Daily News Egypt sat down with the chief representative of The Bank of Tokyo-Mitsubishi UFJ Ltd, Hideaki Chugun. The interview tackled Egypt's economic future, government budget deficit goals and the rates of external and local debt. In your opinion, how do you see the economic performance of the current government? And what is your opinion about the Economic Summit? The current government has made a promising start since the presidential elections last year, and is showing signs of a strong political will for change. They have adopted many structural reforms, such as fuel subsidy cuts and tax hikes as part of a five-year fiscal consolidation strategy, as well as tackling power shortages, reducing arrears to oil companies, and settling disputes with foreign investors, taking positive steps to stabilise and promote its economy to investors. The summit will launch a long-term development and an investment programme designed to promote inclusive and sustainable growth and is aiming to attract billions of dollars in foreign investment, which can only have a positive impact on the economy. It will be important to review and measure the success of any plan outlined after the summit, to ensure they come to fruition.
What do you think of the economic priorities which the Egyptian government should have? The economic priorities should be to build confidence in order to increase foreign reserves and reduce the budget deficit, helping to make Egypt a more attractive environment for business and investment.
What are the main economic challenges which Egypt faces, and in your opinion how can they be dealt with? The main economic challenge will be to increase foreign reserves and mobilise international capital in Egypt, not only from foreign investments, but also through loans from agencies such as the IMF. Providing a good environment for investors through the amendment of legislation and easing investment procedures are steps that can be taken to enable this. However, an effective and representative parliament is integral to the demographic transition on which Egypt's stability and success depend. The delayed parliamentary elections, which are the final step of Egypt's political roadmap is key to achieving economic growth. For example, the improvement in political stability was one of the drivers that prompted Fitch Rating agency to upgrade Egypt's sovereign ratings last month. What is the rate of the budget deficit that you would expect by the end of the current fiscal year in June? I would expect to see a rate of 12% by the end of the current fiscal year.
Is the rate of 10%, which the government defended, realistic? It might be possible to reach 10% within a few years. Can you comment on the rates of external and local debt over the past few months? In your opinion, are they in the secure borders that enable Egypt to repay all its liabilities? The government has tried to manage debt and to reduce overdue overseas payments. However, there are limited foreign currency resources, which make it challenging to meet all external debts. Stand-by facilities from agencies such as the IMF are one form of security that helps.
How do you see the investment climate nowadays, and in your opinion how can Egypt attract FDI again especially from the Economic Summit in March? Does Egypt need new legislation to help increase investment flow to its main economic sectors? There are some signs of economic recovery starting to take place. Egypt's stock market showed a strong performance in 2014 and was the best performing market in the region. M&A activity is starting to become more buoyant, repayment of debt to international oil companies is encouraging them to resume investment and there are signs of improvements in business conditions. Spending is slowly starting to increase and headline consumer price inflation is declining. The economic summit will be a trigger for FDI, and will increase confidence and make Egypt more attractive for investment. I hope the Egyptian government will create the necessary conditions to ensure this becomes a reality. The current legislation is not enough to meet global standards because there are no proper exit procedures for investors.
How do you see Egypt in the future? Egypt has great potential and the country is moving in the right direction. The outlook is positive if the right foundations are put in place now. Does the bank have any investments and businesses in Egypt and want to expand it? Yes, the Bank of Tokyo-Mitsubishi UFJ wants to invest and is always looking for opportunities that meet the right criteria.
