The business community is happy about the cancellation of decree 506, which mandated that 75 per cent of foreign currency earnings be placed in Egyptian banks. Mona El-Fiqi reports Last week's Supreme Administrative Court decision to cancel ministerial decree 506 had exporters and other foreign currency earning businesses breathing a sigh of relief. The decree, which was issued by former prime minister Atef Ebeid following the floatation of the Egyptian pound in January 2003, obliged these companies to deposit 75 per cent of their foreign currency revenues in local banks. The court found the decree unconstitutional. "The government shouldn't have issued such an unconstitutional decree in the first place," said one satisfied businessman. "It was about time it was cancelled, especially considering the reasons why it came out are no longer valid." When the decree was issued in 2003, the government was attempting to fight the hard currency black market that had developed following the floatation, which led to a major slide in the value of the pound. Today, the hard currency market is relatively stable, with very little black market activity. Helal Sheta, chairman of the Federation of Egyptian Chamber of Commerce's Exporters Division, said issuing the decree in the first place was wrong, since the law regulating foreign currency dealings allows people the freedom to sell or buy these currencies at banks or any other authorised foreign exchange bureaus. Hamdi Abdel-Azeem, president of El-Sadat Academy for Administrative Sciences, said the cancellation would induce greater confidence in the Egyptian economy, thus leading to increased local and foreign investments. According to Abdel- Azeem, for the past two years, the decree has been hindering the overall production cycle since it forced foreign currency earners -- mainly exporters and tour agents -- to deliver 75 per cent of their foreign earnings to banks, while keeping them unsure, at the same time, that the banks could provide them with foreign currency when they subsequently needed it. "The cancellation of the decree is a relief to exporters because they are now certain that they can buy any raw materials they might need at any time," he said. As such, "more production means less inflation and more stability in the price of local products and services for consumers." Other insiders, like Amr Abdel-Latif, executive director of the Egyptian Exporters Association (EXPOLIK), said cancelling the decree would not affect exporters' business, since it was only natural that they keep their foreign earnings in banks. In any case, Abdel-Latif said, cancelling the decree was in line with the liberalisation policies currently being adopted by the government. There is some concern, at the same time, that the recent customs cuts might catalyse an import boom that would once again strain the currency exchange market. Under that scenario, experts like Sheta fear the cancellation of the decree would leave the banking system high and dry when it came to hard currency needs. Abdel-Azeem, however, said that was an unlikely scenario since 75 per cent of imports are capital goods and raw materials.
