OBG talks to Mounir Fakhry AbdelNour, Minister of Trade and Industry

Interview: Mounir Fakhry AbdelNour

What sort of regulatory reforms might incentivise foreign investment in the industrial sector?

MOUNIR FAKHRY ABDELNOUR: One of the proposed changes is a bill to amend the Egyptian construction code to save a minimum of four months in delays in getting final building permits or licenses for industrial construction. The root of the problem is the need to provide an insurance policy for the civil liability of engineers and contractors covering damages to third parties arising from construction work.

Unfortunately, in practice, this condition of obtaining an insurance policy proved to be difficult. Therefore, the ministry is proposing a bill to amend the Egyptian construction code to enable the Egyptian Industrial Development Authority to issue temporary building permits for a period not exceeding six months pending the issuance of the insurance policy, which in turn allows the investor to continue with his or her plan to set up business in Egypt without being accountable. In practice, the hazards proved to be few during the first couple of months of construction.

What can be done to encourage “leapfrogging” in terms of value-adding industries?

ABDELNOUR: The Industrial Modernisation (IMCs) are a good example of this phenomenon. The IMC’s mission is to provide business development support to Egyptian industrial enterprises to reinstate them competitively in the global markets. The IMC’s mandate focuses on companies employing more than 10 workers in industrial clusters; therefore, we aim to address the needs of more than 14,000 enterprises.

This is done through three district strategies. In the short term we aim to achieve higher rates of industrial growth through aggressive utilisation of export promotion and foreign direct investment promotion tools. Over the medium term the goal is to enhance productivity of industrial enterprises through a chain of direct competitiveness support programmes. And the long-term strategy is to improve the technological profile of manufactured exports by increasing the share of medium and high-tech exports. One successful example is the National Suppliers Development Programme (NSDP), which is a mechanism to upgrade and modernise local suppliers to major multinational companies operating across different sectors. Under this programme we are increasing the competitiveness of local companies to be accredited suppliers to the international and multinational companies both in Egypt and abroad. As a result of the NSDP initiative, we have seen a total of 17 suppliers operating in the automotive feeding industries accredited as international suppliers to General Motors, Fiat and Volkswagen. Outside of the automotive industry, five companies have been accredited as international suppliers to Unilever.

What can be done to balance ensuring affordable energy inputs with sustainable fiscal policies?

ABDELNOUR: The energy pricing strategy for Egypt aims to balance between budget constraints and the expected unfavourable cost implications on pricing of commodities, due to the removal of subsidies. This can be determined through a differential pricing strategy based on intense energy consumption. Preferential pricing will continue to be granted to the vast majority of industries, which are not classified as energy intensive. Key sectors such as food and beverages and textiles will continue to enjoy competitive energy pricing. Also, the subsidies strategy will be altered towards final products rather than manufacturing inputs. Finally, the energy component in the cost structure of the majority of the energy-intensive industries is not a high portion. Market dynamics will thus play a major role in product pricing, rather than energy prices per se. Currently we are witnessing a continued increase in inflation, despite the fact that most energy prices have remained unchanged. This suggests that there is a need for more trade liberalisation, developing internal trade and improving the quality of the supply chain networks to maximise market competitiveness in the longer run.