Although the Egyptian government showcased its recent reform schemes at a leading annual international business conference, the world remains sceptical, writes Sherine Nasr Egypt's recent sweeping economic reforms may have briefly attracted the international economic community's attention last week; experts, however, said the government has to deliver more to earn the global business world's trust. Last week, Cairo hosted the ninth Euromoney conference, an event that brings together an audience of investors, business leaders, decision makers and government officials to exchange ideas and develop new contacts. This year's event was focused on Egypt's latest economic reform schemes and the government's attempts to turn Egypt into a country that's "open for business". The biggest challenge being faced by Prime Minister Ahmed Nazif's cabinet -- now that, according to the minister, "the government has initiated a package of reform actions to accelerate development" -- is to establish an environment that fosters growth, increases business through national and international investment and employment creation, and, in the meantime, preserves the social safety net that minimises the effects drastic reforms might have on limited income groups. That is not an easy task for a country with a population rate that goes up by two per cent every year, unemployment at around 10.7 per cent, and a need to create some 600,000 new jobs annually. "Although last year was difficult with regards to the stability in consumer prices, the Egyptian economy, however, showed some positive trends," Nazif said, explaining that GDP grew by 4.1 per cent last year compared to 3.2 per cent the year before. Exports increased by 31.7 per cent in dollar value, tourism grew by 52 per cent, and Suez Canal revenue grew by 28 per cent. Last week's reforms included a reduction in tariff brackets (from 27 to six), the elimination of service and surcharges, as well as distortions and exemptions in the customs system, and the reduction of the average tariff rate from 14.6 per cent to 9.1 per cent. Personal and corporate income taxes are next in the reform line, with the government aiming to reduce the tax burden on lower income individuals, and implement international accounting standards in tax assessment. Financial sector reforms promise to be equally drastic. According to Finance Minister Youssef Boutros-Ghali, the government has adopted a number of tools to restructure the banking system. "These include merging smaller banks, providing solutions to non-performing loans, privatising joint-venture banks and preparing at least one public-sector bank for privatisation, and upgrading the regulatory and monitoring functions of the central bank." According to Investment Minister Mahmoud Mohieddin, new arrangements for the country's free zone areas and specialised economic ports will soon be declared -- in yet another attempt to make the economic climate more attractive for investment. Aiming to efficiently manage the country's assets, said Mohieddin, also meant that the 172 state-owned companies would soon be subject to privatisation or restructuring. There was no such thing as "a strategic commodity or a strategic sector", Mohieddin said. "The private sector is welcome to step forward and introduce practical solutions to save loss making companies." The ministry also plans to establish a "Financial Service Authority", to be headed by the Capital Market Authority chairman. The new entity will deal with financial services affecting the insurance industry, mortgage financing and the real estate market. But the government's biggest challenge, said Mohieddin, was guaranteeing integrity and transparency, and avoiding bureaucracy. While most Egyptian businessmen were relieved to see the government finally take action on demands that had been spoken of for years, representatives of multinational companies remained cautious regarding the government's ability to implement all these much-needed reforms in time. "There is a sense of euphoria in the air; however, many realities need to be re-checked," said Austine Ometoruwa, a Citigroup director. Ometoruwa said Foreign Direct Investors (FDI), for example, tended to rely on local money to leverage their capital. "Thus, banks in Egypt should be more market-driven than the case is now," he said. Other commentators were of the opinion that a whole new way of thinking needed to be broached. "When we talk about change, we tend to look at the past," said Hisham Youssef, chief of cabinet for the Arab League secretary-general. "When we talk about industry, we still mean textiles, while agriculture for us is no more than some traditional agricultural products. We should think of biotechnology, and the more advanced industries if we want to be successful."
