Business leaders voiced frustration with Egypt’s government at an investment conference in Cairo this week, where officials pledged to revive an economy battered by political turmoil but offered few details on policy.
The new Islamist-led administration that emerged from last year’s popular uprising has secured some aid from foreign governments to head off a fiscal and balance of payments crisis.
Investors are now waiting for the government to reveal a detailed strategy for reining in an unmanageable budget deficit, including changes to a system of state fuel subsidies to ensure that subsidies only benefit those who need them.
Only then is the International Monetary Fund likely to agree a $4.8 billion loan, a stamp of approval seen as necessary to end a drought of inward investment, bolster weak foreign currency reserves and bring down sky-high state borrowing costs.
Prime Minister Hisham Kandil and Investment Minister Osama Saleh spoke of mega-industry projects, petrochemical expansion, a launch of Islamic government bonds and new public-private partnerships worth $8 billion.
Kandil forecast economic growth of around 4 percent in the fiscal year to the end of June, above the 2.7 percent seen by economists in a Reuters poll last month. Growth was around 2 percent in 2011/12.
Business figures, however, said they were left wondering how and when it was all going to happen.
“They were not speaking openly,” said one local investment banker who attended the sessions. “They spoke in a vague manner and did not shed light on many important issues and did not allow questions and answers with the officials.”
Egypt’s stock market has rallied by more than 50 percent since President Mohamed Mursi came to power in June, but gains have been mostly driven by local retail investors.
Foreigners have tip-toed back into the treasury bill market, helping yields ease from historic highs, but central bank foreign reserves are yet to recover, with little sign of a major increase in foreign inflows.
Firms say they need more clarity on politics – Egypt still lacks a new constitution and a parliament after the previous legislature was disbanded by court order – as well as on currency policy and have lingering doubts over the legality of investment deals signed under Mursi’s predecessor Hosni Mubarak.
RETURN TO STABILITY
The Euromoney conference, which has been for many years the highest-profile investment event in Egypt, did not take place last year as an army-backed interim government grappled with political turmoil and unrest.
Egypt has avoided the worst-case scenario of a fiscal crisis and unruly currency default. Euromoney’s return to the economic calendar helps restore a feel of normality.
But this week’s gathering was more downbeat than in past years when more ministers attended and took part in more debates. There appeared to be fewer foreign investors present.
In a sign of more uncertainty for investors, government officials signaled at the conference that new probes of deals signed under Mubarak were needed to ensure the state gets a fair price for assets it sold.
Challenges to Mubarak-era state land sales helped push the country’s formal real estate sector into crisis last year but many of the cases appeared to have been settled by the time Mursi arrived in office.
The target of an IMF deal in November means the government must move fast to complete a social dialogue it insists is necessary before unveiling economic reforms that will impact the day-to-day life of Egypt’s 83 million population.
Mursi’s administration is keen to show citizens it is more responsive to the people who elected it and mark a clear break with Mubarak’s autocratic ways.
Business leaders say they need a clear plan to relieve them from heavy bureaucracy, tackle corruption, lower borrowing costs and make the economy more competitive before growth and investment can pick up.
Haitham Moneim, head of investor relations at carpet maker Oriental Weavers, said the government must tell Egyptian manufacturers its plans for them.
The company had “an aggressive expansion plan worth 1 billion Egyptian pounds ($164 million). We stopped it now,” he said. “We will not buy machinery or things to generate top line growth or sales until there is a clear direction.”