Responsible for Egypt's largest concentration of wealth and serving over 6 million customers, the National Bank of Egypt (NBE) is one of the country's financial pillars.
Four years ago, NBE chairman Tarek Amer took charge of an institution in turmoil, mired in problems and irregularities, gradually transforming it into one of the most robust and profitable banks in the region.
Ahram Online recently sat down to talk with Amer about his experiences at the NBE and with the International Monetary Fund (IMF), as well as Egyptian attitudes towards business and the future of the bank.
The Cabinet
Ahram Online: We know that you were offered the chance to lead the economic group of ministers in Egypt's new cabinet. Why didn't this happen?
Tarek Amer: I was supposed to head the economic group in the cabinet, but to properly do that role, I had to take charge of the ministry of finance. However, they had already asked Mr Momtaz El-Said to continue in his position, so I had to decline the offer.
Qatari presence in the Egyptian banking system
AO: How do you view Qatar's plan to acquire stakes in Egyptian banks, including a controlling stake in National Societe Generale Bank? Are people worried about this?
TA: The nationality of bank owners doesn't matter. What matters is the economic development we expect it to stimulate.
There is no need to worry because central banks in general are one of the few regulatory bodies that enjoy near absolute authority over the sector they regulate.
It can impose punishments on banks and prevent them from transferring profits abroad, and it can interfere in the appointment of management and the board of directors at any bank. It can even send one of its own to run any bank it wants.
Why don’t we [Egyptians] have self confidence? We are afraid of whomever wants to enter our markets -- we look upon them as invaders.
The general attitude in Egypt is extreme fear of outsiders. That's why Dubai, a tiny city, became an international financial centre while Egypt was just watching. The emirate has its doors wide open to investors from across the world.
Wages, taxation and the National Bank of Egypt
AO: How has your experience been with the National Bank of Egypt?
TA: When I first came to head NBE, I hired a number of new, qualified staff who I knew would be able to improve the performance of the bank.
That meant I was faced with a severe backlash from many existing employees, who claimed I was overlooking them in favour of these new employees.
Failures always attack those who succeed under the cover of "justice." This kind of socialist justice, where everyone becomes equal, is, in fact, unjust. Some people are more talented than others and some work harder, they deserve to be rewarded. Others, however, just throw accusations at others.
That is why government employees in Egypt are the ones who always protest, while the government is full of corruption. Now anyone who is a failure or is corrupt in any organisation can claim to be a 'revolutionary' fighting corruption, while the opposite is true.
We have to change this socialist mindset in Egypt to be able to develop. Social justice is for everyone to get an opportunity, and then he who performs better is rewarded.
AO: What do you make of recent calls to limit pay levels for the heads of public banks?
TA: NBE manages some LE300 billion in assets, the largest sum in Egypt. What kind of experience would you expect the bank's head to have? Definitely a world class one, so they are able to wisely mange this wealth and develop it.
If we look at market rates, we find that a public bank president in Turkey is paid LE20 million per year. What is strange is that some say that the LE200,000 I get each month is a large amount, although I am supposed to receive LE2 million.
The government, which owns NBE, has the absolute right to choose someone who would accept a salary that would appease public opinion. They could save a few millions in exchange for putting billions of the country's money in jeopardy.
AO: Part of the call for social justice in Egypt involves adjusting taxation. How would that affect business in Egypt?
TA: The tax regime in Egypt must be revised. There are many who made large incomes without paying adequate taxes. I am also for implementing a 'variable' taxation scheme, as you can't incur the same 20 per cent rate on two persons, the first gets LE500 million and the second gets LE1 million.
AO: Hassan Heikal of EFG-Hermes has proposed a one-time 20 per cent wealth tax to be incurred on those who own more than LE60 million. What's your opinion on that?
TA: Well, if Mr. Heikal proposed such tax, why doesn’t he start by himself and pay? It is better to talk about a capital gains tax. For example the government should have imposed a tax on Orascom Telecom's recent deal, which amounted LE64 billion.
AO: Moving back to the NBE, will we see the largest bank in Egypt publicly traded in the near future?
TA: Well, I do need to raise the capital of the bank as my budget has become gigantic. The problem is that the state does not have the funds to do so.
Going public is not my decision, it is the state's. But Egypt hates privatisation in general.
AO: Do you think going public would be in the interest of NBE?
TA: I do not have a comment on this issue, but what I can say is that financial markets in Egypt still need lots of development.
Islamic Banking and the Central Bank of Egypt
AO: What about Islamic banking, do you plan to expand in this direction given the political changes in Egypt?
TA: There isn’t a lot of demand for Islamic banking in the Egyptian market. NBE has several Islamic banking outlets and our expansion will depend on the market direction. In any event, over the past four years we have seen demand for regular banking grow significantly.
AO: And how do you see the current leadership of the CBE. Does it need to change?
TA: Some positions in Egypt are very sensitive, and only certain people can undertake them. For example, I think there are two or three persons out of the 80 million Egyptians that are fit to become governors of the Central Bank of Egypt.
I might even say that Farouk El-Oqda is the best banker in the world. Egypt spends $5 billion monthly on imports while millions of Egyptians don’t work. Who makes this money available? The Central Bank of Egypt does.
The IMF loan controversy
AO: Going back to Egypt's economy, how important is it for Egypt to attain an International Monetary Fund loan given the rumours about attached conditions?
TA: I am not aware of the loan's conditions. But I think it is very important that Egypt signs the loan agreement for several reasons. The size of the loan is not large, and Egypt can pay it back the next day, no problem.
What is more important is that the agreement with the fund will boost the confidence of the world's investors in Egypt [encouraging them] to start doing business in the country.
Here in my office I met top-level officials from international banks who told me that they are waiting for two things to start injecting funds into Egypt: First, is the signing of the IMF loan. Second is making sure that the central bank's monetary policy remains independent.
The truth is that Egypt has hated the IMF and the United States ever since Gamal Abdel Nasser's time, although he originally sought to finance the building of the high dam [near Aswan] from the World Bank, but it refused. Had Nasser been able to get the funding from the World Bank, Egyptians would have loved it, along with the IMF.
AO: So why are some opposing the loan?
TA: The fund will approve the loan to Egypt if the government undertakes some reform and restructuring that would ensure the stability of the economic situation in Egypt. These reforms, by their nature, are not popular, such as rationalising subsidies.
The normal citizen always wants 'free things' and this is the eternal problem between citizens and governments. While the latter thinks about the future, the citizen wants bread today, and that's where the problem lies.
AO: But some say that the loan will not serve the neediest segments of the society.
TA: This is wrong. If you look at the state budget, you would find it completely serving the poor. Around a third goes to public servants, a third to subsidies and another third to debt service. The small remainder goes to investments in public sanitation and electricity.
Dropping Egypt's debts
AO: You must have heard about the group calling for dropping Egypt's debt, justifying the call by saying that such debt was undertaken by Mubarak's regime which did not represent the people. What do you think of that?
TA: Well this is just not true: the Egyptian people are responsible for whatever debts Mubarak took because they let him rule for 30 years. And if Mubarak was corrupt, we – as the people – are also corrupt because we did not hold him accountable.
I am frequently asked, why didn’t you resign in the years you were working under Mubarak? As a matter of fact, I tried to resign more than once, but my resignation was not accepted. What I did was that I just stopped anybody from interfering with my work. If others had done that, Mubarak would not have been corrupt.
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