As a testing financial year comes to an end Sherine Nasr detects at least some economic shoots An air of optimism pervaded the 15th Euromoney conference in Cairo on Tuesday. The financial crisis has fortunately proved not as bad as predicted, especially in Egypt, which recorded 4.7 per cent growth in 2008/09 despite unprecedented increases in international food and energy prices and a slowdown in revenues from major hard currency earners, the Suez Canal, tourism and foreign direct investment (FDI). "Most governments would be thrilled by these growth figures," says Richard Ensor, managing director of Euromoney Institutional Investor PLC. Other positive indicators include a reduction in unemployment to nine per cent and inflation running at between six to eight per cent compared to 18 to 22 per cent in June last year. The fiscal deficit remained well below seven per cent of GDP. Real estate and the IT sectors enjoyed robust growth of 15 per cent, while the manufacturing sector grew by 4.5 per cent. "This year we are planning on a growth rate of around five per cent," says Minister of Investment Mahmoud Mohieldin. He added that LE8 billion will be pumped into the economy over the next year, "a continuation of the infrastructure projects earlier announced by the government". The five per cent growth rate, though, may prove hard to deliver. It will require an estimated LE135 billion of private-sector investments to enter into the economy. Prime Minister Ahmed Nazif underlined that although Egypt hasn't reached the pre-crisis stage yet, he is relieved that there are many signs of recovery. "The local market is resilient, national investors' appetite is growing and tourism is picking up," he said. Fortunately, two of the fastest growing sectors in Egypt, communications and IT and electricity, had good news for investors. Tareq Kamel, minister of communication and information technology, announced that two licences to provide telecommunication services in housing and tourist compounds will be offered to local and international companies. "Bids will open on 12 January. Efficient players are invited to contribute their know-how. The two licences are expected to stimulate $1 billion of investment within the next five years with eight per cent of the revenues shared by the government," said Kamel. He added that the revenues from the communication sector, which hit $5 billion during 2008/09, have exceeded all expectations. Hassan Younis, minister of electricity and energy, revealed a five-year plan to increase Egypt's grid by 58 gigawatts, at a cost of $120 billion, starting 2011. "This is a very ambitious plan. For the first time in Egypt private investors are being invited to build their own plants and sell energy," says Younis. But is it enough for Egypt to grow by five per cent as the world financial crisis recedes? "Absolutely not," says Mohieldin. "We have many challenges ahead of us." One major challenge is unbalanced growth among economic sectors in Egypt. Sustainability of development, fairer distribution of wealth and improvements in public services will all have to be addressed in the coming phase. Yet, warns Ensor, "the proximity of the coming presidential election may see the government adopt cautious rather than progressive policies." Nor are the clouds of recession fully dispersed over either the EU or the United States. Unemployment may rise further and capital inflows are diminishing due to the credit crunch. Countries that were among the strongest advocates of market- based economy have started to adopt protectionist measures to help fend off the worst effects of the crisis. "It is important to understand that countries will have to fend for themselves to mitigate the effect of the crisis on their economies," says Taher Helmy, senior partner at Helmy, Hamza and Partners. There are opportunities, though, lurking within every crisis. Greater attention is being given to emerging markets as the antidote to a lingering recession in the Western hemisphere. According to a study conducted by the Commercial International Bank (CIB), growth rates in 2009/10 will be highest among emerging markets: China 7.5 per cent, India 6.3 per cent and Egypt 5.5 per cent. "The G20 have found the answer in the emerging markets," says Hisham Ezz El-Arab, chairman of CIB. "Although Egypt is a late comer, I'm positive that as an emerging market it will get more than its fair share in terms of private equity," says Marc Franco, the newly appointed EU ambassador to Egypt. "We are studying ways by which EU funds can be incorporated in public private partnership projects in Egypt under the Mediterranean Neighbourhood Policy." As the Euromoney conference closed, another major event, MEDA Finance 2009, kicked off yesterday, to discuss the distribution of EU finance, technical assistance and grants worth $22 billion.
