by Angy Essam
The government is working to create an attractive investment environment for local and foreign investors, but after the seizure of the properties of some prominent businessmen such as Safwan Thabet, the chairman of the Juhayna company, and Mohamed Farid Khamis, the main owner of the Oriental Weavers company, concerns have been raised regarding investment in Egypt.
The Egyptian government is seizing the properties of businessmen whom it suspects of financing the Muslim Brotherhood or supporting financially any terrorist action.
Magdy Tolba, board member of the Holding Textile Company and the former head of the Export Council, said that some people wrongly believe that the government is nationalising seized assets. “The issue is simply that if there is suspicion that a businessman is financing any terrorist operations or the Muslim Brotherhood, the government will temporarily seize his properties pending an investigation, and if he is not guilty, it will return all his properties,” said Tolba.
Tolba assured that such security measures are taken in all the European countries, where security issues always come first. He also stressed that the Egyptian government would never consider seizing assets for nationalisation as the country has a free economy and is participating in many international agreements such as the Global Trade Agreement.
“What really affects the economy is not the seizure, but rather not explaining the reason behind the decision,” said Tolba, adding that the government should announce the charges against the accused. “Transparency is a vital issue in the economy sector.”
Regarding the effect of this on foreign investments in Egypt, Tolba said that this will not affect foreign investments as long as investors have the right picture of what is happening. “Delivering the right picture is the responsibility of our embassies and commercial offices abroad, who must correct the wrong image that some of the international media are creating, assuring that the seizures are a necessary and temporary measure.”
Tolba said that Egypt has many unique investment opportunities, and could attract more opportunities, increase its foreign exchange reserve and increase job opportunities if it succeeds in managing its economy. Tolba says the country must enhance its economy internally to achieve progress in its external economy.
“Unfortunately, we have once again become an investment repelling country, because we are working separately, with each economic sector working alone without any kind of coordination with the other sectors,” said Tolba.
He noted that one of the main investment obstacles is the difficulty in financing. He says that obtaining the needed financing is both difficult and costly, with interest rates ranging from 12 to 13 per cent, while abroad it is 1 or 2 per cent. “Industry is the core of investment. Industry needs financing, that’s why financing is the key tool to a successful investment sector,” said Tolba, adding that workers and employees need to be trained and inefficient work laws need to be amended.
He referred that one of the main factors that reduce foreign investment in Egypt is the high production cost. The solution, he says, is to set a complete, detailed and quick strategy that all the economic sectors would agree upon.
There should be a clear financing strategy, which includes decreasing the high costs of production and, most importantly, amending the work law, as well as paying more attention to employee and worker training. “Investing in human resources is the most valuable investment,” said Tolba.
Mohamed Genedy, the head of the Industrial Investors Syndicate, said that if the property seizures are applied legally and are based on accurate facts, they will not harm the investment sector.
Genedy explains that investment is not being harmed by the seizures, but rather by other factors. “The law that governs Egyptian industry is very old,” Genedy says. “It was passed in 1958, so why do we still use it? It must be updated.” The government is fragmented with each minister working towards achieving only the goals of his ministry. He postulates that the solution is to have one person leading the Cabinet’s economic group, who would issue decisions that serve all economic sectors.
“The investment sector and the Egyptian economy as a whole are now in their weakest state because of the conflicting decisions taken by economic officials,” he says.
Genedy believes that the Constitution should include an article dedicated to the investment sector, drawn up by investors and economic experts. This article would solidify an investment strategy. “We have the worst investment percentage from the deposits, which is 42 per cent. In other countries, the lowest percentage is 65 per cent, so we have to increase our percentage.” Genedy stresses that the business cycle in European countries is one and a half months, while in Egypt it is four months. “In order to attract more investments we should decrease our business cycle,” he says.