The Kingdom of Forex and Egyptians' Money

“Using wicked ways to make you a victim; become rich quickly without effort”. This is the way of attracting investments in the foreign exchange currency market, Forex. Since the trap of the businessman named Nabil El-Booshi, leading manager of Optima stock exchange company, at the end of 2008, which gained him 60 million dollars, from the both famous and small investors, under the guise of investing it in the Forex for 'promised' returns ranging between 10% and 12% monthly; the activities of the market have doubled.

According to police reports and security investigations the total amount of money swindled out of investors reached 1 billion dollars (8 billion pounds). During the past 4 years investors have regarded it as the ideal place to invest and save, due to the small returns from other investment sources. At the forefront of these is the high interest rate of loans in banks and the bureaucratic hurdles encountered by anyone trying to set up a new company or an investment project. 

The Egyptian Central Bank opposes investment in the currency exchange market since it is considered unsafe, because it relies heavily on speculation and thus is a threat to investors' money. However, it is still considered the government's problem in failing to attract investors to legitimate safe projects.

The monies invested by citizens in the 'new' Suez Canal project reached 64 billion pounds in just 7 days. Similarly, signing up for Emmar Misr reached a total of 3 billion pounds. This confirms the availability of funds among citizens and investors, which are not properly targeted by the government.

An example of suspect activities was carried out by Capital Incorporation which managed to garner 300 million dollars from citizens under the guise of investment in Forex. Such activities are considered a contravention of statute no. 146/1988 regarding financial investment. 

“Forex” is an abbreviation of Forex Exchange which the foreign currency exchange market, which is considered one of the largest financial markets and the most widely active. Within this market, bids are placed on currency pairs, such as “euro-dollar”, where an investor would buy 'euros' due an expected rise in their rate versus the 'dollar'.

There are many international associations supervising the Forex; namely ASIC, MIFID, and FCA. Licensing by these associations is considered a mark of safety for the potential investor. If any of the companies break the licensing rules they are subject to fines and possible withdrawal of their license.
Their are 190 countries participating in Forex, with the exception of Egypt, which considers it an illegal sector, due to its reliance on speculation and unsafe investment.

There are only 3 Arab countries which consider the Forex legal; Kuwait, the Emirates and Lebanon.
An expert in dealing in Forex, Sherif Khorshed, explained that Egypt is not ready at this point in time to participate in Forex activities as it lacks the necessary supervisory methodologies and personnel, and without these the market would be left open to an infinite number of illegitimate and swindling activities under the guise of equity investment.

Khorshed has recommended the application of American and British Forex supervisory laws in Egypt, in order to save time and to benefit from their experiences in this field.  Many Egyptians have resorted to Forex because they do not trust the Egyptian stock market and the losses it entails. Most of those who invest in Forex think it is the foreign equivalent of the stock exchange and therefore lack the necessary knowledge and expertise. 

Dealings in Forex reach an approximate 5 trillion dollars daily, although it is impossible to know the exact amount of 'Egyptian money' invested since it reaches the Forex indirectly via illegitimate means. Another investment expert stated that as long as the government refuses to grant licenses to certain companies, investors will continue to fall victim to bogus set-ups whose only aim is to swindle investors out of their money, under the guise of Forex trading.

According to Mohamed Reda, a financial expert, the vast majority of Egyptian citizens suffer from low revenues in savings and investment accounts, and due to rising inflation, individuals try to find additional income in order to face life's difficulties. Another reason why the Central Bank may abstain from licensing new companies to deal in the Forex market is due to the fact that it wishes to limit outgoings in US dollar currency. However, this has not prevented rogue companies from luring Egyptian investors and ripping them off. In addition, the high rate of insurance on investment loans, compared to capital increases the dangers of clearing financial standing, should the market fall in opposition to speculation.

In summary, expansion into the foreign currency market involves great risks which can lead to the loss of one's entire capital in a single day. Hence, it is required to attract individuals to participate in investment projects thus benefiting both parties. Additionally, investors need to be educated and protected from marketing campaigns which could lead them to an investment precipice. This is especially the case when some Forex companies advertise having 600 thousand investors, which although may not be true, it does attract more individuals, who may not normally take the risk.