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Viewing cable 09CAIRO1256, EGYPT: MINISTER OF INVESTMENT SPEAKS ON REFORMS AND

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Reference ID Created Released Classification Origin
09CAIRO1256 2009-07-02 12:56 2011-08-24 16:30 UNCLASSIFIED Embassy Cairo
VZCZCXYZ0000
RR RUEHWEB

DE RUEHEG #1256 1831256
ZNR UUUUU ZZH
R 021256Z JUL 09
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 3114
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
UNCLAS CAIRO 001256 
 
SIPDIS 
 
STATE FOR NEA/ELA 
 
E.O. 12958:  N/A 
TAGS: ECON EINV ETRD EAID EFIN PGOV EG
SUBJECT:  EGYPT: MINISTER OF INVESTMENT SPEAKS ON REFORMS AND 
ECONOMIC STRATEGY 
 
1. (U) Key Points 
 
-- The Egyptian Minister of Investment Mahmoud Mohieldin threw his 
weight behind a forthcoming World Bank study on the Egyptian 
investment climate and recommended reforms. 
 
-- Mohieldin said Egypt cannot expect the high growth rates that it 
experienced before the crisis for at least 3-5 years. 
 
-- Mohieldin indicated that the future of foreign investment in 
Egypt may lie more in Asia than in Europe. 
 
2. (U) In his remarks opening the Egypt Investment Climate 
Assessment 2009 in Cairo on June 22, Minister of Investment Mahmoud 
Mohieldin expressed broad agreement with the findings and 
recommendations of a forthcoming World Bank report. He explained 
that continued investment reform is crucial to propelling Egypt in a 
fundamentally altered global economy. He opined that a new economic 
norm is emerging as a result of the global financial crisis, and 
that expectations must be adjusted. Over the next three to five 
years, he said, Egypt will have to adjust to lower average GDP 
growth, higher unemployment, and more difficult investment promotion 
due to stronger protectionist measures erected by OECD states and 
other developed countries. 
 
3. (U) Mohieldin told the assembled audience of economists, 
businesspeople, NGO representatives, and Egyptian government 
officials that he is "very concerned" that Egypt is facing a "new 
economic order" and a "global crowding-out effect." He cited a lower 
risk appetite among foreign investors making it more difficult to 
attract investment. As a result, Mohieldin said that it may be 
difficult for Egypt to reach even the diminished economic growth 
expectations caused by the global downturn. Although 4-5% GDP growth 
is not unimpressive, he explained, only growth rates of 6-7% will 
have a positive impact on unemployment and poverty in Egypt. 
 
4. (U) The Minister said another impact of the global crisis is a 
major shift in economic power from the west toward the east. He 
stated that the crisis has "expedited" the process of moving India 
and China to the top of the global economic order, with the United 
States, Japan, and European countries being bumped down in global 
economic importance. He said that the United States is still the 
"main provider of global public goods," such as the "mighty dollar," 
but that even the dollar is beginning to be questioned. He brought 
up recommendations from the governor of the Chinese central bank, 
Zhou Xiaochuan, in March to replace the dollar as the sole reserve 
global currency, and explained that such changes must be considered. 
He added that Egypt should strengthen ties with emerging economic 
powers, particularly India and China, and enhance Egypt's ability to 
take advantage of those ties. Ports along the Red Sea will become as 
important as ports on the Mediterranean because of increased trade 
with Asia, Mohieldin explained. He cited as an optimistic sign that, 
over the last two months, Egypt has seen more business delegations 
from Malaysia and other Asian nations than from all the European 
countries combined. 
 
5. (U) The World Bank report discussed at the conference is expected 
to be released in full within a month, but the lead author presented 
its summary findings and recommendations to the Minister and 
audience. The report explains that, although some reforms from 2005 
are beginning to have an impact across sectors, deeper and more 
widescale reform is still crucial to draw increased investment and 
develop the private sector. The World Bank found that the top 
constraints to investment in Egypt include macroeconomic 
uncertainty, particularly inflation and concern about the Egyptian 
government's response to the global crisis, a still burgeoning 
informal market that competes against and often undercuts businesses 
in the formal economy, regulatory uncertainty, insufficient human 
capital, and barriers to financing. Mohieldin stated that the 
"findings should not come as a surprise to anyone," and that 
corruption is an area that will require particularly increased 
attention. 
 
SCOBEY