Egypt is scheduled to host the Annual Meetings of the Asian Infrastructure Investment Bank (AIIB) on 25-26 September in Sharm El-Sheikh, with one of the aims being to boost Asian investment in the local market.
AIIB is a multilateral development bank and international financial institution set up in 2016 by Chinese President Xi Jinping as an Asian alternative to the World Bank and other western-led multilateral lenders. It has 106 members worldwide.
Against the background of the present economic challenges, Egypt is targeting Asian markets among others to secure the foreign currency needed to shore up an economy badly hit by the Covid-19 pandemic and the Russia-Ukraine war.
It is also keen to secure soft and concessional loans to bridge its financing gap, with some of them likely to come from Asian markets.
In an interview with Al-Ahram Weekly Minister of Finance Mohamed Maait explained that hosting the Annual Meetings of the AIIB would underline the economic, political, and development importance of Egypt and was an opportunity to promote Egypt as a logistics hub.
Over the last 10 years, Egypt has invested LE10 trillion in modernising its infrastructure, one of the main perquisites to attract investment, and created an attractive investment environment, while working on widening the role the private sector plays in the country’s economy, Maait said, who is Egypt’s governor at the AAIB.
He said that Egypt is looking forward to a greater role being played by the AIIB in supporting the country’s pursuit of greener and smarter infrastructure.
President Abdel-Fattah Al-Sisi’s planned attendance at the meetings’ opening session shows the importance Egypt places on enhancing development partnerships amid the challenges that the emerging markets and developing economies are currently facing, Maait said.
The agenda covers a wide range of issues, including ways to secure low-cost funding for infrastructure projects, exploring avenues for expanding the role of the private sector in the economy, and establishing new multilateral partnerships in order to attain sustainable development among the AIIB’s member states.
Talking to the Weekly days before the event, Maait said that he hopes the meetings will conclude with Egypt securing concessional financing for the private sector to be invested in development-related projects, including renewables, sustainable transportation, communication, the Internet, water, and green projects.
He noted that Egypt wants to benefit from the AIIB’s plan to dedicate 50 per cent of its investments to climate action-related projects through 2025, providing low-cost and concessional financing for projects that can require huge investments to be executed.
The AIIB’s Egypt portfolio of projects is valued at $1.3 billion. The bank has notably invested in the metro line in Alexandria, the Benban Solar Power Plant, and water projects in rural areas, and it is currently investing in the development of the Damietta Port.
Maait said he hopes the bank will increase this portfolio to cover 220 projects with a total value of $40 billion.
In the countdown to the meetings, an open dialogue between the minister and representatives of the private sector and a delegate of the AAIB took place to explore further partnership opportunities between the two sides.
The AIIB offers promising opportunities and stimulating financial facilities for investments in Egypt, especially in sectors that have competitive edges in the international markets.
On the efforts made to support the local business sector, Maait highlighted the launch of the State Policy Ownership Document this year, plans to revive the country’s privatisation programme, and increasing the number of projects eligible to get golden licences that reduce the procedures needed to establish a project so that all investors need is a single approval.
These measures reflect a commitment to opening broad horizons for private investments with simplified procedures and are integrated with other incentives in priority sectors such as agriculture, industry, tourism, new and renewable energy, telecommunications, information technology, and other sectors aimed at reducing the trade deficit, Maait said.
Widening the private sector’s contribution to the local economy is a key commitment to the International Monetary Fund (IMF) under its $3 billion Extended Fund Facility (EFF) loan programme for Egypt that continues until 2026.
On how the AIIB can help to empower the private sector and enhance its participation in infrastructure projects, Maait told the Weekly that the bank is keen on seeing the removal of financial obstacles facing the private sector and supporting development activities.
“Within this framework, the bank adopts facilitative and low-cost policies and mobilises financial resources for the private sector, providing numerous attractive opportunities for developmental investments,” he said.
The AIIB also assists in mobilising various funding sources to implement logistics infrastructure projects in partnership with the private sector in the fields of transportation, energy, and sanitation.
“This contributes to the transition to a green economy and achieving sustainable growth in the field of infrastructure. It aligns with the state’s direction to increase private-sector participation in the economy,” Maait said.
Maait also discussed the key messages Egypt aims to convey through hosting the meetings. Egypt aims to promote Egyptian investment opportunities in promising sectors, he said, adding that the main features of the AIIB’s strategy in the Egyptian market include its presence in supporting green infrastructure and climate action, fostering regional connectivity and cooperation across continents, establishing a supportive infrastructure for digital technology, and mobilising private capital.
“The government continues to maximise its efforts to develop basic infrastructure in order that the country can become more capable of facing crises and more resilient in the face of climate change,” Maait said.
He added that recent years have seen an unprecedented leap in developing and modernising basic infrastructure as part of the state’s aim to produce a “Digital Egypt” following the best global practices and systems.
“This is a fundamental cornerstone for achieving sustainable economic growth, attracting more domestic and foreign investments, creating new job opportunities, and improving the efficiency of the services provided to citizens,” Maait said.
He explained that the government has allocated LE10 trillion to develop basic infrastructure through various initiatives and development projects, such as the “Decent Life” project for rural development and other projects in the fields of energy, roads, bridges, essential services, ports, metro systems, new cities, digital infrastructure, and new urban communities.
Regarding the investment in infrastructure, which is costly and requires significant funding, Maait explained that the state has moved towards establishing more international partnerships with multilateral institutions and banks.
The country is experiencing challenging economic conditions, including soaring inflation, poor foreign direct investment (FDI), weakness in the local currency, an increasing budget deficit, and rising debt levels, he said.
Tapping new markets and targeting fresh investors are key to helping the country to meet its financial obligations and fulfil its commitments to the IMF.
The cabinet recently approved the issuing of a second batch of $500 million yen-denominated “Samurai” bonds with a five-year maturity in a bid to diversify the government’s financing resources, as well as to tackle the dollar shortage the country is experiencing.
Egypt is currently implementing a plan aimed at collecting $191 billion until 2026 to address this issue.
Maait said that the government plans to launch its first-ever offering of Panda bonds in Chinese yuan targeting the Chinese market, a first in Africa and the Middle East.
He added that it also plans to introduce green Samurai bonds that will “attract new segments of investors interested in environmentally focused bonds, following the success of our US-dollar denominated green bonds and Samurai bonds.”
These financing tools will contribute to achieving the UN Sustainable Development Goals and contain inflationary pressures, he said.
* A version of this article appears in print in the 21 September, 2023 edition of Al-Ahram Weekly