|
TRADE TALK
BOLSTERING INVESTMENT: THE U.S. TRADE & DEVELOPMENT AGENCY
Given the success of the USTDA’s previous projects in Egypt, as well as the country’s large population and booming economy, the Egyptian private sector should actively seek out the agency’s many opportunities.
BY MAGDA SHAHIN
Director, Trade-Related Assistance Center (TRAC), AmCham Egypt
In the midst of the global economic downturn, banks are recalculating risk. Lending will now, and for a long time to come, be approached with a great deal of caution. This reality portends a financing and liquidity shortage that may raise significant obstacles to securing investment for new projects, notably large ones. The United States Trade & Development Agency (USTDA), which forges partnerships between foreign project sponsors and the US private sector with the support of the US government, is readily available to fill this void. Meeting with USTDA representatives during AmCham’s annual DoorKnock mission to Washington DC, we learned how Egyptian businesses and the government can capitalize on USTDA support with the right projects and the right approach. The timing couldn’t be better.
What is on offer?
USTDA grants, which are provided directly to overseas project sponsors for technical assistance, feasibility studies and training, are available to both government institutions and private entities (though the latter, or a public-private partnership is favored). The agency provides grant funding to overseas project sponsors for the planning of projects that support the development of modern infrastructure and an open trading system. Essentially, the agency’s interest is in facilitating economic development through infrastructure projects, job creation, training, the transfer of advanced technology, and trade capacity building – all areas of interest to Egypt.
The USTDA funds various forms of technical assistance, early investment analysis, training, orientation visits and business workshops. In addition to direct financial support, partnering with US firms can contribute significantly to the development of skills and managerial capacities. Acquiring USTDA support stands to benefit not only individual investors, but also the private and public sectors at large, relieving some of the pressure of unemployment and contributing to the vocational training reforms already in play in Egypt.
Opportunities abound
The USTDA is no stranger to Egypt. The agency has supported several projects in the country either directly or through its sister agencies, the Overseas Private Investment Corporation (OPIC) and the Export-Import Bank of the United States (Ex-Im Bank). These agencies help US exporters and the US private sector to invest in markets where apprehensive private capital may not otherwise venture.
In 2008, the USTDA’s portfolio of projects centered on three strategic areas: promoting best practices in energy and the environment; ensuring secure trade; and fostering open and fair trade. Notably, the agency funded assistance to promote the development of transportation infrastructure in Brazil and sub-Saharan Africa.
In Egypt, the agency has provided funding for a variety of projects. It funded a feasibility study for the setup of an integrated sugarcane and ethanol plant in the Kalabasha Valley near Aswan. It has provided EgyptAir Maintenance & Engineering (EgyptAir M&E) with a grant to upgrade its ICT infrastructure. Furthermore, it has funded an early investment analysis for the Egyptian Basic Industries Corporation’s (EBIC) ammonia production plant in Ain Sokhna.
EBIC has, by all accounts, been an incredible success. The USTDA-funded study, which was conducted by KBR, provided the foundation for the development and construction of a modern ammonia facility that now boasts cutting-edge technology and conforms to the latest global environmental standards. Moreover, following the completed study, Ex-Im Bank approved a $229 million long-term guarantee to support KBR in financing the construction of the facility. The plant began production in January 2009 and its progress to date has led to plans to replicate the project on a larger scale.
Given the success of EBIC, it is surprising that, in comparison to other countries, USTDA involvement in Egypt has been negligible. Excluding the major oil-producing countries, Egypt is the largest economy in the region and a regional success story. It is therefore disheartening to see USTDA’s conservative involvement in Egypt to date. Whereas USTDA invested in 91 priority development projects in Brazil in 2008, which stimulated a relatively modest $263 million in US exports, during that same year Egypt garnered investments in only three projects. The EBIC ammonia production plant alone generated more than $275 million in US exports of goods and services.
Egypt has a large population and hence a large domestic market and an abundance of labor. Investors from the US can diversify their business portfolios here and capitalize on the country’s increasingly enabling business environment. The agency should be ready to engage in this market and the Egyptian private sector should be more proactive in seeking and accessing the USTDA’s range of opportunities.
The basics: How to make use of the USTDA
During AmCham’s DoorKnock mission this year, meeting with USTDA representatives we learned some of the basics of acquiring USTDA funding and assistance – a process that in fact is fairly straightforward. The USTDA website offers a comprehensive guide on the application process, available at http://www.USTDA.gov.
Given the agency’s central goal of channeling the export of US goods and services into sustainable development projects abroad, it is essential to emphasize the mutual benefits of any proposed project, including the potential opportunities for commercial cooperation with US firms and the export of US goods and services.
To initiate the formal process of project consideration, a proposal must be submitted directly to the agency. The USTDA does not have a standard application form or deadlines; proposals can be submitted at any time. However, they should contain the following core elements: a description of the objective of the USTDA-funded activity, as well as a description of the project and its potential technical, economic and financial prospects; an articulation of how the proposed project will contribute to the mutual development goals of the agency and Egypt; a statement on the environmental impact of the project; a clear statement on the anticipated imported content of the products and/or services in question; and terms of reference for the proposed USTDA activity.
The Trade-Related Assistance Center at AmCham Egypt is available to assist in the preparation of proposals to help get projects off the ground. We are ready and able to act as a contact point to bridge the Egyptian business community with US private capital through the USTDA.
Marketing Practice
THE CHANGING FACE OF THE CONSUMER: IS RECESSION REAL?
Despite the increased reluctance of Egyptian consumers to commit to long-term financial obligations, Egypt’s huge population provides plenty of promise for businesses with marketing savvy. The trick is to identify where these opportunities lie and employ the right strategies to tap into them.
marketingpractice@amcham.org.eg
BY HEBA KELADA
Senior Research Director
Ipsos Egypt
In recent times, world news has been, for the most part, bad. Economies are weak: organizations are closing down, facing financial difficulties and resorting to redundancies. Times are tough and there appears to be a high level of uncertainty regarding when the light at the end of the tunnel will appear.
The economic downturn has affected different people in various ways, and to differing extents. So, what does the picture look like in the Middle East and, specifically, in Egypt?
In most countries around the world trust in the financial system has been crushed. In the Middle East, however, this phenomenon is less prominent, since in this part of the world consumer loan penetration is very low – the highest rate being 25 percent in the UAE and the lowest being less than 10 percent in Egypt. Therefore, there is no panic as a result of turbulence in the regional financial system, but this does not mean there should be optimism in Egypt.
While the picture looks gloomy in many western countries, overall confidence in the MENA region is better; it scored around 50 – out of a maximum of 100 – based on the 2009 Consumer Confidence Index (CCI) developed by Ipsos MENA Group. Saudi Arabia scored the highest and Egypt and Lebanon the lowest, only 32 and 30, respectively. Confidence is higher in oil-producing nations because, typically, these nations experience steady growth when oil prices rise.
Faith in the strength of economies to weather the current challenges varied greatly across the MENA region. Saudi Arabia exhibits the highest believability in the strengths of its economy. In Egypt, Jordan and Lebanon, however, consumers expressed much less confidence in the strength of their economies. Egyptians expressed even less faith that the economy is going to be somewhat stronger towards year end. Despite these views, trust in the Egyptian financial system is undeniable, as seen by consumers’ belief that their financial situation will become better in the coming five years.
In terms of consumption patterns, there is no doubt that there has been a reduction in consumer spending. While it was inevitable in leading world markets such as the US and Europe (primarily Germany, the UK, France and Italy), the picture in Egypt is not much different. Confidence in purchasing long-terms assets such as real estate or cars is not high compared to durables such as television sets and refrigerators. This is a natural pattern given the relatively high uncertainty about the future and the risk-aversive behavior that Egyptians generally exhibit.
Reluctance to commit to long-term financial obligations is also directly attributed to consumers’ confidence in job security – be it keeping their jobs or maintaining their current salaries. In Egypt the picture is as insecure as in the UAE, although employees in Saudi Arabia and Jordan have fewer worries about job security. We have witnessed more and more Egyptians losing their jobs in the UAE recently, and then returning to their home country. This number is expected to become even higher towards the middle of the year.
Looking at consumer spending over the last six months, the pattern has varied greatly. Consumers were trying to save on some items, but there were certain product and service categories that saw no change in consumption levels, namely, rent, utilities, gasoline, cigarettes and, to some extent, groceries, as well as telecommunications and the Internet. Areas where consumers sought to save include clothing and dining out, as well as travel.
Only affluent consumers in Egypt have expressed no intention of reducing future spending on holidays and consumer goods. These are niche markets that are primary sales drivers for restaurants, hotels, airlines, car makers and banks.
Despite the recession and changing consumer behavior, we are still a country full of opportunities, given our population of 80 million. The key is to identify where these opportunities lie and address them successfully. How? The answer is constant and consistent: the right marketing strategies.
Submit
your comment
Top
|
