Emirates Palace, Abu Dhabi, UAE

Global Financial Markets Series

Egypt On The Rise: The West - East Corridor

27th May, 2015, JW Marriott, Cairo

Introduction

Key points from panel discussion:

The discussion focused on two key areas: how to attract foreign investment/currency, the risks & opportunities involved, and how the domestic market can gain access to this capital. It was largely agreed that execution and access to capital were key for development.

Basil El-Baz

  • Any developing economy has to start with decreasing the impact of import costs; therefore investment into the manufacturing sector is essential. That in turn means opportunity to invest in and grow the Oil & Gas industry, so if you invest in exploration, you can triple the returns for the refining business and then multiply that again when looking at the downstream business.
  • Entrepreneurship needs to be encouraged. There are few protections for start-ups and a culture that doesn’t encourage the risk of starting your own business, therefore there needs to be a shift in the culture.

Hisham El-Khazindar

  • Many sectors used to be entirely state owned, e.g. the power generation sector was monopolized by government but due to recent reforms this has been opened up to the private sector allowing for huge investment opportunities.
  • The government has done an excellent job at showcasing and marketing the reforms that have been put in place. (Basil agreed with this.) 

Ahmed Badreldin

  • Abraaj sees investing in Egypt as a very attractive proposition, especially in certain sectors e.g. healthcare and education. They are both bullish on Egypt and increasing exposure.
  • There may be a risk of too much money and too few opportunities (disputed by Hisham). 

Omar Mehanna

  • Historically, there has been inertia from the banks due to distributing capital only to the large corporates; only 17% of SMEs have access to capital and only 7% of completely new investments within this section are supported by the banks. This needs to change.
  • Egypt’s Loan to Deposit Ratio is 40% as opposed to regions like China (72%) and LatAm (118%), but they have one of the highest Deposit to GDP Ratios – this discrepancy needs to change also.

Interview with Mr. Sherif Samy, Chairman of the EFSA (Egyptian Financial Supervisory Authority)

Interviewed by Mr. Chavan Bhogaita, ‎Managing Director & Global Head of Market Insights & Strategy

Key points from Interview:

  • Samy highlighted the a need to rebuild the trust that people have in the system: ‘The main challenge is the public at large, where big businesses may not be looked at by everyone as a very safe thing to partner with.’
  • The title of the debate should be renamed: ‘Egypt: Against All Odds’, because despite the difficult times there have been more M&A deals and IPO’s in the last 12 months than over the previous 5 years.
  • As regulators, they are allowing bonds to be issued by companies that are not even rated to deter people from thinking of them as just ‘junk bonds’ & drive access to credit markets, and development.
  • The government has outlined plans to grow infrastructure aggressively, but the state budget cannot even fund 50% of this. Therefore, other instruments must be relied upon to finance the projects such as The Suez Canal.
  • People that are investing as much as 0.5bn USD need exit strategies. The government is proposing 10 yearlong policies and tax legislation, the problem with this however is that governments change and so this is not a policy that he believes they can commit to.

Panelists

Moderator

Please click on any of the above to see the full bio for the relevant participant.

Basil El-Baz

Chairman & CEO, Carbon Holdings

Basil El-Baz is an Egyptian industrialist, entrepreneur and business executive serving as Chairman and Chief Executive Officer of Carbon Holdings, a downstream oil and gas development company.

While studying government and economics at Harvard University, El-Baz developed the concept for building an ammonia plant in Egypt, which ultimately became Egyptian Basic Industries Company (EBIC). He submitted a feasibility study on this concept and was awarded a grant by the United States Trade and Development Agency to conduct further studies.

El-Baz has developed and financed two major industrial greenfield projects in Egypt, Egypt Basic Industries Corporation (EBIC) and Egypt Hydrocarbon Corporation (EHC). EBIC represents and still is the only project to receive a comprehensive loan guarantee from the Export – Import Bank of the United States. Furthermore, EBIC is one of a select number of projects in Egypt to be financed entirely by consortium of international banks. The project had an approximate value of US$650 million at closing. EBIC proved to be successful and today is the 6th largest global exporter of ammonia. EBIC was eventually sold to Orascom Construction Industries.

Carbon Holdings’ second project, Egypt Hydrocarbon Corporation (EHC), with a transaction value of approximately US$550 million is considered as the first major industrial project to close in post-revolution Egypt. Construction of the second project commenced in August 2011 with commercial operation scheduled to commence during the fourth quarter of 2014. In December 2012, Carbon Holdings concluded its US$114 million acquisition of the Egyptian polypropylene producer, Oriental Petrochemicals Company (OPC) and is intending to commence commercial operations in the fourth quarter of 2014. 

Carbon Holdings is developing a US$6.75 billion Naphtha Cracker and Polyethylene Complex project named Tahrir Petrochemicals. It is anticipated that the project will be financed entirely by the Export – Import Bank of the United States, the Export – Import Bank of Korea, the Korea Trade Insurance Corporation and SACE, the export credit agency of Italy.


Press Releases

Egyptian government officials, business leaders and financers to discuss opportunities and challenges facing Egypt at NBAD's Forum in Cairo - English | Arabic
27th May, 2015
Strong appetite for investment in Egypt - English | Arabic
27th May, 2015

Gallery