A large delegation of US businessmen who this week checked if Egypt is really open for business departed reassured, writes Niveen Wahish "We got a clear message that Egypt is open for business," Michael Froman, deputy assistant to US President Barack Obama and deputy national security advisor for international economics, told Al-Ahram Weekly. Together with Deputy Secretary of State Thomas Nides, a handful of other US government officials and a delegation of over 100 US businessmen representing around 50 companies, Froman was in Cairo this week. It was dubbed the largest ever delegation to visit the region and the biggest delegation of US businessmen to visit Egypt since the 1980s. "The delegation will leave impressed with the progress achieved so far [by the government in achieving stability]." On a similar note, Lionel Johnson, US Chamber of Commerce vice president for Turkey, the Middle East and North Africa affairs told the Weekly that, "the new government of Egypt is committed to putting this country's economic reform back on track and moving the country forward to a private sector led growth model, realising that the government has limitations and for the long term it is the private sector that is going to create the jobs that are so desperately needed here in Egypt." Johnson led the delegation that mostly included executives of companies already operating in Egypt along with some others new to the Egyptian market. Organised by the US Chamber of Commerce, through its Egypt-US Business Council, the delegation followed in the footsteps of an official US government delegation that had come to Cairo late August to negotiate a concrete timeline for forgiving some $1 billion of Egypt's debt to the US and granting credit guarantees worth another $1 billion. Throughout their four-day stay, the business executives and officials repeatedly underlined their interest in looking into new business opportunities and partnerships for US companies, expressed US business confidence in Egypt, and underlined their commitment to Egypt's long-term economic development. Just by virtue of the number of people that came in this delegation, Johnson said, the delegation wants to signal that American companies are very interested in playing a role in Egypt's future. But according to Akrum Bastawi, a specialist in international economic relations, the level of seniority of the delegation, combined with the nature of their portfolios, suggests that the US administration is leveraging this opportunity to assess the new Egyptian government's behind-the-scenes players and centres of influence, its operating style and general disposition on a range of matters that extend beyond bilateral economic relations. While there was no expectation that any deals would be signed during the visit, Johnson pointed out that meeting officials of the new government could help companies make decisions that they had been putting on hold for a year and a half. He said members of the delegation were intrigued about the agenda of the new government. "They wanted to hear for themselves and make their business decisions based on face-to-face interactions with the people who now have government responsibility." Moreover, according to Bastawi, many of these companies are looking to build new networks of relationships that provide them with access to the new economy of Egypt, access very much needed if there are bumps on the road during possible changes in regulatory policies affecting business, including the potential introduction of Islamic banking rules. The lack of clarity on Egypt's political scene has kept investors, domestic and foreign, on the sidelines since the revolution in January 2011. And while that situation has improved with a civilian president now in office, some qualms remain. The constitution and parliamentary elections remain issues of concern according to Hisham Fahmy, executive director of the American Chamber of Commerce in Cairo (AmCham). Other concerns relate to the business environment. According to Johnson, US businessmen see the need for structural reforms, streamlining investment procedures, adherence to the rule of law and the sanctity of contracts. He said if US companies see rules of the game that are clear and understood by everyone, "You will have more companies here than you want." He gave the example of restructuring the taxation structure for foreign companies operating in Egypt. "Paying more is not the issue if it [the system] is transparent." Johnson explained that lack of transparency is "what detracts from the certainty of the environment, and that keeps investors away." According to Fahmy, "the government realises the problem, but they have yet to take decisions." According to Froman, Egypt has great potential but it has to compete with other emerging markets to attract investment. "The actions of the new government will be important to send a positive signal [to investors]." Bastawi agrees. "Substantive new investment will be premised on greater clarity in the business environment." He said that from a non-Arab perspective, the prerequisites for that include finalising a new constitution, electing a new parliament and at least 18-24 months of demonstrated political stability where the government can show that it has a well articulated economic policy and plan, as well as the power and expertise to implement it. Bastawi pointed out that in the meantime there will be announcements from time-to-time of investment by US companies, but the vast majority of these investments will be technically necessary and part of the ordinary course of business, such as normally scheduled upgrades to equipment in production facilities, but that cannot be truly counted as new investment since it would have occurred anyway as long as the businesses operate. Bastawi stressed that the Mursi-Qandil administration has so far made the right moves in terms of publicly communicating their intended economic policy posture and keeping themselves accessible to international investors. In fact, as Prime Minister Hisham Qandil told the delegation at an event organised by AmCham: "We want to provide an enabling environment for you to work here." But "more details will eventually be required on the economic plan, but their general approach is reassuring to both US and other global investors for the moment. Until there is a constitution and parliament, however, serious business decisions will have to wait," said Bastawi explaining that most US companies view the Egyptian economy within the larger paradigm of their global portfolios. "In very few cases is Egypt a critical country to do business in. The reality is that Egypt is not as big a market as it could be, but it is still one of the top 2-3 markets for US products exported into Africa." He recommended that for that to change, Egypt will have to get back to rapid growth combined with a much better level of overall educational and qualitative development, so that not only its consumer market becomes of greater interest to US companies, but also Egypt's ability to be better-integrated into the wider and more downstream stages of global supply chains that would allow it to become an export hub for US overseas production, much like China. Meanwhile, the size and strength of the delegation suggested not only the level of potential investment ahead, but also the support felt for Egypt within official US circles. According to Johnson, there is a strong pro-Egypt lobby in Congress, at the US Chamber of Commerce, and the US-Egypt Business Council to continue to push for a free trade area agreement (FTA) eventually, and debt relief for Egypt now. "We advocate even a broader debt relief package for Egypt. What is being talked about now is just one third of the total. Our perspective is to eliminate it all. In our budget environment that is a little bit difficult, but we are prepared to push and advocate for that because we think that fundamentally if it is tied to reforms here, that money is better used for Egyptians right now." The previous delegation that was in Cairo late August began hammering out with Egyptian authorities the timing and details of debt relief support promised by the US following the revolution. Some of the suggestions include transforming some of the debt into a debt-swap arrangement, whereby Egypt would be required to continue to repay its obligations to the US but via a special fund that could only be spent on US-coordinated assistance programmes benefiting Egypt.
