Seven and a bit months into the float of the EGP, you could be forgiven for sometimes thinking there are more Egyptian companies looking at offshore investments than there are foreign investors looking at Egypt. To get some color on what’s fact and what’s fiction (or at least, to borrow from Mark Twain, “greatly exaggerated”), we sat down with Ali Taqi, managing director and head of commercial banking at HSBC Egypt.

Why take Ali’s pulse? He’s been with HSBC for more than 13 years and has served in the UAE, New York, Jordan, and Egypt. HSBC is a key conduit into the country for foreign investors — and works with businesses here that are looking to grow beyond our borders. Edited excerpts from our conversation:

EnterpriseAM: How have trade corridors changed since you moved to Egypt two-and-a-half years ago?

Ali Taqi: Egypt was a place I wanted to come to because it’s a strategic market for us and it has all the right things going for it. Trade is a fundamental piece of our business — we exist to facilitate trade. So trade corridors, trends, and evolution really matter to us.

Read the press or listen to the analysts, and they’re saying the same thing: We’re currently moving towards deglobalization. But that’s not what we’re seeing, and not what our customers are telling us. They’re actually seeing more globalization, they’re seeing more integrated supply chains. Yes, there have been some disruptions here and there, but the reality is that our business volumes — our trade volumes — indicate that trade corridors are growing.

MENA is a growth business for HSBC, and that growth is underpinned by the level of trade and investments into and out of the region. Egypt is a key market for us regionally — it has all the right fundamentals, it’s a growth market for us, and it’s also the heart of world trade from a geographic perspective.

We see Egypt trading more with China, Asia, Saudi, the UAE, and even Europe. We’ve prioritized Egypt for the implementation of our HSBC global trade solutions — a whole front-to-back modernization; Egypt has been put up as one of the priority markets for the project.

Meanwhile, supply chains are becoming a lot more integrated, and — as a bank — we are positioned to support that.

E: What’s driving trade growth for Egypt? How much of it comes from Egyptian companies looking to expand outward, or Chinese companies looking for a manufacturing base closer to Europe that has a trade agreement? And how much of it is Saudi and the UAE?

AT: It’s very balanced. The number of local companies that come to us that are looking to launch operations or set up shop in Saudi and in the UAE has increased many-fold, and that creates growth in multiple dimensions.

But we’re also bringing customers here. Investors from abroad see Egypt’s long-term fundamentals — they see the 100 mn people, the skilled labor force, the vast natural resources, the returns on their investments. They’re convinced of the Egypt story. This includes investors and company owners in Asia, southeast Asia in particular.

E: So, there’s appetite right now?

AT: We have specific clients that are doing due diligence as we speak. Challenges persist, but facilitating them coming here is our area of excellence. But ultimately, it’s balanced between local firms expanding abroad and foreign companies setting up shop here.

E: How important is China in the mix, now versus two and a half years ago? Are we doing enough to attract the Chinese?

AT: China is hugely important, for multiple reasons: The technology, the technical know-how that they bring, and the fact that they’re looking outbound — all of this makes it an essential market for us. It’s hugely important and you can’t miss out on that, I think, from a commercial standpoint. We already have a China desk here in Egypt. It’s been there for a number of years, and it operates across multiple disciplines. We’ve got it covering markets, trade, and payments.

I think a lot is being done to attract Chinese investors. GAFI came with us to China on a roadshow to speak with investors. We got very positive feedback about it and we’ve started seeing inbound interest on the back of that.

E: What are the big questions you’re getting about Egypt from outsiders, whether on the trade or the investment side?

AT: The past two years obviously have been challenging, with the stability of the FX regime being a primary concern for clients who want to make sure that they’re getting the returns that they anticipated. The fact that headline inflation is slowing and things generally appear to be moving in a positive direction has been encouraging for investors.

The past 18 months have seen much improved business friendliness, if you look at what GAFI has brought in in terms of simplifications — all of that has been positive. But investors need to see some stability, healthy volatility in the FX rate, and indicators moving in the right direction.

E: What is the mood among your Egyptian clients right now?

AT: They’re thinking of how to future-proof their businesses against any possible shocks on the macro level. I’d say the mood is: We’re in it, and we’re moving forward. Egyptian businesses are incredibly resilient, and their level of resilience and strategic thinking is quite remarkable.

But if we’re being realistic, there is also a bit of a “wait and see” approach. Everyone’s hoping and gunning for the best, because they see what international players see. But there’s a measure of caution.

E: What are some of the mistakes that Egyptian businesses make when they look outward? Are there hallmarks that indicate a certain business knows what it’s doing when looking to expand?

AT: It depends on the sector, but in general, the first key is to see whether they’ve mapped out the competition. Those who do well know exactly who their competitors are, and they know the areas where they could be efficient. They mapped it to a sort of SWOT analysis — their positives, their negatives. They found a gap and engaged in very meticulous planning of going around that map. They built a very rigorous cost revenue model. Strategically, they weren’t going after crazy growth — they were going after something that was sustainable. The revenues were there, and they knew they could get it.

What sets successful businesses apart is that the owner is typically very strategic about the “why.” It wasn’t about expanding because Saudi was the new thing — it was because they wanted to build a sustainable international business. They say: “I feel I have a product, a proposition that is lacking in some markets, and I feel I can bridge that gap” — that clear vision is key.

Finally, an awareness of human capital is another essential factor. They know exactly who to go for, which general managers — “How am I going to hire the best general manager, and what’s going to make me attractive to them? How do I incentivize them?” Those are all important questions to think about, and they’re ones that are often neglected.

E: Are there sectors where you see Egyptians getting more traction abroad than others?

AT: Egypt has a distinct edge on renewable energy and manufacturing. In terms of renewables, Egypt has an abundance of resources, a committed government strategy, and the human capital to execute renewable energy projects — that’s all exportable to another country where the government’s strategy is clear.

On the manufacturing front, we’ve helped a number of clients set up in Saudi Arabia — they went in with their manufacturing teams, because they know they can replicate their expertise over there, and they’re able to fix a lot of inefficiencies that exist in these sorts of markets.

E: It’s not rocket science to take a piece of a government infrastructure contract in Saudi, but it’s much more difficult to go in there and compete as a private sector actor looking to win private sector business.

AT: What we see from our business is that they compete on both fronts. Obviously the Saudi government does have a big role to play — they’re investing — but there have been many joint ventures that brought in Egyptian clients. We’re also seeing some of our smaller players be active in the Saudi market and bidding for private-sector work. It’s hit-and-miss, but it’s like any other market.

E: What is driving business for you at home in a high-interest-rate environment?

AT: A number of things. A key pillar for us is cash management — we’re seeing a lot of clients implement a much more rigorous approach to their cash management, because they want to self-finance as much as they can. We help them take their cash, help them deploy it in areas they want to shorten payments to suppliers, and we have the best-in-class cash management solutions.

I think the second thing for us is helping clients export. That’s been a huge driver for us. We’re quite competitive in that field, and we want to be the leading bank to support international growth. Finally, helping our client transition is another main driver of our growth. We do that by providing advice, products, propositions, among other things.

E: What challenges do you have in the portfolio right now?

AT: We’ve been fairly resilient because we’ve backed the right players, the right industries, and our strategy has helped us navigate those areas. We remain very well capitalized, and highly liquid clients recognize this and want to bank with us.

The challenges lie in the clients’ ability to be resilient, and that’s tied to the situation on a macro level.

E: Where do rates have to be before we see the first signs of appetite for borrowing?

AT: The way I see it, policy stability is more important than what the rate happens to be — whether it’s 20%, 30%, or 15%, I don’t think that is something that borrowers or clients look at. Business owners want stability. They want to know what’s in front of them, and they’ll take care of the rest. To me, it’s just about running a more disciplined business. They look at the situation and they say — what do we do now? Whether it’s negotiating different types of contracts, using international players, or even focusing on the local market.

E: What are you seeing in FX market dynamics right now? What are the signals that indicate that we’re on the right track?

AT: We think it’s on the right path, and I think the policies that were enacted have given a measure of confidence, but it needs a little bit of time to see that this will continue. You have to look at the main trends — inflation being one of them — because to us, as a corporate business, those indicators signal whether a client can sell, and that there’s the necessary purchasing power. If FX stability and availability continues in the long run, that would give international investors plenty of confidence. What we’ve seen so far represents a positive signal. That, coupled with Egypt being a fundamentally positive market, just drives a sense of cautious optimism.

E: If you would pick three industries that are obvious winners over the next 36 months, what would they be?

AT: Renewable energy is certainly one of those sectors, both in the short and long term. Manufacturing is another — particularly appliances and white goods. It’s a growing population, there’s plenty of demand, and Egypt’s position pushes this forward. Finally, I would include EVs and mobile phones — components and assembly, specifically. I’d add the agriculture industry as a fourth winning industry as well. If you look at what Egypt produces, especially with food security being such an important strategic issue globally, I think Egypt has a major role to play.

E: SMEs?

AT: SME for us is an important business that we do in Egypt. We see an opportunity to help clients move internationally. The SME business for us is very much centered around what we call the “new economy.” We launched Afaq, a dedicated proposition for SMEs where we are focusing on supporting trade, technology, and sustainability, as these three sectors are the pillars underpinning the new economy.

We are in a unique position to capitalize on the group’s advanced technology platforms to support this critical part of the economy, bringing truly global solutions to our local SMEs here in Egypt. Egyptian entrepreneurs are at a pole position of innovation and are the drivers for delivering the country’s future economy as it diversifies and connects internationally.

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