Egypt now a prime tar­get for for­eign di­rect in­vest­ment

The Star Early Edition - - INTERNATIONAL - Bloomberg

EGYPT may ex­ceed its $10 bil­lion (R132.18bn) tar­get for for­eign di­rect in­vest­ment this year as the weaker pound re­duces the cost of do­ing business in North Africa’s largest econ­omy and a new in­vest­ment law comes into force, the in­vest­ment min­is­ter said.

Sa­har Nasr said she had been ap­proached by in­vestors from Saudi Ara­bia, Sin­ga­pore, China and the United Arab Emi­rates – in­clud­ing Emaar Prop­er­ties chair­per­son Mo­hamed Alab­bar and Al Ghu­rair Group – about po­ten­tial in­vest­ments. The pipe­line for the fis­cal year that be­gan July 1 in­cludes oil and gas, real es­tate, tourism and lo­gis­tics in­vest­ments, she said in Cairo on Mon­day. Nasr said it was too early to com­ment on the size of the po­ten­tial deals.

The Egyp­tian pound has halved in value against the US dol­lar since the cen­tral bank re­moved most cur­rency con­trols in Novem­ber, help­ing to end a for­eign cur­rency short­age and se­cure a $12bn loan from the In­ter­na­tional Mon­e­tary Fund. The gov­ern­ment also em­barked on a struc­tural re­form pro­gramme that in­cludes sub­sidy cuts and new taxes to con­trol its bal­loon­ing bud­get deficit.

An edge

“With the de­val­u­a­tion, the cost of labour – blue or white col­lar – is lower than else­where,” Nasr said, adding that even with re­cent re­duc­tions in fuel sub­si­dies, the cost of en­ergy in Egypt re­mains less than in neigh­bour­ing coun­tries or other emerg­ing economies. “Egypt sure has an edge.”

Egypt re­ceived about $8.7bn in for­eign di­rect in­vest­ment in the fis­cal year ended June 30, Nasr said, an in­crease from $6.9bn a year ear­lier but be­low its $10bn tar­get. US in­vestors have also ex­pressed an in­ter­est in do­ing deals, while com­pa­nies that are al­ready in Egypt, in­clud­ing Mars and Gen­eral Elec­tric, are plan­ning to ex­pand, she said.

Pres­i­dent Ab­del-Fat­tah El-Sisi rat­i­fied a new in­vest­ment law this year aimed at cut­ting red tape, giv­ing what Nasr called a “sig­nif­i­cant sig­nal from the high­est po­lit­i­cal level that, yes, Egypt is open for business.”

Though the weaker cur­rency has boosted in­vestor con­fi­dence and at­tracted in­flows, it has also helped drive in­fla­tion above 30 per­cent, pres­sur­ing Egypt’s 93 mil­lion peo­ple, half of whom live near the poverty line – and con­fronting El-Sisi’s gov­ern­ment with a ma­jor chal­lenge.

The cen­tral bank has re­sponded to ris­ing in­fla­tion by in­creas­ing its bench­mark in­ter­est rate by 7 per­cent­age points since Novem­ber. – Bloomberg

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