Vague state policies frustrate Egypt business leaders

* Government speaks of mega-projects, economic reform

* Investors wonder how and when it will happen

* Annual conference returns but foreign investors scarce

By Shaimaa Fayed and Asma Alsharif

CAIRO, Oct 10 (Reuters) - Business leaders voicedfrustration with Egypt's government at an investment conferencein Cairo this week, where officials pledged to revive an economybattered by political turmoil but offered few details on policy.

The new Islamist-led administration that emerged from lastyear's popular uprising has secured some aid from foreigngovernments to head off a fiscal and balance of payments crisis.

Investors are now waiting for the government to reveal adetailed strategy for reining in an unmanageable budget deficit,including changes to a system of state fuel subsidies to ensurethat subsidies only benefit those who need them.

Only then is the International Monetary Fund likely to agreea $4.8 billion loan, a stamp of approval seen as necessary toend a drought of inward investment, bolster weak foreigncurrency reserves and bring down sky-high state borrowing costs.

Prime Minister Hisham Kandil and Investment Minister OsamaSaleh spoke of mega-industry projects, petrochemical expansion,a launch of Islamic government bonds and new public-privatepartnerships worth $8 billion.

Kandil forecast economic growth of around 4 percent in thefiscal year to the end of June, above the 2.7 percent seen byeconomists in a Reuters poll last month. Growth was around 2percent in 2011/12.

Business figures, however, said they were left wondering howand when it was all going to happen.

"They were not speaking openly," said one local investmentbanker who attended the sessions. "They spoke in a vague mannerand did not shed light on many important issues and did notallow questions and answers with the officials."

Egypt's stock market has rallied by more than 50 percentsince President Mohamed Mursi came to power in June, but gainshave been mostly driven by local retail investors.

Foreigners have tip-toed back into the treasury bill market,helping yields ease from historic highs, but central bankforeign reserves are yet to recover, with little sign of a majorincrease in foreign inflows.

Firms say they need more clarity on politics - Egypt stilllacks a new constitution and a parliament after the previouslegislature was disbanded by court order - as well as oncurrency policy and have lingering doubts over the legality ofinvestment deals signed under Mursi's predecessor Hosni Mubarak.


The Euromoney conference, which has been for many years thehighest-profile investment event in Egypt, did not take placelast year as an army-backed interim government grappled withpolitical turmoil and unrest.

Egypt has avoided the worst-case scenario of a fiscal crisisand unruly currency default. Euromoney's return to the economiccalendar helps restore a feel of normality.

But this week's gathering was more downbeat than in pastyears when more ministers attended and took part in moredebates. There appeared to be fewer foreign investors present.

In a sign of more uncertainty for investors, governmentofficials signalled at the conference that new probes of dealssigned under Mubarak were needed to ensure the state gets a fairprice for assets it sold.

Challenges to Mubarak-era state land sales helped push thecountry's formal real estate sector into crisis last year butmany of the cases appeared to have been settled by the timeMursi arrived in office.

The target of an IMF deal in November means the governmentmust move fast to complete a social dialogue it insists isnecessary before unveiling economic reforms that will impact theday-to-day life of Egypt's 83 million population.

Mursi's administration is keen to show citizens it is moreresponsive to the people who elected it and mark a clear breakwith Mubarak's autocratic ways.

Business leaders say they need a clear plan to relieve themfrom heavy bureaucracy, tackle corruption, lower borrowing costsand make the economy more competitive before growth andinvestment can pick up.

Haitham Moneim, head of investor relations at carpet makerOriental Weavers, said the government must tell Egyptianmanufacturers its plans for them.

The company had "an aggressive expansion plan worth 1billion Egyptian pounds ($164 million). We stopped it now," hesaid. "We will not buy machinery or things to generate top linegrowth or sales until there is a clear direction."

($1 = 6.0893 Egyptian pounds)

(Additional reporting and writing by Tom Pfeiffer; Editing bySusan Fenton)

((thomas.pfeiffer@thomsonreuters.com)(+202 2578 3290)(ReutersMessaging: thomas.pfeiffer.thomsonreuters.com@reuters.net))