Tarek Metwally, Deputy Managing Director and Executive Board Member of Blom Bank-Egypt, said that banks operating in the domestic market, whether Egyptian, Arab, or foreign, are fully prepared to finance projects that will be launched during the current and upcoming period.
However, Metwally placed one condition on financing these projects: that they have an economic importance for the Egyptian economy, and a positive reflection on Egyptian citizens.
Daily News Egypt interviewed Metwally, who has long-standing experience in the economic and banking sectors, in which he has been working for over 28 years. He is also the president of Blom Egypt Securities, and a board member of AROPE Egypt for life and property insurance, Concord for IPOs promotions, as well as being a member of the American Chamber of Commerce, United Arab Traders, and the Financial Markets Association.
A number of major projects in the current and upcoming period are anticipated – are banks ready to finance these projects?
First of all, the projects that the government will put up, both related to the Suez Canal Axis Development project, or other major projects, cannot be entirely financed from the inside through banks, but the government should seek to attract foreign investment as much as possible. The importance of foreign capital must be emphasised. We need foreign currency. The remainder of the financing of such projects can come from the local market through banks, or liquidity from local investors. Despite my assurance that banks are ready to finance these projects, this is on one condition. The condition is for these projects to prove their feasibility and importance to the entire national economy. They must also prove to have a positive reflection on Egyptian citizens. Banks will not rush to finance any projects put forward simply because they are national projects.
In your opinion, which banks will play a greater role in financing these projects – Egyptian banks, or Arab and foreign ones?
I expect strong competition among all banks operating in the domestic market to finance these projects. At the same time, I expect great cooperation among banks to arrange syndicated loans for projects that need large funds, more than one bank can solely fund. Syndicated funds will be available, and direct dealing between banks and investors will also be available. Each bank will have to bring its A game.
But some argue that most of the banks’ liquidity is used to cover the state budget deficit, and thus they do not have sufficient liquidity to finance projects – is this true?
Certainly not. Banks invest part of their liquidity, not most of it, in treasury bills and bonds, which are put forward by the government to finance the budget deficit. They also have more liquidity that can be used to finance projects without any pressure on them. Hence, covering the budget deficit will not be an obstacle to financing development projects. And I want to explain something else. The loans-to-deposits ratios in banks operating in the Egyptian market amounts to 40% of the total volume of deposits, while those rates in a country like Turkey are 130%. This means that Egyptian banks have huge liquidity than can be injected into projects. Banks can also reduce their investments in debt instruments, if the loans-to-deposits rates reach 60% or 65%. They can also attract more deposits, if forced, which I do not see coming. If the state succeeds in attracting foreign investments for the projects it will put up, there will be no pressure on banks to finance these projects alone.
Do you see that many banks’ capitals in Egypt help pumping funds to major projects?
I see that the coming period, and projects that will be put forward, may require supporting the capital base of banks, so as to be able to grant huge funds.
There have been rumours in the market that the Central Bank of Egypt (CBE) is about to issue new instructions requiring banks to increase their capitals. If this is true, have you been addressed with such instructions?
We, in Blom Bank-Egypt, did not receive such instructions. However, banks have already been increasing their capitals voluntarily. As I mentioned before, funding major projects will require huge capital. Geographic expansion, by opening more branches, also requires increasing banks’ capitals. When the CBE obliged banks to raise their capital to EGP 500m at the beginning of the implementation of the banking reform programme in 2004, that amount was appropriate based on the market status at that time. Now, however, and in the light of major projects that require huge funds, some of the banks’ capitals has become little and need to be increased. There is a large number of banks that have already supported their capitals, and pumped consecutive increases, by directing all, or part, of the profits retained for this purpose. Blom Bank-Egypt conducted several increases in its capital during the last period, by directing all profits made over the past years for this purpose. The bank’s capital is now at EGP 1.7bn.
Can the dollar crisis, which we have been suffering from over the past years, affect attracting foreign investments to the Egyptian market?
We must differentiate between two things. Foreign investors need freedom in importing and exporting foreign currency. There is no problem with this now. Moreover, Egyptian investors, if they can prove their foreign currency sources, can export abroad without any trouble. The real problem is covering importers requests. Here we must emphasise that we need to rationalise the import, we focus on importing necessary commodities only, and stop, even temporarily, importing leisure and luxury goods, so that we can overcome the current stage.
What are your expectations regarding the dollar problem?
I expect a marked improvement in the dollar problem during the upcoming period. I can assure that the waiver of the dollar in banks increased significantly recently, especially after the decisions taken by the CBE since the beginning of this year, on top of which is capping foreign currency deposit. I hope the exchange market and foreign exchange reserves in Egypt can go back to what they were before 2011 – I expect this to happen soon.
In your opinion, what is the nature of the projects Egypt needs during the current period to revive it economically?
Egypt needs projects that affect growth, such as infrastructure projects, especially in the fields of energy, industry, petrochemicals. I believe that it is possible for these projects to achieve a major breakthrough in the coming period.
Previously, you spoke of the importance of attracting foreign capital to invest in projects that will be put forward by the state. Is Egypt capable of doing so?
First, we must agree that all the projects that will be established during the upcoming period will definitely need foreign currency to cover imports from abroad, both in terms of machinery and equipment, or certain production requirements. Therefore, it is important to attract foreign capital to meet these needs. As for Egypt’s ability to attract foreign investment, all indicators show that we are capable of it. Egypt is now enjoying political stability that is much better than the past years. We have promising investment opportunities, but we also have big problems with the investment laws, the system of taxation, customs, and activation of the one-stop system. How could foreign investors come to Egypt not knowing how to work, or how to export their money abroad again?
In your opinion, what does Egypt need to succeed in attracting foreign investment?
We need clear investment policies and ambiguity-free legislation, especially with regards to regulating the entry and exit of foreigners from the Egyptian market, and system of taxes, customs, and labour. We have two completely different sides to Egypt. On the one side, we have the Egypt that efficiently completed the new Suez Canal in one year and stunned the whole world. But on the other hand, there is the slow Egypt, groaning under the weight of bureaucracy. We have a very good chance of starting, especially after the New Suez Canal. Egypt has completed a project that is a model that proved to the whole world that we could work efficiently and at a great pace. We proved to have the ability to think and work. Why can’t we repeat such project in various sectors, such as health, education, industry, agriculture, and others?
Do you think the New Suez Canal Project can change the nature of the investment environment in Egypt?
The New Suez Canal proved to the world that there is a great cooperation between the people and their government. The biggest proof of that is the EGP 64bn, the cost of the canal that was completely collected within only eight days. This proves something else, which is that when people believe in an idea or a project put forth by the state, they support it. This casts another burden on the government, which is convincing the people of its actions. The New Suez Canal Project also proves that the problem was never the people, but a failure in the management system. Therefore, if we want to go forward and advance, we must develop the administrative organ in Egypt. I reiterate that we have all the ingredients for success, and we built a model that whole world attested to. However, it is necessary to get rid of bureaucracy and laziness that some officials in the state suffer from.
Finally, are you optimistic about Egypt’s future?
Yes, certainly. I am very optimistic. My optimism has its foundations. In Egypt, we have significant challenges, but for the first time we can say that we have a strong and determined political will that wants to change and face challenges.