The government needs to do more to further encourage foreign investment and face its own growing budget deficit soon, or else the economy could down spiral further, a panel of bankers and economists said on Wednesday.
“The government has to set the clear message: Egypt is open for business,” said Yasser Gamali, chief business officer and managing director at Alex Bank, speaking at the Euromoney conference in Cairo. “I want the starter to go ahead and start.”
Despite a slew of business conferences in the recent months and ongoing negotiations with the IMF for a US$4.8 billion loan, Egypt’s economy remains sluggish. Foreign direct investment is still at a trickle, and unemployment stands at nearly 13 percent as of the second fiscal quarter. Last week, Finance Minister Momtaz al-Saeed announced that the country's budget deficit had already reached LE170 billion, much larger than the predicted LE135 billion for the 2012-2013 fiscal year.
The problem, some said, is that both the government and the private sector are employing the “wait and see” approach.
“The banking sector and the government both have to make the move,” said Ibrahim Ashmawy, chairman of WestGate Consultants. “No one is pulling the trigger.”
The bankers said foreign and domestic investments are scared off by lengthy bureaucratic procedures, security issues, and fear of losing assets. To bring back domestic and foreign investors, they said that Egyptians should tone down on demanding radical political change, and instead focus on reforming institutions.
“We don’t need another revolution, but evolution,” was a mantra said by more than one panelist.
Wael Ziada, head of research at EFG-Hermes Holding, said the government needed to address its own budget problems before the economic situation could get better. He said policymakers should be less concerned with politics and more with the country’s economic health.
“I’m sorry, but the economic decision is linked to a political timetable,” he said. “We have a ballooning budget deficit, and it's crippling the entire system of this economy."
In the past year, heavy government borrowing from domestic banks has left little credit for private business, the main engine for new jobs.
The experts pointed to the opportunity for growth in the banking sector and abundant labor as some resources that will help Egypt out of its economic hole.
Government officials said during the first day of the conference on Tuesday that they were open to investment and believed fully in the benefits of a free market economy.
Hussein al-Qazzaz, advisor on integrated development to President Mohamed Morsy, said the government would soon initiate a “social dialogue” with experts and specialists to launch the specific projects that are part of Morsy’s economic Renaissance plan.
But the clock is ticking, experts say, and any dragging of feet by the government could have grave consequences.
“The government is acting like cancer patient who needs chemotherapy but won’t do it because he doesn’t want to lose his hair,” Ziada told Egypt Independent. “We’re running out of time.”