Like a phoenix, Egypt economy is rising from ashes

At first glance, software engineer Ahmed Elhaz, psychiatrist Mohammed El Shami and furniture maker Mahmoud Shaaban have little in common: One writes computer code, another provides counseling and the third uses carving tools to ply his trade.

Yet all three are benefiting from an unexpected turnaround in Egypt’s long-suffering economy.

The country recently made a deal with the International Monetary Fund for a $12 billion loan that saved it from bankruptcy but also required tough austerity measures. Those demands are helping President Abdel Fatah el-Sisi — who visited President Trump at the White House on Monday — sweep out decades of dust in Egypt’s state-dominated economy and spur new businesses.

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IT specialist Elhaz, 30, has taken advantage of the spring cleaning, and it is paying off. In 2015, he and El Shami, 38, won a $60,000 government grant for their startup, Shezlong, which offers psychotherapy sessions to patients via their smartphones.

Less than two years later, Shezlong has acquired 14,000 patients. “At first I was apprehensive about the idea,” El Shami said. “But once I tried it, I loved how it optimized my time and saved me from the headache of traffic jams. For many of our clients, who don’t come from a culture that is always supportive of psychological therapy. The service has given them access to help they would have been shy about seeking in person.”

“Entrepreneurship is growing and young people have the ideas,” added Elhaz. “Egypt does have challenges but the new mindset will win.”

In a research note published late last year, Merrill Lynch said el-Sisi was tackling needed economic restructuring that was ignored during the nearly 30-year rule of President Hosni Mubarak, who was ousted in a 2011 uprising.

Bank of America said the IMF’s demand that the Central Bank of Egypt float its currency to reflect free-market forces — a move that sent the Egyptian pound plummeting against the U.S. dollar — created an attractive opportunity for investors. The IMF also required the government to trim food and fuel subsidies and reduce regulations.

While the currency drop and reduced subsidies inflicted punishing inflation on most Egyptians, the revalued pound has resulted in domestic products selling faster than high-priced imports for the first time since the mid-1980s.

Egypt’s trade deficit declined 44% in January from $3.49 billion to $1.96 billion in January 2016. In the same period, this nation of more than 90 million people boosted exports by 25%. Egyptian craftsmen are now competitive with countries like India and Vietnam.

“There was an instantaneous attraction for foreign investors and a huge competitiveness gain for the Egyptian economy with it being so much cheaper to produce goods and services here,” said Mohamed Abu Basha, vice president for research at Cairo investment bank EFG Hermes Holding.

In a dusty alleyway just blocks from el-Sisi’s Abdeen Palace, cabinet maker Mahmoud Shaaban, 43, is busy fulfilling back orders for customers looking to remodel their kitchens.

“People are staying in the neighborhood and coming to me for cabinets instead of going out to Festival City Mall and getting them from the big stores that import them from Malaysia and Vietnam,” said Shaaban. “I’ve been able to take on my nephew to help me out, and my brother is happy that his son has a job.”

For the past year, Egypt’s unemployment rate has hovered around 12%, but it is nearly double that for young people aged 15 to 29.

Now the low cost of labor is attracting foreign investors and creating jobs, especially for young people with digital technology and foreign language skills.

Customer service giant Teleperformance, which fields calls for corporate giants like Expedia and Vodaphone, has shifted jobs from Greece to Cairo, where wages are as much as 60% less than in Europe.

“My dad was a tour guide and he also speaks excellent English,” said Izzat Shehata, 24, a graduate of the Cairo University Faculty of Commerce. “But the tourism industry has basically collapsed here so I meet Americans over the phone, handling their insurance claims instead of showing them the pyramids.”

Transportation giant Uber recently said Cairo was its fastest growing market in the Middle East and Europe, success that reflects how authorities have allowed competition under the IMF’s guidance.

“We’ve had the right conversations with members of parliament and regulators,” said Abdellatif Waked, 29, Uber’s general manager in Egypt. “Things are moving in the right direction. In less than two years we have hired 50,000 drivers.”

“Necessary changes that should have happened years ago are finally happening,” he added. “This is the time to put the perfect platform in place and lay the groundwork for future growth in Egypt.”

Original PostedUSA Today

 

 

About the author: Thomas Yates

After finishing his Business Management degree Tom was looking to join a progressive company where he had the opportunity to have his own ideas listened to and implemented. It was a case of being in the right place at the right time as Rivermead Global were looking at taking somebody on and in 2009 Tom joined the company. If you are looking at buying a property in Egypt or Turkey you have come to the right people. Read our Ultimate Guide To Buying Property In Hurghada