The Managing Director for the Southern and Eastern Mediterranean (SEMED) region at EBRD Janet Heckman- Egypt Today/ Yasmine Samra. The Managing Director for the Southern and Eastern Mediterranean (SEMED) region at EBRD Janet Heckman- Egypt Today/ Yasmine Samra.

Exclusive Interview: EBRD to invest at least €1B in Egypt in 2018

Thu, Mar. 1, 2018
Thanks to the bold economic reform program launched by the authorities in November 2016, the European Bank for Reconstruction and Development’s (EBRD) has doubled its investments in Egypt in 2017 to about Eur1.5 billion in investments, the Bank's Managing Director for the southern and eastern Mediterranean (SEMED) region Janet Heckman told Egypt Today in an interview in Dubai.

Speaking with a positive tone about Egypt's economy, Heckman revealed that EBRD would be interested in buying a stake in state-owned banks if the government decides to privatize the state owned banks. EBRD‘s equity stakes generally don’t exceed 25 percent , she said affirming that this step will encourage foreign investors' confidence in the Egyptian economy.

She also stressed that the new investments to be made in 2018 are likely to exceed Eur one billion. EBRD has already signed beginning this year projects for approximately Eur 85 million.

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The Managing Director for the Southern and Eastern Mediterranean (SEMED) region at EBRD Janet Heckman- Egypt Today/ Yasmine Samra.

- Can you give us a quick review of Egypt's portfolio last year and the key projects that received your funding?

Last year, we ended the year with about €1.5 billion in investments, the largest contribution from among financial institutions operating in Egypt such as the International Financial Corporation (IFC) and the European Investment Bank (EIB). Egypt is now the second largest country receiving our investments out of all 36 countries where the EBRD operates in. We had 36 projects of which only three are public sector.

The bigprojects you know about is the EBRD contribution with €350 million to Benban’s private sector solar power projects in Aswan which is considered one of the largest solar generation facilities in the world. We also provided €137 million for Fayoum Wastewater Expansion Program and about $300 million for Egyptian National Railway for locomotives and railways cars. Additionally, we also invested in 11 projects in the financial institutions’ sector with a total value of more than €400 million.

Last year, we have opened a new office in Alexandria, and we hope over the next 18 months to also open offices in Upper Egypt and in somewhere the Suez Canal zone.

- Turning to 2018, what are the new projects you are currently financing and what are the key priority sectors?

We expect a big portfolio for this year which will be more than €1 billion.

This year, we are focusing on Public Private Partnership (PPP) and a good example is the 6th of October Dry Port project which is a logistics center and our investment will be based on the tenders since the government is part of the project. Egypt’s Head of the Suez Canal Authority and Minster of Transportation Hisham Arafa came to London to launch the project end of last year.

The Dry port is a big logistics center where goods will be coming to the country duty free and then will be used for production purposes and export.

The other big project we discussed with the government in London is the desalination for the Suez Canal industrial zone. The value of investment in this project is still under evaluation. Hopefully, we will sign and start these projects this year.

We are also working closely with banks and financial institutions. The areas we are working with banks includes SMEs’ financing, loans for energy efficiency, and women in business. We are also assisting banks with their capital adequacy with subordinated debt to help them increase their capital after the devaluation.

We hope this year if the ministry decided to go ahead with privatization, we would be involved in at least one of the two state owned banks included in the plan; Banque De Caire and The Arab African bank and even Bank of Alexandria still has a small stake owned by the state. This will depend on the conditions and how we would help the government in privatization. If the EBRD has a stake in a bank, this helps encourage foreign investors. We are looking forward to buy up to 25 percent of the floated shares of these banks.

We are also working on agribusiness projects. We are providing a $52 million loan to China-based Angel Yeast’s subsidiary in Egypt, to expand its operations in Egypt, almost doubling the size.

The loan is provided to Angel Yeast’s subsidiary in Egypt, which is hailed as the world’s third largest producer of yeast extracts, and this will expectedly boost Egypt’s production of the yeast and its relevant products, as well as increase exports.

We are very pleased to support this project, which will boost exports, bring foreign direct investment and create jobs. This is a great example of how the idea of increasing trade and cooperation along the ancient Silk Road can bring benefits to local workers and economies. The EBRD is also proud to support the efficient use of water resources in Egypt, in line with EU standards, which is one of our top strategic priorities in the country.

Also, in the agribusiness sector, we will be lending local companies producing sugar. We also have a program called “Advice for Small Businesses” for supporting supply chain and providing special advice for small and medium-sized enterprise sector which is a vital ingredient for a healthy market economy.

With the government we will be buying a stake in one or two of the state-owned banks, and will be investing in the 6th of October Dry Port, one of the Metro lines, and we are looking at the new high speed train from Cairo to Aswan in addition to green cities starting from public transport, street lightening, emissions’ control. These are the key areas of cooperation for 2018. We work closely with all ministries and our business is on demand.

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The Managing Director for the Southern and Eastern Mediterranean (SEMED) region at EBRD Janet Heckman- Egypt Today/ Yasmine Samra.

- How do you assess Egypt's reform program and what was its impact on your investments in the country?

The reforms process led us to double our investment in 2017 and I think the biggest reform is the liberalization of the currency exchange rate which enabled companies to have access to foreign currency. Other reforms including the New Investment Law, the Bankruptcy Law, and other legislative reforms were really important.

- What do think is still needed to be done or remains a challenge?

About what else needed to be done in terms of the reforms, the ministries and the government should focus right now on the World Bank’s Doing Business Report and its indicators as Egypt’s ranks should be among the top 50 countries for doing business. Countries compete in the doing business indicators. In my mind, this is the most crucial at the moment.

- What is needed to promote and empower the private sector?

Egypt’s private sector is extremely dynamic but they need to ensure that they have good policies in place and that is why the WB indicators are so critical. The private sector now needs inflation to come down and lending rates to improve in order to enable the private sector expand and implement their plans. In terms of production for export, I think Egypt as a whole needs a stronger marketing strategy internationally, to brand the country and this is something that we can benefit from the experience of the UAE . Egypt should do all what it can to improve its image abroad.

- What are the opportunities that Egypt should utilize?

Egypt has a unique opportunity in light of its sizable economy and population and production for local consumers and exports as well. The other opportunity that Egypt has is production and activity with Sub Saharn Africa. So, I think it is important for Egypt to look into examples of other North African counties like Morocco for example in promoting trade ties with Sub Saharan African states. Historically, if you look back 30 years ago, Egypt was a major exporter to the Sub Saharan states and there were a lot of trade ties. This is a huge opportunity for Egypt to improve production for exports and promote ties with the rest of Africa.

- How do assess the performance of the economy since the reform program was launched?

I think we are starting to see the return of economic growth and inflation is beginning to drop and it is to continue to drop further. We have seen many investments from the government in infrastructure which is absolutely critical to ensure that the right conditions are in place for investments.

- Do you think local investors will be motivated to inject new investments given the high cost for borrowing from banks?

Well, certain local investors have continued to do business under very difficult conditions and I believe now that the people see the stability in the currency for about 18 months and the opportunities going forward that you will see both domestic investments from locals and from the Arab countries like the UAE and from abroad.

I think foreign investors would be concerned with the WB indicators, but also corruption in huge areas remains a large problem. One way the government would assure foreign investors is by setting up an investor ombudsman which is an independent person or judge who is responsible for handling specific complaints by investors related to State services during the licensing procedure of their investment projects or specific bureaucratic obstacles, delays, disputes or when they feel that the law in not acting in their favor or someone asking for a bribe other difficulties arise they can appeal to that person. It is very successful and it is has be done in a number of countries like Ukraine, Kazakhstan, and Greece.

The Investor Ombudsman provides its services upon request regarding an already existing problem. The service is offered complimentary.

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The Managing Director for the Southern and Eastern Mediterranean (SEMED) region at EBRD Janet Heckman- Egypt Today/ Yasmine Samra.

- In addition to the New Investment Law and New Bankruptcy Law, what do you think is still needed to boost lure more investment?

The other thing we are working on with the Egyptian government now is the establishment of a foreign investor council which include the president of the country, and the president of the EBRD plus the CEOs of the top 20 foreign investors in the country to discuss issues that are affecting their companies and business and how to improve business in the country. We have this council to be accomplished in 2018.

- Can you give us a quick review about the EBRD regional activities and future plans?

In our next annual meeting scheduled 8-10 May in Jordan, the EBRD will focus on Middle East countries including Egypt. Around the region, last year we had significant business; it was a record year in Tunisia with €325 million, €310 million in Morocco, and €180 in Jordan. Now, we are very busy getting new businesses in place in West Bank and Ramallah with estimated investments of about €20 million and Lebanon of at least €100 million during 2018.

We will open our first offices in Lebanon and West Bank this year, in addition to 2 in Morocco, 2 in Tunisian, 2 in Egypt plus 1 in Jorda

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