Work, production will pull Egypt out of crisis: HDB Chairman

Building pillars of state is the basis for achieving economic growth and stability, says El-Sebai

Fathy El-Sebai, Chairman of the Housing and Development Bank (HDB), said that work and production are the only ways to pull Egypt out of its current crisis.
In an interview with Daily News Egypt, El-Sebai said it is very important to reassure investors, providing them with extra incentives and exemptions to stimulate the economy and attract foreign investment.
What is your vision for Egypt's future on the political, economic, and banking levels?
I have a sense of general optimism towards the future in Egypt, under the wise leadership and political vision that began with the New Suez Canal and its new ambitions and challenges. The Egyptian market is large, and has multiple resources. It is a vibrant market that is capable of achieving great development, in spite of all the events the country has seen. We are still alive and achieving positive growth rates. They may not be the same rates we saw before 2010, but at least they're not negative. This alone is a very positive indicator of the Egyptian market's efficiency, and the ability of the Egyptian economy to recover and advance. We are now in a new phase, and there is a roadmap in place that is being implemented accurately. All Egyptians trust they have chosen the right path. We now await the completion of parliamentary elections. Once they are completed, it will represent a supportive and influential step in the economic situation, to move with confidence and in a more positive and active manner.
Do you think political stability is sufficient for the return of economic growth?
Political stability is a pillar for achieving economic stability and the return of growth, especially as the economic situation in the country was negatively influenced by political conditions, not economic problems. I believe that the Egyptian economy is capable of recovering. There is no doubt that the presence of catalysts will support its faster launch. The return of political stability must be accompanied by decisions and actions that stimulate investment. The most important of such decisions are encouraging investors, and giving them a positive impression that their investments are secure. There is also no harm in providing them with tax breaks and exemptions, as well as facilitating the allocation of land for investment projects.
What is the plan to help the state's advancement?
Work, work and work. My answer will always be work and good administration, as well as its rationalisation. This is the real plan to treat the economy. All sectors of the state must play their roles and work with full power. The administration should be stricter with workers who do not achieve target goals.
Revenues and salaries should be connected to production rates achieved by workers. This must be accompanied by a clear system of penalties for anyone who slacks or does his job with negligence that leads to halting work or reducing production rates, especially with the presence of all the factors that can help improve the production.
What are your demands from the government, and what message would you like to send to it?
I hope the government works on reassuring investors and delivering messages that imply that it is committed to all contracts between government and the investors.
Do you believe that privatisation, in cases such as that of Omar Effendi and others, have harmed the market?
The Egyptian market doesn't need privatisation as much as it needs a highly efficient management to manage its investments successfully with all available facilities, while utilising foreign investors. We must understand that investors look to achieve profits because they are not donating their money, and they must feel reassured about their investments.
Without local or foreign investments, we will not achieve any economic developments or advancements, because more job opportunities will not be available.

The elimination of unemployment and an increase in production rates will not occur without the presence of investments, and so we must first encourage local investors to increase their investments in the country, and they must be reassured first. This should be followed by a strong entrance of Arab investors, and if foreign investors were hesitant, they will quickly follow if they feel reassured as well, so the government must take bold measures to stimulate foreign investments. Foreign investments had reached $13bn by 2007, and we hope they go back to that high level again or even surpass it.
Is it possible that this will occur within this year?
We hope this happens and we hope foreign investments flow. This, however, must coincide with the enactment of some investment incentives and tax breaks for a period of time until investments flow, as they did in the ‘90s, when investment incentives contributed to achieving a leap in the size of investments in the country.

In your opinion, what are the most prominent economic sectors that can help achieve growth faster?
The tourism sector is considered one of the most prominent economic sectors that can help achieve growth faster, especially as the infrastructure for it is present. It's also known that Egypt has all the potentials needed for tourism in all its forms, and any country that has these potentials is able to attract 80 million-90 million tourists.
The real estate investment sector is also considered one of the sectors able to increase growth rates. It's known that this sector is considered the engine of any economic growth in any country, as it has a great role in stimulating many sectors and industries related to it. Before 2010, real estate investments represented nearly 16% of the state's gross domestic product (GDP), and we must work on restoring this sector to its previous state of activity in order to increase the growth in GDP of Egypt.

What is the role of banks in re-operating halted factories and supporting other economic sectors, like tourism and real estate investments, and reviving them?
Banks have always been present and never failed to finance economic projects or support them. However, banks cannot finance losing projects because they study the projects thoroughly before they finance them in order to make sure that they will achieve enough revenues to repay the loan, which is basically considered the money of the depositors. As such, banks cannot lend to projects before being assured of their economic feasibility.

Also, it's in the interest of banks to pay attention to financing customers and project owners, as well as opening letters of credit in order to obtain commissions and interests, eventually achieving larger profits. Unlike what is said, banks are not happy to invest their money in government debt tools of treasury bills and bonds; however, they do it out of obligation because they are guaranteed investment tools with the lack of job opportunities in the market.

The banks are accused of looking for guaranteed profits in government debt tools and ignoring real investments that support the economy. What is your response to that?
As I have said before, banks are not really happy to invest in government debt tools, but at the same time they will not risk their money, which is basically depositors' money. Also, it's not in anyone's interest that banks be subject to huge financial problems, because of providing loans to losing projects.
For example, the tourism sector is having problems and facing a decline in hotel reservation rates, and thus, owners of tourism projects cannot repay their debts, and it's not possible that banks would be interested in providing loans within the same sector, but they are supporting existing projects. When the security situation improves, banks will expand in financing the tourism sector again.

What are your views on the housing crises in Egypt?
The housing crises in Egypt will remain and will never completely disappear. The problem lies within the difference between the method of dealing with the housing crises in Egypt and in other countries, whereby citizens abroad are fine with living in studio flats and small areas, while Egyptians refuse this.
The customers' objection to buying housing units of small spaces has caused officials to announce that there are flats of larger spaces, up to 90 metres, with a price of EGP 135,000, and the flats are provided with subsidies with values ranging between EGP 5,000 and EGP 25,000.
Banks are doing their role very well, and so is the ministry, but the problem lies in the customers not accepting small flats or studios, although this is the only solution for providing housing units for low prices. Customers need to change their thinking, and the media must help with this.
As for the matter of reducing the value of advances for housing units, as requested by some, the reduction will not solve the problem, because in the case of reducing the advance, the instalment value will increase, and loans cannot exceed 20 years.

How do you evaluate the performance of the real estate sector over the past period?
The real estate sector has high growth rates because of the increased demand on real estate projects. Currently, customers are more satisfied with the existing projects, whether for the low- or middle-income sectors. The proof is that whenever any new project is offered, it is quickly reserved, which is an indicator that reflects the size of demand on housing units in the market.
In the light of the increase of inflation rates and the rise in dollar prices, customers prefer to invest in the real estate sector, as they consider it to have the best return value currently, especially with the Central Bank of Egypt (CBE) initiative that contributes to activating demand on real estates.
Finally, what message would you like to end this interview with?
My message to everyone is that returning to work and productivity is the only way for Egypt break through to new investment horizons and achieve the desired economic growth. This will occur with the presence of a will and desire in the country's political administration in order to start a new phase.