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Egypt seeks to treble foreign direct investment to $30bn

Egypt is seeking FDI with a particular focus on textiles manufacturing and green energy Alamy via Reuters
Egypt is seeking FDI with a particular focus on textiles, manufacturing and green energy
  • Long efforts expected to pay off
  • Renewed confidence in Egyptian pound
  • Green energy a big target

Egypt’s new cabinet, formed earlier this month, wants to treble foreign direct investment into the country from the record $10 billion of FDI inflows recorded in  2022-23.

The ambitious target of $30 billion in FDI during the current financial year, which began on 1 July, has been set as Egypt cuts budgets and slows down state spending projects.

It may not be feasible without another multi-billion dollar deal similar to the $35 billion agreement signed earlier this year with the UAE’s ADQ to develop Ras al Hekma, according to analysts who spoke to AGBI



However, they expect FDI to increase significantly this year, after a years-long effort to attract international investors, the results of which may not yet have been fully realised because of local currency challenges and a subdued investor climate over the past four years. 

With renewed confidence in the Egyptian pound after the currency float in March, and interest rates across the world coming down, investor interest in Egypt is likely to increase.

“The Egyptian market is huge and the Egyptian government expended a lot of expenditure on infrastructure” in the past few years, says Amr Noureldin, former vice-chairman of the General Authority for Investment, the official agency responsible for promoting foreign investment in Egypt. 

Egypt, on the pivot point of three continents, with good access to European markets, was promoting itself as a “gateway to Africa”, Noufreldin says. 

The country has been hampered since 2019 by a global economic slowdown exacerbated by the Covid-19 pandemic and Russia’s invasion of Ukraine, along with a persistent foreign liquidity crisis that has made it difficult for businesses to operate.

At the same time, the current administration has undertaken a massive infrastructure drive, building thousands of kilometres of new roads and introducing new transport and logistics projects. 

It has also made efforts to cut red tape and ease the investment process through initiatives such as a 2017 investment law offering new incentives and safeguards for investors, and a “one-stop shop” that allows investors to manage bureaucratic procedures such as tax and visa issues with a single authority.

Nada Hashim, a senior investment analyst at CI Capital Asset Management in Cairo, says that while many of these initiatives have been around for more than five years, the benefits are only likely to become apparent after the devaluation of the Egyptian pound in March and as “we start seeing investors being more familiar with the new incentives”.

In particular, the General Authority for Investment is now targeting investment in manufacturing, textiles and green energy, sectors in which Egypt has a theoretical advantage given its low labour costs, geographic proximity to Europe and sizable solar and wind resources.

“There has been a lot of traction from Chinese as well as Turkish companies looking into opening textile factories in Egypt,” Hashim says. “After the devaluation, Egypt has become significantly cheaper in terms of labour costs, so we see the textile industry doing really well and attracting a lot of investment.”

During a recent European Union investment conference in Cairo, where deals worth a potential $72 billion were signed. According to subsequent statements made by prime minister Mostafa Madbouly, green hydrogen and green ammonia were the standout areas of interest. 

Green energy

Hashim says that this interest is particularly high from Europe and that the European Bank of Reconstruction and Development is likely to focus “all their funds” for Egypt on green energy.

Ayman Amer, chief strategy officer at CI Capital, an Egyptian stockbroker, says the biggest source of FDI is likely to remain the GCC, particularly the UAE, Saudi Arabia, and Qatar. In March, the Emirati sovereign wealth fund ADQ’s $35 billion deal to develop Ras al Hekma became Egypt’s largest ever foreign investment deal by far, transforming the country’s economic outlook.

Amer says that CI Capital expects FDI for this coming year to be around $12 billion but that this prediction does not take into account large Ras al Hekma-style deals signed with GCC investors.

“We might see another deal like Ras al Hekma quite soon,” Amer says, suggesting that ongoing talks with Saudi investors to develop Ras Gamila on the Red Sea could be the newest such agreement.

Monica Malik, chief economist at Abu Dhabi Commercial Bank, says that the government’s $30 billion target “looks ambitious, though we do expect to see an improved outlook for FDI compared to the previous few years.” The bank expects inflows of between $15 billion and $20 billion. 

The new finance minister, Ahmed Kouchouk, announced on Wednesday that Egypt’s total budget deficit was EGP505 billion ($10.5 billion) in 2023/24 with a primary surplus of EGP857 billion. The cabinet hopes to keep this surplus high, to bring Egypt’s debt-to-GDP down from more than 90 percent to below 80 percent by 2027.

Malik says: “Attracting FDI will be critical for boosting the GDP growth outlook, especially as the government will need to keep fiscal policy tight and progress with further reforms.”

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