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EBRD looks to boost equity investments in Egypt

Reuters , Wednesday 17 Jul 2019
European Bank for Reconstruction and Development (EBRD) (Reuters)
European Bank for Reconstruction and Development (EBRD) (Reuters)
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The European Bank for Reconstruction and Development (EBRD) expects to keep investments in Egypt at over 1 billion euros this year, boosting its equity portfolio through a delayed privatisation programme, its regional director said.

The bank intends to participate in an expected share offering for state-run Alexandria Container and Cargo Handling Company, among the first of dozens of state-run companies planning to sell stakes, Janet Heckman, managing director for the southern and eastern Mediterranean, said in an interview on Wednesday.

It also hopes to help finance a monorail project that will link Cairo to a new capital being built in the desert, and for which a consortium led by Bombardier has been identified as the preferred bidder, she said.

Set up in 1991 to help ex-communist countries of eastern Europe shift to market economies, the London-based EBRD has extended its operations over the last decade to more than 35 countries, from Morocco to Mongolia.

It started operating in Egypt in 2012, a year after the uprising that toppled former president Hosni Mubarak.

Last year Egypt overtook Turkey as the EBRD’s largest country of investment, with about 1.2 billion euros invested in renewable energy, power, property and tourism, agribusiness and transport.

“It’s been quite a quick ramp-up. As of last month we’ve invested roughly a little over 5 billion euros ... in 95 projects, all but 11 of which are private sector,” said Heckman.

More than half those investments have come since 2017, a year after Egypt began implementing a three-year economic reform programme tied to a $12 billion loan from the International Monetary Fund.

The reforms included a sharp devaluation of the Egyptian pound that made Egypt more attractive to private capital.

Equity only makes up about 5% of the EBRD’s portfolio in Egypt, but that share was expected to rise, said Heckman.

“This year in conjunction with the IPOs and other investments we’re looking at, we expect it to shift significantly,” she said.

The state owns vast swathes of Egypt’s economy. A programme to launch share sales has been held up since last year, partly due to emerging market uncertainty.

Egypt has been praised by international lenders for its speedy reforms, though austerity measures and inflation have left many Egyptians struggling economically.

The government has recently raised basic salaries and pensions for government employees to offset the impact of the rise in cost of living. It has also launched a national healthcare insurance program and a number of other social programs targetting the poor in order to create a basic social safety net.

Gross domestic product is forecast to top 5% for a second year running, but investment outside the energy sector has been falling.

“People want to see a period of continued stability and progress, because it’s a big decision to begin significant manufacturing facilities in a country,” said Heckman.

She said she was encouraged by the start-up scene, signs big Egyptian companies are investing more domestically and expanding infrastructure for investors such as legal and consulting firms.

“We continue to be quite bullish and optimistic about Egypt ... it’s a big country, almost 100 million people and at the same time it’s greatly positioned in terms of export opportunities, which I think have been highly underdeveloped,” Heckman said.

*This story was edited by Ahram Online

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