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Speeches
4 Dec 03 - Deputy Director's Comments at
'Egypt Invest 2003' Conference
Comments by USAID/Egypt
Deputy Director Mary Ott
During panel
discussion "International cooperation and the role
we all should play"
Part of conference "Egypt
Invest 2003: The Egyptian International Investment
and Trade Summit"
Thursday, December 4,
2003
Grand Hyatt Hotel, Cairo
As
delivered
Hello, and on behalf of the
United States Agency for International
Development, I’d like to thank the organizers of
this discussion and the conference as a whole. We
who represent the U.S. Government in Egypt and the
Middle East region believe whole-heartedly in the
approach that is being advanced by this
conference, which is that the private sector needs
to lead the way, and the role of the government is
to create the environment that allows trade and
investment to occur. I am interested to hear the
viewpoints of my fellow panelists and members of
the audience.
We were invited here to
discuss the role of “international donors.” I
think everyone in this room would agree that Egypt
needs to attract more investors to strengthen its
economy, but there is room for discussion on the
best role for donor bodies. What I’ll do is
summarize what USAID has done to date in
strengthening the environment for trade and
investment, and then I’ll preview some of our new
areas of assistance that will be coming on line in
the near future.
Our role at USAID is that
of a facilitator and a supporter. An aid agency,
on its own, cannot create jobs, and it cannot
increase exports. The private sector creates jobs
and exports goods. Therefore, we support
businesses, whether with loans, technology
transfer, or assistance to trade associations.
And we support educational institutions in
order to provide the skilled workforce that
investors look for. Since 1975, USAID has
contributed $764 million to education and training
in Egypt.*
An
aid agency, on its own, cannot improve the climate
for business: The government controls the laws,
regulations, and bureaucracy that shape the
business climate. Therefore, we serve as a source
of advice to the Egyptian government, advocating
for reforms and providing assistance to help the
government follow through on the reforms it
undertakes.
USAID does a lot of work on the
“macro level,” providing technical assistance to
the Government of Egypt related to policy reform
that produces long-term benefits.**
We have supported and will continue to
support the Government of Egypt as it moves
forward with policy reforms in the areas of
customs, compliance with the World Trade
Organization, intellectual property rights, fiscal
policy, the financial sector, and commercial law.
Currently one of our main emphases is helping the
Government of Egypt to modernize the financial
sector and systems of economic data. A new area of
cooperation that is about to launch will
concentrate on real estate financing.
[Topic: Access to
credit]
Policy reform is often abstract.
But USAID is also actively involved on the ground,
providing benefits that assist businesses in a
very concrete and immediate sense.
Many of
you are aware of the Commodity Import Program, or
“C.I.P.” This program provides about $200 million
a year in hard currency to Egyptian private-sector
businesses for the import of equipment and
materials. The businesses get the loans in U.S.
dollars, with repayment terms that are very
favorable, and they repay the loans with Egyptian
pounds. (By the way, those pounds stay in Egypt:
They go into a local fund directed to uses that
are jointly agreed-upon by the Government of Egypt
and USAID.)
The C.I.P. strengthens the
economy by relieving Egypt’s ongoing problem with
a scarcity of credit. Since 1986, more than 1,700
Egyptian firms have gained access to the C.I.P.
for loans totaling $3.1 billion. That allowed the
companies to continue providing a livelihood for
their 430,000 workers, and one in three borrowers
have told us the financing allowed them to
increase their employment. I should add that the
program offers special loan terms for companies
that are increasing their exports, and almost two
out of three borrowers report increased production
and sales.
Our assistance is increasing in
another category: Small and Micro-Enterprise or
“SME” lending. We in Egypt and the United States
Government in Washington believe very strongly
that “micro-loans” are a powerful way to stimulate
economic activity and achieve benefits in
excellent proportion to the cost. USAID’s SME
program is implemented by two banks, six business
associations, and a credit guarantee company.
Since 1990, those institutions have made more than
1.3 million loans, individually averaging about
2,300 Egyptian pounds, all together totaling more
than 3 billion Egyptian pounds. Those loans have
gone to some half a million Egyptian
entrepreneurs, and our reporting indicates that
the loans resulted in job creation totaling
275,000 jobs.
A majority of the borrowers
previously had no access to credit from financial
institutions. More than 80 percent of the loans
have gone to businesses in the “micro” category,
meaning they employ five workers or fewer. A
substantial portion have gone to women.
The SME program is growing: In fiscal year
2003, the program is lending at a capacity of 500
million Egyptian pounds per year. By 2005, the
lending capacity is on track to increase to 600
million L.E. per year, reaching a total of 700,000
borrowers.
USAID is also expanding the
types of bank loans that we support. In September
we joined with National Société Générale Bank in
creating a “green loan” fund that will finance
business ventures in clean energy and ecotourism.
The green loan fund can make loans in Egyptian
pounds up to the equivalent of $10 million.
[Topic: Customs reform]
In the area
of customs, USAID continues to work in
collaboration with the GOE to address problem
identified by the private sector. The challenges
have been acknowledged, and there a clear
commitment on the part of the Government of Egypt
to improve the situation. The Customs Authority
has been challenged by the Finance Minister to
make tangible improvements in the next six months,
and USAID will be supportive.
It is clear
to us that Minister Hassanein is dedicated and
enthusiastic about doing what is necessary to
speed up customs clearance.
I think I’ll
stop with that. I’ll listen with interest to my
fellow panelists, and I’ll be glad to take any
questions at the
end.
______________
Footnotes
*If you add up the total of USAID’s
direct spending on modernizing the Egyptian
economy, it comes to: $3.1 billion in the private
sector Commodity Import Program that finances
top-of-the-line commodities and equipment for
Egyptian businesses; $2.3 billion in budget
support that encourages the Government of Egypt to
continue with economic reforms; $1.2 billion for
agriculture to develop the sector and raise
productivity and incomes; and another $540 million
in private sector support.
**Importance of economic
growth: USAID is very concerned with trade and
investment in Egypt. By far the largest portion of
U.S. development assistance is aimed at economic
growth, and the priority is reflected in our
strategic plan. USAID’s highest-priority
"strategic objective" is to "strengthen the
environment for trade and investment." Under this
umbrella, we cooperate with the Government of
Egypt to improve the policy framework for trade
and investment, make the private sector more
competitive, and enhance opportunities for
business growth.
USAID’s approach to policy
reform: We encourage policy reform in part by
agreeing with the Government of Egypt on goals and
then providing budget support when those goals are
met. USAID has the most significant donor presence
in the policy reform area. There is no current IMF
program and the World Bank has a limited presence.
The Government of Egypt strictly limits its
borrowing for development. USAID coordinates with
the EU and other donors on policy reform.
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| This document was last
updated in Friday, August 20, 2004
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