Investment and Foreign Trade Minister Hassan El Khatib took the stage yesterday at our EnterpriseAM Finance Forum in Cairo to speak with more than 550 senior members of our community about his priorities going forward.

For many of our readers, El Khatib needs no introduction: He managed a USD 10 bn portfolio as managing director for equities at the European Bank for Reconstruction and Development, with investments spanning 38 countries. He was a managing director at global private equity firm Carlyle Group covering North Africa and he was managing partner at EFG Hermes Private Equity. He also served on the board of the Sovereign Fund of Egypt and of the Central Bank of Egypt.

He is now Investment and Foreign Trade Minister — the long-shelved ministry was reinstated for the new Madbouly cabinet in line with state efforts to boost FDI and FX inflows — having entered government service this past summer.

Below are edited excerpts from our conversation:

ENTERPRISE: Your ministry is investment and foreign trade. What’s the message in that? What’s the mandate in having both portfolios under one roof?

Hassan El Khatib: The combination of investment and trade is the right combination. We need a voice for investments. We need a voice to address the problems for investors. We need someone to champion what needs to happen in the business environment to foster investment and to open the market for investment — but trade is equally important. It takes a combination of the two to fulfill the aspirations of the country, which is that we need to become a hub for investment, manufacturing, and exports.

We need to know where to play and how to win. We’re selecting a number of sectors where we have a competitive edge. We have lots of challenges, but we also have an opportunity.

E: What does an opportunity look like?

HK: There’s a real supply chain shift. The chapter that I see globally today is the West vs. China. This chapter is starting to be written, and we need to be part of it. Europe is moving away from their model of producing at the lowest possible cost — the efficiency model — and they have moved onto a resilience model, where they want onshoring and supply chains that are closer to their borders. So, you need to start looking at who will produce for Europe, that’s another opportunity.

Labor costs in Egypt are far lower compared to others in the region. We have a qualified labor force that — with some minor vocational training — can be top class. And we have talent in the engineering sector specifically.

E: Countries such as Vietnam, Morocco, and India step change in their exports and ability to attract FDI in less than ten years. What's the target for us in a decade as an economy? What can we accomplish in a decade?

HK: I know what we need to do, and the sky's the limit. You need the policies, you need the predictability, you need the transparency. If we get this right, Egypt will be open for business, and we’ll attract the right FDI. The global FDI pool is finite, but we need to be in the right position to capture enough of a share of that FDI.

It’s all about monetary policy, fiscal reform, crowding out, and trade policy.

Monetary policy is at the heart of what investors want to see. It is key to everything we do. What investors want is not a fixed currency, they want clarity about policy — and that policy should be inflation-targeting. We’ve never applied this. The new central bank board helped birth this narrative of targeting inflation rather than fixing the currency. The focus on exchange rate has been there for 30 years.

E: You spoke a moment ago about priority industries. How will you choose them? Is it based on job creation or export potential? What factors go into the mix?

HK: There are some sectors that are obvious winners — labor-intensive sectors like ready-made garments and textiles. If we do the right things, we can increase our exports from this one segment by USD 4-5 bn. We have industrial zones on the Sixth of October and the Tenth of Ramadan, but we need to do more in places like Minya and Beni Suef.

There are also the intermediate sectors — not high tech, but with some emphasis on tech and labor. Egypt is well positioned in the supply chain of feeder industry and white goods.

Then there are sectors that have huge potential and a competitive edge, like tourism, real estate, and medical tourism.

There are certain sectors that we’d like to support. You can’t really be a jack of all trades. I think focus is important.

E: What does support mean?

HK: Predictability, transparency, and policy. I think we have enough incentives — maybe too many incentives. It's now about having a proper business environment.

We want to be clear about our tax policy — we want it to be a place where we can pencil in the tax rate for the coming 20 years. Policy stability, predictability, and transparency — that’s what we want.

E: We thought that once we floated the currency, a flood of FDI would come in. This hasn’t happened. Was that expectation reasonable? And if not, when can we expect that flood to happen?

HK: Our emphasis isn’t on FX, it’s about having monetary policy targeting inflation. After 30 years of fixating on having a strong EGP, this isn’t our narrative anymore. Everyone’s waiting to see what the new government is going to do.

The top priority for us is to fix some of the problems facing foreign investors, as we’ve done as we have been finalizing the Agreement on Promotion and Mutual Protection of Investments between Egypt and Saudi. The Saudi private sector is very keen to invest in sectors like tourism and green energy. Our job is to facilitate those investments with policy. And that agreement also protects the large number of Egyptian companies that are investors in Saudi Arabia.

E: What are we talking about when we talk about privatization? Where do we see the program going?

HK: I’m not fixated on privatization — having a list of assets and trying to sell them. I’m an investor, I don't want to sell at the worst time ever. I want to change the whole program from having it be about selling these assets for the cheapest price. Instead, I want to talk about maximizing their value and the returns we get for them, move them to a sovereign wealth fund, have them be run by the private sector, and monetize them to generate more value.

Let’s take renewables, for example. Private participation is 1.8 GW for wind and 1.8 GW for solar. If we want 30 additional GW, we want it to be fully carried out through the private sector.

We need the private sector to invest USD 240 bn between now and 2030. I am confident that if we carry out the right policies, money will come.

E: How will the business community know that we’re on track when it comes to privatization?

HK: We need to work as a team. The government and business have to work hand in hand to make this new narrative a reality. When we’re on the right path we’ll know it.

The government hasn’t announced the new narrative yet — we’re looking at the challenges, setting up a plan, and making decisions. Once that’s addressed, we can have a clear path forward. And if we start seeing young Egyptian talent abroad come back to our country, I think that would be a success — that's a different measure. So, it's not about numbers.

E: You were in London last week with BEBA and our friends at HSBC — what was your elevator pitch?

HK: We’re a new government, we want to work as a team, we know the challenges very well, and we have a plan to address them.

We also need to talk about trade policy. The problem is we’ve always been fixated on an import problem, we don’t have an import problem at all. Our import to GDP stands at 20%. Our problem is exports, which are at 10%. We need to have it go up to 30% or 40%.

How many days does it take to clear goods? We will work with the teams in the ministries on this. First we can cut the clearance time by two days, then by another four to five days. It’s doable, but it needs work. Easing trade makes a huge difference in terms of the cost of products we sell on the market.

I’m hopeful that we can create an economy that’s open for business.