Focussing on inflation CURRENCY war is a term that was coined in 2010 to describe interventions to devalue currencies by major economies such as China and the United States. These interventions aim at enhancing the competitiveness of those countries' exports. In an attempt to find out what such a process means for Egypt, the Egyptian Centre for Economic Studies (ECES) organised a seminar this week entitled "Currency war: Implications for Egypt." Magda Kandil, executive director of ECES, showed that if Egypt were to join the currency war, the consequences would be grave as the resulting depreciation of the value of the Egyptian pound would increase inflationary pressures. Rather than target currency devaluation, Kandil recommended that cutting inflation is more important. She showed that although the Nominal Effective Exchange rate has ranged between LE5 and LE6 per dollar between 2008 and 2010, in effect the Real Effective Exchange Rate has appreciated to around LE13 per dollar as a result of inflation. She also pointed out that although depreciation of the currency should mean less imports as importation becomes more expensive, that does not occur in Egypt due to a large dependence of exports on imported inputs. Moreover, "depreciation may not stimulate export growth, absent efforts to improve quality and efficiency," she said. The effect of the currency war has meant that low interest rates in advanced economies have led to a surge in "hot capital inflows" to developing countries, increasing appreciation pressures. Hot inflows are extremely volatile inflows that move quickly to any country providing better returns. To shield itself Kandil suggests Egypt should increase incentives for long-term foreign direct investments and tax hot inflows. She also recommended that "fiscal consolidation should aim at decreasing the risk premium in interest rates." Leg-up for entrepreneurs US BUSINESSMEN met with Egyptian innovators during the Global Entrepreneurship Programme launch to discuss business opportunities, Eman Youssef reports. Representatives from 13 American companies and entrepreneurs from the information and communications technology (ICT) sector, senior government officials and Egyptian investors discussed investment opportunities and the business climate in the United States and Egypt. The four-day Global Entrepreneurship Programme (GEP) launch, organised by the Egyptian Ministry of Communications and Information Technology and the US State Department, focussed on fostering partnerships to support entrepreneurship in Egypt. Egyptian Minister of Communications and Information Technology Tarek Kamel highlighted the importance of the programme, which was part of US President Barack Obama's initiative in June 2009 to advance entrepreneurship in the Middle East and the Muslim world. "Egypt has strong relations with the United States on both the political and ICT levels," said Kamel, predicting that the ICT sector will witness great development through the two countries' work together. The programme was also inaugurated by US Ambassador to Egypt Margaret Scobey, who emphasised that the GEP is considered the first step towards encouraging entrepreneurship while fostering the spirit of innovation in Egypt. "Egypt has all the potential to be the regional hub for innovation," said Tarek El-Sadany, CEO of the Technology and Entrepreneurship (TIEC). Hosted by the American Chamber of Commerce in Egypt and the American University in Cairo, a competition was held among a number of Egyptian ICT companies which had been nominated for the best project idea. The US delegation, whose members met with representatives from the Egyptian government, was also hosted by the Nile University and the US-Egypt Business Forum. According to Steven Koltai, the US State Department's senior advisor for global entrepreneurship, his country has chosen Egypt to launch the GEP as Egypt is the key focal point of entrepreneurial activity in the region. "US investors are actively engaged in the Egyptian market and more are willing to join," said Koltai, adding that regional investments in economic reform and human and capital infrastructure in Egypt provide a strong foundation for entrepreneurs and investors, both local and international. To support entrepreneurship in Egypt, the GEP's US and local partners will engage in numerous activities such as identifying opportunities, training aspiring entrepreneurs and assisting with access to funding. Government ministries, non-governmental organisations, universities, professional associations, foundations and businesses will all work together in support of the promising trend of business start-ups and social innovation in Egypt.
