OBG talks to President Abdel Fattah El Sisi

Interview: President Abdel Fattah El Sisi

What are the main priorities that the government is looking to address in the coming year?

ABDEL FATTAH EL SISI: Egypt’s ultimate objective is to establish the foundations of a modern, civil, democratic state built on effective institutions and the rule of law. We have adopted a new constitution which upholds the principles of democracy, freedom, human rights and the rule of law, after holding a free and transparent referendum, and we have elected a new president by an overwhelming majority in free and fair elections, which witnessed a considerable voter turnout.

The most pressing priority in achieving this objective is to conclude the transitional roadmap for holding parliamentary elections as soon as possible in order to establish a complete political framework of strong institutions. These elections are of particular significance in the process of democratisation in light of the fact that the new Council of Representatives will assume a third of the powers currently held by the president. The elections will be followed by a legislative overhaul, with all laws being reviewed and, where necessary, amendments being made to bring legislation in line with the rights and freedoms enshrined in Egypt’s new constitution, including freedom of speech and of the press. The process of legislative review will aim to create a truly democratic society with the necessary safeguards.

The conclusion of the elections will also usher in a cabinet reshuffle, as any new cabinet would have to be approved by the Council of Representatives. The conclusion of the transitional period and the implementation of the roadmap will constitute a monumental step towards realising the aspirations of the Egyptian people as expressed in the two popular revolutions of January 2011 and June 2013. Security and stability will subsequently be consolidated, which are key demands of the Egyptian people as well as crucial factors for economic development.

This is to be pursued in parallel with a comprehensive economic development programme that aims to boost economic growth, tackle unemployment, attract foreign direct investment (FDI) and improve the living standards of Egyptians via large-scale mega-projects and support for small and medium-sized enterprises. One of the most important steps taken by the government is the convening of the Egypt Economic Summit to be held in February 2015, in order to promote investment in the Egyptian economy. In tandem with efforts to boost economic growth, the government will work to address wealth discrepancies through various measures such as social security programs.

One of the imminent priorities of the Egyptian government in both domestic and foreign policy is to confront the growing threat posed by terrorism. Our region has been ravaged by the scourge, and within Egypt itself, terrorists have targeted civilians and security personnel in their quest to drag Egypt and the wider region back into the Middle Ages. Egypt acts as the first line of defence in the battle against terrorism, and we have adopted a comprehensive, multifaceted approach towards tackling this threat.

This is not solely limited to military and security measures but also focuses on socio-economic development, countering the spread of extremist ideologies, disseminating tolerant values of Islam and cutting off funding to terrorist groups. Egypt is an active participant in collective efforts to combat terrorism, and we believe this transnational threat demands concerted and coordinated action.

What role do you see Egypt taking in the Israel-Gaza peace process?

EL SISI: There is no such thing as the “Israel-Gaza peace process” but there has always been a Palestinian question, whose just and comprehensive settlement should be based on the relevant UN resolutions, as well as the basic principles of international law and the main tenets of the peace process laid down by Egypt in the1970s. In the most recent conflict in Gaza, it is worth noting that Egypt has exerted all efforts, just as it did in previous confrontations, to spare further bloodshed and pave the way for a ceasefire to allow for the resumption of indirect negotiations and restitution of normal life. Palestinians in Gaza and elsewhere in the Occupied Territories have as much of a right as the Israelis to live in peace and security. They have the right to an independent state of their own, in exercise of their inalienable rights to freedom and independence. Our efforts to re-establish calm should not be confounded with the need to resume earnest negotiations to achieve durable peace in the Middle East. We will pursue that objective and tirelessly shoulder our responsibility as a regional power, but we nonetheless call on world powers to exert their efforts, in light of the importance of our region in world affairs, and with a view to other burgeoning regional challenges.

How can trade volumes between Egypt and Africa be increased?

EL SISI: Egypt firmly believes in the importance of reinvigorating its historical ties with African countries. Egypt played a pivotal role in supporting the struggle to end colonialism and apartheid in the continent. This approach aims at contributing to the socio-economic development of our people and taking advantage of the fact that several African economies boast a remarkably high rate of economic growth, thus providing an opportunity to enhance intra-African trade and investment. Accordingly, our African policies place great importance on enhancing intra-African trade, as well as increasing Egyptian investments in African countries. Through its membership in the Common Market for Eastern and Southern Africa (COMESA), Egypt plays a key role in leading the way to establish a free trade area spanning the block’s 20 member states, helping to create a unified economic space of around 400m people.

Egypt is taking part in ongoing negotiations to establish a Tripartite Free Trade Area encompassing COMESA, the East African Community and the Southern Africa Development Community, creating a much larger market of 26 African counties. Egypt will host a summit for the leaders of member states of the three regional blocks to discuss how to push forward with trade liberalisation, paving the way to establish a long-awaited economic space.

How important are Egypt’s ties with the Gulf Cooperation Council (GCC)?

EL SISI: Egypt’s relations with GCC countries set an example for wider Arab relations by virtue of the strong links binding the governments and people, which have positively impacted various aspects of bilateral relations. The GCC countries, realising the geopolitical importance of Egypt, have decided to support its democratic transition, as a strong stable Egypt is imperative to the stability and security of the entire MENA region. Such strategic relations are also found at the economic level, where the GCC countries, particularly Saudi Arabia and the UAE, realise the importance and potential of the Egyptian economy. They have undertaken significant investments therein, and have also provided important support to the Egyptian government in its economic reform programme.

In the same realm, Egypt realises the importance of Arab national security. In particular, the security of the GCC is part and parcel of national security. Egypt considers security in the Gulf a national responsibility. Indeed, any tampering with GCC security is a red line for our country. Furthermore, Egypt and its GCC partners stand united against the menace of terrorism and are forging a strong partnership to deal with radicalisation through a comprehensive approach.

What are the government’s priorities for improving development indicators?

EL SISI: The government is engaged on two fronts in the economic field: addressing the challenges of four years of political transition that have taken a toll on the economy, and focusing on structural challenges in order to unleash the country’s long-term potential. Egypt is on the verge of an economic take-off and we are determined to accelerate this process through immediate economic stimulus, infrastructure spending and mega-projects that will increase domestic and foreign investment.

Since late 2013, the government has implemented two economic stimulus packages with the aim of extricating the economy from the aftermath of four years of politically charged change. These packages comprise additional budgetary allocations for a series of public works programmes and social justice spending designed to stimulate the economy and improve the standard of living and social services. However, the bulk of the allocation is directed at tackling business disruptions by injecting funds and providing new opportunities for contracts in the construction sector – a major employer in the Egyptian economy. Funds were also allocated to provide upgraded services to more underprivileged rural and urban areas.

More significantly, the government has initiated a series of important national mega-projects, the most important being the Suez Canal Corridor Development Project. Worth more than LE60bn ($8.52bn), it entails digging an additional channel alongside a considerable length of the existing canal in order to double shipping capacity and multiply revenue. New ports in the three governorates adjoining the canal will also be constructed, as well as a new airport, an industrial zone west of the Gulf of Suez and a technology valley in Ismailia. Other important mega-projects include the Golden Triangle development in Upper Egypt. This project envisions exploiting Egypt’s rich natural resources and mineral wealth in the region between Qena, Quseir and Safaga, while also developing the area for industrial, commercial, agricultural and tourism opportunities. The North West Coast Development Plan will provide a comprehensive and strategic vision to develop the north-west coastal region and its desert hinterlands, including establishing new housing and commercial communities along the Mediterranean coast and a new green city in Al Alamein. As we expect to begin reaping growth windfalls from such stimulus and infrastructure investment, we are already witnessing promising signs in terms of economic growth. In fact, Egypt’s GDP grew by a rate of 3.5% in the final quarter of the fiscal year 2013/14, up from 2.5% growth in the third quarter.

What is the government doing to secure investment?

EL SISI: The government is embarking on efforts to tackle the regulatory and bureaucratic obstacles that stand in the way of private sector and foreign investors, as well as policies to ensure a level playing field where transparency and the rule of law prevail. Chief among these measures is a new uniform investment law that will further streamline the path for FDI. The new law is expected to remove antiquated and unfair legal hurdles, which should result in an estimated inflow of no less than $15bn over the next three years. This in turn will translate into new job opportunities. The government is undertaking a review of existing FDI that has been adversely impacted by political developments since January 2011. We are committed to finding solutions to some of the issues affecting such investments on a case-by-case basis, and we will spare no effort in mitigating any difficulties that foreign investors face in order to reach fair and prompt settlements to any existing disputes.

What can be done to improve fiscal sustainability?

EL SISI: The Egyptian economy has long been afflicted by considerable public deficits due to excessive spending and unsustainable subsidies. These structural problems have put further strain on the economy throughout the previous four years of political transition. In order to establish the proper foundations for economic growth, a new path towards fiscal discipline is needed while ensuring social justice.

In pursuit of this, we are undertaking in the new budget for 2014/15 steps to reform and rationalise subsidies, which have been an impediment to growth and development for many years. Such subsidies cost the Treasury roughly 20% of the entire budget. The reforms introduced by the government of Egypt entail a five-year process of energy subsidy rationalisation that will maintain support for the lowest income strata. The immediate deliverable of this reform package will be in the narrowing of the budget deficit in the current fiscal year by 2% of GDP, with concomitant reductions in the four upcoming years.

In parallel with this important subsidy reform policy, we are developing new sources of revenue through a comprehensive and progressive tax reform. The government is rolling out: a fair property tax law; increases for cigarette and alcohol taxation; capital gains and dividend taxes; a temporary 5% tax increase on Egypt’s wealthiest individuals; and a new value-added tax that will exempt basic food items. By front loading these fiscal consolidation measures, we hope to be able to lock into a budget deficit that will be in the single digits by next year, down from 13.7% of GDP in fiscal year 2013/14, even as we spend more on health and education in line with our constitutional commitments.