INTERVIEW – Bahaa-Eldin Law Office: Developing Egypt’s manufacturing industries is a must to offset coronavirus impact
Amwal Al Ghad has interviewed Moustafa Moussa – Local Partner at Bahaa-Eldin Law Office in cooperation with BonelliErede – on Tuesday, tackling key areas related to the impact of the coronavirus crisis and ways to offset its repercussions. The interview also highlighted the company’s activities and plans for the coming period.
- What is your overall evaluation and overview of the implications of the coronavirus crisis for the economic system as a whole and for different sectors?
Generally speaking, I believe that what threatens and overburdens any economic system, no matter how good it is, is being afflicted with “uncertainty”. Unfortunately, the distinctive feature of the coronavirus crisis is uncertainty, whether in that it landed over our contemporary world without warning and the worst is the uncertainty regarding the timing of the total or partial disappearance of that crisis. Consequently, this uncertainty has imposed itself on the behaviour of all people today, whether ordinary individuals, governments, or international organisations, which will lead to a wave of economic slowdown in the most optimistic scenarios.
As for the second part of your question about the implications with regard to the various sectors, I think that it is no longer a secret or in the need of specialised analysts. We have, and are seeing the effects on sectors such as aviation, tourism, education, and the movement of international trade and transport. But we cannot lose sight of the fact that there is a wave of good luck for the sectors of technology and financial technologies in general and also pharmaceutical industries.
- What are your expectations for the economic system in Egypt in regards to the continuation of this crisis?
I think that in such exceptional circumstances there may be some optimism for developing economies in general and Egypt in particular. Indeed, Egypt has accumulated structural challenges for decades, in addition to the external debt burden and as long as we try to be within the global economy, foreign borrowing will unfortunately remain needed. Therefore, we hope that Egypt’s economic system will benefit by intensifying its efforts to develop its various manufacturing industries and export. The coronavirus crisis, despite its cruelty to economic systems, may perhaps compel the major participants in the global economy to reconsider concentration, for example, that there is one country that plays the role of the major manufacturer in the world, that is, China. Therefore, these major participants should return to the axioms of investment through diversification and non-concentration. We do not deny that there are indeed significant economic and efficiency benefits when undertaking manufacturing in a country like China, but I think that this is no longer acceptable, at least the severity of this concentration will be considered. Therefore, Egypt has an opportunity to prove its capabilities with regard to manufacturing, exporting and promoting the lower cost of workforce in comparison with competing markets as well as favourable geographical factors.
- What are the most prominent requirements for the current stage to reduce the effect of the negative repercussions of this crisis?
The requirements are many and complex, especially in a country that has a huge parallel economy. I believe there is a number of relevant points:
First, it is important to maintain and continue the national projects that the government has started. The second is to enhance financial inclusion to accommodate this parallel economy and to facilitate investment movement. The third point is that we must take a “truce”, even temporarily, from the Egyptian procedural bureaucracy to facilitate and restore the movement of industrialisation and the establishment of private projects. I am only talking about a temporary “truce” because any discussion about eliminating procedural bureaucratic obstacles is only a visionary hypothesis.
- What do you think about the latest amendments and laws issued, such as the Companies Law?
Indeed, there was a package of legislative measures and amendments related to the fields of finance, investment, and companies, and therefore we cannot reduce the matter to the Companies Law only. Here we can say that the Central Bank of Egypt and the Financial Regulatory Authority were at the forefront of adopting many of these amendments.
On the one hand, the Central Bank of Egypt made many initiatives and decisions, for example reducing interest rates by 3 percent, postponing debts, measures to reduce cash transactions, and promoting electronic payment methods, providing the necessary financing to import strategic goods and supporting the sectors and companies most affected, in addition to initiatives to support the tourism sector, which resulted in that the amount allocated to the initiatives for this sector reached 50 billion Egyptian pounds. Also, an initiative for the agricultural and industrial private sector to provide 100 billion pounds at a rate of return of 8 percent, which is calculated on a declining basis.
On the other hand, the Financial Regulatory Authority has also issued many decisions related to the capital market and the stock exchange related to facilities for the purchase of treasury shares and electronic trading in securities. In addition, there were also facilities for payment of installments for the clients working in the insurance and real estate finance sectors, financial leasing and factoring and microfinance activity.
- What do you think about the effect of these amendments and laws issued on the investment climate in Egypt?
I think that what I have referred to in the previous question would send a positive message to market participants, but the important thing is to follow-up and review these amendments and initiatives and update them periodically as this would enhance and stimulate the market.
- What are the most prominent legislative amendments that the nature of the current stage requires to keep pace with the current conditions?
Let me refer back to what I mentioned earlier. That there is an urgent need to alleviate the bureaucratic procedures necessary to set up a project, especially in the fields of manufacturing and export. I do not only refer to the time required to establish a company, but also to actual operation and the development of the manufacturing process in a way that restores and attracts small and large investors alike.
Unfortunately, there is no single legislation that represents the ultimate solution, but they are legislative accumulations between multiple competent authorities. This situation must be seized to address the overlapping between the competent authorities, and then comes the time for discussing legislations that requires amending.
- Tell us more about the activity of Bahaa-Eldin Law Office in cooperation with BonelliErede in the Egyptian market? And the nature of its various departments in the field of business community?
Bahaa-Eldin Law Office in cooperation with BonelliErede assists international investors entering or operating in Egypt, as well as Egyptian corporations on all aspects of their legal needs, including corporate, M&A, banking & finance, capital markets, regulatory, international arbitration, litigation, international taxation and transfer pricing and competition. The firm can leverage also – especially on the practices which by nature are more cross-national – on the expertise of BonelliErede’s professionals from other offices in Europe, Africa and the Middle East. We cover virtually all industry sectors, with a primary focus on banking, private equity, energy, construction, manufacturing, and shipping.
- What are the geographical areas outside Egypt in which the BonelliErede’s work is located?
Looking at the roots of BonelliErede, of course a larger stake of work is related to the home turf Italy and Europe, where the firm offers a full spectrum of services in Italian law and European law. With regards to Africa and the Middle East, the vast majority of the work relates to the countries where we are present, but we can boast mandates in over 30 jurisdictions in the region, the most numerous being in Nigeria, Tunisia, Libya and Saudi Arabia. We also have pan-African work: for instance, we have cases of Egyptian clients operating in Togo and Mauritius, or clients from Morocco, South Africa or the UAE asking legal advice for their operations in Egypt.
- What are the features of strategy Bahaa-Eldin Law Office in cooperation with BonelliErede towards the Egyptian market in the coming periods?
Our strategy is to keep having and developing a combination of “inbound” business (ie. work from international investors interested to invest in Egypt or who have legal needs in our country), and of “local-to-local” business with Egyptian corporations seeking specialistic advise in Egypt and, potentially, also outside for their expansion abroad. Of course, the cooperation with BonelliErede and the synergy with its offices in Europe and in the UAE is decisive to this strategy, especially with regards to capturing “inbound” work. The synergy with our Dubai office is particularly relevant for the firm’s success in the whole region.
Also, we aim at further developing our capability to assist, by combining the competencies of various BonelliErede’s professionals of the Public International Law and Economic Diplomacy Focus Team, public bodies and international organizations in relation to cross-border trade, investments and business cooperation in Egypt.
- What are the most prominent executed and managed deals by the office inside and outside Egypt? And their investment values?
I can provide a limited amount of information for confidentiality reasons. Anyway, just looking at the last few months I am pleased to mention a few of our major deals, namely:
- we assisted a French leader in the entertainment sector in the acquisition of an Egyptian target.
- we advised an Emirati company engaged in the chemical sector in the re-organization of their business in Egypt. We also advised a major pan-African bank in various continuative banking regulatory, finance, and corporate governance aspects in connection with their operations in Egypt.
- we assisted an engineering service company operating throughout the MENA region in various mandates, including the establishment of new legal entities and joint ventures in Egypt and in the UAE.
- What about the most prominent acquisitions and mergers deals currently managed inside and outside Egypt, their investment values and the sectors represented in them?
Some of the M&A we are currently working on are as follows:
- We are assisting an Egyptian medical centre on the possible sale of some of its Egyptian assets
- We are assisting an Egyptian healthcare company in the sale of a majority stake to an Egyptian private equity fund. We just finalised the second phase of the acquisition by an Italian company engaged in the renewable energy sector of an Egyptian target.
- What about the office financial activities and the deals it aims to manage?
I would only mention that, leveraging also the expertise from BonelliErede, we aim to strengthen our role also in project financing mandates related to infrastructure and energy projects, which at the moment are largely on hold in Egypt, but therefore we believe they will surely start again and will represent an imperative business development area for us.
- Are there any companies that you aim to restructure, with a view to offer them in the stock market in the future?
If you mean whether we are currently in the process of restructuring companies with a view to public offering. Then let me tell you that we always provide legal advice to many companies with regard to restructuring, whether it is for offering or for other purposes. However, if the question is who will publicly offer, then I cannot say for sure, as the matter is related, as you know, to several factors, and for the time being it may not be considered the best timing.