South Africa calls for 'amicable solution' for GERD    Macron promises to help mobilise aid for Lebanon after massive blast    Trump says coronavirus vaccine possible before Nov. 3    Egypt's Suez Canal revenues up 4.7% in last 5 years: Chairman    Egypt's NUCA launched new land plot for urban activity in Sheikh Zayed    Tennis: Kyrgios says 'slim to no chance' of playing French Open    Premier League clubs vote against use of 5 substitutes next season: BBC    Egypt's net foreign reserves rise to $38.3 bln in July – CBE    French President: Lebanon needs reforms or will suffer more    Egypt's GASC gets offers in wheat bids for Sept. shipment – traders    Foreigners staying in Cairo without residency permits to not allowed in resort towns    Egypt's field hospital in Beirut receives wounded cases of Lebanon's blast    Man Utd should target Kane over Sancho, says Scholes    Australia's second-biggest city enters strict new coronavirus lockdown    Egypt records 123 new coronavirus cases, 18 deaths on Wednesday    Survivors mark 75th anniversary of world's 1st atomic attack    Egypt rejects Ethiopia's latest proposal on GERD: Irrigation ministry    Foreigners staying in Cairo without residency permits not allowed in major resort towns: EgyptAir    Egypt sending 2 planes loaded with medical aid to Lebanon after wrecking explosion    Global coronavirus deaths exceed 700,000    Beirut reels from huge explosion leaving at least 100 died, nearly 4,000 injured    After blast, Lebanon has enough grain for less than a month, minister says    Going for gold    Senate slam dunk    Don't miss the concerts of Boghdady Jazz Big band    My visual diary    The ambassadors of Cleopatra    African Champions League final will be played on Oct. 16-17, CAF says    Egypt invites Tesla's founder to visit Giza Pyramids after controversial tweets    Sisi: Egypt favours negotiations over a military solution to resolve Nile dam crisis: Al-Sisi    No room to delay Egyptian Premier League games – EFA's board member    Egypt's President Sisi ratifies extending state of emergency for 3 months    Egypt Cup games to resume after Premier League finishes: EFA    The Facebook Preacher's Search for Fame, and Egypt's Economy    Arafa Holding reports $144,000 COVID-19-related losses in April    Egypt's efforts in Libya to activate free will of Libyan people: Al-Sisi    Egypt calls on UNSC to address oil spill risks off Yemen coast    Egypt economically strong in face of COVID-19, reforms ongoing: International Cooperation Minister    Hyksos campaigns were internal takeover, not foreign invaders: study    Reports over Ethiopia filling mega-dam    COVID-19 affects Egypt sporting clubs    COVID-19 will soon turn to seasonal like swine flu: Presidential Health Advisor    ‘Egypt's Support' coalition convenes to discuss its Senate election list    Robbery attempt leads to discovery of Ptolemaic monuments in Qena    Flouting international guidance, Ethiopia unilaterally starts filling its Nile dam    Google ‘translate' ancient Egyptian hieroglyphs    Zaha speaks out after online racial abuse    Farwell to 74-year old Egyptian military production minister El-Assar    







Thank you for reporting!
This image will be automatically disabled when it gets reported by several people.





Correcting misperceptions
Published in Al-Ahram Weekly on 20 - 06 - 2019

Foreign direct investment (FDI) into Egypt fell to $6.8 billion in 2018, down from $7.4 billion the previous year, according to the UN Conference on Trade and Development (UNCTAD) 2019 World Investment Report.
However, Sherif Fahmy, a director at NGage Consulting in Cairo, believes that although the FDI was lower than expected in 2018, it is still the highest in the region. The UN report showed that Egypt figured as the largest recipient of FDI in Africa that year. Fahmy said that global FDI flows had seen a 13 per cent decline in 2018, falling to $1.3 trillion. This had been attributed to US tax reforms in 2017, which provided tax incentives to US multinationals to repatriate foreign-held capital and invest it in the US economy, he said.
FDI into Egypt had reached around $8 billion in 2016, almost double the figure of 2014, prompting the government to target $10 billion in FDI. However, this did not happen despite multiple efforts.
Allen Sandeep, director of research at Naeem Holding, a consultancy, believes the government has done a decent job in laying the foundations for Egypt to be viewed as an attractive investment hub in the future by enacting bold economic reforms such as the phasing out of petroleum subsidies, taming inflation, and maintaining a competitive exchange-rate policy.
He said that measures such as the new investment law with the one-stop-shop to facilitate set up and the various incentives it offers in free zones had been important to changes in the balance of payments, drops in yields on treasury bonds, and levels of interest shown by investors in international bond issuances.
Fahmy added that the government intended to take further measures to accelerate the automation of procedures. It was also committed to policies designed specifically for value-added and technology-oriented sectors that contribute to overall economic growth and decrease unemployment, he said.
The government's investment act in particular is designed to promote investment in less-developed regions to enhance living standards.
While Fahmy was optimistic that Egypt could attract more FDI to reach around $8-8.5 billion in 2019-2020, Sandeep believed that for FDI to pick up as a result of the reforms being enacted a time frame of five to 10 years was needed.
In the meantime, he stressed that the government must engage more in investor roadshows and strong PR and marketing impetus to improve awareness externally. Risk perceptions about Egypt, whether on politics, the economy or security, were a lot different outside than within the country, he said.
This had meant that risk premiums were mispriced, resulting in sluggish investor interest both for foreign portfolio and foreign direct investment. He suggested that new venues for investment needed to be prioritised in areas such as the services sector.
Business-process and knowledge-process outsourcing and IT-enabled services were good options for Egypt, he said, because it had a strong edge in terms of human capital.
Alexandria University economics professor Mohamed Abed agreed on the need to coax investment towards areas with potential for Egypt. He lamented the fact that around 60 per cent of incoming FDI poured into the oil-and-gas sector, while more was needed in manufacturing because that was what created jobs.
Around 10 per cent of FDI goes to manufacturing at present. This was mostly directed towards domestic consumption, however, whereas what was needed were export-oriented industries that could generate hard currency, Abed said.
Fahmy explained that according to the UNCTAD report, foreign investment in Egypt was skewed towards oil and gas, as significant discoveries of offshore gas reserves had attracted investment and the country became a net exporter of gas in January 2019.
British Petroleum, he said, had increased its investment stock in the country to more than $30 billion. Egypt also signed at least 12 exploration and production agreements with international oil companies in 2018.
However, Fahmy said the UNCTAD report also showed some large foreign projects had been announced in other sectors, such as a $2 billion Ukranian project by Nibulon to upgrade Egypt's grain-storage infrastructure and a $1 billion Saudi project by Artaba Integrated Holdings for the construction of a medical city.
In addition, the Chinese Shandong Ruyi Technology Group had signed an agreement to invest $830 million in the construction of a textile area in the Suez Canal Special Economic Zone (SEZ).
Fahmy said that companies opening up in Egypt were not there just for the domestic market, but “for the entirety of the two billion people that represent countries that are part of free-trade agreements and encourage the flow of goods into international and regional markets.”
However, FDI into Egypt could also be affected by global conditions. Sandeep said that the ongoing trade war with China instigated by the US could have long-lasting global impacts, both directly resulting in the flight of capital out of emerging markets and indirectly because of the spillover impacts due to contagion.
Geopolitical risks due to tensions between Iran and the Gulf countries and the US could also affect the price of commodities such as oil and could impact trade, tourism, and Suez Canal receipts, Sandeep said.


Clic here to read the story from its source.