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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