The HSBC Group General Manager Deputy Chairperson and Chief Executive Officer HSBC Bank Egypt Jacques-Emmanuel Blanchet, said that the Egypt is becoming much more business friendly.
Blanchet told Daly News Egypt that Egypt’s economic situation has continued to improve during 2018, our overall views remain positive.
He added that the Egyptian government has been instrumental in bringing the country’s economy through a challenging couple of years.
According to Blanchet HSBC is honoured to be able to work closely with the Central Bank of Egypt (CBE), “our clients and other key institutions to help create a stronger and more stable economy,” he said adding, HSBC’s balance sheet support to Egypt is an illustration of HSBC’s commitment to the country given the long term positive outlook of the economy.
DNE sat down for an interview with Blanchet, the transcript for which is below, lightly edited for clarity:
– At the moment, what is your view for the Egyptian economy?
It has now been almost two years since Egypt took the bold decision to float its currency and implement a solid economic reform programme.
Egypt’s economic situation has continued to improve during 2018. Our overall views remain positive. External and fiscal deficits are narrowing, inflation and unemployment are declining, while growth is accelerating, and monetary policy has remained tight.
The International Monetary Fund’s latest review of Egypt’s growth predicts that the real GDP will rise to 5.5% in 2018/19. This is expected to be supported by a recovery in tourism, higher net exports, and investment. It also forecasts rising natural gas production, as foreign investment in the gas sector bears fruit.
Egypt’s foreign reserves rose to over $44bn at the end of June 2018, which also has a very positive impact in increasing investors’ confidence.
On the ground, Egypt is becoming much more business friendly with new investment and licensing laws, boosting domestic and foreign business activity. There is also real progress being made towards digitising the economy. The short-term pains associated with the reforms were undoubtedly challenging for many people, but I think there is reason to believe there are much more and positive times to come.
By pushing through significant economic reform and creating a more business-friendly environment, the Egyptian government has been instrumental in bringing the country’s economy through a challenging couple of years. We are honoured to be able to work so closely with the CBE, our clients and other key institutions to help create a stronger and more stable economy.
– What are the current strengths and challenges of the Egyptian economy?
– Egypt’s economy is well diversified amongst multiple important sectors, such as oil and gas, tourism, manufacturing, agriculture, transport, and real estate. Having a diversified economy is a vital enabler of a sustainable, strong economy. This is particularly true when enacting reforms, which are aimed at addressing a lot of the chronic issues in many Egyptian industry sectors.
Another area of notable and well-known strength supporting the Egyptian economy is Egypt’s ideal location. We are in a central global time zone meaning that we can align well with established markets to the West and growing economies in the East. The ‘Belt and Road’ initiative, a huge Chinese infrastructure investment project, is a significant opportunity for Egypt and other countries in the Middle East. At the tip of the continent, we can also look South, as Egypt serves as the gateway to Africa. The large consumer market of Egypt is a significant strength that many investors assess and take into consideration while making strategic investment decisions into the country.
On challenges, the World Bank’s ‘Ease of Doing Business’ report draws attention to some important issues. We still have high interest rates due to inflation and there are regulatory and bureaucratic impediments for investment.
– What activities or projects can assist the Egyptian economy with growth?
– Continued focus on the economic reform programme is fundamental to Egypt’s future. Promoting financial inclusion to register clients, such as individuals and SMEs in the formal economy will have a beneficial effect on the banking sector. It will also, more importantly, enhance transparency, reduce corruption, and increase the state’s share of taxes and revenues. This would allow the government to increase spending, which may include social welfare programmes and, on the education, and health sectors.
There are a number of opportunities available to the private sector as illustrated by the Ministry of Investment and International Cooperation’s investment roadmap. This includes increased transparency, an improved dialogue between investors and key stakeholders within the government.
As part of HSBC’s partnership with the Ministry of Investment and International Cooperation, we have arranged a number of events to promote investment in Egypt. We recently held an event that was attended by clients and international investors to brief them on Egypt’s trade and investment landscape. It gave them a brief on the macro outlook and introduced the different investment opportunities in Egypt and the new investment roadmap.
The HSBC Economist Roadshow travelled to Cairo in May 2018, with Simon Williams, HSBC’s chief economist for Central and Eastern Europe, Middle East, and Africa (CEEMEA). We are pleased to be able to provide our clients in Egypt with this important economic update on the country and wider region.
– What role could banks play in assisting the Egyptian economy? Regarding your bank—what projects and activities does it focus on financing to assist the economy?
– Banks have an important role in supporting and promoting financial inclusion and offering banking and credit services—particularly among small and medium sized businesses, which make up an important segment of the economy.
The combination of HSBC’s strong global network with its presence in 67 markets and over three decades of local presence give us an unrivalled ability to connect Egypt’s most innovative, vibrant and well-run businesses with the fastest-growing international markets.
The HSBC’s ground breaking work to support the CBE with stabilising the country’s economy in 2016 has been praised as an innovative piece of work in reserve management by Central Banking publications. The $2bn funding package, provided to Egypt in early November 2016 in the form of a reverse repurchase agreement, was hailed as being a key factor in the dramatic turnaround for the Egyptian economy. In a further vote of confidence in the HSBC-led consortium, the CBE chose to renew its funding deal in November 2017. The old package was allowed to mature, and a new deal was struck for approximately $3.2bn at a much-reduced price.
Last year, the HSBC also signed a memorandum of understanding with the Ministry of Investment and International Cooperation to support Egypt’s strategy of attracting foreign direct investments into the country through the bank’s branches across the world.
Being an international bank, there is a strong focus for the HSBC in Egypt to support the multinational clients doing business in Egypt. We are assisting various entities within the government of Egypt to arrange ‘mega financing’ requirements for State entities.
Over the course of 2017, HSBC Bank Egypt’s fully-fledged investment bank led and arranged transactions in excess of $3.5bn supporting the government of Egypt.
For example, the HSBC had led the mega financing for Egypt Electricity Holding Company’s three new power plants built by Siemens in Beni Suef, Burullus, and New Administrative Capital for €4.2bn. The HSBC had also assisted the Ministry of Finance to arrange for Eurobond for $4bn during February 2018 by tapping international investors to invest in Egypt’s bonds.
Furthermore, through the bank’s market leading securities services platform, the HSBC has partnered with clients and supported the growth in transaction volumes post devaluation, leading to significant foreign currency inflows into Egypt and facilitating global investors’ investment ambitions.
– What are the new services that the bank offers or targets offering in Egypt during the coming period?
The HSBC’s 36 year history in Egypt, significant capital, and people’s commitment has resulted in the bank consistently maintaining a leading position as one of the most active multinational financial institutions in Egypt.
Digitalisation is considered fundamental to the Egyptian Economy and HSBC has an unmatched digital offering that enable both retail and corporate clients to conduct a wide range of transactions. We are particularly excited by the opportunities provided by digital banking where we see an increasing number of customers using our mobile solutions for their everyday banking needs.
We will also continue to strengthen our SMEs proposition, which has evolved over the years supporting internationally aspirant SMEs through access to trade finance and international expertise. The HSBC is in the unique position to be able to capitalise on the group’s advanced technology platforms to support this critical part of the economy, bringing truly global solutions to local SMEs. Our appetite and right to win in this sector is evidenced by the significant growth in all aspects of our business, best characterised by our SMEs growth funds in 2015 and 2016, and doubling our balance sheet commitments to SMEs in 2017.
On the retail side, the HSBC is well positioned to support the growing needs of our customers and helping them realise their ambitions, aiming at providing customers with a seamless banking experience wherever and whenever they want, with a special focus on customer segments whose needs and aspirations are best met through our offerings.
In terms of our customers, offering a market-leading level of service is at the centre of our strategy and we continue to invest heavily in this area. In 2017, we reviewed the footprint and performance of our branch network to ensure we are optimizing the allocation of our resources. We have relocated some branches and launched new ones at better sites to ensure our customers can bank with us the way they want to.
As the leading global bank, the HSBC has a significant business in Egypt and remains committed to the future economic growth of the country. The HSBC is well positioned to support the growing needs of its customers and helping them realise their ambitions.
The HSBC’s balance sheet support to Egypt is an illustration of the HSBC’s commitment to the country given the long term positive outlook of the economy.