Business Today Egypt (BT) July - August 2021

Face of Business
Firstly: Macroeconomics and Industry
What was the state of the Egyptian economy
prior to the economic reform program
of 2016?
In 2014, Egypt’s economy was unstable after
two revolutions, and there was a general state of
confusion following the upheaval, and therefore
this created an imperative need to implement
the economic reform program in 2016, which
included measures such as liberalizing the exchange
rate and increasing interest rates.
The weak economic situation created the
need for an ambitious plan to rebuild the state
and the economy, and it proved positive.
Four years after the launch of the economic reform
program, what are the main advantages and
disadvantages of the first phase of the program?
After 4 years, it can be said that Egypt has
strongly succeeded in implementing an economic
reform program, and this is positive for
the country in the long term.
I see the economic reform process’s resounding
success; the value of the Egyptian pound is
improving, and the economy has been able to
absorb the coronavirus crisis’s negative effects
given the economy’s capacity to withstand the
shocks.
However, one of the negative aspects of this
stage is that investments are directed to banks
due to high interest rates, and this of course negatively
affects the industry.
At the beginning of 2020, the Egyptian state
took a number of measures to localize the industry
and increase the proportion of the local
component [in goods], and these measures were
disrupted due to the Covid-19 crisis, but the state
is still proceeding with a plan to reform the industry,
because history has proven that there is
no alternative to high-tech industry in supporting
sustainable economic growth. Today, the
plan is to reduce interest so that factories can
continue, and we have seen soft financing initiatives
for factories at an interest rate of 8%. Other
initiatives included financing small and medium
enterprises at an interest rate of 5%, the initiative
to settle defaulters’ debt, and other initiatives
primarily aiming to help the industrial sector
return to growth.
How do you evaluate the second phase of the
macroeconomic program, and in your opinion,
what are the most important requirements for
reforming the industrial sector?
The economic reform program’s second phase
is completely different, as it is primarily based on
higher-priority sectors: industry, technology, and
agriculture. These sectors are also the most capable
of driving economic growth and achieving
sustainable development, by boosting exports,
supporting food security, reducing imports, and
attracting foreign investment.
There is also great interest in technical education,
with the state focusing on establishing
technical schools attached to major factories, directing
interest in small and medium industries;
this is one of the main reasons behind economic
growth and development in countries such as
Germany, China, Korea, Malaysia, Indonesia
and Vietnam. The state is working on this aspect
and provides factories, lands, facilities, logistical,
material and marketing support, and holds exhibitions
to help market these small factories.
The automation of the state’s financial system
and the digital transformation of taxes and customs
give the business community transparency
and reassurance. Additionally, one of the most
important advantages of this economic reform
stage is a shift whereby the state increasingly relies
on the private sector.
The industrial sector has borne the brunt of the
rise in energy prices, according to industry leaders.
How can you balance support for industry
while at the same time not adding new burdens
on the state budget?
It is necessary to separate energy prices from
the industry, or industry support amongst the
relevant ministries. The Ministries of Electricity
and Petroleum are the two ministries that
deal the most closely with industry and have a
problem with the industry, especially after the
price hike. The two ministries alone should not
foot the bill. The government, represented by
the Ministry of Finance, collects value-added,
income tax, and all kinds of taxes from factories.
It would be better if the Ministry of Finance
supports these industries by paying the
required support difference to the Ministries
of Petroleum and Electricity to maintain the
price. Also, local energy prices must reach the
level of international prices because our goal is
to export, and without that we wouldn’t be able
to compete; this must be done through export
and energy subsidies through the Ministry of
Finance, ensuring operational economic efficiency.
The ministries of Electricity and Petroleum
should also not deal with factories for the purpose
of profit; the industry provides job opportunities
and pays taxes, and therefore a balance
must be achieved while providing energy
at competitive prices. We need a clear energy
pricing policy, in line with the global market.
46 July - August 2021
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