Egyptian small investors look for a role

Staff Writer
Columbus CEO

SHARM EL-SHEIKH, Egypt (AP) — Hisham Khalil heads a medium-sized construction company, the sort of firm that past Egyptian governments generally ignored in their grand economic reform projects in favor of close friends and mega-businesses.

So when Egypt launched its latest roadmap to an economic future at an international conference this past weekend, Khalil accepted an invitation to attend, looking to see for himself if this crew will be any different.

He wasn't the only one. Many of the Egyptian investors at the Sharm el-Sheikh gathering — making up nearly a third of the over 3,000 attendees — were young and came from small and medium-sized businesses. In the new push for investment to rescue the economy, they wanted to know whether the government, led by the former military chief-turned-president Abdel-Fattah el-Sissi, is ready to widen the base of participation and move away from a centralized operation that long benefited a small pro-regime clique.

In the privatization and investment drive of the 2000s under longtime autocrat Hosni Mubarak, Egypt scored impressive economic growth, reaching an all-time high of 7 percent. But it failed to translate into wider prosperity. The number of Egyptians below the poverty line swelled. A few skyscrapers went up along the Nile, gated communities flourished in the capital's suburbs but infrastructure elsewhere languished. Mubarak's sons and top businessmen in the ruling party became symbols of the inequalities.

The squeezed middle class as well as upper-class Egyptians who had no buy-in into the system were the first to trigger the popular uprising in 2011 that ousted Mubarak.

At the weekend's conference, Khalil, 42, says he saw some signs of a new attitude — enough to keep him listening, even if he's not totally convinced.

Perhaps most impressive for the mid-sized Egyptian companies was simply that they had a seat at the table. At the massive, glitzy event, younger businessmen mingled directly with government officials and ministers, at times complaining to them over obstacles or debating ideas to improve the environment or ensure businesses are socially responsible.

Khalil, the CEO of Haski Engineering and Contracting, said the Investment Ministry invited him and was clearly looking for "young blood."

"People like us, the former regime never looked to us and we never looked to talk to them either. It was always the people close to the regime," said Khalil. "Now, we are trying until they prove us wrong." Khalil, who was among those who took to the streets in 2011, said the government has clearly taken note of the need to widen the base.

"It is the revolution. They know people won't wait anymore," he said.

The three-day conference raised over $36 billion dollars from mostly foreign investors— an impressive achievement for a cash-strapped government aiming to kick start an economy broken by turmoil since 2011.

But Egyptian investors, particularly smaller ones, pointed to other signs they said encouraged them:

— A degree of transparency. The government drew up development plans for the next five and 15 years, integrated across ministries and in discussions with the private sector and experts, a departure from the past, said Ahmed Nounou, the director of Logic Management Consulting. His firm helped the government translate the plan into specific goals to be met in different sectors, including health, legal reforms and transparency. Still, it is not known what basis the government used to choose who was on board in the planning.

Upcoming planned reforms include legislation to create a new electricity authority to end the conflicts between the electricity and petroleum ministries. Another would significantly reduce the huge ranks of civil servants, mainly through early retirement. That's a potentially explosive move, but one that opens the way for a younger breed.

"They are much more forthcoming with their plan," said economist Mohammed el-Dahshan, who attended the conference.

— New voices in the planning. A dedicated joint Egypt-Emirati task force advising the government on the economic plan has brought in a significant number of young experts and has been able to cut through much of Egypt's bureaucratic red tape.

— The more than 20 centerpiece projects that the government presented to investors at the conference proved well chosen and bankable, prepared through specialized local investment banks. They included projects in real estate, in the fertilizer sector, as well as private sector projects such as a venture capitalist firm seeking to invest in small entrepreneurs.

— A smarter approach. For example, in past real estate deals, government sales of its land to investors were fraught with accusations it sold too cheap, leading to long court cases. This time, the government plans to enter real estate projects as shareholders. For a small investor, that would mean the government would have a stake in the project and can facilitate permits and clear red tape.

Still, old ways were not totally gone — nor old faces, with some figures close to the Mubarak era roaming the conference hall.

Though officials made a good show of talking outreach at the conference, smaller businessmen aren't certain that will translate into real inclusion later on. There was little talk about policies to ensure wider social benefit from growth.

Khalil, for example, said he attended in part to push for his new initiative to get the private sector involved in building low-income housing by finding creative means of financing for the poor. He said he presented his proposal to the government. He's pushing ahead, talking to bankers on fine-tuning the project. "This is the change I want to see," he said.

A panel at the conference on social-inclusive growth did not include a single Egyptian businessman. Bahraini businessman Khalid Janahi voiced criticism at the panel that the government was not spending enough on sustainable development.

Speaking later to AP, he noted that there is still little accounting for investment and other money spent during Mubarak's last years. He said the demands of Egypt's 2011 uprising for social justice have not disappeared.

"Social justice — and before it, dignity — are going stay, are going to come back, regardless how much you hit people over their head or how much you give them money in their hat to keep their mouth shut."

Sherif el-Helw, founder of Akanar Partners, an Egyptian investment bank that prepared some projects at the conference, said some of the cronyism of the past years may still take place. But the government is not just talking the talk of greater inclusion, he said. Unlike the Mubarak regime, it's working from a devastated economy and needs results. Authorities are "looking behind their back all the time," he said.

Abdel-Hameed Sharara, 27, was one of the youngest participants at the conference. He founded RiseUp, the region's biggest summit of entrepreneurs, gathering some 3,000 young businessmen and women in its last meeting in Cairo the past winter.

He said the government got the vote of confidence it wanted from the conference, but young Egyptians expect more.

If officials think racking up foreign investment is enough, "I don't think this is the right thing," he said. "This is just the spark of the start of them becoming more active and caring more about the country."