CAIRO: Minister of Investment Mahmoud Mohieddin visited the United States for 48 hours late last week to promote investment in Egypt and met with 14 representatives of financial institutions, funds and investment companies. The minister was accompanied by Ziad Bahaa-Eldin, chairman of the General Authority for Investment and Free Zones, and joined members of the American Chamber of Commerce in Egypt (AmCham) during their annual door knock visit to the U.S. He highlighted Egypt s progress on the economic front and measures taken to increase trading volumes on the stock exchange and to increase direct and indirect foreign investment. Mohieddin expects gross domestic product to grow by 5.5 percent to 6 percent this year. The growth is accompanied by an increase in trade and investment in comparison to previous years, which Mohieddin said are the result of the government s reform measures in recent years. Investment in non-petroleum sectors tripled last year and capital flows increased by some $3 billion. Net foreign direct investment now exceeds 4 percent of gross domestic product, and Mohieddin expects this figure to continue to increase during the current fiscal year. Mohieddin told the audience of investors and bankers that the government s reform initiatives would continue and that there is no turning back, and that the government intends to increase the role of the private sector in the country s economic process. The government s economic reform program is not always popular. In particular, Mohieddin s privatization program has faced some obstacles with the row over the sale of Omar Effendi and the earlier acquisition of Egyptian American Bank by Calyon. Mohieddin said that domestic discussions regarding the government s economic reform agenda should be seen as a positive development and that there is traditionally a great deal of political debate over the sale of public assets in particular. In terms of the ongoing controversy regarding the sale of Omar Effendi, Mohieddin said that the matter is before the prosecutor-general and that he cannot comment until a decision is taken by the latter, although negotiations are ongoing between the Holding Company for Trade, which owns the department store, and the Saudi Anwal Group. The minister conceded that the public, as the owner of such assets, need to be informed about the process of their sale and the basis of valuations. He cited the controversy surrounding privatization in other countries, including the attempt of Dubai Ports World to take over several U.S. ports, as an indication of the common politicization of privatization programs. Meanwhile, the American investors emphasized their interest in the Egyptian stock market in light of the attractive price-to-earnings ratios of listed companies and the increase in liquidity. There is also an increase in the diversity of companies on the stock exchange, in part due to the offering of shares in state-owned companies, as well an increase market capitalization from 35 percent to 80 percent of gross domestic product. Mohieddin also met with real estate financing companies and invited one company to seek partnerships in the securitization of mortgages in Egypt as well as insurance for real estate. The government has been keen to encourage mortgages since the reform of the real estate laws several years ago, but such efforts are constrained by the drawn-out property registration procedures and high registration fees and property taxes. Mohieddin said that a law is being proposed to parliament to limit property registration fees to a maximum of LE 2,000; current registration fees are 3 percent of the value of the property with no limit. Minister of Finance Youssef Boutros-Ghali is also expected to reduce taxes on property following his substantial reform of the income tax system. The existence of a secondary market for mortgages, for which securitization is a first step, will serve to encourage a primary mortgage market. Overseas Private Investment Company, an agency of the United States government that supports American private sector investment in the developing world, is considering investing mortgages in Egypt in either the primary or secondary market, and is working in coordination with the Mortgage Finance Authority on this. Mohieddin also courted several insurance companies that specialize in life insurance during his visit, explaining his plan to liberalize and reform the insurance market in coordination with Boutros-Ghali.
