Should Egypt look to Ireland for advice on establishing itself as a major International Financial Services Centre? Pierre Loza reports The idea of an Egyptian International Financial Services Centre (IFSC) has been heralded for the last ten years. With its prime geographical location and abundance of educated labour, there are few who would argue against Egypt's potential in this field. While little has actually been accomplished towards fulfilling this goal, the emergence of Prime Minister Ahmed Nazif's government -- with its stronger focus on the services sector -- has inspired a newborn optimism. In light of that dynamic, some are looking towards Ireland, a nation that has successfully pulled itself from social, political and economic instability, to provide Egypt with a few lessons on how to become a vibrant financial powerhouse. At a workshop entitled "IFSC Cairo -- The Irish Experience", organised by the Egyptian European Council, Irish Ambassador to Egypt Richard O'Brien spoke of how Ireland evolved from the turbulence of the mid- 1980s, when it was generally regarded as an economic underdog, into a nation that is today among Europe's most serious economic players. "Inflation was 21 per cent, today it is 2.4 per cent, and unemployment was 24 per cent [while] today it is down to 4.6 per cent," he said. "Ireland is today the third largest per capita exporting nation after Belgium and Singapore." According to O'Brien, the IFSC was part of a consensus-based initiative that united the entire nation behind the goal of creating a better economic future. This transformation meant greater investment in education and infrastructure, as well as bold efforts to remove protectionist trade barriers while keeping a stern focus on remaining competitive. "We also fought to make a place for peace," he said. The development and planning of Ireland's IFSC was initiated by the International Development Ireland (IDI) foundation, a private body with a mission to provide quality products and services to facilitate the successful development of markets. IDI director David Lovegrove, who also spoke at the workshop about Ireland's experience, said, "a country can change; the past and the present need not be indicators of the future. If that was the case, then in Ireland, we'd still be herding pigs, Dubai would still be making sand castles, and Singapore would be as bad as it ever was." Lovegrove went on to outline the initial steps to establishing Ireland's IFSC, which included the development of a national vision based on consensus, coupled with a strategic plan that utilised lucrative market opportunities. An institution called the Dublin Docklands Development Authority was also created to monitor and empower the development of the Dublin Docklands area, where the IFSC is located. What started out as 20,000 square metres of world-class office space grew rapidly to 62,000 square metres, which now include hotels, a massive complex of quality apartments, retail and leisure facilities, as well as a university campus. "By 2012 it will cover between 17 and 20 hectares; we'll have a quarter of a million metres squared of prime office space and close to 1500 quality apartments," Lovegrove said. The Irish realised, at an early stage, that key ingredients to a competitive Irish IFSC would include the facilitation of money movement, as well as a tax treatise that conformed to international best practices. In the Irish context, the problem was not that the labour was not there, it was that it was scattered outside Ireland. "We knew that there were a lot of Irish people living overseas in IFSCs who would be happy to come back to Ireland," he said. An aggressive marketing campaign was launched to boost Ireland's credibility against established competitors, like Frankfurt and London. At that stage, industry concerns were mainly related to the presence of proper regulatory and licensing structures. To soothe these worries, IDI formed a committee of "three wise men" -- the governor of the Central Bank of Ireland, the secretary- general of the Ministry of Finance, and the chief executive of IDI. The three wise men travelled around the world to explain the regulatory procedures that the Central Bank of Ireland would impose on companies setting up in the IFSC, as well as the licensing procedures followed by the Finance Industry. "After being assured from their local regulatory institutions that our procedures conform to international best practices, the companies began coming forward," Lovegrove said. These moves catalysed the Irish IFSC into one of the fastest growing offshore financial centres in Europe, with 16,000 direct employees, 450 different institutions, and 700 million euros in annual corporate tax revenues. For the development of an Egyptian IFSC, Lovegrove suggested the benchmarking of objectives that focussed on a specified market niche, where Egypt has a comparative advantage. This should be done within the context of an Egyptian package that covers all areas of concern. "This total entity will determine whether a company will come here, or go to Dubai." He also encouraged the development of private and public sector partnerships that work to bolster Egypt's image as a business-friendly environment. Equally important was taking advantage of "the enormous amount of money flowing into this part of the world". Lovegrove also said Egypt had to make mistakes and learn from them in order to get to where it wanted to go. Mohamed Abdel-Salam, chairman of the CairoAlexandria Stock Exchange (CASE), also spoke at the workshop about Egypt's potential to become an IFSC. Abdel-Salam believed that the establishment of an Arab stock exchange in Cairo, scheduled for 2005, would set forth fertile ground for an Egyptian IFSC. To be located at the Smart Village, the Arab stock exchange has the potential to bring a substantial number of regional players to the Egyptian market. "Our vision is to become the base market of the region, within a few years," he said. Even with all these plans in place, an Egyptian IFSC can never become a reality without the presence of a strong bond market, as financial expert Sherif Raafat, former CASE chairman, commented. "We need a bond market to finance infrastructure, government securities and real estate. These are the three legs to a stool of developing a fixed income market," Raafat said. In terms of the legal framework, Raafat said Law 83 of 2002 was a good start. "The law did the following: it stipulated a five per cent corporate tax, a 10 per cent income tax, and allowed foreign firms 100 per cent ownership." If anything, Law 83 planted the roots of a competitive Egyptian package. With fast moving competition and a lot of catching up to do on legislative, regulatory and marketing levels, an Egyptian IFSC is still tough to imagine in the near future. Even with Egypt's advantages that roll off the tongue, policy implementation would take time to bear fruit. As Sameh El-Torgoman, chairman of the Mortgage Finance Authority, said, "we have been discussing how to make Egypt a financial hub since 1997, and we are still discussing it today; this shows how much progress we've made."
