Project Neptune rising…

Project Neptune rising…

… amid renewed liquidity concerns

Innovations in Wealth Management Technology Awards 2014

Innovations in Wealth Management Technology Awards 2014

The rise of new players with technology at their core

Egypt’s reluctant finance minister gets to work

Samir Radwan was a surprise choice as Egypt’s new finance minister – even to himself. Appointed at the height of the chaos, the retired economist is working hard to sustain Egypt’s finances and economy through a period of extraordinary upheaval. Eric Ellis joins him in Cairo


IN EGYPT’S CHAOTIC last days of January, with his country convulsing around him and police abandoning their posts, Samir Radwan was on the streets in Maadi, one of Cairo’s more agreeable neighbourhoods, defending his hearth and home from the anarchy that’s rippling across the suddenly combustible ­Middle East.

When Radwan was satisfied that his street was secure against looting marauders exploiting the power vacuum, he returned home to tidy up his study – and instead saw his life change dramatically.

“I was clearing up my papers as I’d promised my wife,” he says. “I had hardly started when I got a phone call asking me to do this – to be the minister of finance.” He astutely ignores Euromoney’s inquiry as to who made the call, but it’s clear it was either Hosni Mubarak who, as history now has it, was in his last days as dictator, or his erstwhile placeman, prime minister Ahmed Shafik.

“I was not at all flattered, it was not that type of emotion,” the amiable 69-year-old development economist says. “It was a total surprise. I hesitated, it took a bit of discussion, and it was settled when Dr Ahmed Shafik, the prime minister-designate, then spoke to me and asked me: ‘Look, are you refusing to serve your country?’”And with that patriotic arm-twist, Radwan promptly became the United Arab Republic of Egypt’s 23rd minister of finance, a job he’d never imagined he would be doing.

“That [phone conversation] settled it for me,” Radwan says. “Something inside me said: ‘Look, go, give it a try... if you don’t serve now when would you serve? When we are living a comfortable life?’ So there you are. Voilà!”

Radwan smiles, remembering the bewildering sequence of events as Mubarak was scrambling to save his 32-year presidency by replacing his cabinet of cronies with a platoon of new technocratic ministers he hoped would be more acceptable to the masses baying for reform from Tahrir Square. “So I went down, I think I was the last to arrive at the palace, and I took the oath and I haven’t looked back since.”

That’s just as well. After 11 days in office, Radwan would see his notional patron Mubarak step down as Egypt’s strongman. Radwan’s predecessor, Youssef Boutros-Ghali, the nephew of a former UN secretary-general, who had been sacked to placate the Tahrir Square demonstrators, fled Cairo for Europe just hours before Mubarak’s resignation. Seen shopping on London’s ­Oxford Street, he’s now sought by Interpol on corruption charges. And then, on March 7, prime minister Shafik, the man who had telephonically tweaked Radwan’s nationalism and who Mubarak had appointed as prime minister the same day as Radwan became finance minister, resigned the office he’d held for just five weeks, also to placate the Tahrir thousands pressing for a clean break from the Mubarak regime.

Two months on, Radwan is not only still in office but is doing what he can to stabilize the Egyptian economy, which suffered as protests gathered momentum. He’s also trying to regenerate jobs for Egypt’s 60-million-strong workforce and busying himself with this year’s budget. Indeed, he’s operating as if his tenure will be open-ended and not, as is highly possible, until after Egypt forms its first democratic government, which he could well be in anyway if he does a good job. “I am working as if I am here forever, because if I accepted to be a minister under these circumstances, then I would not look back,” he says.

That’s all very well but Samir Radwan’s role in recent events raises a crucial question – how has he, a Mubarak-era appointee in one of the critical offices of state, managed to avoid the wrath of the Tahrir protesters?

The answer seems to lie in Tahrir Square itself. As the sun set after evening prayers at this now historic heart of central Cairo, Euromoney embarked on a vox-pop of the vast expanse of the capital’s Nile-side downtown to ask that very question. The answers were almost uniform – few know who Radwan is. So by extension few see him as a Mubarak crony. Samer Soliman, a prominent democratic activist and professor at the American University in Cairo, says that Radwan is a good choice for the finance portfolio. “He’s never been part of the putrid regime,” he says, about as high a compliment as can be made in Cairo these revolutionary days.

Radwan has spent much of his life outside Egypt, in the comfortable environment of Geneva where he worked as a senior economist-researcher writing papers and proffering advice on ­industrial relations for the member states of the UN’s International Labour Organization. Radwan retired from the UN in 2003, returning to Cairo with a useful pension to run an economic think-tank and consult for such bodies as Egypt’s financial regulator and its state investment agency. In the weeks before he got the call to serve, he had been setting up an institute focusing on enhancing services and governance in Egyptian financial and capital markets. Radwan is known to Cairo’s small technocratic core as a safe pair of hands, one of the country’s few economic intellectuals and – he claims – a committed democrat. However, it’s an anonymity that puts him beyond the consciousness of most of those who populated Tahrir Square.

“My life now has changed in the sense that all I do is work, 13 to 14 hours a day, I have no private life, I don’t see my family so much. We meet in the corridor, which keeps the marriage going. But it’s a very important job and I have full trust.”

Radwan’s years in Europe have made him an unknown in his youthful homeland. While that perhaps might not sate a statesman’s ego, Radwan is more than comfortable with his relative obscurity. Indeed, it has proved mightily useful as protesters scour government ranks to lay siege to anyone they regard as Mubarak-tainted, sensitive to well-founded suspicions that the strongman they ousted in a remarkable example of people power would simply dictate terms from the edges via appointed loyalist placemen such as Ahmed Shafik.

Under the radar

Indeed, in the modern techno-context of this spate of Middle East intifadas, Radwan is so under the popular radar in Cairo he didn’t have a Wikipedia biographical page about him until March 8 this year, such are the modern emblems of celebrity. The finance ministry website simply says “being updated” next to the Radwan biography link, while still displaying details of his tainted and now hunted predecessor Boutros-Ghali. Even to this day, his Wikipedia entry carries only one line of biography: “Samir Radwan is an Egyptian politician, the current Minister of Finance, appointed at the end of January 2011 by Hosni Mubarak. He is an economist with a liberal viewpoint, interested in employment and human development issues.”

That description was certainly not written by Radwan, a graduate of the secular Cairo University and London University’s School of Oriental and African Studies. Yes, he says, he’s a liberal and yes too, he’s focused on labour and development. But, as a self-described dyed-in-the-wool Keynesian, Radwan rails at being described as a politician. He is not a member of any political party, and the finance ministry is his first ever formal political post. At 69, this former economics lecturer at St Antony’s ­College, Oxford, seems almost bemused to be a cabinet minister, though no less honoured as a proud – and concerned – ­Egyptian.

And he also rails at being regarded as a Mubarak crony, his time abroad broadly corresponding to the Mubarak era. He says he was no political appointee to the ILO – “it doesn’t work that way, there is no national quota, thank heavens” – and is and was beholden to no one in the Cairo establishment. “I am definitely my own man, and this is personally very liberating. I am not in conflict, I have always been known as someone who has his own mind, independent and policy-oriented. My strength is policy.” He is bemused that over the many years he has advised stricken governments from Poland to South Africa, “as thousands of screaming youths are in the street and the minister asks me: ‘What shall I do?’” that he should find himself in that situation in today’s Egypt. “I’d be a liar to think that all this could have happened here.” Indeed, he says he is now being urged to “walk the walk” in his homeland after years, as he says, of “talking the talk, to put my money where my mouth is.”

Perhaps it’s the suddenly enlightened mood of the times but Radwan is disarmingly frank for a minister whose job it usually is to put a gloss on state affairs. “I don’t think anyone can dispute we have a massive job ahead of us, but that also makes it an opportunity to create a new Egypt from this chaos,” he says.

We are talking in the back seat of the minister’s official car as it crawls through the gridlocked streets of Cairo, where Radwan is on his way to a cabinet meeting a short distance across town. The journey is an eloquent statement of this new era for Egypt, of Radwan’s modesty, and perhaps too his lack of clout and political history. Only a few weeks ago, when it was still the Mubarak era, a minister on the move would have police clearing traffic ahead, sometimes cracking heads as they went. A phalanx of outriders would flank the limousine, trailed by an entourage of ministerial hangers-on and security.

But today the only evidence that this is a VIP is that Radwan is in a late-model black Mercedes, a contrast to the maelstrom of battered Kias, Fiats and Nissan Cherrys driven by the Cairo Everyman. There are no bodyguards in evidence. The suited official in the front seat is Radwan’s personal assistant and diary-keeper, ringing ahead to say his boss might be late to the cabinet meeting. “Security is the least of my worries,” Radwan says.

Radwan hasn’t contrived a display of ministerial modesty to make a point to a journalist in these trying times – 30 minutes earlier he had cancelled this interview because he suddenly lost the gap in his agenda to fit it in before this more important meeting of men who might well not be in office in a week, such is the fractious mood of the nation. Indeed, it was at our own suggestion to ride with him that he finds Euromoney seated alongside as he makes his way through Cairo. It takes an hour to make a six-kilometre journey across the city, passing Tahrir Square where a rump of protesters are calling for this government to go.

Jobs, jobs and jobs

Radwan says he’s been writing about “these issues that young people are demonstrating about” for a long time. “My writings are known to all of them. I think I have their respect. If I go tomorrow, then I have stirred some feathers, put some ideas with a stamp of the minister of finance on them. But if I am here for six months, it is a bit of breathing space to give to those ideas, to give them some substance so they can take root. It’s the only way I can operate.” Switching briefly to the third person, he adds: “The popularity of the minister of finance is surprising even to himself. People are comfortable, they find I’m accessible.”

Marooned in gridlock, we ask Radwan what are the most important items on his to-do list. “I see three things as the most important,” he says. “They are jobs, jobs and jobs. Short, medium and long term its jobs, jobs, jobs, jobs, jobs.” It’s here where the old ILO stager is in evidence. “Unemployment doesn’t really mean a thing in this economy where there is a large informal sector. It’s a low-productivity economy and that means it’s a low-income economy. People wonder why the high growth that was happening in the last few years before the financial crisis didn’t trickle down. Yes, there is unequal distribution of wealth, that’s true, but I think also if you have 42% of the labour force illiterate or semi-literate, how can you claim any share of the cake? It is those boys and girls who speak languages and who are connected who get on. And 42% happens to be exactly the measure of people below the poverty line.”

And then, as if on cue, a beggar in rags approaches the gridlocked Mercedes, soliciting for money while clutching her stomach. Radwan’s assistant gently gestures her aside. Little does she realize the prize sitting in the back of the car. Radwan smiles: “She doesn’t know and she doesn’t care.”

Egypt’s richest man, the telecoms tycoon Naguib Sawiris, estimates that the state sector built up by Mubarak, partly to reward cronies, controls about 70% of the Egyptian economy. Radwan disputes that number, saying it is closer to 35%, but agrees that massive reform is needed.

The American University’s Soliman worries that the current political vacuum makes it ripe for Cairo’s state sector to evolve into Russian-style oligarchies, deploying the financial clout derived from these cloistered empires. Indeed, many Egyptians believe that these state institutions are where the Mubarak family wealth – variously estimated to be between $2 billion and $60 billion – has been salted away. The family is alleged to have kept secret accounts at the state-owned National Bank of Egypt. In March, the NBE’s chief executive, Tareq Amer, reportedly said that senior members of Mubarak’s National Democratic Party illegally made $17 billion in loans without guarantees. In late February, Amer – a former deputy governor of Egypt’s central bank – had insisted to Euromoney that the NBE was run “strictly on world-standard commercial lines”.

Radwan says: “You have the government, and then you have the public business sector, the state institutions, and that’s where the bulk of the state’s wealth is.” As for retrieving ill-gotten regime assets, he says: “This is very important but we would like the law to take its course. We are not out to frighten the private sector, we need the private sector. We should be very careful about these things. We will do it in a transparent and legal way, which is what the people are demanding.”

Radwan says privatization is a pressing agenda item for him. “Privatization in Egypt has been an unhappy experience because it went very slowly and then stalled. And then there was this idea of using the proceeds of privatization to distribute sukuk [Shariah-compliant financial returns, such as bonds] and that really was not acceptable to the people. There was this suspicion as to why the government would be handing out money. The credibility gap was tremendous and it was abandoned.”

Radwan has seen how sovereign asset funds have developed elsewhere and is impressed at the way statist Malaysia and ­Singapore have gathered their state jewels – their airlines, telecoms, defence industry and key banks – under the banner of Khazanah Nasional and Temasek Holdings. He proposes a similar structure for Egypt. However, it is not clear that would work in a system that seems about to become boisterously democratic, unlike Singapore and Malaysia. “The idea is to pool the public sector in one company to be run like the private sector, that buys, sells, divides, merges but on very professional private-sector lines, a state holding company like Malaysia did with the famous Khazanah. I’m proposing this idea to end this stalemate where companies are losing, we are running the danger of losing a lot of wealth and the workers are getting very irritable.”

Radwan see this proposed entity as positioned to pursue Egypt’s much-vaunted Desert Development Corridor – an ambitious $25 billion infrastructure proposal conceived and subsequently stonewalled under Mubarak – that has been dusted off by this interim government. The proposal envisages developing a 1,000-kilometre north-south stretch of the Nile Valley from Cairo to Aswan with superhighways and railways, as well as water and power grids. As for foreign investment, Radwan says: “We are open for business. Foreign investment has come off, understandably, but once it comes back it comes back quite strongly. Of course it could be better, we want it to be better and secure and we will make it so.”

Careful spokesman

Despite the turmoil around him from day one, Radwan hit the ground running. For a few days as Mubarak teetered in early February he emerged as a careful spokesman for the regime, at times appearing to be the only minister of state willing to have a public presence. He delicately avoided appearing to be Mubarak’s apologist while appealing, unconvincingly in the main, to protesters to believe that this dying government’s hastily made commitments to reform were genuine. That burden lifted on February 11 when Mubarak fell and Radwan moved to more substantial matters of state, calling for relief on Egypt’s $32 billion in foreign debt from offshore lenders “if they are serious in wanting to help build this new Egypt”.

His preference would be for debt swaps like those Cairo received for its political support for the US-led war on Iraq. “These were good, I’m asking for a repeat of that or any experience or modality our friends the Americans used in Pakistan and elsewhere. It’s an opportunity.” He also likes the style of Thai finance minister Korn Chatikavanij who, after his government wobbled and then confronted political turmoil in Bangkok, took his ministry’s message to the field. Radwan has a similar mantra to Korn’s, that the finance ministry isn’t just about managing the state’s money and funding government function, it’s about the livelihoods and the empowerment of normal Egyptians.

It’s language that Radwan’s predecessors might have used but would have been unlikely to practise. “People take a minister of finance more seriously than, say, wishy-washy labour. They know a finance minister is a serious guy.” Tax-wise, he admits: “I’m not collecting everything but the fundamentals are not bad. I think I’m getting about 75% of what I should be.”

Still, a little scaremongering in the fashion of regional leaders does not go astray. “The battle is not over,” he says. “There are forces sleeping in the wings and they can come up at any moment, Islamism and old bureaucrats as well. They are just hiding and they could come up and throttle this movement, which is not organized.

“Egypt is a leader and it has become very clear that we are the weight in the region. If you don’t stabilize Egypt, the region can suffer. I’m not saying don’t change the other regimes, let them do what they want.”

He jokes that Egypt should have patented the political slogans of the Tahrir Square movement, now being deployed in intifadas elsewhere in the Arab world. “It’s pan-Arabism, finally coming to fruition. The royalties could have helped us immensely!”

Not just business as usual

Radwan is convinced the economy will quickly stabilize. “I don’t want it to be business as usual, I want it to be better than usual,” he says. “We have the fundamentals to deliver, no doubt about it.” But then, in mid-March, a setback came for Radwan’s New Egypt. Ratings agency Moody’s lowered Egypt’s foreign-currency and local-currency government bond rating to Ba3 from Ba2. Citing the continuing political volatility and unrest in neighbouring Libya, where thousands of Egyptian migrant workers suddenly lost their jobs as Gaddafi laid siege to his own country, Moody’s said it was maintaining a negative outlook on Egypt’s ratings during a transitional “process fraught with uncertainty”.

The agency said: “In Moody’s opinion, this extended period of political disturbance undermines Egypt’s institutional strength and raises event risk, at least over the short term.”

Radwan forecasts that Egypt’s economy will grow at between 3.5% and 4% this difficult year and he’s budgeting on the assumption that in these times of turmoil in the oil-producing Middle East the oil price will not fall below $100 a barrel. He sees the democracy movements continuing to spread in the neighbourhood but notes that “Saudi Arabia is not Libya”.

“What I like about the democracy movement is their freshness. It’s not like they have a blueprint for the economy but their heart is in the right place”

Samir Radwan
Although the Cairo stock exchange has been closed for trading since January 30, the day before Radwan took office, he commends the Central Bank of Egypt’s governor, Farouk El-Okdah, for doing “an excellent job” in keeping the Egyptian pound relatively stable and foreign reserves untouched. The pound has fallen about 2% against the US dollar since January 25 when the anti-Mubarak protests first flared. “He had a small reserve beside the official reserve like any astute governor would, a rainy-day fund,” Radwan notes. Indeed, NBE boss Tareq Amer admits he has “been in the room when senior officials had made demands of the central bank, only to be refused by the governor”. Radwan observes that El-Okdah, who did not respond to interview requests, “has been under tremendous pressure”.

The Radwan Mercedes passes a portrait of modern Egypt’s most celebrated strongman, Gamal Abdel Nasser, the most passionate recent advocate of pan-Arabism, who died in office in 1970. Seen as a champion of Egypt’s poor, Nasser is enjoying a nostalgic revival in the post-Mubarak era. As a youth, Radwan’s personal politics were forged in the populist Nasser era. “We were kids in the 1950s, the 1956 attack by Britain, France and Israel. What would you be?” Of himself, mindful of his career at the ILO, he cites that old aphorism: “If you are not a leftist before 30 then you have no heart, but if you are still a lefty after 30 you have no bloody brain!”

He continues: “Of course I’ve studied all the great philosophical tracts. When you study economics, you have to study Karl Marx, everything from Marx to John Maynard Keynes. Keynes is my hero. I’m very glad he has been rehabilitated. What separates me from some of my colleague who are now my critics is that they are ‘1970s World Bank’ and I am Keynesian.”

Radwan says he has been speaking a lot to leading members of the “loosely formed” democracy movement. “They have no head, they have no party but they are very well organized and identifiable groups. They come to my office, they sent some representatives and I’ve enjoyed that, it’s very good.” He says the infectious mood reminds him of his own student years in the London demonstrations of the late 1960s alongside Tariq Ali, who remains a close friend, as he was of the late Benazir Bhutto, whom he taught at Oxford. “These democracy groups know that they want a clean slate, a tabula rasa. Beyond that, they are out of their depth.

“The Egyptian elite is defunct, rotten. I am part of it, by virtue of age, and I have said that to them more than once. But money has never really been important to me. Besides, if you are not a millionaire by the age of 45 you never will be.

“What I like about them [the democracy movement] is their freshness. It’s not like they have a blueprint for the economy but their heart is in the right place. What these young people have done in 20 days we have not managed to do in 20 years. I am very proud of the spirit that has been sweeping through. I am proud of Egyptians, we are not like some of our neighbours.

“What has been happening is beyond anybody’s expectations. This has created a space for demands, some legitimate, some not, and whatever the cost of this destruction it is worth it for the country because it was caught in a sclerosis syndrome. We now have to get on with running the country again.”


You must be a trialist or subscriber to view this content

Please Subscribe or take a Free Trial below.