More foreign companies are pledging to invest in Egypt, as the country begins to reap the benefits of economic reforms introduced over the past nine months under President Abdel Fattah al-Sisi.
Egyptian officials and business leaders are now looking to build on those early successes. This week they will convene global business leaders for an economic summit in the coastal resort town of Sharm El Sheikh, in an effort to rehabilitate its bruised image for would-be investors who have held back over fears of continued political instability.
For Mr. Sisi, the stakes are higher than ever. In 2013, he ousted the previous democratically elected Muslim Brotherhood leadership, headed by Mohammed Morsi, vowing to restore security and rebuild Egypt’s economy, which had been at a standstill since protests against former president Hosni Mubarak engulfed the nation in turmoil in early 2011.
The outcome of his reform programs aimed at jump-starting and strengthening the economy largely hinge on keeping domestic security under control, providing sufficient assurance to investors wanting to stay, enter or return to the country.
“They have to pay attention to security if they want to attract investors,” said Dimitris Tsitsiragos, vice president of Global Client Services at the International Finance Corporation, a branch of the World Bank. However, Mr. Tsitsiragos said if Egypt manages to boost its growth rates, “that will go a long way in mitigating the security situation.”
The challenge facing Mr. Sisi was underlined over the past week with a series of terrorist attacks targeting international businesses, including French supermarket Carrefour and a branch of National Bank of Abu Dhabi. And for months, Mr. Sisi’s government has been entangled in a continuing battle with Islamists, who have escalated their attacks on soldiers and policemen in the Sinai Peninsula.
Despite these security concerns, which some analysts argue are relatively contained compared with other countries in the region, Egypt’s potential for economic recovery is seen as huge and there are signs Mr. Sisi’s policies are bearing fruit.
British oil major BP PLC said in March it had signed an agreement to invest around $12 billion with its partners to develop the West Nile Delta gas fields, which would significantly raise the country’s domestic energy supply. Coca-Cola has said repeatedly that it will invest $500 million in its Egypt operation over the next three years.
BP said the project is “a vote of confidence in Egypt’s investment climate and economic potential.” Bob Dudley, the company’s chief executive, described it as the largest foreign direct investment in Egypt.
“It demonstrates our continued confidence in Egypt and our commitment to unlock its energy potential,” he said.
Foreign direct investment has started to find its way back to Egypt after nearly drying up over the past four years, especially from the six Gulf Cooperation Council countries, including oil giants Saudi Arabia, the United Arab Emirates and Kuwait, said Rafik Nayed, vice chairman for Deutsche Bank Middle East and North Africa.
Egypt’s initial economic recovery, which began about a year ago, was largely due to the largess of oil-rich Gulf states that had opposed the Morsi regime and were eager to do business with his successor, economists said.
In addition, Egypt’s stock market closed 2014 as one of the top performing global exchanges, while the International Monetary Fund in February praised the government for its reforms, saying they were “starting to produce a [economic] turnaround.”
The IMF now predicts 3.8% growth for the Egyptian economy for the fiscal year ending June 2015, and 5% growth over the medium term.
Despite the turnaround, investors and economists say Egypt still has a long road ahead as it works to repair its domestic economy. The country’s inflation rate hasn’t lessened, hovering around 10%, roughly the same level as before the turmoil and more than double the 4% average of the GCC countries.
Its fiscal deficit remains high, and the tourism industry—once a major source of foreign currency—is still on the mend. Youth unemployment, one of the grievances that triggered the protests against Mr. Mubarak, is widespread.
“Addressing these areas is critical for medium-term economic growth,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank. “There are substantial challenges—job creation is going to be very important—and we would need to see signs of deepening progress,” she said.
Mr. Sisi has also been the subject of international condemnation for what was largely perceived as the show trial and harsh prison sentences leveled at three Al Jazeera English service journalists, who were accused of spying, and for his continued crackdown on activists and peaceful protesters.
In Sharm El Sheikh this week, Egyptian officials are expected to announce more economic reforms, including new tax and investment laws, alongside further investment promises from foreign investors. They’ll highlight the vast potential the country of 90 million people holds in terms of human resources and consumption needs.
“We have to work 48 hours in 24 hours and work as a population,” said Ahmed Abou Hashima, chief executive of Egyptian Steel, a domestic steel manufacturer that employs around 3000 people. “This is the start, the beginning, not the end,” he said.
Source: The Wall Street Journal
