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One of the highlights of AmCham’s activities is its Doorknock mission, where for one week, Egyptian business leaders and entrepreneurs visit the US for intense long days of meetings with different stakeholders, fostering investment and growth opportunities. The entity mimics the process in reverse by inviting US businesses to visit Egypt for a series of networking events and meetings.
With the pandemic, the AmCham needed to change its previous model to be able to continue to promote the country’s business scene.
Arab Finance sat down for an in-depth discussion with President of AmCham Sherif Kamel where he discusses how the entity is manoeuvring the new norm; the flow of US investments in Egypt; the ingredients needed to ensure that the country’s digital transformation process benefits all aspects of the economy; the cultural shift required to address financial inclusion.
What are AmCham’s objectives over the coming period? How have the changes in the global economy impacted the entity’s current direction and priorities?
We continue to do what we do. We build bridges between our private sector in Egypt and its counterpart in the US.
We managed to keep things going thanks to digital channels. Not only to maintain the connection between local and international businesses, but also to maintain the dialogue on the continuous improvement of the business climate.
The whole world is going through a disruption phase, and usually, when we speak of disruption, we mean technology. It disrupts whatever we do, it opens up opportunities, but it also introduces many challenges. In 2020, disruption came from a different sort of enemy, the pandemic, and technology came to the rescue, it presented so many opportunities. One of which is the accelerated digital transformation.
Travel of course is not back to normal, and it won’t be until the vaccine can reach more people, which could take around eight months, globally.
We are still opting for the platforms that allow us to do that without traveling. Technology allowed us to do that and allowed us to maintain our objectives as is throughout the pandemic
Speaking specifically of your main activities, chief among which is the Doorknock mission, how are you manoeuvring not having your key activities?
One of the main activates of AmCham, and has been since its inception, is the Doorknock mission. Of course, that did not happen in 2020.
Last year, we opted for virtual meetings during the summertime, which is a very different experience in comparison to the very intense, long days of meetings with different stakeholders. We can’t do that online.
We really can’t compare the intensity and the variety of our virtual meetings with what we do every year. However, in the end, keeping the connection and the dialogue open between both countries is what’s important.
It is also clear that it is going to be difficult to conduct this mission this year as well, at least in its original time which is around now, April. We are, however, hopeful that we could do that later in the year, but there are too many variables to consider.
How has the pandemic impacted the volume of trade between both countries?
Trade between the two countries stood at $6.9 billion in 2020, a moderate decrease from 2019’s $8.6 billion. I believe that’s primarily based on the global disruption to the value chain, the supply chain, and international trade transactions.
Many tend to be concerned with the size of our imports; however, I believe, what we need to focus on is the size of our exports.
I think Egypt has a significant potential to export more, it’s just not tapped into yet. Moving forward, a boost to our exports would tick so many boxes for the economy in Egypt, including creating more job opportunities.
And how can private businesses participate in increasing our exports?
The private sector has the needed connection and means to achieve that, the challenge is how to create more demand from the importer’s side and open more markets.
We need to make ourselves more visible, we need to increase the number of trade missions. It’s all about connections and creating business opportunities.
I think we are currently providing a more conducive business environment in Egypt, but what we want is also the reverse: our companies reaching global markets.
One of the sectors with a high export potential is the IT sector. We are very good at outsourcing our technology services. The limitation here isn’t what we are doing but rather the size of the services we are exporting.
Across different sectors, we are still scratching the surface.
How do you evaluate the interest of US businesses and investors in Egypt’s economy today? What are the main sectors that tend to attract US investors? Why do you think that is?
Next year, Egypt and the US celebrate 100 years of diplomatic relations. Throughout that period, there has been strategic dialogue between the two countries and a big chunk of our relationship revolves around business and commerce.
The Egyptian market and its growth potential are massive. In addition, the country is a gateway to Africa and many other countries in the region, all of that makes the country an attractive investment destination not just to US companies but to the international market at large.
The sectors that have long attracted US companies, and where they are already extremely active, are Oil and Gas; energy; healthcare; agriculture; education and training; information and communication technology; financial.
As you can see that’s a diverse portfolio of sectors and that by design is the result of the diversity of the Egyptian economy. An important factor that is also contributing to this diversity is the size of the local economy and the International Monetary Fund (IMF)-backed structural reform program.
From 2016 to 2019 most, if not all, economic indicators were getting better. Despite COVID-19, Egypt is the only country in the MENA region that recorded economic growth in 2020. This confirms the tough decisions the government made during the previous few years, they provided us with a cushion to absorb the pandemic’s shock.
We have absorbed the biggest hit so far, however, follow-up repercussions are yet to arrive. That said, our progress and growth will depend on how the pandemic subsides worldwide.
Reform is a journey it is not a destination, while the previous phase was successful, there is still part two of the reform and I think this is where digital transformation can play a major part. Here I mean enhancing efficiency and address a wide variety of issues that currently we deal with.
Many people think digital transformation is automation, it is not. It’s a platform for productivity, efficiency, a means to create more jobs.
That’s a concern of many in our culture. Could you elaborate on why the digital era will create more jobs?
People think that digital transformation started in 2020, it did not. In my view, it started the day personal computers were invented, that’s around 40 years ago. Things progressed at a slow pace until the 90s, taking an obvious push when the internet was introduced, then another massive boost with mobility.
Judging by the previous three decades, we have seen a massive introduction of technology across different sectors, we have already seen the migration of people from one job to the other. That needed training, enhancement of skills and capacity, but it did not increase the unemployment ratio.
You are actually upskilling the human capital to meet the new demands. In my view, people won’t be replaced with machines, we just need more calibers that are better equipped to deal with machines.
That’s why if I put on my educator hat on, I think a couple of degrees and diplomas are needed. The skillset of the human capital is very important and investing in it is crucial. By that, I don’t mean only investing in degrees but in lifelong learning. That will help them benefit from digital transformation beyond just a connectivity platform, but also as a productivity platform to improve efficiency and effectiveness.
How has the pandemic impacted the flow of US investments in Egypt? Is the change temporary?
The investments of US companies in Egypt need to be looked at from two perspectives: The oil and gas sector versus everything else.
The former was not impacted, but other industries are yet to recover to their pre-2011 levels. It’s like a jigsaw puzzle, we liberalized the exchange rate, we have taken a myriad of structural reform measures including the subsidies and new laws to attract more investments; however, still, the level of foreign direct investments is yet to reach desired levels.
Everybody projected that with the results of the structural reform program and achieving 5.6% GDP growth in 2019, that the country would see an increase in foreign direct investments (FDI). Of course, the pandemic was quite a setback in this regard.
I have to add that financial institutions such as Fitch, S&P, Moody’s are all supporting the notion of Egypt’s solid growth potential and attractive business environment.
In your opinion, what more can be done to further encourage US investors to enter the Egyptian market?
Until the pandemic hit, we were perceived as one of the hottest markets for FDI.
Generally speaking, investors are seeking an easy, attractive market to enter. It’s more about the economic environment as a whole; the support mechanism, the facilities, the opportunities, the value-added, and so on.
Obviously, no investors would consider Egypt unless they see proof of reward, and they compare between different markets before they make a decision.
We need to address the small parts that make up the big picture. We need to create an environment that is conducive to business growth, that way when they compare notes with other markets they opt for Egypt.
It’s a journey and we need to continue to build on what we achieved so far. Information shared has to be current and investment processes need to always further improved.
Egypt has made remarkable progress in its digital transformation journey. Do you think it is difficult for businesses to keep up with the transition?
This is also an ongoing journey, and the government is trying to help companies migrate from the way they are currently doing business to a much more efficient and future-enabled way.
Post pandemic, I think, things will end up settling in a more of a hybrid model, where certain procedures will be virtual while others remain as is, for the time being, to ease the shift a bit.
Whether or not all businesses are ready for the steps currently being taken, I think there is no one-size-fits-all, but some are ready. The bulk of the Egyptian economy is based on small- and medium-sized enterprises, not all of them have the infrastructure or capabilities to keep up.
Technology is an important building block for digital transformation, but it’s one of three. The first is the human capital, are they ready? Do they have the skills required for the required shift?
The second is the environment, it is the rules and regulations. The objective isn’t just to automate the current processes that we have but rather to improve them and digitize them.
The third is the technology and data infrastructure, which Egypt is making remarkable strides in. Over the past 18 months alone the country has invested close to $2 billion in digitizing its economy.
Despite the myriad of efforts addressing financial inclusion, many people and businesses are yet to be included. Other than the government’s current steps what else should be done? Also, how can the private sector boost inclusion?
This topic taps into several areas beyond the financial sector. It relates to the culture, the public’s attitude, being ready for the global future, and the economy at large.
For example, out of 100 million Egyptians, only a minority are banked, only about 40% of the adult population. That’s one of the least percentages in the world.
People for different reasons opt not to bank their money. This means that a huge amount of the country’s resources are outside the formal sector. If we manage to bring a part of that into the system it would have an enormously positive impact on the economy.
We have seen many initiatives by different institutions, the government, the Central Bank of Egypt, the private sector. However, I believe our strongest tool at the moment is Fintechs and non-banking entities. It’s the platform that can bring in non-banked segments into the financial world of the economy.
This is a long process and its challenges go beyond just numbers. A case in point, if we look at how many people have digital wallets, we will notice that it is continuously increasing but when we examine how many are using them regularly or at all, the div will be a minority.
Shifting people’s attitudes and cultural perception is a whole other journey that we collectively need to take with the government.
We are seeing so many non-banking institutions that are offering financial services, which is great but Egypt is a big country, and it’s growing fast. We need a much higher level of involvement from all stakeholders.
Financial inclusion is very important as it impacts most elements of the economy.
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