Repression, poor laws deter investment in Egypt -tycoon Sawiris

Mon Jun 30, 2014 11:52am EDT

* Billionaire says says not ready to invest in Egypt

* Message not good news for hopes of economic recovery

* Says iron fist policy toward opposition deters investment

* Legal changes also needed to protect investors -Sawiris

By Mirette Magdy

CAIRO, June 30 (Reuters) - Egyptian billionaire construction tycoon Samih Sawiris said he has no plans for new investments in his country while political oppression and legal failings continue to obstruct economic revival.

The largest Arab state is in urgent need of major stakes from magnates like Sawiris, who could invest millions of his own fortune and in so doing mobilise much from foreign investors.

It will be hard for Egypt to recover otherwise, since aid from Gulf Arab allies will eventually dry up and growth forecasts of about 3 percent are far below the level needed to create enough jobs to keep up with rapid population growth.

New President Abdel Fattah al-Sisi has made security and the economy his top priorities, pledging to pursue a crackdown on the outlawed Muslim Brotherhood and seeking local and foreign investments to supplement billions in Gulf aid.

More than three years of political turmoil since the ouster of veteran autocrat Hosni Mubarak in 2011 has scared off investment and tourism in the most populous Arab country.

Sisi, who toppled elected President Mohamed Mursi last July and as army chief launched a campaign against his Brotherhood supporters, must act quickly to address economic grievances which helped bring down two presidents in the past three years.

Sawiris, a member of the Christian minority that comprises about 10 percent of Egypt's population and largely backed Mursi's removal, said he was hopeful about Sisi but called for an end to the state's use of force and intimidation.

"If the oppression of innocents ... does not stop, the government will not take bold decisions to revive the economy and investment," he told Aswat Masriya, a news website sponsored by the Thomson Reuters Foundation.

Leaders from Mursi's year in office have been rounded up and prosecuted, sometimes in mass trials, with many sentenced to death. Courts this month sentenced three Al Jazeera journalists to seven years on charges including supporting the Brotherhood, stirring an international furore.

Several Mubarak-era ministers have also been jailed on corruption charges, including former finance minister Youssef Boutros Ghali and former trade minister Rachid Mohamed Rachid.

DIFFERENT STROKES

The primary barrier to investment in Egypt now is the fear generated by such tactics that prevent officials from taking bold decisions that might later land them in jail, Sawiris said in an interview earlier in June.

"I do not plan to invest in Egypt until there are changes to the legal system to support and protect investors," he said.

"Investments will not come to Egypt unless the legal system which governs executive action is revised."

The government approved a law in April preventing third parties from challenging contracts between the government and an investor, a tactic used by anti-corruption activists.

The new law was seen as a positive step for attracting investment, but Sawiris said other legal gaps mean officials remain afraid to take decisions, discouraging new investments.

Sawiris hails from a prominent family which controls the sprawling Orascom corporate empire. He runs Swiss-based Orascom Development Holding, which operates tourist resorts and real estate projects in Egypt and Europe.

His brothers, Nassef and Naguib, hold top managerial positions in Orascom Construction Industries and Orascom Telecom, respectively.

Naguib, who backed the opposition to Mursi, told Reuters days after the Islamist president's overthrow that he and his brothers would be "investing in Egypt like never before". Nassef set up an investment firm this month that announced two projects worth about $300 million.

For now, Samih seems to be breaking stride with his brothers, preferring to resolve a long-standing dispute with the government over land allocation before entering new projects.

Underlying his tempered approach is unease about the fate of Egypt's already dwindling middle class.

He said planned cuts to Egypt's bloated energy subsidies would hit this segment of the population the hardest.

"The coming period will be a massacre for the middle class ..., which will witness a new period of deterioration in its standard of living," said Sawiris. (Writing by Stephen Kalin; Editing by Mark Heinrich)

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Comments (1)
SetiOne wrote:
It never cease to amaze me how the 1% always demand our submission to their economic model, which works best for them so that we may enjoy the crumbs of their feasting on our resources.

The Egyptian government should be applauded for its attempt to get its people, especially the elites and upper middle class, to be more responsible and snap out of their dependence on handouts and subsidies that are debilitating the country with debt. This is not to mention the mindless waste of precious resources, like water and energy.

The progressive austerity measures aim at sharing fairly the debt burden, while shielding the most vulnerable in society. It is no longer acceptable let alone responsible for governments to continue with the defunct age of entitlement.

It must be said that it is the elites and upper middle class who are quite vocal (and heard with their privileged access to the media, like Reuters for example) about the loss of their privileges to those subsidies.

Sawiris and his fellow satellite (Egyptian elites) and foreign investors are unhappy about the minimum wage structures and that it will cost them more to do business in Egypt. It is no surprise that Sawiris and other predatory investors dwell with fervor on the importance of a free market that will correct the government’s ‘malfunction’.

No matter that, in so many instances of foreign investment in infrastructure privatisation, such as electricity and water, the most convoluted socio-economic reengineering can only produce a market, which is artificial, rigged, imperfect and imperfectable.

The satellite elites and the upper-middle classes should shoulder their fair share of the debt burden, instead of resorting to their smear and fear campaign of the new government.

Jul 05, 2014 12:03pm EDT  --  Report as abuse
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