Officials tried to assure foreign and domestic investors that the local climate for business is safe and friendly on Tuesday, after the Egyptian stock market took a hit Monday due to some tough rhetoric on corporate corruption from President Mohamed Morsy.
In a speech to commemorate the October 1973 war with Israel on Saturday, Morsy said that government watchdogs are in the process of investigating several unnamed private companies for accusations of corrupt practices with the former regime.
Following his statements, the Egyptian Stock exchange’s largest index, the EGX 30, dropped a significant 2.42 percent on Monday.
On Tuesday, Egyptian officials seemed to be assigned to damage control, trying to calm fears of a witch-hunt. They told investors they had no reason to close their pocketbooks.
“We want Egypt to be a mecca for investors,” Prime Minister Hisham Qandil said, in his remarks at the Euromoney conference, a gathering of investors, media, diplomatic and business leaders which organizers say is meant to help restart investment in the country’s ailing economy.
“Allow me to confirm that the Egyptian government is committed to economic reform and free market economics,” he said.
Addressing what he called the “rumors” that had caused the recent dip in investor confidence, Qandil said that the Egyptian government would respect all existing contracts, and abide by the laws under which they were signed.
“Any action taken by the government will not be retroactive,” he said.
At the conference, other officials also stressed the importance of foreign investment returning to pre-January 25 2011 levels. The country has been trying to attract foreign investors after many left throughout the past year and a half of unrest. Foreign and domestic capital has yet to turn out in full, amid prolonged negotiations for a US$4.8 billion dollar loan from the IMF lack of a clear economic reform plan, dwindling foreign reserves, an expensive subsidy plan and growing budget deficit.
“All of my faith is in the return of investment,” Finance Minister Mumtaz al-Saeed said.
Officials and finance leaders also decried the obstacles to investment in the country.
Minister of Investment Osama Saleh said that the two main challenges to investors are instability, production halts due to labor strikes, and bureaucratic legal hurtles.
He cited changes he made to the investment law in January 2012 that allowed for amicable resolutions of disagreements between private companies and the government as the most significant step towards bringing back capital to Egypt.
Business leaders also said Egypt has a ways to go before it can claim to be a welcoming climate for foreign investors, as the stock market's reaction to Morsy’s remarks last week demonstrated.
They called for the government to streamline legal procedures that issue licenses and approvals for businesses, and to foster a bureaucracy that is accountable, but not rendered ineffective by fear of corruption accusations.
“The challenge is creating an environment where the bureaucracy can actually get things done,” said Ahmed Heikel, chairman and founder of Citadel Capital. “You can’t expect someone who is going to appear before the public prosecutor on corruption in the morning to go on in the afternoon and approve a license for an investing corporation.”