Tinawi: Egypt’s Economic Identity is Unclear

Akram Tinawi, chief executive officer and managing director of Arab Banking Corporation-Egypt, stressed on the importance of forming an economic consultative council encompassing financial and economic elite and experts who will set Egypt’s priorities in the upcoming period so as to contain the country’s financial crisis.

Tinawi added in an interview with Amwal Al Ghad that the economic visions set by presidential candidates are not precise as they focus on the political situation which is raising concerns about Egypt’s economic identity in the upcoming period. Besides, the absence of compromise between the Parliament and the current government represents a “threat” to Egypt’s future.

Amid the current political turmoil, how do you see the future of Egypt’s economy?

The situation is unclear because of the current political turmoil Egypt is witnessing that drives the country’s attention away from the economic indexes, even after it deteriorate.

However, Egypt’s economy is capable of recovering through developing foreign resources and attracting investments especially that the country’s infrastructure were not negatively affected and that Egypt has all factors and instruments to make it able to achieve good growth rates.

An economic consultative council encompassing economic experts shall be formed to set a plan to improve the current economic situation and indentify the optimal economic system Egypt shall adopt.

What are the main factors that will contribute in improving the economic situation?

There are three main factors that will contribute in improving Egypt economy. The first factor is strengthening Egypt’s foreign reserves which fell by US$ 22 billion in a year and three months threatening the country to be unable to meet its liabilities towards foreign bodies and incapable to cover Egypt’s imports for three months and that will affect Egypt’s credit rating and reduce the country’s possibilities to borrow from outside bodies.

The second factor is restructuring Egypt’s economic system and setting laws and rules that encourage businessmen to invest in Egypt and guarantee their rights. In addition, a study shall be done about improving dollar resources and increasing growth rates to strengthen GNP’s position.

The third factor is reforming security system as any political and economic development cannot be implemented in security lax.  This can be done through launching a”90 days of safety” initiative in which all people together with  governmental  bodies shall cooperate and that will improve Egypt’s resources; including tourism, exports, Suez canal revenues and Egyptians transfers from abroad.

What is your opinion about the economic visions of presidential candidates?

Presidential candidates obviously neglect economic situation as they rather focus on the political situation. None of the candidates spoke about the deteriorating economic situation nor suggested methods of improving Egypt’s dollar resources to stop the sharp fall in foreign reserves which dropped from US$ 36 billion in December 2010 to US$ 15.1 billion last March, losing US$ 22 billion since 2011’s revolution.

Foreign reserves will continue to decline, unless foreign transfers are injected through Egypt’s dollar resources or from an international financial institution. International Monetary Fund is studying granting Egypt a credit instrument allowing the country to borrow from international financial institutions.

How can we attract foreign investments to Egypt?

Foreign investments will be injected, if the political and security situations are stabilized after the end of the current transitional period. Government shall enact laws to regulate investment that will guarantee the rights of the country and investors. In addition, Egypt shall commit to its previous and upcoming contracts as well as settle all problems facing investors to encourage them to invest in Egypt.

How do you see the Central bank of Egypt’s monetary policy?

Central bank of Egypt is managing the monetary policy professionally since Farouk El-Okdah has become the governor. CBE has set exchange rates and ended dollarization process in Egypt in difficult times after the world financial crisis 2008 and the turmoil Egypt has witnessed after the revolution.

How do you see CBE’s decision about reducing obligatory reserves by 2%?

CBE took a well-studies and good decision in reducing obligatory reserves as this will provide more liquidity for banks and government which needed in financing budget deficit that reached EGP 140 billion because of the security lax and increased demands of workers that aggravated after the revolution.

To what extent Arab Banking Corporation is affected by the political and economic turmoil?

All sectors have been affected, but I think 2012 will be a start for recovery. Bank’s results proved my point as ABC achieved 50% increase in profit in the first quarter, compared with the profit ABC achieved in the first quarter in 2011. ABC posted 25% growth in 2012through the well-studied expansion plan the bank implemented in Egypt which targeted financing all strategic and vital sectors. ABC targets to increase its budget to EGP 7 billion in 2012, up from EGP 5 billion in 2011.

What about your expansion plan across Egypt?

ABC delayed expansion plan n 2011 due to the security lax, but the bank plans to open five new branches to reach 33 branches.

Do you consider offering new savings instruments or increasing returns in the upcoming period?

ABC has savings instruments with competitive rates up to 12.25%. ABC also innovate certificates with different maturity dates (150 days and 200 days). These instruments attracted much liquidity, that make deposits rose by EGP 500 million to reach EGP 4.3 billion in the first quarter of 2012. Loans to deposits ration registered 60%.

ABC will offer government employees salary-guaranteed loans and payment of club’s subscriptions as agreed with Wadi Degla Club.

Do you plan for Islamic products?

ABC-Egypt has no license to conduct Islamic banking transactions. However, if the demand increase on these products, the parent ABC group will offer these products as its has Islamic investment arms .

How revolution affected bank’s non-performing loans portfolio?

ABC’s non-performing loans portfolio is less than 4% of the bank’s loans. After the revolution, non-performing loans rose to 7%, but then they retreated to the normal rate. Corporate loans portfolio is free from non-performing loans because of ABC’s prudent lending policy.

Why did ABC writeoff shares in the stocks?

Free floating percentage for the listed stocks is not compatible with the new regulations that were set by Egyptian Financial Supervisory Authority and that condition that at least 5% of the bank’s shares.

ABC had two choices either to writoff the shares willingly or to wait till they were cancelled officially. As ABC considers the benefit of its shareholders, ABC chose to writeoff it shares earlier.

The shares were valued in accordance to their value in 2010 which were up from their value in 2011. I expect that all shares will be bought in a year.