The following is the text of my Keynote Speech at the Global Trade Matters/Egyptian Exchange 5th Annual Awards to Outstanding Companies in Egypt
Opening Remarks
First of all I would like to thank Ashraf Naguib, Managing Director of GTM, for inviting me to participate at this event.
Address the Key Guests
Mr. Karim Helal, Chairman of the GTM/EGX Strategic Advisory Board
Members of the GTM/EGX Strategic Advisory Board
Distinguished Guests
I bring you greetings from China, the faraway land with a civilization that matches your own in antiquity
It is a great honor to be invited to participate in this very prestigious event to celebrate the achievements of Egypt’s top companies, and the men and women who have made them successful
First of all, I would like to offer my congratulations to the awardees. Not only have you survived the The Great Recession of 2007 ( I will not use the “D” word) but you have thrived and prospered in the most difficult financial and economic conditions since the 1930’s. You have every right to be proud of yourselves. Give each other a pat on the back. You are the Best of the Best!
But precisely because you are The Best, you must be asking yourselves “What’s Next? What am I going to do next year? Has the world economy recovered? Or, will we be like Japan and lose a decade, or two?”
The HKG Story: China’s Proxy
Ashraf asked me to share with you my thoughts, concerns and optimism for 2010.
Before I go on, I have a confession to make. I am not an economist nor am I a banker. I am a bean counter (an accountant) turned stockbroker. I don’t have any grand theories of economic boom and busts, nor do I have a prescription for “saving the world’s economy”.
All of you present today, run huge corporations with thousands of employees and revenues in the billions.. The fact that you are sitting here tonight is proof enough of your success. So I am not going to try to tell you how to run your business
However, in the 40 years since I started working in 1969, I have observed at first hand a few economic cycles and I have been fortunate enough to have participated in the miracle that turned China from a backward agricultural economy on the verge of starvation into the economic powerhouse that it is today.
I am sure you are all familiar with China’s economic statistics and I will not bore you with the details. However, I would like to talk a little bit about China’s proxy economy, HKG.
When I first returned to HKG in 1971, the Hang Seng Index had just closed the previous year at 211. The average daily turnover was USD2.6 million and the turnover for the whole of 1970 was USD778.4 million.
By the end of 2009, the HSI closed at 21,872. The average daily turnover was USD7.9 billion and the turnover for the year was USD1,979.4 billion. Per capita GDP was USD30,088.
During the past 4 decades, HKG benefitted by being the proxy for China. Foreign companies trading with China did so through HKG, and Chinese companies used HKG as a window on the world.
When China opened it’s doors, Chinese companies used HKG as the platform of choice in raising capital and much needed foreign exchange. Since the first Chinese company (Tsingtao Brewery) was listed in HKG in 1993, over 300 Chinese companies have have followed raising some USD280 billion in IPO and subsequent fund raising. Chinese companies now account for over 30% of the listed companies, over 60% of the market capitalisation, and over 70% of our daily turnover.
HKG benefitted by being on the doorstep of China but that is not the secret to our success. Many cities have had similar opportunities but by not evolving as the times changed, fell by the wayside. A prime example is Kashgar on the Old Silk Road. For many years, it was the point of entry in China and prospered for many years by being the conduit of goods between China and the rest of the world. Look at it now.
By the way, I am sure you have heard about China’s USD2.3 trillion foreign exchange reserves. Over 10% of that came through the HKG capital markets.
Yes, HKG benefited by being on the doorstep of China but the key is that we changed from being a trade entreport to a financial intermediary and we contributed to the country’s development.
Egypt and North Africa
When I talk to Western bankers and economists, they see the world as 3 regions: The Americas, Europe Middle East and Africa (EMEA), and Asia Pacific. My view of the world is a little more complicated based on population, proximity and store of resources:
North America and Canada
Latin America
Europe
Middle East and Africa
Russia
Central Asia
China and Asia Pacific
I believe that Egypt and Egyptian companies can and do play a similar role in Africa and the Middle East i.e. be the conduit between the Middle East and Africa, and the consumer nations. In terms of population and resources, Africa has the potential of being a stand alone economic entity. Forty years ago, who would have thought that China would be the economic power it is today?
Africa and China
There is a final ingredient in the mix. Don’t look to your tradional markets for growth!
In the 1800’s, British trading hongs in HKG made their fortunes by being the intermediary between China and Europe. In the 1960’s this role was surplanted by Chinese trading firms.
However, China would not have prospered without that great engine of consumption, the USA. Many companies and individuals in HKG started their fortunes by facilitating trade between China and the USA.
Most forecasters have called for anemic growth in Europe and the USA. So, where should your companies be looking for opportunities if not in their traditional marklets?
The answer, of course, is China. The annual trade between China and Africa amounted to some USD100 billion. Most of this in exports of energy and mining products from Africa to China and imports of Chinese manufactured goods.
However, the Chinese government is encouraging domestic consumption as a replacement for weak exports to the USA and Europe. It is pumping USD586 billion into the economy in 2009 and 2010 as a stimulus package. And remember, a dollar in China goes much further than a dollar in the US. When you combine this with a population of over 1.4 billion, and household and corporate savings amounting to 150% of GDP, this makes for a very scary growth story.
Just imagine selling one of your products to every Chinese! And that by the way is not so far fetched. China Mobile, the largest of 2 mobile phone operators, has 527 million users.
Conclusion
The Chinese economy grew at a comparatively anemic 8.7% last year (because of the Financial Tsunami) after a decade of double digit growth. As the world economy recovers, I expect China’s growth to resume the previous trajectory and wil one day take over as the engine of growth for the world.
To the companies represented in this room tonight, The Best of The Best in Egypt, I encourage you to take advantage of this once in a lifetime opportunity to participate in the growth of the Chinese economy.
1.4 billion Chinese customers are waiting for you. Go get them.
Thank you.
