Egypt's SWF expected to give major boost to economy: Experts
Doaa A.Moneim, Monday 7 Oct 2019

Egypt's Sovereign Wealth Fund (ESWF), known also as Misr Fund, is expected to start operating by the start of 2020, an official source told Ahram Online on the condition of anonymity.

The new fund is Egypt's first experience ever in this regard, with a registered capital of EGP 200 billion ($11.2 billion) and an issued share capital of EGP 5 billion. The fund is meant to run all state-owned assets, especially untapped ones, for the sake of achieving sustainable economic development according to the best international standards, and is allowed to cooperate with other foreign and Arab funds and financial corporations.

According to the fund's inception law no.177 for 2018, which was approved by the House of Representatives in July 2018 and published in the official gazette in August 2018, the fund has the right to sell, lease for property, authorise utility, and share as in-kind portion in other projects or assets according to the market value by no less than the price assessment determined by the Central Bank of Egypt and the Financial Regulatory Authority.

The fund has its autonomous budget as well, and its financial resources involve its capital, assets that will be under its management, revenues from investing in its assets and resources, loans and banking facilities it received, bond issuing proceeds and other financial tools, and other resources that would be approved by the fund's board.

Hani Tawfik – a stock market expert and former head of Venture Capital Management Company, a state-owned investment fund established in 2017 with a total capital of EGP 150 million to support stumbling factories – told Ahram Online that the new fund is meant to be a key supporter of Egypt's economy through maximising benefits from its untapped assets and working hand in hand with the private sector.

However, Tawfik said that Egypt has little experience in this field, adding that "the hope is the new fund’s CEO has international experience in this regard."

"The success of the new fund in its mission of bolstering Egypt's economy depends on releasing it from any likely restrictions and have it be free in dealing with the private sector, as cooperation with the private sector is one of the new fund’s objectives. Moreover, the new CEO must cope with the investors in private sector prospects to be able to develop state-owned assets effectively," Tawfik said.

Regarding the challenges that the new fund could face, Tawfik said that these include the lack of liquidity in the domestic market and local real estate market depression, especially since the fund’s mission is based on tapping assets and buildings.

Sahar Al-Damaty, a board member of Emirates NBD Egypt and former monetary policy researcher at the International Monetary Fund, told Ahram Online that private-public partnership is a key facet for ESWF’s success in its mission.

"The new fund is meant to open the door wide before the private sector to attract foreign, Arab, and even local investments," Al-Damaty said.

Introducing facilities, easing procedures, and eliminating any likely obstacles would ensure that Egypt's economy benefits from its first sovereign wealth fund, according to Al-Damaty.

In June, the International Forum of Sovereign Wealth Funds (IFSWF), a global network of sovereign wealth funds from more than 30 countries, announced that it admitted Egypt's new fund as an associate member for three years, which marks the Egyptian fund’s first international recognition.

IFSWF associate membership is specifically for institutions in the early stages of becoming a sovereign wealth fund. By becoming an associate member, the Egyptian fund voluntarily agrees to work to apply the generally accepted principles and practices for governance, investment and risk management of sovereign wealth funds, known as the Santiago Principles, as it puts its investment and risk management processes in place.

"The Egypt Fund will mainly focus on investing domestically, whether in existing assets and companies or in new fields and areas to capitalize on existing and new opportunities in the Egyptian economy. The Fund will acquire utilised and unutilised assets and stakes in companies at their market value (including land and buildings) to co-develop with private investors injecting capital and advanced management strategies to generate higher returns and create job opportunities. All forms of investment models will be feasible to allow the Fund to create the highest returns on these assets while also developing specific activities and geographical areas in Egypt. The Egypt Fund will mainly operate through sub-funds and affiliate companies to invest in specific sectors, or projects, with private investors," according to the IFSWF website.

The IFSWF added that the fund will be the largest investment fund in Egypt, with the full weight of the government behind it in resolving any impediments that face investors, and more importantly, in moving in a more structured manner to mobilise assets and companies in Egypt. Furthermore, it will work with investors in an environment that will be equal to any opportunity abroad, without complications and with clear regulations governing the entry and exit of investors, in a way that protects the interests of all parties involved.