Egypt lost roughly $7 billion in revenues from the Suez Canal, down about 60 per cent annually, mainly as a result of attacks by Yemen's Houthis on ships in the Red Sea, Egyptian President Abdel Fattah El Sisi said on Thursday.
The amount marks a drop of more than 60 per cent annually, as attacks in Red Sea and Bab Al Mandab have impeded navigation and global trade, he said after a meeting with the Suez Canal Board.
Mr El Sisi's comments came as Egypt takes steps to boost its economy at a time of crises.
On Wednesday, Egyptian Prime Minister Mostafa Madbouly reaffirmed the government's commitment to make concerted efforts to increase the role of private sector in the country's economic growth.
In a televised meeting with business leaders in the new administrative capital, Mr Madbouly acknowledged that the Egyptian government “was forced” to take an outsize role in the economy in response to a series of crises, beginning with the 2011 Arab Spring uprising and continuing with Israel's war on Gaza.
“We, as the government, have full belief in the importance of the private sector's role and its role as the main driving force of the country's economic engine,” Mr Madbouly said, adding that the Egyptian private sector has historically played a “larger role in the economy with the majority of investments”.
“But in light of the extenuating circumstances that Egypt has been through since 2011, with all the chaos that brought led to the private sector's retreat due to fears that expanding into the economy, would lose them their investments. This forced the state to increase its investment in the economy,” he said.
The meeting came days after the International Monetary Fund (IMF) approved the country's fourth review at the staff level, which comes with a disbursal of $1.2 billion, pending board approval.
The IMF's report emphasised the need for Egypt to speed up reforms to improve the business environment, reduce the state's part in the economy, and increase private sector confidence to attract foreign investment.
Industry leaders present at the meeting outlined several challenges that continue to hinder their operations, including a shortage of available foreign currency for imports and natural gas disruptions caused by the war in Gaza. Egypt imports gas from Israel, and its supplies have been disrupted by the ongoing conflict.
Mr Madbouly defended the state's megaprojects, which have drawn criticism for their high costs without immediate returns to citizens. “This is why, despite all the challenges, we worked to develop infrastructure and implemented large-scale projects whose main purpose was to attract investments over the coming period. We hope these projects will bear fruit very soon,” he said.
He also addressed the State Ownership policy, under which the government agreed to sell its stakes in a number of national industries to foreign and local private sector companies as part of the deal with the IMF.
“We concede that the private sector is more proficient and experienced at management and operation,” Mr Madbouly said. “Today, we are committed to returning the private sector to its prior role as the dominant participant in the country's economy.”
Egypt has faced numerous challenges over the past five years, including the Covid-19 pandemic, the Russia-Ukraine war, regional instability and economic mismanagement by the government.
Over the past month, the Egyptian pound has experienced a significant depreciation against the US dollar and other major currencies.
According to the Central Bank of Egypt (CBE), the US dollar reached its highest level against the Egyptian pound since March, climbing to 51 Egyptian pounds.
The euro, Saudi riyal, UAE dirham, and Kuwaiti dinar also appreciated marginally against the Egyptian pound since the start of December.
The CBE last devalued the pound on March 6, after which the exchange rate was raised from a state-regulated exchange rate of 30 Egyptian pounds to 49 Egyptian pounds, which the government insists is the pound's real market value.
Mr Madbouly noted that since Egypt switched to a flexible exchange rate in March, the dollar's value has varied by 4 per cent to 5 per cent, and similar fluctuations are anticipated in the coming months, depending on the demand for the dollar.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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India (for first three ODIs) Kohli (capt), Rohit, Rahul, Pandey, Jadhav, Rahane, Dhoni, Pandya, Axar, Kuldeep, Chahal, Bumrah, Bhuvneshwar, Umesh, Shami.
Australia Smith (capt), Warner, Agar, Cartwright, Coulter-Nile, Cummins, Faulkner, Finch, Head, Maxwell, Richardson, Stoinis, Wade, Zampa.
The biog
Favourite hobby: I love to sing but I don’t get to sing as much nowadays sadly.
Favourite book: Anything by Sidney Sheldon.
Favourite movie: The Exorcist 2. It is a big thing in our family to sit around together and watch horror movies, I love watching them.
Favourite holiday destination: The favourite place I have been to is Florence, it is a beautiful city. My dream though has always been to visit Cyprus, I really want to go there.
Who's who in Yemen conflict
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
The specs
Engine: 2.0-litre 4cyl turbo
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UAE currency: the story behind the money in your pockets
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Engine: twin-turbocharged 3.5-liter V6
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