DAVOS - Egypt's economy will continue to defy headwinds from the developed world this year, helped by a strong consumer and banking sector and by sustained inward investment, the country's Trade and Industry Minister Rashid Mohamed Rashid told a discussion panel at the World Economic Forum on Wednesday. One of Africa's largest economies, Egypt managed to grow by 4.5 per cent in 2009, a year when Europe and most of the developed world suffered its worst recession in 60 years, and Rashid said the Government expects growth to quicken to five per cent this year and seven per cent in 2011. Those figures were achieved despite a near-50 per cent drop in flows of foreign investment to $7 billion from $13 billion in 2008. Although the financial crisis triggered by the collapse of US investment bank Lehman Brothers in 2008 paralysed many international financial markets, it didn't entirely choke off the flow of inward investment, because much of it now comes from countries removed from the source of the crisis. “There is more coming from Asia. China is an investor, India is an investor, Malaysia is an investor,” Rashid said. Another helpful factor is that the country's banks were thoroughly reformed after a series of bad loan scandals earlier in the decade, ensuring that the system remained both liquid and well capitalised. As such, the sector was able to keep lending to an economy thirsty for capital. The construction sector, Rachid noted, grew 15% last year. With growth like that, it is hardly surprising that domestic capital sources aren't enough to satisfy investment needs. “We know that we need inward investment, and we are hoping for $10 billion this year, but we know it's going to be tough,” he said. Foreign direct investment fell by nearly 50 per cent in 2009, to $7 billion from a record $13 billion a year earlier. Rashid said that the Government was keen to attract more investment in renewable energy, especially wind power along the Red Sea coast in the east of the country ��" “one of the best natural wind tunnels in the world,” as he described it. Egypt, whose production of natural gas has trebled in the last decade, has set itself the target of sourcing 20 per cent of its energy needs from renewable sources by 2020. Global business leaders warned Western governments on Wednesday that a populist crackdown on the financial industry could crimp a fragile recovery from the worst recession since the 1930s.The worried response to President Barack Obama's plans to tax and curb big banks, came on the opening day of the World Economic Forum, an annual gathering of some 2,500 business leaders and policymakers in the Swiss ski resort of Davos. Surveys produced for the annual conference showed global economic confidence on the rise after deep gloom in 2009 and a cautious return to hiring, especially in emerging markets. But the spectre of heavy-handed regulation and government intervention in the economy was the biggest cloud on many business leaders' horizon. "It would be unfortunate if regulatory reforms that will be forthcoming were based on a populist message," said Dennis Nally, global chairman of accountants PricewaterhouseCoopers (PwC). Obama jolted markets on January 21 with proposals to force commercial banks to cut ties with hedge funds and private equity funds and stop proprietary trading, and to make the financial sector pay for a massive taxpayer bailout. "Unfortunately, what we are seeing is a number of actions that have taken place very much on a country-specific basis," Nally told Reuters, warning of possible "unintended consequences." "You've seen it in the US, you've seen it in the UK, you've seen it in parts of Europe. It's not surprising because there is a lot of emotion around all of this and people want to see action taken," he said. Barclays President Bob Diamond challenged Obama's effort to limit the size of big banks, telling a forum session: "I have seen no evidence ... that shrinking banks is the answer. "If you step back and say too big is bad ... the impact of that on global trade, on the economy, could be very negative." A PwC study showed business confidence bouncing back after the sharpest drop in economic activity since World War Two, prompting more industry leaders to start hiring again. The survey of 1,200 chief executives in 52 countries found 39 per cent of industry bosses aimed to hire extra staff in 2010, while 25 per cent planned more job cuts, down from nearly half who slashed jobs last year. But recruitment will be on a modest scale and mostly in booming emerging economies such as China and India, rather than in the developed world, the report showed. Obama's proposed curbs on Wall Street drew guarded support from European governments but officials said the European Union does not plan to follow his lead. That could complicate efforts to build a global consensus on financial regulation in the G-20 grouping of major economies. European Central Bank President Jean-Claude Trichet played down transatlantic differences, telling the Wall Street Journal the proposed US reforms were "relevant and interesting" and shared the same aims as European measures.
