Banking deregulation is key for Cairo

27 October 2009

With an underdeveloped banking sector, Cairo must finance economic activity using foreign investment

With relatively few natural resources, Egypt needs to build a diversified economy, capable of creating enough jobs to employ its fast-expanding population, which is also the region’s largest at 83 million.

Since its banking sector is underdeveloped and international lending has disappeared, Cairo must finance economic activity using foreign direct investment.

The Investment Ministry’s $24bn programme of infrastructure projects is Cairo’s first attempt to market a slew of investments rather than individual projects.

Investment Minister Mahmoud Mohieldin says investors will prefer to back projects with readily quantifiable returns on investment. He is probably right. Emerging markets need to compete with one another to attract a much smaller pool of global capital than was available two or three years ago.

Cairo is marketing attractive projects such as the two giant tourist developments in Marsa Matruh governorate on the country’s Mediterranean coast.

The programme of new projects runs until the end of June 2012. Cairo will need to approve and market plenty of others if it is to maintain flows of foreign direct investment over the next few years.

Egypt’s economy is continuing to open up, but it still needs to deregulate key sectors, such as banking, if it is to be assured of a healthy economic future.

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