(Cairo) The recent formation of the board of Egypt’s first sovereign wealth fund puts the fund on track for operation after a long delay.

The new board, which was formed on May 23, is headed by Minister of Planning, Hala al-Saeed, and contains a large number of investment experts and bankers, including people who worked at the world’s most prestigious economic and business institutions.

Egyptians hope for the wealth fund to make the best use of its assets and attract investments from other countries, especially oil-rich Arab states that have enough financial surpluses to invest in Egypt.

“The fund is expected to revolutionize investment concepts and rules in our country,” said Yumn al-Hamaqi, an economics professor at Ain Shams University.

It will exploit our country’s unused assets whose value exceeds tens of billions of dollars

Egypt’s House of Deputies (parliament) approved a bill proposed by the government for the establishment of the fund in mid-July 2018. The fund is established with a total capital of 200 billion Egyptian pounds (roughly $12 billion). The capital of the fund will consist of state assets, investments by local and international financial institutions, investments by other sovereign funds and companies. The general assembly of the fund was formed in mid-May last year.

Hopes are pinned on the fund to diversify Egypt’s investments, shield the economy against unexpected fluctuations and energize investment partnerships with other Arab states, the government says. The fund, will bring in additional revenues to the state treasury by exploiting unused assets.

Egypt’s first sovereign wealth fund is small compared to funds managed by other Arab states. The sovereign wealth fund managed by the United Arab Emirates, for example, boasts a capital over $900 billion. Cairo says, however, that the fund is a good first step for future investments and financial gains.

“The capital of the fund will necessarily increase with time,” said independent economist Mutassem al-Shahidi. “The sovereign wealth funds of some of the countries of the region contained even less capital than Egypt’s sovereign funds has, but with time these countries succeeded in increasing the capital of these funds.”

The government will be trying to use the fund in diversifying investments, especially in sectors of the economy that do not usually attract the private sector.

Economists said, infrastructure projects and water and electricity plants do not attract the private sector, even though they are important to the general public.

The creation of the fund is part of a larger plan by Cairo to secure different sources of income

Egypt learned the lesson of depending on traditional sectors of the economy, such as the tourism sector, the hard way. The tourism sector was hit hard following the 2011 revolution and then thrown into total recession by the bombing over Sinai of a Russian passenger plane in late 2015.

Egypt has plans to become a major trade hub. In the second half of 2014 and the first half of 2015, Egyptian authorities spent billions of dollars to upgrade the Suez Canal by digging a parallel channel to allow two-way traffic for the first time since the opening of the canal a century and a half ago.

Nevertheless, the recession that hit the world economy a short time later negatively affected international trade, which had its toll on the Suez Canal. Economists say a sovereign wealth fund can shield the economy against unexpected fluctuations and secure revenues for the state treasury.

“The fund will also contribute to improving Egypt’s economic standing by creating jobs and raising economic growth,” Hamaqi said. “By attracting investments, the fund will incentivize production, increase exports and consequently raise the overall gross domestic product.”

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