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Egypt pins hopes on FDI to offset domestic woes 

Egypt's prime minister Mostafa Madbouly and his finance minister Mohamed Maait. Egypt plans to sell state assets to attract $40 billion in investment Reuters/Amr Abdallah Dalsh
Egypt's prime minister Mostafa Madbouly, left, and his finance minister Mohamed Maait. Egypt plans to sell state assets to attract $40 billion in investment
  • World Bank will help to sell 32 Egyptian state-owned companies
  • Egypt has over 1,200 investment opportunities
  • Weak Egyptian pound has deterred foreign investment

Egypt’s faltering privatisation drive was given a shot in the arm this week after the government announced that it had entered into a five-year partnership with the International Finance Corporation to sell off state assets.

Under the partnership, the IFC – the private sector development arm of the World Bank – will help to structure and prepare 32 state-owned companies for sale.

“We’re now embarking on offering these companies to investors and divesting from companies like Vodafone Egypt,” Hossam Heiba, president of Egypt’s General Authority for Investment and Free Zones (Gafi), told AGBI.

Heiba was speaking at an event hosted by the Arab British Chamber of Commerce focused on investing in Egypt, called A Glimpse into Egypt’s Emerging Investment Opportunities.

Telecom Egypt, which is 70 percent owned by the Egyptian government, holds a 45 percent stake in Vodafone Egypt, one of four mobile operators in the country.

In May, the authorities sold a 9.5 percent stake in Telecom Egypt through the Cairo stock exchange.

The Qatar Investment Fund, a sovereign wealth vehicle, has been linked with buying the entire government stake.

Heiba said that the government was also in the process of finalising the sale of “three or four” ship container handling companies to Gulf sovereign investors and that Saudi Arabia’s Public Investment Fund was “close” to buying some real estate businesses.

“The process is ongoing,” he said. “But it all depends on the market conditions.

“However, we are working diligently to complete the sale of these companies as promised by the Egyptian government towards the end of this year.” 

Investor uncertainty

Gafi says it has more than 1,200 investment opportunities available but overall foreign investor sentiment remains lukewarm due to reservations about Egypt’s economy and weakened currency. 

The Egyptian pound was devalued three times in 2022, and analysts are predicting a fourth. 

As part of a $3 billion loan package negiotiated with the IMF in October, Cairo agreed to undertake wide-ranging structural reforms to reduce the state’s footprint in the economy.

In May, Egypt’s prime minister Mostafa Madbouly outlined a plan to sell an expanded raft of state assets to private investors to attract $40 billion in investment over the next four years.

Funds from asset sales are seen as crucial to help plug a financing gap the IMF estimates will amount to $17 billion over the next four years.

Gulf states have traditionally played a role in propping up the Egyptian economy by providing grants and deposits in its central bank, but they are now looking to make a commercial return via investments into the country.

Earlier this month, a consortium led by Masdar of the UAE signed an agreement to secure land in Egypt to build a $10 billion 10gw capacity wind farm.

Egypt ranked as the world’s top destination for FDI in mega-projects in 2022, according to fDi Markets, a greenfield investment monitor. 

The FDI related purely to 17 green hydrogen projects, accounting for 97 percent of Egypt’s total inbound capital investment in 2022. 

The country has long struggled to attract FDI outside its energy sector, partly due to concerns surrounding the rules that protect investors and excessive red tape.

“Two of the main issues facing investors in Egypt are lengthy administrative procedures and inconsistent implementation of policies,” Ali Metwally, a Mena economist and risk analyst at Infospectrum, said. 

“Policies on paper may not be consistently enforced across regions or government entities. This lack of consistency creates an unfavourable business environment with arbitrary decisions and regulatory complexities.” 

Golden licence programme

In October last year, the Egyptian government launched a “golden licence”.

The licence requires a single streamlined approval for establishing, operating and managing strategic, national and public-private partnership projects.

To date, the government has granted 17 such licences. Applications that meet the requirements are approved within 10 days, and licences are granted within 20 days after receiving approval.

Gafi president Heiba said that the cabinet and the parliament had agreed to expand the criteria of the licence to include almost all companies and all sectors.

Investors are incentivised by the government, with benefits such as a 50 percent refund on the land value allocated for industrial projects, provided that production starts within two years of authorisation. 

The Egyptian government also provides a deduction of 30-50 percent on taxable profits.

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