CAIRO: Financial services group Credit Suisse voiced unequivocal support for Egypt as not only a strong choice for international investment, but as one of the best choices in the region, according to a recent report. The report cited Egypt's healthy stock market, domestically-driven demand and government economic reforms among its many attractions. However, the turbulence witnessed by the EGX 30 this week - sliding by 3.84 percent Monday to post its largest loss for 2010 - raises several questions. Although not necessarily indicative of a sustained downward trend, the fall reinforces the insecurity of several of the factors upon which Egypt depends to see the economy return to its pre-crisis vigor. Regional tensions remain an issue. Orascom Telecom (OT), one of the primary weights dragging down the market Tuesday, has seen losses of $46.4 million following World Cup qualifying matches between Algeria and Egypt last November. In its recent results statement for fourth quarter 2009/2010, OT reported, "The recent riot events in Algeria following the football match had a negative impact on the operations. A tax dispute with the Algerian government and an ownership tug-of-war with France Telecom have also weakened OT's position. According to Arab Finance, CI Capital downgraded Telecom Egypt's rating from "buy to "sell with a 6 percent downside. Although Credit Suisse reported an annual 11.9 percent increase for the EGX 30, and highlighted its strength in comparison to GCC markets, such volatility from one the stock index's primary companies is likely to spook gun-shy investors. Credit Suisse concurs with the government's projected real GDP growth of 5.5 percent for fiscal year 2009/2010 and expects 6 percent growth the following fiscal year, in comparison to the 4.1 percent global GDP increase expected. But regional competitors may mop up investors before Egypt has a chance to fully recover; Oman's economy is forecast to grow by 6 percent this year, as the Omani finance minister told Reuters in January. Still, the power of the Egyptian population will drive growth regardless; domestic consumption was responsible for 76.2 percent of GDP in 2008/2009. Credit Suisse looks for a 5 percent increase in real private consumption for fiscal year 2009/2010. GDP growth looks to be driven by domestic growth and infrastructure projects financed by government stimulus, as well as "a rebound in global trade, where Egypt benefits from Suez Canal revenues and exports stated Credit Suisse. Yet Egypt's recovery also relies heavily on FDI levels returning to the heights attained prior to the crisis. The minister of investment still hopes to draw $7.5 billion in 2009/2010, after scaling back from $10 billion, and $9.5 billion in 2010/2011. Finally, Credit Suisse cites the labor force as a potentially major boon. According to their report, "the availability of a large labor force, combined with a low GDP per capita ($2,300 in fiscal year 2008/2009, below countries such as Turkey and China), makes Egypt attractive as a low-cost production destination (globally competitive) and essentially an attractive export hub - Egypt's location and trade agreements with the EU and North America are added advantages. Yet according to the Organization for Economic Cooperation and Development, hired by the Ministry of Investment to recommend reforms for improving Egypt's business climate, a three-day workshop revealed deep dissatisfaction with Egyptian workers. While the Business Climate Development Strategy assesses 12 areas, ranking national labor force alongside access-to-finance, government policies, and corruption, etc, analysis of the labor force touches on wider concerns related to education, social stability and an economy's future potential. As pointed out by OECD economist Ania Thiemann, "Economic growth is not just about firms, but also the human capital that underpins the economy.
