Interview: President Abdel Fattah El Sisi
How is the administration working to increase employment, especially among young people?
Abdel Fattah El SISI: Egypt’s greatest resource is its young people. They will be the engine of sustainable growth. We want our economy to maximise the potential of this resource through the generation of adequate and productive job opportunities. To this end, we are launching several labour-intensive mega-projects geared towards creating a dynamic platform for Egypt’s youth to better utilise their capabilities. Small and medium-sized enterprises (SMEs) are also a vital engine for economic growth and employment, providing enormous opportunities for a large segment of society, including youth. As such, the promotion of SMEs is a key component of our 2030 vision for sustainable development.
A fundamental part of our strategy is to improve education at all levels. We are improving school curricula and expanding vocational training, and we hope to have at least 10 Egyptian universities in the world’s top 500 by 2030.
Each year, around 300,000 Egyptians obtain university degrees, of which 35,000 are in fields related to science, technology and engineering. These graduates represent the future of a dynamic knowledge-based society, and we are working to provide them with the tools necessary to build an innovative, 21st-century economy. We are also working in partnership with the private sector to devise national youth training programmes in technology, engineering and construction.
What steps are being taken to ensure that economic growth benefits all segments of society?
SISI: Our government is committed to policies that aim to achieve inclusive economic growth and stability, and are geared towards creating a modern, democratic, open and productive society. We have been ambitious in the first stage of our economic plan and achieved strong momentum. Our economy is growing steadily and investor confidence is at its highest point in years. We are also committed to pursuing equitable growth. The cabinet has been instructed to apply lessons from the last economic boom of the mid-2000s to ensure that growth will benefit all Egyptians, not just a few. The heart of our reform effort will continue to be gradual fiscal consolidation, in order to restore macroeconomic stability and to bolster a stronger, larger private sector.
At the same time, we will continue to balance fiscal consolidation against our firm commitment to promote social justice, with some portion of the savings from austerity measures being channeled to fund development programmes and social services that directly benefit Egypt’s poorest citizens.
This means that fiscal consolidation will be much less aggressive than we could otherwise achieve, but the pace will be appropriate in light of Egypt’s priority to build a more just society.
We have also established metrics for social progress that are essential to ensuring sustainable development. The government budget is being used as a vehicle to advance social progress, as we are redirecting spending away from areas such as fuel subsidies and towards health and education. We are making targeted investments in order to eradicate illiteracy, and to reduce child mortality by 50% and maternal mortality by 60%.
How can the government balance economic reform with protecting Egyptians’ purchasing power?
SISI: As I have said since the beginning of my term, it is important for us to address our macroeconomic imbalances while still prioritising the needs of our most economically disadvantaged. The decisions to phase out fuel subsidies, restructure taxation and implement more effective and better-targeted social programmes are the cornerstones of this overall effort. The subsidy reform that began in July 2014 is part of a medium-term plan to eliminate nearly all of these supports, with the exception of those for specific fuel products and electricity consumed by Egypt’s most vulnerable citizens.
We also launched the “Karama wa Takaful” programme, which distributes cash directly to designated members of the poorest districts. This programme will cover 500,000 households during the current fiscal year, expanding over a three-year span to more than 1.5m. Furthermore, we are embarking on infrastructure and urbanisation projects specially tailored to accommodate low-income segments. For instance, agriculture reclamation projects are under way that will turn in its first phase more than 600,000 ha of barren desert into arable land and ultimately increase agricultural output and food security.
Can implementation of the projects announced at the Egypt Economic Development Conference (EEDC) be delivered in an effective manner?
SISI: The EEDC was a remarkable milestone for Egypt’s economic transformation and an excellent opportunity to showcase the new economic journey that we are embarking upon. More than half of the initial agreements signed at the EEDC are already being implemented, including $21bn in exploration deals with international oil companies, and a $9bn gas and wind power project with Siemens.
We continue to move forward with the bold economic vision of the EEDC, and the substantial international support and investment that we saw during and after the conference continue to directly benefit the Egyptian people.
What competitive advantages does Egypt possess as a regional economic hub?
SISI: Our dynamic population and strategic location have always given us a competitive advantage as an economic and trading hub, which has been strengthened by the recent expansion of the Suez Canal. This upgrade will increase capacity by allowing two-way maritime traffic, reduce waiting and transit time, and creating new jobs and revenue for the Egyptian people, benefitting the economy as a whole.
That said, the benefits of the new canal to both the Egyptian people and to global investors extend well beyond increasing traffic volume. The Suez Canal Area Development Project will transform 76,000 sq km along one of the world’s most important trading routes into an international logistics and commercial hub that will support more than 1m new jobs and 2m new residents. When complete, this innovative, integrated value-added services centre will connect over 1.6bn consumers across Europe, Asia, Africa and the Arab region, including Egypt’s growing population. Investors will have access to a diverse range of opportunities including manufacturing, agriculture, commerce and ports.
Egypt already has free trade agreements that effectively expand its market size and allow it to serve as a gateway to several markets in the Middle East, Africa and Europe, bolstering its attractiveness as a hub. Finally, the planned construction of wind farms, gas turbines and waste-to-energy incineration plants in the Suez Canal Area Development Project will further diversify and increase Egypt’s power supply.
What efforts are currently under way to encourage foreign investment in Egypt?
SISI: Egypt has made great strides towards advancing stability and security both politically and economically. The parliamentary elections in October and November 2015 marked the final milestone in our roadmap to the future and demonstrate the immense progress that we have achieved in these respects. This progress, in turn, has helped to enhance the country’s investment climate. In fact, the Egyptian market currently offers one of the highest rates of return on investment in the world, and we are continually looking to create new and dynamic opportunities for investors.
In addition to offering a diversified economic base, we are one of the largest markets in the Middle East and Africa. Furthermore, the mega-projects that are currently under way, especially the Suez Canal Area Development Project and the new logistics hub centred in Damietta, will better leverage Egypt’s advantageous geography. These should not solely be measured in material terms – they are investments in the future of one of the world’s most strategically critical countries.
Domestically, newly introduced and amended laws are strengthening the business environment and cutting red tape. This legislative reform includes amendments to the investment law, which have created a new, dynamic platform for doing business in Egypt, and bolstered the autonomy and scope of the one-stop shop approach, streamlining various processes for investors. The government is also directly engaging with our foreign investment partners and actively seeking to address their concerns.
Nearly 300 disputes with foreign investors have been resolved, and the remaining cases are making good progress. The new investment law also includes a dispute resolution mechanism based on international best practices. We are also committed to settling all arrears to foreign companies.
What opportunities do non-traditional trading partners offer in terms of increasing exports and foreign direct investment (FDI)?
SISI: Egypt is rapidly expanding and diversifying its investment partners around the world, both in the public and private sectors. We saw this at the EEDC, where we were able to showcase the new projects that are attracting global investment, while also highlighting a new era of renewed partnership with the private sector. A total of 20 contractual agreements were signed on the sidelines of the EEDC, valued at a total of $66.4bn. Among the most significant was the $9bn contract with Siemens, which will increase Egypt’s power supply by 50%. GE also signed a $1.7bn deal to deliver gas turbines, which are already coming on-line and will add 2.6 GW of electricity capacity to the grid. Several memoranda of understanding were also signed with international financial institutions to explore new means of cooperation.
These new partnerships will help to fulfil Egypt’s energy needs, which will in turn allow us to initiate our development plans and expand our exports. Furthermore, the Egyptian Development Fund has engaged in partnerships with several traditional and non-traditional financial actors to enhance the capacity of SMEs, enabling them to better compete in the international economy by improving their ability to access different regional and international markets.
Such new policies and business engagements are having a real impact on the economy. Over the first three quarters of fiscal year 2014/15, the Egyptian economy grew by 4.2% and FDI increased to $5.7bn. Both developed and emerging markets are benefitting from Egypt’s economic renaissance. Over the past year, we have increased our trade ties with sub-Saharan Africa, hosting a tripartite summit in Sharm el Sheikh between the three major African economic blocs that resulted in the establishment of a free trade area among 26 African nations.
The European Bank for Reconstruction and Development has also recently endorsed Egypt as a new country of operations. Such a major step signals that the bank’s key shareholder-member states acknowledge our sound political and economic trajectory. This paves the way for increased financing by the organisation to help us in building a more competitive, diversified and knowledge-based private sector.
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