According to the World Investment Report 2016, the Egyptian government has amended its investment law in order to foster an environment that encourages foreign direct investment (FDI).
Through the creation of alternative “out-of-court forums to settle investor-state disputes and grant incentives for investment in specific sectors or regions”, Egypt will be facilitating FDI.
While efforts to amend laws and policies are present, the national security threat of accepting FDI in Egypt remains an obstacle for foreign investors. The defence industry, critical infrastructure (electricity cables, water pipes, etc), and purchase of land in security zones are most affected by the FDI limitations and/or review procedures in Egypt.
Additionally, the report divided the FDI regulations for national security and related reasons in Egypt into two types. The first one is full and/or partial FDI restriction in a given sector, area, or activity, including the purchase of real estate by foreigners in border areas or near other sensitive sites, air and maritime cabotage services, and air traffic control. The report added that there are “sometimes restrictions also concerning electricity power grids and exchanges, seaport or airport management, and oil and gas extraction activities”. The second type is state monopoly, in which the government has full control over specific sectors and would not allow foreign investments.
Following Angola, whose FDI inflow increased by 351.7% with $8.7 billion in 2015, Egypt ranked second in the list of top African countries with FDI growth. Egypt marked an increase of 49.3% of FDI inflow, going from $4.6 billion in 2014 to $6.9 billion in 2015. Mozambique came in third place with an FDI close to $3.7 billion, a 24.3% decrease.
A large portion of Egypt’s growth in FDI-related practices happened due to the expansions in the financial industry, such as Commercial International Bank and Citadel Capital, and Pfizer in the pharmaceuticals industry.
Foreign companies’ investment in the telecommunication sector also added to the positive outlook as the telecom company Eaton Towers bought mobile tower services from Orange (Mobinil at the time of the deal). In the gas industry, Italy-based company Eni has continued to extract gas and work on projects in the gas-field in Egypt.
According to the report, prominent firms in the automotive industry, like Japan’s Nissan, will also be investing in Egypt, and governments in general have begun reviewing policies that will support FDI in the manufacturing sector. In a statement, chairperson of Nissan Egypt told Al-Iktissad Wal-Aamal that the company is investing in the raw materials sector in the manufacturing industry, which is directly linked to the existence of encouraging incentives from the government.
By the end of 2016, the estimated average for the growth of FDI inflow in Africa is expected to reach 6%. In the first quarter of 2016, the value of Greenfield projects reached $25 billion, marking a 25% increase compared to the same period in 2015. Greenfield investments are projects in which the parent company starts from scratch in foreign countries, building new facilities and creating new offices and residential units. The services sector will receive 64% of the FDI inflow by the end of 2016, which amounts to over $37 billion, making it the sector with the highest rate of investment in Africa. It is followed by the manufacturing sector, which is expected to obtain 27% of FDI inflow in Africa. This is equivalent to $29 billion.
Ever since the global financial crisis in 2008, the global inflow and outflow of FDI increased by 28%, $1.8 trillion. Investments have increased in terms of number of countries, but not necessarily in the production capacity.
Source: Daily News Egypt
