European stocks to open lower as investors consider smaller Fed rate cut    Gold up on Iran tensions, firmer dollar limits upside    Oil rises as Middle East Gulf tensions flare, Libya oil field shut    UK envoy apologises for not informing Egypt over flight suspension    Egypt's population reaches 99 million: CAPMAS    Egypt extends state of emergency for three months: Official gazette    In Photos: 1st phase of Roxy Garage inaugurated on the 1,050th National Day of Cairo celebrations    Iran thanks Saudi Arabia for release of its oil tanker Happiness 1: Fars    Griezmann 'cried with joy' at Barcelona move    Japan ruling bloc to keep simple majority in upper house, may get 2/3: NHK exit poll    Arsenal boss Emery happy to be patient in transfer market    Arsenal Next Gen ready to 'take on the world', says youngster Saka    U.S. President Trump relished rally chant, Ocasio-Cortez tells constituents in Queens    Oman urges Iran to let seized tanker depart: State TV    U.S.-South Korea military exercise to proceed: official    Egypt urges nationals to abide by Schengen travel rules    EgyptAir to provide larger aircrafts for Cairo-London route after British Airways suspension: Source    Egypt's investment opportunities to be promoted in Italy    Egypt's Sisi attends graduation ceremony for police cadets    Algeria crowned Africa Cup of Nations Champions after Senegal win    Sisi: Egypt supports development efforts in all Nile Basin states    Egypt's PM supervises implementation of Luxor's Corniche project    After appointing new female judge, will Egypt see more women in courts?    Egypt's PM follows up implementation of Luxor's Corniche development project    Egypt tells citizens that Saudi e-visa not meant for hajj    Algerian team came to Cairo to win AFCON title: Djamel Belmadi    Egypt, Uzbekistan study establishing pharmaceutical plant    Egyptians Brace for Rising Prices Due to Subsidy Cuts    Belgium's Port of Antwerp to develop bunkering activity in Egypt    Sudan's military, opposition sign 1st part of power-sharing deal    Peace with Egypt must be made: Turkey's main opposition leader    King Tut's golden coffin undergoes first restoration since 1922 discovery    Changing dominant narrative of women on stage    Explorations of music, sound, architecture of Islamic Cairo and everyday life    Farewell to Italy's best-loved writer Andrea Camilleri    Parliament Speaker announces end of fourth legislative term    Total of 59,455 expats in Egypt have undergone virus C screening    Renovation of Egyptian Museum to include installing new lighting, display systems    Egypt's parliament starts new NGO law discussion    Egypt's parliament Oks new NGO law    Egypt's parliament's 5th convocation sessions to be aired live: Parliament speaker    Cairo hosts 6th meeting of Egyptian-Sudanese military committee    Egypt inaugurates museum to honor late novelist Naguib Mahfouz    Bookmakers expects Egypt's Mo Salah might miss the year's Ballon D'or award    Fired MP detained pending investigations over corruption charges    Egypt sees national population growth rate to halve before 2052    AFCON quarter-finals: Desert Warriors face Ivorian Elephants in early final    Orange Egypt removes Warda from ad campaign after harassment case    







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.