Asset’s sovereign fund improves Egypt's competitive position: Min.

CAIRO – 12 April 2018: Establishing an asset’s sovereign wealth fund aims to contribute to the sustainable development and optimal use of public resources, in addition to improving the efficiency of infrastructure, Planning Minister Hala al-Saeed said.

The minister added that the sovereign fund, which manages the state’s assets, also targets to enhance private investment and to cooperate with Arab and foreign sovereign funds and financial institutions to achieve the state's plans for economic development and to preserve the right of future generations to wealth and natural resources.

“The establishment of this Egyptian sovereign fund leads to increasing the value added in the various economic sectors through partnership with international companies and institutions, in addition to the direct economic gains of the Egyptian economy, such as increasing investment, employment and optimal utilization of state assets and resources,” Saeed noted.

She added that it would also maximize the value of existing public projects and improve infrastructure.

This fund will improve Egypt's competitive position and reduce the risk premium, which will have a positive effect on Egypt's sovereign credit situation; thereby reducing the cost of debt servicing and consequently the government expenditure and budget deficit, according to the minister.

In order to reach a balance between fast decision-making and preserving state-owned money, Saeed clarified that several committees have been proposed for the fund, such as the Investment, Governance, Internal Audit, Risk and Benefits Committees.

She said that the fund aims to manage and make use of the state’s assets with a capital of LE 200 billion and an issued and paid capital of LE 5 billon.

"Sovereign wealth funds represent a large and growing group of savings globally, and they invest in the natural resources’ returns," she said.

The minister added that the long-term objectives of sovereign wealth funds come in line with the long-term investment needs of developing countries.

She pointed out that Egypt has many promising sectors, as well as multiple development gaps at the sectors and geographical levels that can be solved by investments.

“Although the expected return on investment in Egypt is high for the global average and even for emerging markets, the volume of current investments is not at all commensurate with this sector-wide and regional return in Egypt,” the minister said.

Saeed said Wednesday that the fund targets making use of the state’s unused assets, which amount to 3,000 assets.

She added that a unit has been established within the Planning Ministry to follow up and coordinate with other ministries to identify the unused assets. The fund will be managed mainly be the Planning Ministry.

Minister of Public Enterprise Khaled Badawi said in March that Egypt is discussing the setting up of a sovereign wealth fund to manage state companies as it plans to list them on the stock exchange.

Egypt selected 23 state companies for the first phase of the state IPO program. A Finance Ministry statement said in March that the market value of the soon-to-be-listed companies stands at LE 430 billion, adding that the government intends to float about 15-30 percent of the companies on the Egyptian Exchange (EGX).

This comes as part of the state program to float some state-owned companies on the EGX under a five-year program announced in 2016 to attract investment and invigorate the stock market.