Increasing the private sector’s role and fostering public-private partnerships are central to the Egyptian government’s strategy for the next three years, as outlined in its program for 2024/2025 to 2026/2027. This focus raises important questions about the most effective public-private partnership (PPP) model to achieve these goals in the short term.
To shed light on this issue, Business Monthly consulted with experts to explore the optimal PPP model that could drive a dynamic and impactful investment environment, even amidst economic challenges.
Holistic approach needed
In an interview with Business Monthly, Karim Khadr, Head of Equity Capital Markets at CI Capital, stated that Egypt’s investment climate can support increased economic activity. Khadr pointed out that current investment figures reveal a drop in the investment share of the country’s GDP to 13%, down from a peak of 22% in FY2007/2008 and 20% in FY2018/2019, before the COVID-19 pandemic.
“The state ownership policy document opens broad horizons for attracting more private investments. The introduction of the golden license should streamline the process for establishing investment projects, and eliminating preferential treatment for state-owned entities will promote competitive neutrality,” Khadr explained.
He further highlighted that the government’s significant investments in infrastructure and transportation are laying a strong foundation for a better investment climate. Additionally, the development of free zones is expected to facilitate the establishment of various industries.
For successful PPPs in Egypt, Khadr emphasized the importance of a solid foundation. PPP project proposals should be backed by a thorough analysis of needs and value, receive necessary budget approvals, and involve rigorous and fair competition in partner selection.
“PPPs aim to enhance infrastructure project efficiency through long-term collaboration between the public and private sectors. A holistic approach covering the entire project lifecycle is crucial,” Khadr stated.
Khadr explained that the optimal PPP model varies by sector and project type, with considerations for equity internal rates of return (IRRs), debt financing, and substantial bank involvement, especially for green projects. He highlighted that funding is crucial for transitioning to a low-carbon economy, aligning with Egypt’s goal to generate 42% of power from renewables by 2030.
Discussing actions the Cabinet should take to boost the private sector’s role, Khadr recommended automating investment procedures, separating investors from service providers, and setting a fixed tax rate on net project profits. This approach would balance state interests with project growth and streamline tax governance.
Khadr also noted that the General Authority for Investment and Free Zones (GAFI) has identified potential investments in sectors like textiles, automobiles, green energy, and microchips from strategic partners such as Turkey and China, which could be highly beneficial. He added that a lower interest rate environment and a flexible exchange rate could further enhance Egypt’s investment climate, sustain its competitive edge, and promote foreign direct investment (FDI) and exports.
More incentives
Hoda Yassa, President of the Arab Women Investors Union and Chairman of the Businesswomen Association for Development in Egypt, spoke with Business Monthly about the evolving role of PPPs in financing and managing projects. She described PPPs as long-term contracts between the public and private sectors, where private entities finance and manage public projects and services, sharing both the benefits and risks.
Yassa expressed optimism that the new government would take meaningful actions to unlock the private sector’s potential, driving economic growth and job creation. She emphasized that enhancing the investment climate is crucial for implementing Egypt’s Vision 2030 Sustainable Development Strategies. This includes issuing incentives for local and foreign investments, expanding infrastructure projects, and increasing the availability of the Golden License, which currently totals 29 licenses.
She also called for expanding unrestricted areas and simplifying foreign investors’ interactions with banks. New centers are being established to consolidate government offices that interact with investors, streamlining the process for obtaining licenses, permits, and other business approvals.
Yassa highlighted challenges such as competition from lower-quality international goods and operational difficulties faced by factories. She stressed the need to support and revive closed factories by providing substantial financing to preserve infrastructure and skilled labor, as many of these factories suffer from funding shortages.
She outlined a roadmap to address these issues, which includes increasing local, Arab, and foreign investments, improving investor facilities, fighting corruption, expediting company formation procedures, and creating one-stop shops. Additionally, she advocated for enhancing local investment climates to attract foreign investment, addressing issues related to licensing and civil defense.
Yassa also called for the localization of modern industries with advanced technology and the development of global-level industrial cities. She urged greater attention to small and medium-sized businesses, entrepreneurship, and skill development.
Finally, Yassa stressed the importance of expanding the use of new and renewable energy in factories to optimize energy consumption and promote clean industry practices by offering incentives to industries adopting these technologies.
