real estate. But there is room for more improvements, says Elkholy. Dollar liquidity must be improved and barriers to the repatriation of profits made by foreign investors need to be removed. Egypt has introduced $10,000 and $50,000 ceilings on daily cash deposits for individuals and companies in an attempt to halt black market demand for dollars. Nagamune would like to see greater transparency alongside easier access to foreign currency, and believes simpler legal procedures regulating business activities are long overdue. He hopes the new investment law will resolve at least some of these problems. The law provides for a new system for land allocation and a mechanism for the out-of-court settlement of disputes arising between investors and the state. But problems remain, says Jason Tuvey, senior economist at Capital Economics. Investors seeking to enter the Egyptian market could find themselves dealing with up to 78 different government agencies. “The country scores extremely poorly on issues such as investor protection, corruption and the enforcement of contracts, while businesses also have to work through a thicket of red tape,” said Tuvey. More optimistically, Tuvey says past experience has shown that reforms can quickly have a positive impact on the economy. “Following a raft of reforms introduced by the Mubarak government in 2004, foreign direct investment [FDI] picked up sharply from around 1 per cent to more than 8 per cent of the GDP in the space of two years.” Egypt attracted $4 billion of FDIs in the fiscal year 2013-2014 and is aiming to double the figure this year. Red tape and inefficient government employees were raised as issues of concern several times during the conference. Telecom mogul Naguib Sawiris, who is preparing to invest $500 million in Egypt, told Reuters that it was high time the government fired inefficient bureaucrats. The salaries of Egypt's seven million civil servants account for 25 per cent of the budget. “Bureaucracy and corruption are married,” said Sawiris. “You end bureaucracy, you kill corruption.” Financing may pose another challenge to investors. It is not yet clear where the financing for many of the projects will come from. Experts warn that any increase in demand for hard currency from local banks will be untenable. “It has to be in local currency otherwise foreign currency liquidity will be depleted,” says Eman Negm, an economist at Prime Holdings. And, of course, there are security concerns. “Perceptions of stability are a key element affecting Japanese companies' willingness to invest in Egypt,” says Nagamune. While the government works on these issues, experts have stressed that it must not only cater to investors. “Egypt needs growth that offers opportunity to all — women, youth, the unemployed, the disabled,” said Christine Lagarde, managing director of the International Monetary Fund, in her address to the conference. “It means that the benefits of growth are widely shared and felt by the people. To achieve it Egypt must nurture its social infrastructure, not just the physical infrastructure.” Forty per cent of Egyptians are now classified as poor, and the unemployment rate jumped to 13 per cent following the revolution, compared to 9 per cent in the fourth quarter of 2010. There are signs that the government is taking human development to heart. Egypt's Sustainable Development Strategy (SDS) 2030, unveiled on the second day of the conference, targets sustainable inclusive growth and seeks to reduce unemployment to five per cent. SDS aims to promote human development resources through two main pillars, education and health. It promises high-quality education, accessible to all, by 2030, and “an integrated, accessible, high-quality and non-discriminatory health system capable of improving health indicators through comprehensive health coverage for all citizens.” The announcement of so many new investments, and the unveiling of government plans that include construction of a new administrative capital, paint a picture of a new, gleaming, thoroughly modern Egypt. But it will not happen on its own, says Nevine Mohamed, a housewife. “It is time to work. We have to change to make this happen.”
