President of the European Bank for Reconstruction and Development (EBRD) Odile Renaud-Basso arrived in Cairo on Tuesday night for an official visit, one of her first since she came to office in November 2020.
During her visit, Renaud-Basso is scheduled to meet President Abdel-Fattah Al-Sisi, prime minister Mostafa Madbouly, and ministers including Minister of International Cooperation and EBRD Governor Rania Al-Mashat, the minister of electricity and renewable energy, the minister of housing, utilities, and urban development, the chair of the New Urban Communities Authority (NUCA), and the minister of local development.
While in Cairo, Renaud-Basso is also expected to signed a project for financing the construction and development of a 200 MW solar-power project in Kom Ombo, one of the largest privately developed utility scale solar plants in the country that will help to increase its renewable energy capacity. And she will sign the Green Cities Memorandum of Understanding under the EBRD flagship programme to support sustainable infrastructure in Cairo, Alexandria, and 6 October City.
Renaud-Basso was elected by the EBRD’s Board of Governors as its seventh president in October 2020 at its 29th annual meeting. She is the first woman to head a multilateral development bank.
In an exclusive interview, the first with a publication in the Middle East and North Africa (MENA) region, Renaud-Basso spoke to Al-Ahram Weekly about her vision of Egypt’s economy during the Covid-19 pandemic and beyond and how the EBRD could help to achieve it.
Egypt is one of only a few countries you have chosen to visit in person rather than virtually. Why did you opt for Egypt as one of your official stops?
My plan is to visit the most important countries of operations for the EBRD in terms of investment volume and variety of activities. Therefore, Egypt was an obvious candidate as one of the few countries that I will visit this year due to the pandemic. One of my responsibilities as the president of the EBRD is to understand how we are supporting the country, what our contribution to the economy is, and how we can make our work better. The EBRD is active in Egypt on different levels, including large active investments in the Egyptian market, engagement in policies, and the provision of technical support.
How do you evaluate the measures adopted by Egypt to navigate the Covid-19 pandemic and its impacts?
Egypt has a solid macroeconomic framework, and it was the only country in the MENA region to see positive growth in 2020 amid the crisis and its related repercussions. Its close cooperation with international financial institutions (IFIs) and their contributions to the economy as well as the reform plan that was coordinated with the International Monetary Fund (IMF) has led to greater stability in the economy.
What is your opinion of the economic and structural reforms that Egypt has executed since 2016?
I think a number of the structural reforms that Egypt adopted are lagging behind because of the crisis, and the government has moved them to the top of its agenda. From our perspective, reforms are very important, and a fundamental one for the country’s sustainable growth is the necessity to facilitate private-sector activity. This is a key long-term challenge on Egypt’s structural reforms agenda to be achieved.
Another one of the important areas for us is the green transformation of the economy, which all countries across the world are focusing on accelerating, as well as the reduction of carbon emissions and how to contribute positively to the future of our planet in line with the Paris Agreement Agenda.
Egypt has a strong potential to contribute to the green transformation, which will benefit the country. Egypt’s strategic and geographic positioning adds potential to the development of its renewable resources, which is a very important asset for the country moving forward. The government should make sure that the policies implemented maximise the benefits of this vital asset.
What role is the EBRD playing in supporting the private sector during the Covid-19 crisis, including small and medium-sized enterprises (SMEs)?
We had a big programme implemented in 2020 working with the international financial institutions to provide the liquidity needed for the local banks to expand financing to the private sector, including SMEs, in order to support them financially during the crisis. Under this programme, we allocated $800 million in financing to the Egyptian banks for lending to SMEs in a bid to support their financial resilience and to navigate the crisis.
In 2020, we also organised training programmes for 130 SMEs on how to adapt to the challenges created by the pandemic. This is in addition to a strong advisory activity for SMEs through extending technical experience and advice.
As women were harshly impacted by the crisis over all sectors and exposed to hard challenges created by the containment measures that were applied, we extended our support to women in business, especially women entrepreneurs. Women’s empowerment and engaging them in economic activity will have a great impact on the productivity and economic growth of the country.
We will also continue our strong support for the financial sector, which is the main operational sector for us.
What role can the private sector play in the recovery process in Egypt and in pushing forward the development agenda of the country?
During her interview with Al-Ahram.
The private sector plays a critical role in the country’s development, as well as in the recovery process from the pandemic. Egypt and all other countries around the globe need to focus on adapting their instruments to the challenges caused by the pandemic. And when the pandemic is behind us, the country needs to adjust these instruments to build back better. That will be achieved through providing more liquidity to finance the private sector’s economic activities.
The recovery should be green, balanced, and have a positive impact on the country’s agenda. It is not only about financing, but also about providing technical assistance and supporting the development of projects in the sector, and that is what the EBRD is doing for the private sector and SMEs to have a positive impact on society at the end of the day.
Egypt was the only country in the region that saw positive growth in 2020 despite the pandemic, and it managed to keep this positive growth in 2021. One key issue for Egypt will be the tourism sector, which has been severely hit by the pandemic, especially with the high level of uncertainty imposed by Covid-19. This sector needs to attract investments to enhance the country’s recovery.
The economic activities of SMEs need to be supported for the sake of the country’s recovery and growth. Facilitating the work of the private sector is important in this regard to help it seize all its potential. Privatisation and providing capital are avenues to support the sector. I think the government of Egypt understands this quite well.
In 2018, Egypt established its first sovereign wealth fund (TESF) with the aim of attracting domestic and foreign investors as partners in developing state assets. Will there be cooperation between the EBRD and the TESF in this regard?
We are already working with the TESF, and we have very close coordination with it in many sectors, in particular the privatisation agenda of the government. We are also offering our advice concerning the best global practices in the privatisation process. We also need to ensure transparency regarding the projects the fund engages in.
On privatisation, we strongly advise full privatisation, not just the offering of small shares, as this will help to attract more global players as well as local players. Once we move from the advisory and discussion stage to conducting real tenders, we could be in a position to engage in extending financing if the process is done sufficiently transparently.
What kind of policies and procedures does the government need to adopt to support the private sector?
Good functioning and transparent mechanisms as well as a stable tax system that facilitate access to financing through the banking sector or through the capital markets will facilitate the creation of new companies, develop innovation, and enhance the sector’s export capacities. All these are important procedures that, if implemented, would support the private sector.
There are also other procedures on the technological side. The government needs to accelerate its actions concerning digitisation through ensuring that all companies, especially SMEs, have access to technology and to digital processes.
Egypt has strong demographic growth and a wide range of skills. It needs to put in place specific policies that focus on applying adequate measures and actions to support the development of the private sector.
What is the total amount of financing and support that the EBRD has extended to Egypt since the onset of the pandemic?
In 2020, we invested more than €1 billion in the Egyptian market. Overall, since the EBRD started its operations in Egypt in 2011, it has invested almost €7.2 billion in the country in 127 projects, 70 of which are private-sector projects, reflecting our commitment to supporting the sector.
Which sectors are expected to drive Egypt’s growth and recovery?
Three key sectors will play an important role in Egypt’s economic recovery in the aftermath of the pandemic. Agriculture is a major component of the Egyptian economy, and it is a major source of employment that will contribute to economic growth along with the manufacturing sector and associated value chains. The tourism sector, which was badly affected by the pandemic, is expected to recover slowly, but it is a key pillar of the country’s economy.
Trade is also an important sector, and we have seen an increase in demand for our trade finance guarantees.
In November 2020, the EBRD announced its new five-year strategy for 2021-2025 and that it plans to be a fully green-driven bank by 2025. How can Egypt benefit from this strategy?
We have an ambitious target to reach 50 per cent of green financing on our total investments by 2025 and to be fully compatible with the Paris Agreement Agenda when it comes to the projects we finance. We plan to push our Paris Agreement alignment forward and to focus more on renewable energy projects instead of coal and oil ones.
We aim to ensure that our investments and projects are consistent with the objectives set by the government and the long-term strategy it adopts in terms of the Paris Agreement Agenda. There are many opportunities, especially in the renewable energy area, and we are bringing in private investment at a very competitive cost — in terms of the costs of energy — and we are keen to continue working on this agenda, which is important to the country.
How do you see the actions Egypt is taking in terms of accelerating its green actions, green investments, and the issuance of the first green bonds in the MENA region?
We are happy with the progress that has been made. We have been working with the Egyptian authorities to develop an agenda of regulatory and structural reforms, including a new auctions mechanism that facilitates investment by the private sector in green projects.
This is the beginning of a long-term process in adopting the green approach and investing more in green projects through the private sector. There is a lot to be done, but all of these are positive steps.
The EBRD celebrates its 30th anniversary in April. How has the role of the bank changed over the years?
We have learned and accumulated a lot of expertise from what we have done. We have kept our commitment to supporting the private sector in our countries of operation, which was one of the EBRD’s mandates at the beginning and is still at the heart of our work. The green agenda and the sustainability dimension came as a response to global developments regarding the green transition and building resilient economies to be able to counter likely global and local shocks.
We are also eager to have a strong presence in the countries where we operate and not only in capital cities, but also in regional ones. Furthermore, we engage in policy dialogue with the authorities by playing an advisory role regarding required reforms for a country and its related regulations and frameworks to unlock its potential. Our role is not only to provide financing and equity, but also to have a positive impact on our countries of operation.
Meanwhile, one of the important improvements we have witnessed over these years is expanding our operations beyond Eastern Europe, which is our main operations area, to reach other countries, including countries like Egypt, Turkey, Tunisia, Morocco, Jordan, and Lebanon where we have made positive contributions.
Climate change is a critical global issue at present. How can action on the climate be accelerated in the Mediterranean region, including Egypt, through 2030?
The best way is to invest in renewable energy and related projects as well as in infrastructure and the networks it requires. The success of these projects relies on policies that support these actions through adopting green transportation, the better treatment of water, and better waste management, and all these are parts of the green agenda.
Moreover, governments in the region, including in Egypt, need to extend incentives to investors to be sure that new factories will be eco-friendly and have plans to cope with their carbon emissions.
What role can IFIs play in helping the region’s countries, including Egypt, to meet their commitments to the UN Sustainable Development Goals (SDGs) by 2030?
They can help by providing good financing and good advice. Numerous IFIs are already financing major projects that are being implemented in line with the SDGs agenda of the region, including Egypt, and especially in developing countries that need financial support.
The transition from fossil-fuel projects and factories to green ones needs support to facilitate the process and its consequences. For instance, Egypt has taken a strong decision concerning cutting fuel subsidies under the IMF-backed reform programme that was implemented in November 2016. It was a hard decision, especially on the Egyptian people, and it was a transition that needed support to deal with its repercussions.
So, support, financing, and advice are key elements that IFIs can introduce to the region in this regard.
What is the EBRD’s forecast for Egypt in 2021 and beyond?
Our economic growth forecast for Egypt is positive for 2021 and 2022 thanks to the economic and structural reforms it has adopted, which backed its navigation through the crisis and gave it robust buffers that helped it in achieving a positive outcome.
What are the EBRD’s targets for the Egyptian market in terms of financing and investment in 2021?
We do not have a nominal target, as our support is project-driven. This means that we decide to invest in projects that serve Egypt’s economy and that are aligned with our policies and agenda.
What we did in Egypt in 2020 was great, and I hope that we will do the same in 2021. We need to work hard to keep the same level of magnitude.
*A version of this article appears in print in the 22 April, 2021 edition of Al-Ahram Weekly