Mohamed Abbas Fayed, Deputy Chairman and Managing Director of Bank Audi-Egypt, said Egypt’s economy is currently in a critical situation, but there are reasons for optimism, and it requires hard work.
In an exclusive interview with Daily News Egypt, Fayed explained that there is currently EGP 400bn-EGP 500bn in the banks ready to be loaned. However, the role of banks always starts after proposing the projects that prove their economic feasibility.
Fayed believes that developing the state’s administrative body is a real challenge facing the government, and that the administrative and financial corruption is more dangerous to the country than terrorism, and must be decisively combated.
How do you perceive the Egyptian economy now and in the future?
In a nut shell, I believe that the Egyptian economy today is in a critical situation. However, it has reasons for optimism, and requires working hard.
Can you tell us about your perception in more detail?
Sometimes, the economic situation in countries is critical, and there are no solutions to revive them. However, although the Egyptian economy is in a critical situation, it has a lot of possible solutions. I believe that the most important solution is hard fruitful work by all citizens, and to be unified as if they are one man.
Here, I like to assert also that the economy is the core of everything in the society; the economy affects the social life, which, consequently, affects the political scene. In other words, economic stability leads to improving social life, and consequently, political stability occurs. On the contrary, the economic deterioration has social and political impacts. The evidence is the situation Egypt went through over the last years.
If the Egyptian economy now is in a critical situation, what are the reasons for optimism?
Egypt is a promising country, and has all the ingredients for success, starting from its unique location, perfect climate, and the very high level of natural resources. All the resources are available in Egypt, and its economy is diversified. What we miss is the citizen’s awareness of its importance, his role in helping it, and his sincere will in working and changing to a better life. So, we have to spread awareness among citizens, that what really matters is not the number of hours he spends in work, but the production. Moreover, we must start where the others ended. We are embarking on the last political merit, which is the parliamentary elections, and consequently, we would finish building the state’s institutions, which means more stability in the country. Another reason for optimism, is that the present government has an advantage that it acknowledges the problems, and it is known that the first step in treating the disease is admitting the existence of the disease itself. Former governments had ignored a lot of problems, and here we are, suffering their effects now.
The state is suffering deficit in the general budget, and a significant increase in the size of the public debt, which would put more pressure on the government, in the next period. That requires more efforts to maximise the revenues, and to try to compress the expenditures. I believe that the government already realised that, and started to make difficult procedures, of which former governments did not dare to make, most important is reconsidering the subsidy system.
What about hard fruitful work? How do you make it happen in the light of the severe oversaturation in jobs in the state’s administrative body?
It is why I have stressed that work must be fruitful, because some people are used to working for hours, but do not produce much. The Egyptian economy needs heavy production in all sectors in order for it to rise again. The president has touched a sore spot, and he has the will, vision and plans necessary for reform, and the people must support him. Every Egyptian must work with dedication, realise the problems the state is suffering from, and try to help in solving them. I believe that the census in Egypt is not the real problem. The problem lies within the people’s ability to produce. Everyone must realise that there is no way out of what we are suffering from but through hard work and production.
We have the new Suez Canal project that proved to us and the world that we are all able to work and achieve in short periods of time, especially with sincere intentions, good management, and a strong will. Why don’t we use these qualities in dealing with the rest of our problems?
The reform of the banking system was also a good model to emulate. It is known that the Egyptian banking system was dire, and a plan to reform it was put and implemented by all participants with great dedication and efficiency until Egyptian banks became among the strongest banks in the world and proved their strength in facing many crises and challenges. The situation of the Egyptian banking sector was disastrous, but with will and determination it is now at its highest levels, which strongly asserts that there is nothing too hard to achieve if we have good management and will. The BRICS (Brazil, Russia, India, China and South Africa) are a very good role model. Almost 20 years ago, these countries were in a situation worse than ours, but with determination and will, they managed to turn into important countries with strong economies.
In your opinion, what does the Egyptian economy need in order to unfreeze?
The Egyptian economy needs clear laws and legislations to stimulate investments, locally and internationally, but more importantly; these laws need to be enforced firmly. A clear vision by the government is also important, as well as a stable exchange rate and fixed tax policies. We are in desperate need of attracting foreign investments, especially that we suffer from a lack of foreign currencies and we need to maximise our resources of them. To be a country that attracts investments, the right legislative environment must be created. Any foreign investor that decides to invest in any country, asks about several matters, most importantly, the availability of the needed amount of energy to operate his factories or projects, the labour law that will govern his relations with workers in the project, the exchange rates and whether they are pendulous, the lands on which the projects will be established and how dealings are made on them as well as their prices, and how he will enter and exit with his money or profits whenever he desires.
It is known that any investments, especially the foreign ones, need reassurance. Investors in long-term projects need to know the governmental vision and plan in order to avoid surprises or sudden changes in the laws that govern their work in the future, as well as avoid crises that affect their investments like what happened with some investors who have bought Egyptian companies and were forced – by law – to return them to the government. I believe that the government has already done a lot of modifications to many labour laws to work on stimulating investment and economy. The president also issues laws that he believes are essential without waiting for the People’s Assembly, as he realises the importance of the factor of time. In my opinion, there is another important challenge for the government, which is including informal economy that is considered a disaster the state knows nothing about. If Gross National Product (GNP) is estimated at EGP 2.4tr, the informal economy would exceed this volume. This type of economy includes small and medium enterprises, most of which runs underground and we know nothing about.
What else do you think is important for treating the problems faced by the state?
I consider the development of the state administrative authority as the real challenge for the government, along with eliminating bureaucracy. There must be an explicit and clear confrontation of corruption in administrative and financial state institutions, as corruption is more dangerous to the state than terrorism. We must fight and confront it with full force and the government is actually working on that, but we need to confront it in stronger way. As I said earlier, the president has a vision and decision-making ability, but state agencies have to help him. Egypt needs real men who have real will, sincerity and good management.
Do you think that reforming the state administrative authority will take time, or can it be achieved quickly?
As long we have a good will and obliged to apply the law firmly to everyone, we will not take much time in the reform process. Certainly, we may face difficulties in the beginning, especially with stakeholders who need to lay their interests aside and put the country’s interests first, but we will finally succeed with our will and determination.
On mentioning the stakeholders, recent actions adopted by the Central Bank of Egypt (CBE) to adjust the exchange market were severely attacked – how do you explain that?
Firstly, the CBE dealt in a great technical and professional way with the exchange rate problem, and the procedures taken to eliminate the black market of currency trading are adopted in all countries. It was not right to have two prices for foreign currency in the Egyptian market in a state that aims to attract foreign investments, but the stakeholders did not like that, as the CBE’s procedures hit their interests, prompting them to attack them.
In your opinion, what are the projects that we need to refresh the Egyptian economy at the moment?
Egypt currently needs many projects in various sectors, in parallel with each other. Feasibility studies can determine the projects that we need and which one will be a priority. In general, we are in the most need for expansion in different power projects, so that we can achieve the industrial renaissance we see. We also need projects that create added value in the economy, in the sense that we should not export raw materials such as cotton and sand, but manufacturing them to raise their current value. In addition, Egypt needs land reclamation and cultivation projects and associated development of livestock, poultry, fisheries and everything related to food commodities, especially as we import a large proportion of our food, consuming huge amounts of foreign currency.
Ports and establishment of ship maintenance centres and fuel stations are among the important projects, on which economies of entire nations depend, and create significant amounts of foreign currency. The Suez Canal Axis is also one of the important projects. Additionally, Egypt needs to develop tourism and hotel sector, and promote it well. Although we have all necessary ingredients, revenues do not commensurate with the comparative advantage that we have, that requires a reconsideration of promoting system of Egyptian tourism. We also need labour-intensive projects to provide job opportunities for youth as 70% of Egyptian people are young. Nevertheless, if we did not give hope for those young people, we will face a real problem as free time and poverty lead to chaos and loss. Hence, we should care about housing projects to meet citizens’ housing needs, and most of all to invest in health and education in parallel with these projects. The healthy body and enlightened mind are the sustainable development tools.
How do you see the role of banks in refreshing Egyptian economy?
Banks are the main factor of any economic activity, and without banks there will be no economy, however, their role always comes after launching projects. Egypt has a very strong banking system, but the economy was weak, thus banks did not find appropriate projects to invest their money in. Also, there were countries with economies ready for growth and their banks are weak, such as Turkey, which led to its decline, but in Egypt we have strong banks and have sufficient liquidity to finance any project that demonstrate its economic feasibility. We, as bankers, want the economy to move forward again, and there was no project launched recently that the banks did not offer to finance. Wherever there was an investment opportunity, we found banks ready to finance them. There is EGP 400bn-EGP 500bn in the banks ready for lending at any time.
How would the banks balance between financing project and continuing to finance the state budget deficit?
The bank funding of projects will result in an increase in production, and a gradual decline in the budget deficit, thereby reducing the country’s dependence on banks to finance this deficit. It also allows more liquidity for banks to inject in the projects, and so on. It is like a continuous cycle that spins with clock.