Business Today Egypt Q&A with Philip Blumberg

Business Today Egypt (PDF download)

Philip Blumberg Blumberg GrainQ&A with Philip Blumberg, chairman and CEO of the Blumberg Capital Partners group of companies and chairman of the firm’s investment committee.

Q: With the January 25 Revolution in 2011 and the economy ground to a near halt, many expected that real estate prices would ease. This didn’t really happen. Instead, activity in the sector slowed down. How do you see that has changed? Would you say demand is back at its pre-2011 levels?

BLUMBERG: With the sever slowdown in the Egyptian economy including financial, tourism and construction sectors, the natural outcome for real estate is a severe slowdown as well. Real estate values and construction activity are derived from the larger economy so until the Egyptian economy is stabilized spurred by governmental action, recovery will be at a trickle rate.

Important prerequisites to recovery are government and financial stabilization through pending IMF and US aid packages. Job creation is the key, however, and that requires confidence in Egypt to attract and maintain FDI and new manufacturing companies. One of our businesses, Blumberg Grain, is considering such an investment, which would also provide basic infrastructure to the agricultural sector allowing farmers to increase crop yields and income.

Kick-starting Egypt’s economy with economic development projects is the key to increasing construction and real estate activity. We are beginning to see a pickup in activity already, so it’s all the more critical to enhance this momentum. Egyptian leadership have big plans to stimulate the trade sector with new infrastructure. This focus on exports is also critical to Egypt’s future in terms of strengthening its economy and standing in trade and balance of payments. On the potential upside, consider Egypt’s superb trading position with Europe, North Africa, free trade status with much of Africa and its key role in the Middle East.

Once this economy stabilizes, it has the potential with appropriate economic leadership to be a power in the MENA region and beyond, much as Turkey’s role has grown in the world economy.

Q: It has been said that investors are now showing their willingness to consider opportunities in the Egyptian real estate sector. How would you describe these investors?

BLUMBERG: I’d describe those investors as leading edge, and leading-edge investors success is key to attracting the larger mainstream companies and investors. It’s this increase in economic activity that gets the real estate economy going as well.

We see long-term opportunities in quality office development, retail and residential projects. In the short term we see very considerable opportunity in the industrial and warehouse sectors. There is tremendous built-up demand for warehousing at ports, free zones and in the new projects being contemplated in the economic plan known as the Nahda, or Renaissance Plan.

These are more than just words, as we are preparing now to commit to a large scale investment in Egypt in this sector and to move to expand our manufacturing business with construction of a manufacturing plant and export hub in Egypt. The Hub will employ 1,000 Egyptians and potentially increase Egyptian exports by $6 billion (LE 40.39 billion) and the country’s GDP by 2.2%.

We have faith in Egypt and in our working with government leadership see a very strong and decisive effort to generate and support economic development projects like ours. As long as this continues we are optimistic about prospects for Egypt.

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