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WHAT WE’RE TRACKING TODAY

Today’s edition wraps our morning coverage of the EEDC, although we’ll turn back to Sharm — hopefully by week’s end — with an updated Investment Tracker. Today’s edition includes a quick fix of non-EEDC news, a wrap-up on international views about Sharm, an update of the investment tracker, and a rundown of yesterday’s plenary sessions. The simultaneous sector-specific sessions were again not broadcast or livecast outside Sharm El-Sheikh.

Meanwhile: Where in the world is Vladimir Putin? Check in with the Economist or the BBC. Check out some of the best “Where’s Putin?” memes. Or read the always insightful Tom Nichols on his The War Room blog: ‘If Putin Dies.’

THE WEEK AHEAD

Arabian Cement will hold its 4Q2014 results call at 5pm CLT on Tuesday (17 March).

LATER THIS MONTH

The Terrapinn Middle East Investment Summit gets will take place 30-31 March
(Monday-Tuesday) in Dubai. Details here.

Developer and investor briefing on Egypt’s feed-in tariff program (Cairo, Tuesday 31 March). In conjunction with Eversheds, DNV GL and IFC, Apricum will present at an official briefing on behalf of the Egyptian government for companies who have pre-qualified for Egypt’s FIT program. For further information, please contact Dr. Moritz Borgmann atborgmann@apricum-group.com

LAST NIGHT’S TALK SHOWS

From selfies with the President to the Prime Minister breaking down in tears during the closing plenary, the final day of the EEDC was charged with emotion.

Directly after the Prime Minister’s speech, talk show host Gaber El Armouty appeared in OnTV’s studio with a traditional Egyptian brass incense burner to ward off the evil eye — a typically Egyptian end to a hugely successful three days in Sharm El-Sheikh.

President Al Sisi’s closing remarks at the EEDC and the unprecedented selfie scene before and after his speech played on a continuous loop on every Egyptian television network last night. El Hayat El Youm interviewed three of the ushers who stood beside the President. Clearly overwhelmed and basking in their five minutes of fame, the teenagers all said that they were shocked to be invited on stage. “We will all go down in history as the first Egyptian youth to take a selfie with the President,” one enthused.

“El Selfie,” an elated Amr Adeeb bellowed, declaring that there is light at the end of the tunnel. “Would you have ever believed that the conference would end in such a manner? I can’t describe the feeling inside the conference hall, it was complete euphoria. We violated every presidential security protocol in the book. The president’s security did not have previous knowledge of what was going to happen. They were in a terrible state. The President, however, looked very comfortable.”

Commenting on the historic selfie moment, Lamees El Hadidy said, “Who ever said that Egyptian youth are not behind the President? This is the perfect opportunity for us to highlight the importance of youth in our society. We need them to play a major role in building the future.”

El Hadidy interviewed Minister of Investment Ashraf Salman for a recap of major announcements from the past three days. On the foreign reaction to the investment law, Salman said, “the law has addressed the major issues of investors and the reaction has been positive.”

Osama Kamal interviewed Minister of Trade and Industry Mounir Fakhry Abdel Nour, who noted, “The CEO of Siemens was the one who urged German Chancellor Angela Merkel to reach out to President El Sisi. She wasn’t planning to do so until after the Parliamentary elections.”

Added the minister: “I think that Germany and the West in general have come to realize that there has to be a balance between democracy and security. The Charlie Hebdo attack had an impact and the ISIS massacres. I went to France and Madrid to invite people to the conference, and I noticed a big shift in attitude. The Spaniards certainly understood our circumstances,” added Abdel Nour.

“Both President Al Sisi and the Prime Minister Mahleb gave extremely moving speeches today. Their sincerity and their patriotism is limitless,” said Abdel Nour. “What this conference has done is give us a tremendous push that is going to get us out of the bottleneck but its just the start. When the President said that we need EGP 200-300 bn, he was right. There are things in this country that need to completely overhauled like the education and healthcare. There is work to be done.”

SPEED ROUND

EDITA Food Industries announced the indicative price range for its offering on the EGX as being EGP 16.80 to EGP 18.50 per ordinary share to be listed. As the company sets off on its roadshow, Chairman and CEO Hani Berzi noted: “We look forward to meeting with domestic and international investors to discuss the compelling corporate competitive advantages and underlying macroeconomic and market fundamentals that have allowed us to deliver revenue, EBITDA and net profit CAGRs of 19.6%, 26.9% and 26.2%, respectively, in 2012 to 2014. The breadth and depth of our product offering, our outstanding market position in key segments, modern ISO-certified production facilities and extensive sales and distribution network give us reason to be very optimistic about our potential to continue creating shareholder value” Edita will not receive any proceeds from the offering; selling shareholders are pan-emerging markets private equity firm Actis and Greek snackfoods manufacturer Chipita. Shares will trade under the symbol EFID on the EGX.

The committee responsible for the nation’s election laws is leaning towards increasing the number of seats by 20-30 for a total of c. 600, according to Al Masry Al Youm. The committee previously rejected the notion of fixing representation per electoral district at two members of the House of Representatives, saying the figure would range from one to three based on population.

Hepatitis C drug Sovaldi is reportedly sold-out in the Greater Cairo Area just 15 days after it launched. Al Masry Al Youm reports that it contacted several pharmacies in Cairo and Giza, and all confirm that they are out of said drug. The newspaper claims drugmarkers are ramping up production to meet demand.

EGYPT IN THE NEWS: THE EEDC EDITION

The most widely circulated piece in the foreign press on the EEDC over the past few hours and going into Monday morning is ‘Egypt basks in world support at investor conference’ by the often-critical Sarah El Deeb of the AP along with Brian Rohan. Besides a cursory mention of the conference’s successes, the focus of the piece is that the EEDC is being claimed by the administration as an pillar of its legitimacy by pointing toward economic progress and the promise of future development. Deeb ends the piece by noting the Ikhwan weren’t mentioned in the conference, (Deeb is apparently surprised that there was no mention of a potential Tawheed Wel Nour IPO) closing with a quote by Ikhwanweb: “In a statement Saturday they [the Ikhwan] criticized the economic summit, saying that the government was shooting down peaceful protesters and selling “Egypt’s future to the highest bidders.”

For maximum self-trolling: Al Jazeera seems to be sizzling in its own juices over the conference, barely eking out a few paragraphs before ending with the obligatory “and then they ousted Morsi” capstone. Shoehorned in the middle of the article is a link to a blog post by Marwan Bishara, the senior political analyst at Al Jazeera (doesn’t ring a bell, sorry) who also seems to be very brief in his “analysis”: ‘Egypt at a discount?’ Bishara adds some Ikhwanweb-esque press release touches over his undisguised contempt for Egypt: “It’s common sense that encouraging quick foreign investment in a country that ranks one of the lowest in the world in terms of stability, infrastructure and technology, means selling Egyptian public assets and offering new projects at a discount … But Sisi needed to rush new legislation to encourage foreign investment without even the existence of a legislator, let alone an elected one, in order to shore up support for his regime. And that he did.” Is that it? Is that the worst they can do with unlimited money? If it is, it’s oddly disappointing. Egypt deserves enemies who are more interesting and intellectually stimulating.

The Atlantic’s Matt Schiavenza has a highly critical piece on the proposed new administrative capital:‘Egypt to Build a Potemkin Capital.’ The title is a reference to Grigory Aleksandrovich Potemkin, a Russian military officer during the reign of Empress Catherine II, who according to folklore would build fake villages for her viewing as she would pass through the countryside. The term ‘Potemkin’ has now become associated with putting together something that is fake, often for propaganda. The article is basically completely lifted from AUC Professor Khaled Fahmy’s piece that we first noted back on 13 March, to which this article references. The commenters are hammering Schiavenza for failing to recognize that other countries have moved the location of their capital, to others lamenting the author’s abuse of the term ‘Potemkin.’

To cleanse the palate: The Wall Street Journal offers up a positive-neutral take on the conference’s proceedings: ‘Egypt’s Sisi Closes Economic Conference With Call for Further Investment,’ closing the article with guarded optimism: “The International Monetary Fund in February said that recently enacted economic measures have boosted Egypt’s prospects for growth, which will also help reduce the country’s double-digit unemployment rate. But for Egypt to attract the massive investments it seeks, the country will have to deliver on the promises it has made at the conference, and execute the development projects it has launched, analysts said.”

Sir Martin Sorrell, Chief executive of WPP, the world’s largest ad agency, echoed President El Sisi’swishes to hold the EEDC on an annual basis. The idea was also endorsed during Friday’s EEDC panel ‘The Global Investor’s Perspective’ by both Abraaj’s Arif Naqvi and Citi’s Peter Orszag as a means to step back, assess, and hold parties accountable to promises and pledges made.

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A MESSAGE FROM PHAROS HOLDING: Are analysts under-valuing Egyptian companies? The Stern School of Business’ Aswath Damodaran has backed Pharos’ assertion that analysts may be undervaluing Egyptian companies due to an error in commonly accepted terminal value calculation methodology. Learn more here.
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ENTERPRISE’S EEDC INVESTMENT TRACKER: THE ALPHA VERSION

Estimates on the total value of agreements and memoranda of understanding vary widely in the domestic and international press, from a low of USD 38.2 bn to a high of USD 158 bn, and several figures in between.

We hope to have a proper EEDC investment tracker structured for you to read by the end of the week — one we’ll update for you going forward. In the meantime, our updated list of investments reads as follows, and this much is clear: If Saturday was about petroleum and energy, Sunday was about real estate. The following is a breakdown by sector of key agreements and MoUs announced over the course of the EEDC.

OIL & GAS (USD 22.4 bn)

• BP: Agreement to invest USD 12 bn over four years to develop oil and gas fields in the West Nile Delta, with production scheduled to start c. 2017. The largest agreement signed to date, it was concluded (along with most other E&P deals) and announced just before Sharm as a momentum building. (Release here)
• BG: Will invest USD 4 bn to develop natural gas fields in the Mediterranean, per COO Sami Iskander.
• Eni: Agreements to invest USD 5 bn over 4-5 years to develop gas discoveries to produce c. 900 mcf of gas.
• Dana Gas: USD 350 mn to support the drilling of 40 new development wells as well as investing in existing assets
• Samsung: An arm of the Korean chaebol is reportedly considering investments of up to USD 1 bn in the nation’s oil and gas sector, with a focus primarily on technology and equipment.
• Heba Saleh has a wrap-up of oil and energy deals in the FT.

POWER GENERATION (USD 34.7 bn)

• Siemens: MoUs worth USD 10.5 bn (EUR 10 bn) to build a windmill rotor blade factory as well as 4.4 GW combined-cycle power plant in Upper Egypt and 2 GW of wind power (location not confirmed), perBloomberg. See also the company’s announcement in pdf.
• Tharwa Investments has signed an MoU yesterday what it is claiming is the largest single-site coal-fired power plant. The MoU for the USD 11 bn, 6 GW plant was signed with the Egyptian Electricity Holding Company, according to a company press release picked up by Zawya.
• ACWA: USD 7 bn coal-fired power plant (some reports see this lumped together with the Masdar and ACWA renewables projects, below, but our understanding is that this is a separate MoU)
• Masdar and ACWA: USD 2.4 bn to build 4.4 GW of generation capacity, including solar, wind and combined-cycle natural gas under a non-binding framework agreement. The company’s announcementnotes “the partners will evaluate 2 GW of renewable energy projects, including 1.5 GW of solar and 500 MW of wind. The first project that would be considered is a 200 MW solar photovoltaic plant. … The framework agreement also calls for development of 2.2 GW of combined-cycle natural gas generation led by ACWA Power.”
• Terra Sola: Egyptian Electricity Holding Company signed a USD 3.5 bn MoU with Terra Sola Consortium to develop a 2GW solar project spread across an unspecified number of PV solar plants in various phases on a Build-Own-Operate-Transfer (BOOT) basis, per a company press release.
• Naguib Sawiris has inked an agreement to invest USD 100 mn in a solar power plant, he told Reutersyesterday. The investment is the first of USD 500 mn in fresh capital the businessman is looking to invest in Egypt.
• GE: USD 200 mn agreement to build a manufacturing and training facility that will create 400 new jobs

TRANSPORTATION & LOGISTICS (USD 7.4 bn)

• AVIC: The Chinese company inked a USD 1 bn deal to manufacture rolling stock and develop rail assets; the agreement was first explored during President Abdelfattah El-Sisi’s groundbreaking trip to Beijing. The rail assets include an electric train covering a 22 km, 16-station route in Alexandria and the capacity to move 1.5 mn passengers monthly, per Transport Minister Hany Dahy.
• DP World: An agreement to build a USD 415 mn liquid bulk terminal in Ain Sokhna Ports.
• Al-Swidan: Two deals worth USD 6 bn to invest in the Damietta commodities hub as well as the Suez Canal Development Project.

REAL ESTATE & RETAIL (USD 24 mn and counting)

• Palm Hills Development announced two MoUs signed on Sunday: The first agreement is aconsortium of Palm Hills and Abu Dhabi’s sovereign wealth fund Aabar Investments signed with the Ministry of Housing, Utilities & Urban Communities for the exclusive co-development of 10,000 feddans (c. 10,380 acres) in Sixth of October city, according to an emailed press release from the company. Most interesting in this respect is what’s not included in the release: News that the MoU could carry a value of up to EGP 150 bn.
• Palm Hills signed a second MoU on Sunday with the Ministry of Housing, Utilities & Urban Communities for the exclusive co-development of 500 feddans (c. 519 acres) in East Cairo, according to an emailed statement from the developer. Reuters puts the specific location as New Cairo, again quoting the minister of housing.
• Majid Al Futtaim (MAF) announced the increase of its total investments in Egypt from EGP 18 bn to EGP 22.5 bn. Under the signed MoU, an additional investment of EGP 4 bn is allocated to (1) the development of four neighbourhood centres in the new residential cities in Cairo as well as four new shopping malls in greater Cairo and (2)  EGP 500 mn allocated to introduce the largest and first local VOX cinemas over the coming five years. MAF also announced two new projects forming part of the original EGP 18 bn investment plan, including a new City Centre, under the name of City Centre Almaza, with investments of EGP 3.5 bn, and the major redevelopment and expansion of City Centre Maadi, with investments of EGP4 bn. (Read MAF’s company release)
• Two additional MoUs were signed with Egypt real estate developer Mountain View and Saudi Arabia’s Sisban Holdings to develop 500 acres in New Cairo at a cost of USD 3 bn, and 470 acres in 6th of October City at a cost of USD 2.7 bn, according to Minister Madbouly, speaking to Reuters.
• The Sharbatly and Shobokshi duo will build tourism, residential and agricultural projects worth a combined USD 4 bn in South Marina under an agreement signed with the Housing Ministry and their Arab Company for Real Estate. The company will develop a 2,800 feddan area.
• Skidmore, Owings & Merrill will lead city planning for The Capital Cairo, the new administrative capital. No value was ascribed to the deal in the statement.
• The land deal for the proposed new administrative capital was signed on Saturday between Mohammed Alabbar and head of the Capital City Partners fund and Minister of Housing Moustafa Madbouly.

HEALTHCARE (valuation not specified)

• GE Healthcare and the Ministry of Health signed a partnership agreement to improve Egypt’s healthcare technology management system along with the support of the World Health Organization (WHO). The project will be carried out in two phases: the first phase will involve a feasibility study for the establishment of a Biomed Center, followed by the development of a strategic operating plan that will see the launch of the Biomed unit in phase two, to be run by the Ministry of Health & Planning in co-operation with GE and WHO. (Read)

OTHER (USD 3 bn)

• Beyti, a joint venture between Pepsi and Saudi Arabia’s Al-Marai, will build a USD 525 mn juice factory in Beheira, according to state-run news agency MENA. Pepsi, meanwhile, noted again that it is investing USD 500 mn in Egypt this year to expand production.
• Abu Dhabi’s Khalifa bin Butti bin Omeir will invest USD 2 bn in “key sectors” of the economy,Reuters reports.

REGULATORY REFORMS

• Confirmation we will see a new tax code published and that the value-added tax is in the wings, per Finance Minister Hani Dimian (see our summary of his remarks in Part 2 yesterday’s special report).
• A new law governing insurance is being finalized and new executive regulations for pension funds are ready, per Egyptian Financial Supervisory Authority chief Sherif Sami.
• A new, independent “shadow” regulator for the oil and gas industry (potentially along the NTRA model) “within six months,” said Oil Minister Sherif Ismail (see our summary of his remarks inPart 2 yesterday’s special report).
• The CBE is set to open an overdraft account in USD so that importers can receive their shipments in the event that banks cannot provide them with foreign currency, according to Chairman of the Federation of Egyptian Industries (FEI) Mohamed El Sewedy speaking to Daily News Egypt. There will also be procedures to expedite required documentation, and importers will be able to repay the bank in EGP, according to El Sewedy.

SPOTLIGHT ON EEDC CLOSING REMARKS

Closing Remarks, President El-Sissi

In an unscripted and emotionally-charged speech, El-Sissi began by inviting all the young organizers and participants in the conference to join him for a victory celebration on the podium, underscoring the vitality and vigor which he believes is a reflection of the new Egyptian economy and society. .

With every syllable uttered being accompanied by loud and adoring cheers from the crowd, chanting in step “long live Egypt,” he stressed the urgency for change and reform, claiming “we are running late and time is running out.” He spoke about his active drive to shorten the timeframe of some of the most important projects announced during the EEDC, such as the New Capital City and a 13 GW expansion in power generation, which he claims he managed to cut from “30 months to a year and a half.” His powers of persuasion, he said, helped cut GE’s 750 MW power capacity expansion from a timeframe of 30 months to eight.

El-Sisi also stressed the urgency of Egypt’s fiscal predicament, which will need USD 200-300 bn, and spoke on how participating nations will help finance their companies’ investments, stating that “at this critical time, companies must think beyond profit margins.”

President Sissi then hailed the EEDC as an overwhelming success and thanked the originator of the idea, the late King Abdullah of Saudi Arabia. He called for this conference to have a lasting and impactful legacy, and announced that EEDC will be an annual event drawing in continuous investment.

His conclusion thanked all those nations, companies, leaders and organizers for their help and support. He then sent a message to the Egyptian people: “From all over the world, people have come to help you get back on your feet. It is now on you to not squander this gift.”

Closing Remarks, PM Ibrahim Mahlab

Prime Minister Ibrahim Mahlab opened his unscripted closing speech by telling the audience he will speak as an Egyptian citizen. Mahlab’s pride was palpable as he said that now “We know what an honest leader with a vision and a country with willpower look like.” Mahlab thanked all of the conference’s attendees and expressed his gratitude to Saudi Arabia, the UAE, and Kuwait in particular.

The key outcomes of the conference, according to PM Mahlab, were:

• The signing of USD 36.2 bn worth of investment contracts;
• Signing engineering procurement construction (EPC) contracts worth USD 18.6 bn;
• Securing USD 5.2 bn in funding from international financial institutions;
• USD 12.5 bn in aid and investment packages from Saudi Arabia, UAE, Kuwait, and Oman.

“We are about to present to the world the Egyptian experiment,” PM Mahlab declared. “We will have to work 24/7 to get the projects done… no time to rest… we all have to work now,” he added. The cabinet had convened at 4 pm in Sharm that day and the ministers got clear directives to follow up on all of the projects announced closely.

PM Mahlab “from the land of peace” thanked the whole world before having the cabinet ministers come on stage to sing the national anthem.

EEDC PANEL DISCUSSION: FINANCING EMERGING MARKETS

Key Takeaways:
The panel started off with long remarks from the EFSA Chairman, Sherif Samy, and the head of the EGX Mohamed Omran.

Sami expressed his happiness to hear the Minister of Finance talking about financing options such as sukuk and noted that EFSA has already drafted a sukuk law that ended up in the “government’s drawer.”

Samy also talked about developments with EFSA’s regulatory framework saying that a new law governing insurance is being finalized and new executive regulations for pension funds are ready. The underdevelopment and under-penetration when it comes to insurance is concern for Samy. EFSA is now pushing for more diversification in unconventional non-banking financing tools, Samy said.

Omran opened his remarks by praising the performance of the EGX and pointing out the large relative growth of the market. He said that, as the bourse’s chairman, he is not just looking at the ROI figures but also at how the market is functioning.

Emirates NBD’s CEO, Shayne Nelson, pointed out Egypt’s strength in having a very low private sector debt to GDP. He sees lots of room for banks to expand as SMEs make up 80% of the economy but only get 6% of financing, but there are obstacles that need to be overcome first as SMEs borrow against titles usually yet handing permits remains a slow process.

“We want to see simple things” Tirad Al Sheikh Mahmoud, the Abu Dhabi Islamic Bank’s CEO, said before going on to explain his desire to see SMEs become a more active part of economy. Banks right now are limited to large corporations based on their reliable financial data and retail customers, who have access to financing based on income. Mahmoud wants to see a more active market for Sharia-compliant instruments in Egypt and opportunities for the bank’s Sharia-compliant funds.

Sherif Samy responded to the sukuk concerns by saying that EFSA will not be a religious authority. “We’ll structure Sharia-compliant products, but we’ll never call them so… there will be a Sharia board responsible for that.”

“We see being here [in Egypt] as a huge opportunity for our shareholders,” Alex Thursby, NBAD’s CEO remarked in spite of the volatility in the market. He eyes potential for a local corporate bond market and knows how big the potential for it is after seeing the subscriptions for the new Suez Canal project’s bonds from individuals, let alone from corporations. Thursby also underpinned the importance of export finance as it helps building foreign currency reserves and having its criticality in taking banks “away from ratings-based financing” and giving access to low cost funding.

In the closing remarks, the three banking representatives were asked about their view of the biggest challenges facing financing in Egypt:

• ADIB’s Mahmoud said it was making sure that supply meets demand as, following the EEDC, expectations have been raised and pressure increased and so every step needs to be calculated in the next 12 months.
• Emirates NBD’s Nelson was more specific in pointing out that the biggest challenge is how to secure access to foreign currency. Nelson noted that the fundamentals are strong and that after entering the Egyptian market, NBD is beating its acquisition forecast but that the market’s ability needs to be harnessed as banks remain underlent.
• NBAD’s Thursby urged Egypt to avail itself of the liquidity pools that “sit around all over the world.” This is a critical challenge, but also an opportunity – he never “saw a banking system with so much liquidity” and there is a need to give investors the opportunity to apply savings in a different manner. On the SME front, Thursby acknowledges that access to financing is important, but that they also need cheap and timely payment options along with access to trade finance and foreign currencies.

 Best quotes:

“When you go to school, that’s a 14-year contract between the student and the school … that’s definitely securitisable” —Sherif Samy, Chairman, Egyptian Financial Supervisory Authority

“I don’t know why the government is shying away from [listing public sector companies] on the stock market… The government is an agent of managing companies, not an owner… I urge the government to use the stock market using our platform for capital increases… Let citizens at large monitor their own assets.” —Mohamed Omran, Chairman, The Egyptian Exchange

“Look at the import substitution benefits … the sky is the limit … Egypt is the deepest market in the Middle East … very little to say of what can’t be done here.” —Tirad Al Sheikh Mahmoud, CEO, Abu Dhabi Islamic Bank

“The civil servants in [Egypt] have no incentive to make decisions … they make a mistake and they’re put in prison” —Tirad Al Sheikh Mahmoud, CEO, Abu Dhabi Islamic Bank

“Egypt is one of the few countries to have a constitutional requirement saying that the non-banking regulator is independent… we talk, but they can’t ask [EFSA] to take specific actions.” —Sherif Samy, Chairman, Egyptian Financial Supervisory Authority

EEDC PANEL DISCUSSION: TECHNOLOGY AND INNOVATION

Key Takeaways:

Entrepreneurs and technology innovators examined the opportunities for technology and innovation as a key generator of dynamism in the Egyptian economy.

Khaled Negm, Minister of Communications and Information Technology, Egypt:

The Egyptian government has and will continue to support innovation in the future. Egypt is one of six countries that support the disabled by utilizing mobile technologies. In the future, we plan to establish innovation centers in our universities and tech parks. Innovation is a very flexible concept. The recently-introduced administrative capital can be considered innovation. It is an innovative solution to solving the problems of slums and congestion in Cairo.

Amr Awadallah, Co-founder and CTO, Cloudera, United States:

Awadallah briefly reviewed his company’s founding, stating that Cloudera was founded six-and-a-half years ago. The company now has over 900 employees and has raised over USD 1 bn in capital. In response to the moderator’s question about the level of funding Egypt can raise, Awadallah replied that if he can raise USD 1 bn for Cloudera, Egypt can definitely attract USD 70 bn to USD 80 bn. With regard to entrepreneurial risk and reward, Awadallah stated that when he left Yahoo, while his income dropped significantly, he ultimately realized huge rewards after the founding of his company. He said that entrepreneurs must be willing to forgo current benefits in order to reap rewards in the future.

Awadallah lamented that the culture creates inertia against firing people that aren’t performing up to par. This has to change. We must not be afraid of making mistakes. We cannot innovate if we don’t try new things.

Shashi Buluswar, Co-founder and Executive Director, Institute for Globally Transformative Technologies, Lawrence Berkeley National Laboratory, United States:

Realistically, Egypt will not be able to compete with global leaders in R&D, at least not in the short term. That said, Egypt can follow in the footsteps of India and China, countries that I like to refer to as a fast-followers. Fast-Followers can conduct research and development on products and technology that were originally created in the developed world in order to maximize their benefits to the country’s population. For instance, refrigeration is an example of a technology, that if available at a lower price, could benefit a much larger segment of Egyptian society. Refrigerators are often to expensive for many poor Egyptians. Egypt could focus its R&D efforts on this type of technology.

Another examples is that of desalination. Desalination, while available throughout the world, is a very expensive and time consuming process. Egypt would benefit in researching ways to make the process cheaper and more efficient.

Ahmed El Alfi, CEO, Sawari Ventures, Egypt:

The strategy we use is to tell people that we are looking for innovators. Fortunately, Egypt is full of these types of these people. When we initially announced our intention to finance startups, we were flooded with requests .The Engineering and Technology universities in Egypt produce some fantastic talent, all they need is an opportunity to succeed.

We have funded many start ups in Egypt. Many of the ideas we have seen are brilliant and could potentially applied to any part of the world.

The government has achieved some amazing things over the past couple of months. However, there is still much more that needs to be done. The government should channel more money towards Research and Development. There are brilliant people in this country who are unable to achieve their full potential due to a lack of funding.

We have companies that are making money recycling trash bags in an innovative way. Additionally, we are financing a company that is making videos of public school lessons. Both of these projects, are beneficial to Egyptian society.

Ali Faramawy, Corporate Vice President, Microsoft Middle East & Africa, Turkey on government use of technology:

I am very happy that the government has employed technology in order to solve some of the endemic problems facing Egypt. Large nationally supported infrastructure projects, while beneficial, are not always the best solution to solving these problem. Innovation, new technologies and business models can provide keys.

Walt Macnee, Vice Chairman, MasterCard Worldwide, United States on financial inclusion:

Macnee stated that one of the biggest problems facing the finance sector in Egypt is financial inclusion. Only 10% to 15% of Egyptians have bank accounts. This is obviously a bad thing for the Egyptian economy, as it creates a lot of inefficiency. At Mastercard, expanding Financial inclusion in Egypt is a priority of ours.

Achieving this goal, fortunately, is very likely due to Egypt’s high mobile penetration rate . Master Card has created platforms that allow mobile users to make payments, such as cash transfers, internet purchases, and remittances. The technology is already available to the Egyptian public and the platforms are growing in popularity.

Best Quotes:

“If you want to be optimistic of Egypt’s future, then I urge you to meet with entrepreneurial youth we’ve been working with.” —Ahmed El Alfi

“Egyptians have been raised to be afraid of the unknown. We are very used to commending success, however, we rarely do the same when it comes to failure. We must commend failure in order for innovation to flourish.” – Ali Faramawy

EEDC PANEL DISCUSSION: ECONOMIC INCLUSION

Key Takeaways:

Minister of Trade and Industry Mounir Fakhry Abdel Nour opened the panel by stressing the importance of SMEs to the new Egyptian economy as is a leading generator of employment, and a main engine for growth. The value of SMEs lay in their ability to involve and incorporate marginalized members of society such as youth and women.

The new policy regarding SMEs. Speaking on the new government policy with regards to SMEs, Abdel Nour stated that it was important to define what SMEs are in order to vigorously target them. He went on speak on new mechanisms to ensure funding and aid for them, such as Social Development Fund and the Industrial Training Center. The latter will be focused on providing training and mentorship to entrepreneurs. He went on to cite other sources of government funding for SMEs such as the DIF, Ayadi, which was launched by the Ministry of Planning, in addition to mentioning an expanded SME funding program to cover the long neglected Upper Egypt area.

Participation of non-government agencies. Heba Handoussa, Founder of the Egypt Network for Integrated Development, discussed her experience in developing an SME culture in Upper Egypt, after being inspired by the Revolution of 2011 and the will of the youth to take charge of their lives. Her stated goal was to identify in Upper Egypt, enterprises that are ripe for funding and if successful, replicate the experience with other businesses. Examples she cites of successes include cottage textiles business and solar powered fisheries. She also discussed a program called “one village, one product” which would aim to turn an entire community to the production of one item, generating collaborative and sustainable growth in addition to incorporating the direct participation of women in a traditionally male-dominated society.

Participation of the large scale manufacturers. Speaking on the role of industry, Mario Spangenberg, President and Managing Director of General Motors Africa, spoke on the immense strides the auto sector has taken to build up skillsets and provide vocational training. As a labor intensive industry, whose tasks and required skillsets are diverse and span a large range, not only is it a major employer but those trained and operating in the sector will be considered as valued and employable. In order to shore up vocational training for employees, auto companies have undertaken numerous training programs in association with the government. He made a pitch for the auto industry as being a major force of economic inclusion of youth, and stressed that policies benefiting the industry will benefit youth. As such the government must incentivize manufacturers, grow economies of scale, and attract suppliers by making imports cheaper.

The venture capital climate in Egypt. When discussing the venture capital climate in Egypt, Wamda CEO, Habib Haddad, stated that the VC culture in Egypt is weak considering how youth unemployment is 20%. Furthermore 80% of all start-ups in Egypt have failed to receive follow-up funding, an additional indicator at how start-up potential goes largely untapped. However, he did commend the entrepreneurial spirit among the youth since the 25 January Revolution.

Challenges to Economic Inclusion in Egypt. Handoussa’s main concern on this issue was the high prices of imported goods and the culture of monopolies that dominate the Egyptian economy. Spangenberg’s argument calls for the shoring-up of the domestic supply chain in order to foster industry and an export-based economy. The lack of an efficient supply is, according to him, the major challenge facing vocational training and employment. Habib identified the “mega project mentality” as the main challenge. Banks are hesitant to finance SMEs and the government seems to offer no incentives to provide capital to these start-ups.

What more could the government do? According to Handoussa, one of the main reasons for a stagnating entrepreneurial culture is the difficulty of SME players to compete in the marketplace due to lacking the ability to market their goods and services. The government must provide assistance in that. Habib suggests that government needs to take more active steps in deregulation and allow SMEs to flourish without government hindrance. He also expressed the desire to see entrepreneurs included in any productive discussion on SME policies. Minister Abdel Nour concluded the discussion by stressing the need for a comprehensive overhaul of the education system.

Best Quotes:

“Government needs to get out of the way…it needs to make an actual concerted effort to get out of the way, which is not easy.” —Habib Haddad, CEO of Wamda

“According to a Global Entrepreneurial Monitor Survey, start-ups increase and flourish with the teaching of entrepreneurship at all levels of education.” —Heba Handoussa, Founder of the Egypt Network for Integrated Development

EEDC PANEL DISCUSSION: SOCIAL INCLUSION

Key Takeaways:

The importance of social inclusion in the development of the nation. Ghada Wali, Minister of Social Solidarity, opened the discussion with a brief history lesson explaining how even though Egypt was meeting high standards of growth in 2005, the lack of social inclusion and integration of disenfranchised segments of society in that growth led to the eruption of the 25 January Revolution. She stressed the need for these lessons to be incorporated in all future policy planning. For his part, Sir Paul Collier, Professor of Economics and Public Policy at Oxford University, stated that social inclusion is the real driver behind economic growth, due to it being the most important factor in guaranteeing social and political stability. It is only with stability that growth from investment can take shape.

Policies undertaken by the Ministry of Social Solidarity to promote greater social inclusion.Minister Wali, pointed to several key initiatives undertaken by the ministry in this regard. These include:

• increasing expenditure on education and health to 10% of GNP as mandated by the constitution
• expanding welfare benefits
• improve targeting measures to identify those in need through a unified registry and database accessible to government bodies and agencies
• Passing of a new micro finance law that allows private sector companies and NGOs to provide credit to those in need
• Improvement to housing policies
• Expanding the health insurance program
• The alleviation of subsidies, which were primarily benefiting the rich at the expense of the poor

What role can the private sector play in social inclusion. According to Fadi Ghandour, Founder and Vice Chairman of Aramex and Co-founder and Director of MENA Venture Investments, one of the main obstacles to social inclusion is the partial self-imposed isolation of big capital and the private sector, which seems to have focused primarily on profit margins. The development system in place is also culpable in this isolation. There are obvious advantages to private sector involvement in social inclusion. These not only include funding, but also collaboration in training and developing human capital. As a the primary employer, the private sector must take an active role in enlightening the education system on the requirements for employment so that the schools may become more useful and relevant, said Sir Paul Collier.

Government efficacy at social inclusion. Khalid Abdulla Janahi, Chairman of Naseej, public policy in the whole region, including Egypt, has utterly failed in achieving social inclusion and continues to do so at its own peril. This is evident in the high levels of regional poverty, unemployment, discrimination and a widespread culture of corruption.

Merging social inclusion into the investment plan. All the panel participants came to agreement on this issue. Minister Wali outlined several mechanisms by which the government has integrated social inclusion to its investment platform. These include investment in labor intensive sectors thereby maximizing hires; social inclusion policies will be streamlined across all ministries allowing for a unified collective policy that better incorporates the needs of disenfranchised members of society and to ensure that all programs are funded in a sustainable manner; maximizing hires of marginalized members of society; including the community in all major investment decisions.

Stakeholder partnerships. This is another issue that quickly gained a consensus among the panel participants. Collier cited a number of examples by which the private sector had an active role in collaboration with the government in helping the marginalized. He cites an innovative program in Kenya, whereby the government and cell phone companies have expanded e-commerce to those who have never been banked before (but have had access to cell phones). He also reiterated Fadi Ghandour’s point in partnering with the private sector in improving education policy, as it is essential for the private sector to have a hand in molding the workforce it requires through setting targets for the education. The German model of apprenticeships and internships was mentioned as an example to follow.

Challenges to social inclusion. Almost all the panelists agreed that the main issue hindering social inclusion is culture. Fadi Ghandour points to a glamorized vision of what SME and micro businesses are, a vision molded by Silicon Valley. He also points to an endemic fear within the banking community on the unfeasibility of SMEs, even though the overwhelming majority repay their microfinance loans. The culture in Egypt and region remains focused on big capital and mega projects, with smaller players being squeezed out. Collier points to an erroneous perception that social inclusion and national security are two separate issues, while he believes that they are one in the same. Junahi was quick to criticize the lack of human rights in Egypt and the region and how sustainable development will never be achieved so long as human rights remain in the back-burner of the government’s priority lists. He states that the lack of human rights and the proliferation of a culture of nepotism and cronyism is the largest hindrance in establishing a meritocracy whereby social mobility can take place.

Best Quotes:

“One needs to look no further than the EEDC to see the regional failing in social inclusion … with only 9% of speakers being women and none of the speakers were below the age 25” —Khalid Abdulla Janahi, Chairman of Naseej

“How are they [the marginalized members of society] considered unbankable when over 90% of recipients of microfinance repay their loans in full?” —Fadi Ghandour, Founder and Vice Chairman of Aramex and Co-founder and Director of MENA Venture Investments

“Egypt is a society that is too big to fail and it holds such high potential that it cannot be allowed to linger in the state it is in.” —Sir Paul Collier, Professor of Economics and Public Policy at Oxford University

BY THE NUMBERS

USD CBE auction (Sunday, 15 March): 7.5301 (unchanged since Monday, 02 Feb)
USD parallel market (Sunday, 15 March): 7.67 (-0.01 from Thursday, 12 March; Reuters’ trader quotes 7.67 as unchanged for one week)

EGX30 (Sunday): 9,726.03 (+0.88%)
Turnover: EGP 502.6 mn(21% below the 90-day average)

WTI: USD 44.34 (-1.12%)
Brent: USD 54.22 (-0.82%)

TASI: 9,628.7 (-0.6%)
ADX: 4,424.8 (-1.3%)
DFM: 3,613.6 (-2.5%)
KSE Weighted Index: 444.3 (-0.4%)
QE: 11,964.2 (-1.0%)
MSM: 6,301.0 (-1.5%)

CALENDAR

19 March
(Thursday): Taba Liberation Day.

21 March
(Saturday): Mother’s Day observed in Egypt.

30-31 March
Terrapinn Middle East Investment Summit, Dubai. Register online here.

Our full-length calendar returns tomorrow.