EBRD's annual investments in Egypt expected to eventually reach €2bn

Bank to buy shares of some governmental companies through IPO programme, says managing director

Janet Heckman, managing director of the Southern and Eastern Mediterranean region at the European Bank for Reconstruction and Development (EBRD), said she expects that her bank's annual investments in Egypt will gradually rise to €2bn as economic conditions remain strong and economic reform continues.
Heckman added that the EBRD has already invested about €600m in 10 projects in the past few months of 2018, noting, "nine of the financed projects are in the private sector. We expect to invest about €1.4bn by the end of 2018, which is roughly the same amount of money we invested in Egypt last year."
"We are a demand-driven institution and providing financial packages for the market depends on demand. We already have the money and we are not restricted in terms of what we do in Egypt," said Heckman.
Daily News Egypt sat down with Heckman for an exclusive interview, the transcript for which is below, lightly edited for clarity.
The EBRD is working on a plan to inaugurate new offices in Egypt. Where do you plan to set up your new branches?
We are looking into two areas, one option is having a new office most likely be in Assiut, while the other will probably be in Ismailia. We think it is very important to have a presence in both Upper Egypt and the Suez Canal Economic Zone (SCZone).
When will you open the new branches?
At least one of the two offices will be opened in 2018 and the other one will be inaugurated next year, as we are in the process of working on setting them up now.
Since the EBRD is opening new offices in the market, will you particularly inject new investments in those locations, Upper Egypt and the SCZone?
Yes, we would hope so, we are already doing a lot of business outside Cairo and we are very active in providing advice through small business programmes. We have advised over 600 small and medium enterprises and trained them on how to run their businesses better, how to create a business plan, how to target export markets, and how to do production methodology, according to international standards.
For example, one of our largest investments outside Cairo is the Benban solar project, where we are heavily investing in 16 projects and we expect their constructions to begin shortly.
The Fayoum wastewater project is another big project. We also finance schools in Alexandria and fund other projects all throughout Egypt, as it is a big country with almost a 100 million Egyptians.
In Egypt, there are some regions which have a significant population like Alexandria, where more than 8 million people live, so some regions in Egypt are bigger than some countries where the EBRD operates.
In the SCZone, we have a memorandum of understanding with the General Authority for the SCZone to develop the economic zone in terms of a regular tariffs framework with private investors.
What the EBRD always does is to work on the policy with the government on one hand and support the private investors on the other. The feed-in tariff energy programme is an example of this way of work as we worked with the government and financed private projects. We aim to continue that method in the SCZone projects.
How many requests do you receive to finance new projects in Egypt by local partners and in which sectors?
Energy and power is a very important sector for the EBRD to invest in, in both private and public sector projects. We hope, this year, to be active in more solar energy projects and wind projects. We want to support business-to-business solar projects, where the government is not involved.
In the power sector, there is really a lot of work to be done. Natural resources are quite an exciting area in Egypt, as the country in involved in being a gas hub, so we see opportunities in refineries, shipping, and other areas related to Egypt's plan to be a gas hub. I expect this area to have significant investments from us.
We are active in other countries that are involved in Egypt's plan of being a gas hub. We have a presence in Lebanon and Cyprus.
Energy efficiency is a key area again for private sector companies, so we will continue working in it. We are doing a lot of work in the agribusiness sector too and Egypt's climatic conditions should be a key centre for agriculture production and exports. We have a significant team working in this area.
Infrastructure is an area where we receive demands to invest in. We have huge megaprojects, including in the roads, railways, and water sectors.
We are working with the General Authority for the SCZone on a desalinisation project. We are also looking at water treatment, wastewater, and solid waste management projects. Hence, we support anything related to infrastructure. We see all sectors of the market as having opportunities.
Have you received any demands to finance projects in the New Administrative Capital project?
I do not think we have anything in the New Administrative Capital yet.
What about your local currency loans activity?
We offered those kinds of loans, but other local loans from Egyptian banks are subsidised, it is difficult for us to expand in this activity in the current conditions.
We also do a lot of technical advisory in the country. We are working with the Central Bank of Egypt on developing new yield curves in money markets to know how to develop the markets and, further, to make it easier for Egyptian companies, for longer terms, to buy in local currency.
We are also working on environmental legislation to face climate change challenges. We are working with all the cement companies on how to reduce emissions and improve the quality of Egypt's air.
The EBRD is interested in buying specific shares of some governmental banks, like Banque du Caire and AlexBank. Are you interested in other governmental firms?
We are very interested in the Egyptian privatisation process. We are keen on buying shares of some governmental companies, not only local banks through initial public offerings (IPOs), as the EBRD's mandate is to increase the role of the private sector in the economy.
However, the IPO programme is still in its early stages, but in general, financial institutions are probably the first area we would look at.
Do you have a specific plan for boosting SMEs?
We are very optimistic about our plans for SMEs. We have special team called advice for small businesses that works on advisory services for small and medium enterprises. In conjunction with that, we also have other programmes through the banking system for financing SMEs and also for risk-sharing with the local banks to enable them to increase their portfolios targeting them.
Through our regional office in Alexandria, we hope to see more activity in that area. We train the consultants who work with SMEs and their expertise to further develop companies in the field.
Media reports have said the EBRD plans to buy a share of Wadi Degla SC. Do you have a comment?
No comment on equity transactions.
What are the challenges that still face the Egyptian economy? And what is your recipe to tackle them?
The best way to tackle the Egyptian market's challenges is to make progress in the World Bank's business report. The report indicators include main challenges, such as bureaucracy, which I know that the Ministry of Investment and International Cooperation is already working on.
Activating the one stop shop project makes it easy for investors to deal with the regulators, which inhibit the easy registration of companies. I think that anti-corruption and transparency procedures are very important.
I think that the cabinet is a technocratic one and it does recognise the problems and understand how to face them.
Last year, we saw a lot of progress in the Egyptian business climate, but it was too late to reflect on the most recent World Bank Doing Business report. I think when the new one is released, we should see bigger progress.
In Egypt, we will increase our investments and hire staff. We are expanding in Cairo's office through taking over the office beside us. We increased our staff from about 45 persons when I first came here a year ago to almost 70 persons now.
We are doubling our size here and Egypt is a regional hub for us. I am the first deputy managing director to cover the Southern and Eastern Mediterranean region. We cover Morocco, Tunisia, Jordan, the West Bank, and Lebanon.
We see a lot of investment opportunities in the Egyptian market. Therefore, we opened our new regional office in Alexandria, which is offering the EBRD's advisory for small businesses.
There is a plan to inaugurate new offices in the Southern and Eastern Mediterranean region which you are responsible for. Could you briefly explain the EBRD's activities there?
The EBRD's investments in the Southern and Eastern Mediterranean region were the largest globally last year. The regions received about €2.2bn distributed as €300m for Morocco, €325m for Tunisia, and €150m for Jordan.
Last year, we also opened offices in two new areas, which are Lebanon and the West Bank in Gaza. We have already started three new projects in Lebanon, where Bank Audi's equity participation was one of the EBRD's investments.
In the West Bank, we completed our first two projects, one of which was with a financial institution, while the other was in the medical laboratory areas.
On 4 July, we will be launching our advice for small business programme in the West Bank.
I expect that the EBRD will invest this year at roughly the levels of last year and we would like to expand in other countries in the region like Algeria and Libya if their situations improve.