Egypt now a prime target for foreign direct investment
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.
“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