A country firmly on the path of reform and modernization

Interview with Dr. Hala El-Said, Egypt’s Minister of Planning and Economic Development

The Egyptian government has recently released a draft of what it calls a “State Ownership Policy Document.” The document outlines plans to reduce the state’s involvement in certain economic activities and strengthen the role of the private sector in economic activity and create an enabling environment that attracts and reinforces investments.

This policy is a continuation of previous efforts to promote the private sector’s ownership of public assets with the aim of maximizing the economic return of different economic activities. The state will continue to provide services to citizens while simultaneously monitoring quality and competition. The draft document has been the subject of media attention in Egypt, with reports stating that the government plans to completely exit investments in around 79 activities across various sectors. In 45 other activities, the government will maintain but reduce its investments, while allowing for greater private sector participation.

Economy Middle East conducted an interview with Dr. Hala El-Said, the Minister of Planning and Economic Development in Egypt, to provide further insight into the state ownership policy document. In addition to discussing the document and its objectives, the interview also covers topics such as digital transformation, strategic cooperation with the UAE, and more.

How would you describe the purpose and contents of the state ownership policy document? Additionally, what role is envisaged for Egypt’s sovereign wealth fund within this context?

The Egyptian government has made strengthening the role of the private sector a top priority in its efforts to stimulate sustainable and inclusive growth. To achieve this, the government is directing longterm investments towards key sectors such as renewable energy, water desalination, health, ICT, and agribusiness. Additionally, the government is providing a mix of incentives to strengthen FDI linkages with local sectors.

Since 2014, the government has invested heavily in infrastructure development and implemented legislative and institutional reforms aimed at enabling private investment. An integrated policy for state ownership of assets has been developed, and proposals to enhance the role of the private sector in various sectors have been put forward.

The government has also launched a series of public consultations across the country to address the specific demands of business representatives in all industries and geographic locations. Based on the results of those consultations, a revised version was put forward and officially launched. The sectors and activities identified in the document from which the state will emerge within three to five years include:

The state ownership policy document identifies several sectors and activities from which the state plans to withdraw within 3-5 years. These include crops and fish farming in agriculture, passenger and cargo transport, river transport, food and beverages (with some exceptions), retail, and various financial intermediary activities such as commercial insurance. The document also outlines several manufacturing activities that the country plans to exit, including the leather industry, engineering, appliances, electronics, chemical industries, and textiles.

The Egyptian government plans to maintain or reduce its footprint in several areas, including wholesale trade, many activities in the water and wastewater sector such as drinking water lifting stations and water distribution networks, as well as many mining activities such as coal mining, gold refining, and others.

To accelerate the implementation of the state ownership policy document, the government has highlighted three main mechanisms. These include the listing of state-owned assets through the Egyptian Stock Exchange, new investments for the private sector in the existing structure of state ownership by involving strategic investors, and public-private partnerships (PPPs), especially in relation to infrastructure projects and public services.

What about the role of Egypt’s sovereign wealth fund?

Established in 2018, the Sovereign Fund of Egypt serves as a mechanism to strengthen partnerships with local and foreign private sector entities. It is regarded as the ideal partner for the private sector for various reasons, including the Fund’s operation under a special law that provides flexibility in implementing various investments while also allowing for optimal exits. The fund provides promising opportunities for joint investment in various development sectors. It has already concluded many local and international investment partnerships in fields such as the localization of heavy industries (including the establishment of the Egyptian National Company for Railway Industries), the financial sector, and the education sector.

The fund has also invested in renewable energy, green hydrogen, and green infrastructure projects in several African countries, working alongside a number of international sovereign institutions and funds, such as the Norwegian Investment Fund and the Norwegian company “Scatec.”

The Sovereign Fund of Egypt is actively working to unlock Egypt’s potential as a gateway to Africa by creating attractive investment products across multiple sectors, including renewables and green hydrogen, tourism, real estate, and logistics. The Fund operates through five sub-funds: infrastructure and facilities, tourism; real estate and antiquities; healthcare and pharmaceuticals; financial services and financial technology (fintech); and the IPO subfund. The last sub-fund is in line with efforts to exit specific sectors and advance the IPO program. Moreover, the sovereign wealth fund will restructure these companies to increase their valuation and marketability before they are publicly listed. This provides a unique opportunity for investors to invest in assets that are not otherwise accessible.

What role is digital transformation achieving towards Egypt’s future vision? What are the efforts of the Egyptian state in this field?

Digital transformation plays a crucial role in enabling governments to achieve sustainable development goals, visions and strategies. The global conversation revolves around the Fourth Industrial Revolution, big data and the jobs of the future. In this regard, the Egyptian government has increased its investments in the ICT sector to EGP 82 billion ($2.68 billion) between 2014/15 and 2022/23, representing an increase of 2,200 percent, more than 20 times the 2014/15 fiscal year.

Egypt’s Vision 2030 includes a set of sub-goals under the sixth sustainable development goal, which focuses on administrative reform, improving the efficiency and effectiveness of government agencies, promoting transparency and combating corruption. Other sub-goals include making data available, strengthening partnerships with national and international development partners, promoting accountability and the rule of law, decentralization and empowering local governments. The transformation process rests on key pillars, including the establishment of advanced education and training systems to produce an internationally qualified workforce, a robust digital infrastructure for communications and information to support digital transformation, and a national system for information and cybersecurity. It also includes the deployment of digital financial technology Fintech to establish an effective digital infrastructure for financial inclusion and launching innovation and research and development systems.

How does your ministry contribute to the digital transformation process?

The Ministry of Planning and Economic Development contributes to the digital transformation process through several programs, including developing government services. These services include those of localities and new urban communities, providing government services through mobile technological centers (about 200 mobile service cars), and creating combined service centers through the Egypt Service Center project. The Aswan Service Center was launched in cooperation with the UAE, and efforts are underway to expand similar centers across all governorates.

There is strategic cooperation with the UAE in several areas. What cooperation levels are hoped to be achieved in the coming years?

The two countries are collaborating on establishing high-quality government service centers such as the Egypt Service Center in Aswan, as well as enhancing government capacity building in areas such as promoting innovation at work, future foresight, and government communication strategies. Furthermore, there is ongoing investment cooperation between the two countries through the Sovereign Fund of Egypt, which includes a joint strategic platform with Abu Dhabi Holding Company. This partnership presents promising investment opportunities, as outlined in the 2019 protocol for up to $20 billion in joint investments towards economic and development projects. There are numerous investment opportunities in various sectors, including health, pharmaceutical manufacturing, real estate development, financial services and digital transformation. Additionally, besides infrastructure, communications, agriculture and food processing, there are exciting prospects for joint cooperation in the digital economy.

What were the most important issues discussed during your participation in the meetings of the 53rd edition of the WEF in Davos?

The Forum brought together 52 heads of state and government, as well as ministers and CEOs, to focus on solutions and cooperation between the public and private sectors in addressing the world’s most pressing needs.

Several sessions covered a range of topics, including enabling investment in the transition to net zero emissions, planning for the 28th session of the Conference of the Parties (COP), and stakeholder dialogues on climate change and reform in the Middle East. A strategy session was also held to discuss the future of growth. On the sidelines of the forum, numerous bilateral meetings took place with CEOs of companies and representatives of international institutions. These included meetings with the CEOs of AstraZeneca and the Adani Group; the President of Google for Europe, the Middle East and Africa; and the Managing Director of the World Economic Forum. Meetings were also held with the managing partners of Golden Sachs and BAIN Europe, the Middle East and Africa; with the CEOs of Envision Group, Coursera, Honeywell and HSBC Bank Europe; as well as with the Vice President of the Indurama Foundation. Discussions centered on enhancing future cooperation with Egypt and reviewing investment opportunities in various sectors. Overall, the forum highlighted the importance of collaboration and innovation in addressing global challenges and building a more sustainable and prosperous future.

What about the sovereign wealth fund’s tour of a number of Arab countries? What are its objectives?

The Sovereign Fund of Egypt embarked on a tour to several Arab countries to promote investment opportunities in Egypt. During the meetings, we reviewed the first phase of the National Program for Economic and Social Reform, which the Egyptian state launched in November 2016. The state implemented numerous legislative and institutional reforms by enacting laws that simplified project establishment procedures and encouraged local and foreign private sector investments.

In April 2021, the state introduced the National Program for Structural Reforms, which aims to restructure and diversify the Egyptian economy. The government prioritizes the private sector’s role in the Egyptian economy as the cornerstone for stimulating sustainable and inclusive growth, particularly in the agriculture, industry, communications and information technology sectors. It plans to direct long-term investments in key areas such as renewable energy, water desalination, health, communications and information technology, industry and agriculture while providing incentives to strengthen foreign direct investment links with local sectors.

We also reassured investors that the Sovereign Fund of Egypt serves as the government’s investment arm. There is a strong demand for investment opportunities that we currently offer, as the fund provides a range of attractive investment products across several sectors, including renewable energy sources, green hydrogen, tourism, real estate, and logistics. Additionally, we continuously strive to increase the value of some major state-owned companies by involving the private sector either through private placements, IPOs, or pre-IPO activities.

To manage the offering process for state-owned companies on the Egyptian Stock Exchange or investors, a sub-fund was established, providing investment opportunities in strategic assets while restructuring companies before the offering process to enhance their value and returns. The sovereign wealth fund’s plan aligns with Egypt’s Vision 2030, and the country seeks to secure its position on the international investment map.

GCC countries can be drivers of global economic growth

Non-oil sectors, green transition, are major propellers

Gulf countries have had an exceptional year growing their economies in 2022 and in 2023, they will maintain this growth path and continue to benefit from developments in the international energy market. Economy Middle East discussed all of this and more with Issam Abousleiman, GCC country director at the World Bank since August 1, 2018.

Abousleiman is a Harvard University Executive Management program graduate. He also holds an MBA in finance and investment from George Washington University, as well as an MBA in management from the American University of Beirut.

Abousleiman joined the World Bank in 1989, starting his career in the Loans Department, and has since held various positions across the institution, including head of Financial Advisory and Banking at the World Bank Treasury and principal investment officer in the Banking & Debt Management Department. His regional expertise includes Africa, Asia, Europe, Latin America, and the Middle East.

You previously announced that Gulf countries recorded the highest GDP growth rate back in 2022. What are your growth expectations for this year?

The GCC region is expected to expand by 6.9 percent in 2022 before moderating to 3.7 percent and 2.4 percent in 2023 and 2024, respectively. The strong performance in 2022 was driven primarily by the hydrocarbon sector. However, with the recent signals for a more cautious approach to OPEC+ planned production, the oil sector is expected to expand, but at a slower pace, by 3.3 percent in the medium term. Similarly, the non-oil sectors grew by 4.3 percent in 2022 and are expected to grow by 2.9 percent in the medium term to reflect the weaker global growth outlook.

The risks to these forecasts remain numerous. The global outlook continues to be clouded by uncertainty and is subject to various risk factors, including intensifying geopolitical tensions, growing stagflationary headwinds, rising financial instability, continuing supply strains, and worsening food insecurity. Higher food and energy prices are eroding real incomes and could aggravate social tensions in some countries around the world. Global growth is expected to decelerate sharply to 1.7 percent in 2023 – the third-weakest pace of growth in nearly three decades, overshadowed only by the global recessions caused by the pandemic and the global financial crisis. This is 1.3 percentage points below previous forecasts.

Do you trust that Gulf economies can become drivers of global growth?

I do not see why not.

As mentioned earlier, the GCC region is currently considered a bright spot despite high uncertainty and a bleak global outlook. The region has been committed to structural reforms that have allowed for increased private sector contribution and job creation. Indeed, oil receipts continue to play an important role in financing this transition. However, there is also clear evidence of reduced oil dependency overall in these countries.

Which GCC country is expected to achieve the highest growth rate this year and why?

We are in the process of updating our individual forecasts for the GCC countries which will become public during WBG/IMF Spring Meetings in April 2023. Generally speaking, and in light of the global economic slowdown, we do not foresee the oil sector performing as strongly as it did during 2023. However, high-frequency data suggests that non-oil sectors in Saudi Arabia, the UAE, and Oman seem to be performing slightly higher than their peers. This is supported by robust private consumption as well as investments and improvements in the overall business environment.

What is the nature of the cooperation between the World Bank and Gulf countries, and what form of support do you provide?

The World Bank Group (WBG) has maintained strong partnerships with Gulf Cooperation Council (GCC) countries for more than five decades. The WBG has delivered transformational and highly relevant knowledge products to support the development agenda of the region. The governments of the Kingdom of Bahrain, the Kingdom of Saudi Arabia, the State of Kuwait, the State of Qatar, the Sultanate of Oman, and the United Arab Emirates have made use of the global knowledge and development expertise the WBG provides through technical assistance programs offered as Reimbursable Advisory Services (RAS). RAS are demand-driven and tailored to the specific country context, and consist of strategic reform and policy advice, implementation support, and capacity building.

Can you tell us more about the green growth opportunities in the GCC?

There is an excellent and timely opportunity to diversify the GCC economies further using a green growth strategy and playing a leading role in the global transition to low-carbon economies.

The region could use the green growth transition to focus policies on developing green technologies and associated skilled labor that would reverse trends in productivity and enable the region to grow faster. The GCC countries’ total GDP is projected to be close to $2 trillion in 2022. As we mention in our latest Gulf Economic Update, if the GCC countries continued business as usual, their combined GDP would grow to an expected $6 trillion by 2050. However, if the GCC countries implemented a green growth strategy that would help and accelerate their economic diversification, GDP could have the potential to grow to over $13 trillion by 2050.

Focusing on green growth in the Gulf region is entirely in line with GCC vision documents that outline an image of the economy of the future that relies increasingly on the private sector playing a leading role in investment, job creation, and value addition. The GCC green growth strategy should focus on major upstream and downstream sectors of the green economy, including renewable energy, green buildings, sustainable transport, water management, and waste management. In addition, green finance would become a critical enabler for new investments in these areas.