Egypt Eyes Sovereign Fund By Year End to Shake Up State Assets

(Bloomberg) -- Egypt plans to launch its first sovereign fund by the end of the year and will begin a roadshow in the first half of 2019 to drum up private investment, the country’s planning minister said.

Modeled after sovereign funds in India and Malaysia, Egypt’s new investment arm will seek to generate additional wealth from under-utilized state assets rather than investing surplus oil and gas revenues as Gulf countries do. Partnering with the private sector, the fund will seek to attract domestic and foreign investment and build on economic reforms started in 2016 with the flotation of the currency.

"Egypt has a wealth of assets and companies that have not been properly used and mismanaged over many years, and we are ready to start a real partnership with the private sector to render them productive and more advanced," Planning Minister Hala El-Saeed said in an interview in Cairo.

The fund is the latest government measure aimed at reviving growth and investment that faltered in the wake of the 2011 uprising that ousted President Hosni Mubarak. The floating of the pound in 2016 and other measures such as reductions in fuel subsidies allowed Egypt to secure a $12 billion International Monetary Fund loan that has helped to restore some market confidence. Egypt also plans to raise up to 100 billion pounds ($5.7 billion) by selling minority stakes in at least 20 state-owned enterprises on the stock market.

Private Partnerships

The Egypt Fund will have an authorized capital of 200 billion Egyptian pounds ($11.2 billion), and will start with paid-in capital of 5 billion pounds, 20 percent of which will be injected by the government when it is set up.

The Egypt Fund will partner with the private sector to invest in a wide range of assets, including land and buildings, as well as stakes in state-owned companies at market value, the minister said. While the government will wholly own the Egypt Fund, the private sector will be allowed to buy stakes of over 50 percent in sub-funds and affiliated companies. The fund will also be able to invest in various financial instruments, stocks, bonds and other securities inside and outside Egypt.

The vehicle will initially invest domestically in priority sectors such as tourism, manufacturing, petrochemicals, pharmaceuticals and agribusiness that offer the potential for quicker returns, but could later explore international opportunities, El-Saeed said.

The fund has its own legislative framework which "gives the flexibility and will make the fund and its affiliated entities free from bureaucratic regulations that impede investors in Egypt", she added.

The fund will be managed independently and several sovereign wealth funds and major financial institutions have expressed an interest in either injecting capital or providing technical expertise, the minister said. The Abu Dhabi Investment Authority and the Oman Investment Fund helped in the drafting of the law and are providing technical support.

"The fund will work with investors in an environment that will be equal to any opportunity abroad,” El-Saeed said.

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