Interview: Abdulwahab Al Bader
How have low oil prices impacted the ability of Gulf Cooperation Council (GCC) entities to contribute to development projects in Egypt?
ABDULWAHAB AL BADER: The drop in oil prices since mid-2014 has not diminished the GCC’s strong support for Egypt’s economic development, or its contributions to other developing countries. This was demonstrated by the pledge of over $12bn in aid to Egypt by Saudi Arabia, the UAE and Kuwait at the Egypt Economic Development Conference in Sharm El Sheikh in March 2015. This fiscal assistance consisted of grants, development loans and deposits made to Egypt’s Central Bank, as well as oil supplies and private sector investments, all of which were aimed at stimulating the economy.
While government revenues in the GCC have been impacted by falling oil prices, the financial resources of most private institutions are much further removed from oil price fluctuations and do not depend on state budgets. Therefore, many private institutions, including development operations at the KFAED, have not been adversely affected by the drop in oil prices. Support for GCC-sponsored development projects has remained at previous levels and at times exceeded them.
GCC entities, particularly national development institutions, such as the Saudi Fund for Development, the Abu Dhabi Fund for Development and the KFAED have greatly facilitated the implementation of large projects through co-financing and the coordination of their procedures. These development funds have also been active in the co-financing of projects with other Arab regional development companies and international financing institutions, with the mobilisation of the necessary resources being the aim of this cooperation.
Which sectors of Egypt’s economy do you see as having the most growth potential?
AL BADER: Energy and electricity have a lot of room for growth, and they receive greater support from development finance institutions due to increasing demand, which is driven largely by population growth. Significant support is also being directed towards small and medium-sized enterprises (SMEs) because of the potential these businesses have to create new jobs and improve living conditions, especially in low-income areas. SMEs are understood to be a key economic driver in developing economies, accounting for almost 80% of Egypt’s GDP, so these programmes being implemented by Egypt’s Social Fund for Development are intended to help growth in this area. Egypt needs to promote investments across various sectors, and we see a number of projects in Sinai as having significant potential, including desalination co-generation plants.
Besides pledging capital for project financing, the development funds of the GCC work with the Egyptian authorities to speed up the preparation, appraisal and implementation of projects. They also provide consulting services as needed to support the implementation of projects and technical assistance to aid in the preparation of feasibility studies.
What criteria do you use to assess the eligibility of projects for grants or concessionary loans?
AL BADER: All KFAED loans to developing countries are concessionary. The level of concession is determined by several criteria, including the country’s gross national income per capita and the project’s sector, with higher concessions for social sectors such as education, health, water and sanitation, as well as to initiatives that contribute to food security, such as agriculture. The aforementioned industries help to further economic growth, so contributions have a knock-on effect on other areas of the economy.
In assessing a proposal’s eligibility for financing, we first ensure it has been given priority by the government and is supported by a comprehensive feasibility study. The fund also conducts appraisals to ensure any given project is technically sound, financially viable and will have a net benefit to the economy.
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