The Arab region, Egypt included, has untapped potential just waiting to be exploited, Sherine Nasr reports Businessmen and investors from at least 23 countries met this week at the Fourth Cairo Investment Forum to discuss their next move as the global recession begins to wane. The two- day event brought both good and bad news. According to World Bank (WB) Middle East and North Africa region (MENA) Vice- President Shamshad Akhtar there is enough evidence that the region weathered the economic and financial crisis well, "yet, this should not be a cause for complacency." She added that additional disruptions, like the recent Dubai events, short-term and long-term impacts of the losses emerging from the global financial crisis and the slow convergence of the region's per capita GDP to levels similar to those of higher income countries are all factors that render the region vulnerable. According to WB statistics, economic growth in MENA fell by 2.6 per cent in 2009 which is significantly less than the four per cent decline observed in the advanced economies thanks to little direct exposure to the epicentre of the shock, which were the toxic assets of financial systems in developed countries and the limited role of private investment in these economies compared to the rest of the world. "This helped minimise the impact of the shock on overall investment," she said. According to Akhtar, most MENA countries adopted prudent fiscal stances prior to the crisis which helped bring down public debt/GDP ratios. For instance, Egypt's public debt ratio has fallen by almost 20 per cent since 2006, "which gave the country sufficient room for policy manoeuvrability while taking steps to stimulate the economy." In its attempt to drive out of the dark tunnel, President Hosni Mubarak underlined that Egypt has adopted a stimulus plan to encourage more investment into more diversified infrastructure projects and greater attention has been given to the developmental dimension in the governorates of Upper Egypt. In his speech, delivered on his behalf by Prime Minister Ahmed Nazif, Mubarak declared that the government will soon inject more investment in Upper Egypt. Projects include a natural gas pipe extension to Aswan as well as the renovation and establishment of new airports and roads in Upper Egypt. "Assiut airport is now being developed. A new airport in Sohag will be inaugurated and the Upper Egypt-Red Sea road connecting Upper Egypt governorates to the Red Sea ports will soon become operational," said Nazif. This month, the Egyptian Chemical Industries Company, better known as Kima, in Aswan received its first share of natural gas as the farthest southward destination to where natural gas has so far been transported. Other projects include the establishment of a new marina in Luxor, medical compounds in Alexandria and 6 October governorates in addition to a number of projects northwest of the Suez Gulf. According to Mahmoud Mohieldin, minister of investment, these projects will be concluded in full partnership with the private sector. "In order to attract these investments, we have to maintain growth rates above five per cent and keep the budget deficit at round seven per cent of GDP," he said. Mohieldin indicated that a full package of investment-friendly laws and regulations has been adopted during the past four years to encourage more investment inflows in the country. In addition to dispute settlement mechanism and safe exits from the market, the cabinet will soon be discussing the draft of a new law that will regulate microfinance lending as a step towards encouraging this vital sector to have a more secure and diversified access to finance. Access to finance tops the list of challenges facing the sector. "It is important to stress the fact that there are at least six million micro- enterprises in the country which statistically represent a large segment of society estimated at no less than 25 million people. It is a huge market and the financial gap in this market is estimated at almost 90 per cent," said Amr Abul-Azm, vice-chairman and CEO of a company providing development services to micro- enterprises. Notably, the SME sector in Egypt contributes at least 70 per cent of the nation's GDP. According to Osama Saleh, chairman of the General Authority for Investment and Free Zones (GAFI), at least 85 per cent of the companies established during the year fall within the small and medium-size category. A step on the right direction is the establishment of Bedaya or "The Start" as a small- and medium-sized enterprise (SME) service provider that will be entrusted with the task of encouraging these enterprises to start a business development plan, train owners and workers to adopt entrepreneurial skills, help assemble industries in clusters to provide high quality products and finally provide access to finance through banks and companies according to certain regulations that are now being studied by the Central Bank of Egypt (CBE). On the regional front, Egypt has decided to contribute to a $2 billion development initiative that was earlier suggested during an Arab economic and social development summit held in Kuwait last January. The development initiative is mainly aimed at providing required financial resources to SMEs.
