Today something strange happened in Egypt: it achieved a goal ahead of time.
That isn’t meant to be as condescending as it sounds, as Egyptians themselves bemoan the one-step-forward-two-steps-back pattern of recent years. “In Egypt, we always have wonderful history,” one Egyptian broker told me in Cairo last month. “It’s the present day we have a problem with.”
So what to make of the opening of the Suez Canal expansion in one third of the expected time?
Clearly, it’s good news economically. The canal’s own officials believe that the expansion will increase the number of ships per day using the canal from 49 to 97 by 2023, will generate $13.2 billion by 2023 up from $5.3 billion today, and has achieved all this two years ahead of time.
An $8 billion project largely funded through investment certificates, it also demonstrated the liquidity that is available in Egypt for the right investments (although some would prefer that this had been tapped for a wider range of projects than just the Suez Canal)
It also fits in with a sense that after many difficult years in Egypt, things are looking up. My trip there last month was encouraging, albeit with some reservations. There is a sense that stability has returned and that an environment exists in which things can be done: businesses can grow, banks can lend, and people can hope.
Euromoney this month will carry my interview with Hisham Ezz Al-Arab, the chief executive of Commercial International Bank , Egypt’s largest private sector bank. He has seen it all in his dozen years at the helm, but is firmly of the opinion that the country is emerging from volatility in decent shape. “The worst is very much behind us,” he says. His own bank’s results are improving dramatically: between the 2013 and 2014 financial years, market capitalisation rose 52.31%, pre-tax profits 32.56% and total assets 26.43%.
There is some broader empirical evidence to support this positive view. Earlier this year Moody’s MCO -0.99% upgraded Egypt to B3, the first upward notch after six downward ones in the wake of the revolution. Egypt continued to grow at 2.7% on average per year from 2010 to 2014 despite the volatility around it, partly because it has an enormous (and statistically invisible) grey market economy which apparently never slowed. Earlier this year Moody’s said consensus forecasts were for 4.5% growth in 2015 and 5% in 2016, although there are continuing concerns about inflation pressures, foreign exchange reserves, the fiscal deficit, and government debt as a percentage of GDP.
In the wings, though, is a bigger concern: security, and there is good reason to worry. The attacks in neighbouring Tunisia show that ISIS, and various affiliated or like-minded organisations (including some homegrown ones in Egypt, particularly north Sinai), is increasingly powerful in North Africa, and that it is taking aim at western tourist destinations. Egypt has done a good job of keeping Sharm-el-Sheikh secure – it can do so because it’s the bottom of a peninsula, and can therefore be defended – but anyone visiting the Pyramids or the British Museum in Cairo, and in particular the sights further south in Luxor and Aswan, does so now with a certain trepidation.
After all, it should be remembered that, in this post-revolutionary environment, the government in Egypt is not the one that was elected. That one, the Muslim Brotherhood, was overthrown by the current government in a coup; the Muslim Brotherhood’s senior figures have been sentenced to a variety of terms including death penalties. If one ever wanted to create an environment within which radical Islam could attract the disenfranchised, this would be it. For more on this, see the Wall Street Journal’s take on the situation.
It’s an uneasy fact: the Sisi government, improving Egypt’s economy though it is, is as undemocratic as the Mubarak government that was overthrown in the revolution in the first place. Those who work there see press freedoms are more restricted now than they were originally, as demonstrated by the appalling incarceration of Al Jazeera journalists on grounds that were nothing less than a mockery of judicial process.
Consequently, those who are hopeful of a brighter future for Egypt may well be right, and the Suez Canal expansion is a great achievement and will help Egypt present itself on the world stage as a country going in the right direction. But it shouldn’t be forgotten that its stability today is fragile.
About the Writer:
Chris Wright is a freelance journalist focusing on business and finance, particularly in Asia, the Middle East and Africa. he is the former editor of Asiamoney magazine in Hong Kong, and former investment editor of the Australian Financial Review newspaper in Sydney, Australia.
source:Forbes
