The political turbulence Egypt has experienced in the years since the Arab Spring has failed to dent investor interest, The Financial Times reported Saturday. Greenfield investment into Egypt increased by five times last year over 2013's figure, to $17.9 billion, on the back of a series of megaprojects. Investment levels have been holding up well in 2015 despite large declines in many other emerging markets. But could the destruction of a Russian airliner over the Sinai Peninsula on October 31, and fears that it could have been brought down by an explosive device, stem the investment tide? After such an event, the impact on tourism is usually swift and brutal, and also well documented. The impact on foreign direct investment can also be detrimental to the economy. But the degree to which investors take fright, and for how long, is highly variable and, as is often the case, there are double standards between emerging and developed markets. The loss of the Metrojet Airbus with 224 people aboard follows a car bomb blast in Cairo in August 2015 and a general sense of unrest in the Arab world's most populous country. In neighbouring Tunisia, where a gunman went on a deadly rampage at a tourist report on June 26, already low levels of investment are under threat: fDi Markets, an FT data service that tracks cross-border greenfield investment, has recorded only three greenfield projects for the country since then. In Turkey, a larger economy and a more important investment destination in global terms, bombings in Ankara, the capital, in October 2015 have added to security fears that, in combination with slowing growth, are hurting investment competitiveness. Capital expenditure on greenfield inward investment projects dropped by almost half last year compared with 2013, according to fDi Markets, and midyear investment levels in 2015 were tracking 25 per cent below the first half of 2014. That was all before the Ankara attacks, which surely will not help. Terrorist attacks tend to have a more limited impact on investment into developed markets. The Spanish capital of Madrid was rocked by train bombings in March 2004. After a dip the following year — from 195 projects valued at an estimated $10 billion in 2004 to 155 at $8.2bn in 2004 — greenfield investment into Spain rebounded strongly the following few years, surging to $21.4 billion in 2008. The FDI attractiveness of Madrid itself was hardly dented at all: there were only four fewer projects and $19m less investment in 2005 compared with 2004 and numbers at the city level surged in line with the national investment boom between 2006 and 2008. The UK capital suffered a devastating attack in July 2005 but attracted increased FDI afterwards, as did the UK as a whole. Greenfield investment into London rose mightily from $2.8 billion in 2005 to $9.1 billion in 2006. Project numbers increased year on year between 2005 and 2008 before a small reduction after the financial crisis. The fDi Markets database only began in 2003 so comparative figures for FDI into the US before and after September 11, 2001 are not available. But greenfield investment into the country increased every year between 2003 and 2009 and New York City registered large increases in 2004 and 2005 over their 2003 levels. Timing has something to do with it — Madrid and London were attacked during FDI boom years — but not everything. If investors have a long history of trusting the safety of an investment destination it takes more than one event, no matter how deadly, to reverse sentiment. But if trust is already in short supply, as it often is with emerging markets, it can evaporate in a puff of smoke.
