President of the IsDB Group Muhammad Al Jasser spoke to Ahram Online about the Group’s operations in Egypt and how they contribute to supporting the Egyptian economy.
Al Jasser also shed light on the IsDB Group’s plan for the country and the support it has extended Egypt amid the severe impacts of the pandemic and the Ukraine war.
Ahram Online: How do you perceive Egypt’s progress in implementing its economic reforms?
Muhammad Al Jasser: Despite the fact that the repercussions of the pandemic have affected most of the economies across the world, which have worsened since the beginning of 2021, the Egyptian economy has been resilient in the face of these repercussions. This is certainly due to the containment measures taken by the Egyptian authorities to contain the crisis and its impacts, including launching an economic stimulus package of EGP 100 billion (approximately 1.7 percent of Egypt’s GDP) in order to address the effects of the pandemic.
The economic reforms taken before the pandemic, led by Egypt’s President Abdel-Fattah El-Sisi, have helped in restoring macroeconomic stability and increasing the growth rate. The current results showed that difficult decisions, such as floating the local currency exchange rate and energy sector policies, were necessary to spare Egypt more difficult economic options. It is worth noting that Egypt is one of the few countries in the world that achieved a positive growth rate in 2020.
At the IsDB Group, we are looking forward to the success of cooperation with Egypt to serve its economy. As we all know, any positive growth on the Egyptian economy will positively impact the Arab region and Africa.
Egypt's initiative to host the IsDB Group Annual Meetings is an indication of its desire to continue playing its regional role at all levels, foremost of which is economic development.
AO: What are the most prominent sectors and projects financed by IsDB in Egypt?
MJ: To date, the total facilities the IsDB Group extended to Egypt amount to $16.2 billion, of which $2.2 billion are projects financed by IsDB, and $230 million in private sector financing by the Islamic Corporation for the Development of the Private Sector (ICD). In addition, total trade finance operations are valued at about $12 billion through the International Islamic Trade Finance Corporation (ITFC).
The IsDB Group’s other funds and programs have also contributed with nearly $1.8 billion to financing. In addition, the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) provided $6.6 billion in trade insurance and $6.8 billion in new insurance obligations.
The energy sector is at the forefront of sectors the IsDB Group has financed, as the group’s contribution to this sector represents $9.8 billion (60.7 percent of the bank’s total interventions).
This is followed by other sectors such as agriculture with 14.5 percent and industry and mining with 10.9 percent. The rest goes to urban development, road projects, education, transportation, trade, and capacity building. The power stations in South Helwan, West Cairo, Benha, Suez and Assiut, the establishment and development of Al-Azhar University Hospital, youth employment support programs, the National Agricultural Drainage Project, and the Avian Influenza Control Program are among the bank’s most prominent projects in the Arab Republic of Egypt.
The Bank’s cooperation with Egypt has focused on achieving the Sustainable Development Goals (SDGs) by creating sustainable infrastructure, providing energy sources, creating suitable job opportunities, supporting women’s empowerment, helping in industry, and creating an environment for innovation and creativity. We are also aware of the role played by the Egyptian Agency for Partnership for Development, in cooperation with the Bank, in exchanging knowledge and experiences, in addition to building technical and institutional capacities in member countries.
AO: What are the recent updates in the partnership strategy with Egypt and the IsDB’s future plans for the country?
MJ: The IsDB Group’s contribution to promoting comprehensive and sustainable economic and social development efforts in Egypt, creating jobs for youth, and economic empowerment programs amounted to about $3 billion, according to what was agreed upon during the preparation phase of the partnership strategy between the Arab Republic of Egypt and IsDB Group (2019-2021).
This strategy, which was formulated in consultation with the ministries and relevant authorities in Egypt, centres on aligning the economic plans of the Egyptian government with its development priorities and the vision of the IsDB Group.
For our future actions in Egypt, the Bank targets vital sectors that influence competitiveness and attract investment. The IsDB Group also aims to create an enabling environment that encourages innovation and supports inventors, thus enhances the position of investment in human capital, which is the main source of social and economic development.
AO: What are the total allocations the Bank has made to address the repercussions of the pandemic, and how do they support the green economy in Egypt and other member countries amid the ongoing economic crisis?
MJ: On 4 April 2020, the Board of Executive Directors approved the IsDB Group’s strategic preparedness and response program for COVID-19 to support member countries in preventing, containing, mitigating, and recovering from the pandemic.
The program included two main pillars; which are responding to health emergencies and maintaining and revitalising the economic and social sectors involving response and recovery.
The bank has allocated more than $4.5 billion to respond to the pandemic to restore the economic recovery of member countries.
In this respect, the implications of the war in Ukraine have shed light on several development issues around the world, the most important of which are food security and energy supply.
At the IsDB, we are working hard with all our partners to curb the current impacts of the crisis and to avoid potential impacts in the member countries going forward.
As for the second part of the question, the bank encourages and supports the green economy with all available means. During the past 46 years, the bank has been focusing primarily on financing infrastructure projects, in general, and energy projects, in particular.
Currently, renewable energy accounts for the largest portion of the Bank's activities, with financing volumes exceeding $3 billion. In addition, the Bank is expanding in issuing green Sukuk (bonds) to finance green projects in its member countries. The Bank also aims for 35 percent of its financing to be sensitive to climate change, and we have already reached that percentage in 2021.
In this regard, concerning our cooperation with Egypt, there is no doubt that Egypt’s ambitious clean energy plan, which aims to generate 42 percent of electricity from new and renewable energy by 2030, represents a good opportunity for cooperation and partnership between the Bank and the Arab Republic of Egypt and between Egypt and member countries in this field.
The Bank will cooperate with Egypt and member countries and will support the exchange of knowledge and experiences, so that the development projects that receive attention and encouragement are environmentally friendly.
AO: What role does the ITFC play in promoting trade among IsDB member countries and providing trade finances while the volume of intra-regional trade between them remains weak?
MJ: The coordination of joint efforts with the institutions of the Organization of Islamic Cooperation (OIC) has helped in increasing the share of intra-OIC trade in the world trade of OIC member countries from 15.5 percent in 2005 to 21.02 percent in 2018.
The OIC aims to bring intra-OIC trade to 25 percent by 2025 by encouraging its member countries to diversify their partners, products, and services with technical and financial support from the organisation's institutions.
The International Islamic Trade Finance Corporation (ITFC) was established in 2005 as an active aid of the IsDB Group in order to advance trade and improve economic conditions in the Islamic world. Intra-trade among the member countries of the Organisation of Islamic Cooperation for better access to trade finance. The group also provides the appropriate tools for the development of strategic commodities related to trade in order to enhance competition in global markets.
Since its establishment, the institution has mainly focused on the contribution to increasing and promoting trade among the member countries of the Organisation of Islamic Cooperation as an essential part of its strategy and portfolio of operations. In 2019, intra-OIC trade finance operations accounted for more than 67 percent of ITFC trade finance operations, amounting to $3.9 billion, with the aim of facilitating trade between member countries, thus increasing the institution's contribution to the social and economic well-being of these countries.
Since 2008, the corporation has provided more than $55 billion to finance trade flows to the member countries of the Organisation of Islamic Cooperation, of which $34.6 billion have been allocated to finance intra-regional trade for these countries, especially for governments and the private sector, with a focus on small and medium-sized enterprises through local banks and on the bilateral level in member countries.
Given the size of the development gap, poverty and inclusive growth cannot be addressed without international partnerships and the public and private sectors’ support to secure market access, fair trade, and innovative solutions, especially for developing countries.
With regard to trade development, the corporation provided its services, technical assistance, and capacity building activities through multiple programs to provide integrated solutions to its members in order to meet their needs and develop their commodity and strategic sectors, through a strategy of integrated solutions and quality programs to support trade cooperation and economic integration at the regional level.