Day two of the Egypt Economic Conference 2022 saw discussions on all things privatization and industry, from the state ownership policy document, to financing avenues for the private sector, and the Sovereign Fund of Egypt’s role in boosting private sector involvement.

WAITING FOR GODOT-

The state ownership policy document is “nearly final,” Vice Minister of Finance Ahmed Kouchouk said during a session at the conference yesterday. The government has amended about 30% of the document after receiving feedback from private sector representatives through public consultations, including adding and clarifying the position of the state towards some 68 sub-sectors in its privatization plans.

“Nearly” final? Prime Minister Moustafa Madbouly said last month that the government had finalized the document and would unveil it at the conference. Cabinet spokesman Nader Saad said earlier this week that the final version of the document could be unveiled on the conference’s last day (that’s today) after being discussed at the event yesterday.

Refresher: The state ownership policy document details the government’s plan to more than double the private sector’s role in the economy to 65% over the next three years, and attract USD 40 bn in investment over the next four years. The document outlines the industries which the government plans to open up to private companies and the ringfenced strategic sectors which will continue to see heavy state involvement. The new privatization drive came following the economic crisis triggered by the war in Ukraine and during talks with the IMF for a new loan program.

State VC firm up for grabs? The International Cooperation Ministry is looking to exit its venture capital arm, Egypt Ventures, and plans to offer it to international financial institutions, International Cooperation Minister Rania Al Mashat said yesterday, according to Bloomberg Asharq. The firm was established by the ministry, the Saudi Fund for Development, and NI Capital in 2017.

INDUSTRIAL STRATEGY IN 3 MONTHS?

The government wants to work with the private sector to establish an industrial development strategy within three months, Prime Minister Moustafa Madbouly said during yesterday’s session on the state ownership policy document. The strategy would cover the next decade, he said, without disclosing further details.

We need to do more to boost Egypt’s investment climate + credibility, experts say: “We do need to place specific timeframes for all applications for industrial projects across all sectors, regardless of whether or not they are eligible for the golden license, because that boosts credibility,” Planning Minister Hala El Said said.

Dr. Hala was responding to criticism from industry insiders on long approval processes, which they say can be off-putting to investors who are looking for a clear project execution timeline before they pour their money into a project.

Should the SFE and the MPE become one? Another suggestion from experts was to clarify or merge the roles of the Sovereign Fund of Egypt and the Public Enterprises Ministry to ensure policy continuity. Both own state assets and are involved in the company’s state privatization plans.

THE SFE’S ROLE IN BOOSTING PRIVATE SECTOR INVOLVEMENT-

The state IPO program is alive and well, but the EGX has taken a hit: “There have been three years of exceptional circumstances that have hit the EGX hard,” Madbouly said, adding that this is why “we have to be careful when choosing the right moment for state IPOs.” The government, however, is taking this time to do its due diligence, and value state assets appropriately, he added. “We are preparing a list of more assets to put up for sale […] including greenfield projects for the SFE to own and exit,” he said.

That’s why we have the pre-IPO fund: “Our state IPO program has faced delays because of the global circumstances, which have meant that share prices on the EGX do not reflect their real value, which is why we’ve set up the pre-IPO fund to prepare for a better time for these listings,” El Said said. The pre-IPO fund is aimed at preparing state-owned enterprises for listing on the EGX.

But there is a way forward even in crappy market conditions: Follow Abu Dhabi’s lead.

But we’re still waiting on some names: Assets worth up to USD 3bn — including shares currently held by the National Investment Bank — should be transferred to the fund by early November, El Said said previously. A second similar sized phase will follow. One of three Siemens-built power plants has reportedly already been transferred to the fund ahead of a sale.

COMPETITIVE NEUTRALITY-

The Egyptian Competition Authority (ECA) is working on developing a competitive neutrality index through which it can measure the success of its strategy to promote and enforce competitive neutrality, ECA Chairman Mahmoud Momtaz said. This comes as part of the government’s efforts to encourage fair competition, which include a dedicated ministerial committee helmed by Prime Minister Moustafa Madbouly. Momtaz didn’t provide any details on how the index would work.

New regulators could make their entry, while the ECA could get sharper teeth: Amendments to boost the authority of the ECA are in “advanced stages” in parliament, Kouchouk said, adding that the government wants to establish more regulators that can help ensure fair competition, such as an intellectual property authority.

REMEMBER- Legal changes that would give the ECA the power to reject mergers and acquisitions were being discussed in the House last year, but were never put to a final vote in the general assembly.

ON INCENTIVES-

The government wants to offer more incentives for foreign companies to outsource their digital ops to Egypt: The Communications Ministry plans to restructure incentives to foreign companies to get them to set up shop or export their digital operations here, Communications Minister Amr Talaat said in a session, without providing details on the planned incentives.

Residency for foreign property owners on the table? The government is looking into introducing a scheme that would grant foreigners long-term Egyptian residency permits if they invest in property here, Madbouly said. Conference participants had called for the introduction of a Turkey-style citizenship by investment scheme to help boost FX inflows.

ON THE EGP-

New currency derivatives in the works: New currency derivatives are expected to be ready within months to allow investors to hedge against the risk of further currency depreciation, FRA chief Mohamed Farid said yesterday. The central bank could allow onshore non-deliverable forwards (NDFs) and options, Bloomberg previously reported, saying the move would bring more transparency to expectations of EGP movement and protect local companies against major fluctuations if the country moves towards greater currency flexibility.

ON EGX TRADING-

A trader in every family: We need to change the culture around trading to encourage retail investors, EGX boss Rami El Dokany said, adding that digital onboarding and fintech has made it possible to attract new age brackets to the EGX. “We hope to see an EGX trader in every Egyptian household, especially among younger people,” he said.

The main issue the market is currently facing is a lack of liquidity which brings share prices down, El Dokany said. State-owned companies can boost liquidity by investing — especially ins. companies and social ins. funds, he added. “If these companies start funding a big part of daily trading on the EGX, prices will differ greatly,” he added.