Egypt is making progress with economic reforms and is “open for business,” the country’s minister of investment and international cooperation told CNBC Thursday.
“We’re re-positioning Egypt as a global investment destination so we’ve moved forwards with comprehensive improvements in the business environment,” Sahar Nasr, told CNBC’s “Capital Connection.”
The drive to open up the business sector to foreign investment included the passing of legislative reforms — ranging from new investment laws to the removal “of a lot of red tape,” she said.
As a result, Egypt has seen an increase in new companies coming to its shores, Nasr noted, as well as an expansion of existing ones and a rise in private sector investment. Still, she wanted to see a reduction in state-ownership and rise in private sector participation. “It’s a work in progress,” she said.
Nasr said monetary and fiscal reforms, and a weaker Egyptian pound had made it easier to do business in the Middle Eastern nation and that firms were not put off by security concerns, particularly an ongoing conflict in the Sinai peninsula between Islamist militants and Egyptian security forces.
“The fact is that foreign direct investment is coming in and I see big companies from across the world, from the U.S., from Europe, from the Gulf, from Asia, are coming in and establishing their companies,” she said.
“I always look back and reflect to where Egypt was a few years ago and look at where we are today. I’m here in Cairo, a very safe and secure society. Egypt has maintained a lot of political, social and economic stability recently and that’s reflected in all the numbers that I see from ratings agencies, international institutions and more importantly, market confidence.”
Earlier this week, the International Monetary Fund (IMF) cautioned that Egypt should maintain a tight monetary policy to ward off the threat of inflation as new subsidy cuts come into force.
In a report Monday, the Fund also praised the country’s efforts and progress on economic reforms enabling it to receive a further $2 billion tranche of a three-year $12 billion loan the IMF made Egypt in 2016.
In return for aid, the IMF said Egypt must adhere to a reform program including cutting fuel subsidies, introducing a sales tax, floating its currency and reducing bureaucracy for foreign investors.
The IMF predicted growth of 5.5 percent for the fiscal year beginning July 1, and said the near-term growth outlook is “favorable” and supported by a recovery in tourism and rising natural gas production.
Nasr also said progress had been made on reforms: “We can see that in the GDP (gross domestic product) growth … finally, for the first time in many years we have a surplus in the balance of payments and we really care about job creation and there has been a drop in unemployment rates and a surge in foreign direct investment and that’s very rewarding. But we still have a long way to go.”
The latest data show that reforms made by Egypt’s President Abdel Fattah al-Sisi, who pledged economic stability during his election campaign to get the unemployment rate down to 10 percent, are bearing fruit.
This rate dropped to 10.6 percent in the first quarter of 2018. Egyptians have had to deal with rising costs amid the reform efforts, however, particularly after the state floated the Egyptian pound last year, prompting it to slump in value, coupled with the sales tax and cuts to electricity and energy subsidies in 2017. More pain for consumers lies ahead with further cuts to subsidies planned this year.
Core inflation, which strips out volatile items like food, is declining, however, and stood at 11.1 percent in May, the Egyptian central bank said in late June as it announced it would keep its main interest rate at 17.75 percent.
High interest rates help ease inflation but make it harder to promote spending and economic growth. Nasr said Egypt’s main objective was to raise living standards and would do so through infrastructure projects and job creation.
“We’re targeting youth, we’re targeting women because they are the ones that suffer more from unemployment rates, so we’re putting forward a support package for small and medium-sized enterprises, start-ups are our priority and we’re providing a package of financing and technical assistance,” she added.
Al-Sisi won a second term in office in the March election with little opposition. He first came to power in 2014 having led a military coup against former Islamist president Mohamed Morsi, linked to the now-banned Muslim Brotherhood group. The coup came against a backdrop of protests calling for Morsi’s resignation with protestors disliking Morsi’s agenda and authoritarianism.
Despite reforms efforts while in power and the support of Washington, there has been widespread criticism of Al-Sisi’s crackdown, arrests and imprisonment of his political opponents, repressive attitudes toward the media and accusations of human rights violations.
Human Rights Watch and others said the recent election lacked the minimum requirements to be called “free and fair” too. With the Arab Spring of 2011, overthrow of Morsi and military coup, Egyptian voters want stability.