Al-Ahram Weekly Online   11 - 17 October 2012
Issue No. 1118
Published in Cairo by AL-AHRAM established in 1875

A good story to tell

Does Egypt have what it takes to attract much needed foreign investment? Sherine Abdel-Razek listened in as economic experts tried to offer answers at the Euromoney conference

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Attendees of the last two to three conferences organised by Euromoney in Egypt before the 2011 revolution recall vibrant presentations by the charismatic former Minster of Investment Mahmoud Mohieddin bragging about Egypt's success in attracting multi-billion dollars annually in foreign direct investment (FDI).

This year the scene is different, with government officials trying hard to convince attendees that Egypt has what it takes to attract investment and with the latter appearing largely unconvinced, or at the least holding firm to the belief that for Egypt to recover a lot still has to be done.

Momtaz Al-Said, minister of finance, said that Egypt seeks investment of LE176 billion for the current fiscal year and that only LE100 billion of this can be covered by the local public sector. "We need both local and foreign private investments to cover the balance."

Minister of Investment Osama Saleh, for his part, presented the projects aiming to attract investment. The government will be offering 15 new projects according to the public private partnership system to investors. In addition there are a number of multi-billion national mega projects, the most important of which is the development of East Port Said.

So Egypt is in dire need of investment. But what does it lack in attracting it? This was the question Richard Bank, the director of the Euromoney conference, asked Saleh.

Saleh said that Egypt had enough good fundamentals that the flow of FDI slowed down for only six months after the revolution and then started pouring in.

Saleh recalled that South Korean electronics producer Samsung was trying to choose between Egypt, Morocco and South Africa as a place to set up a new plant. "We were able to convince them with our fundamentals and they chose Egypt. We signed another project with the UAE based Al-Futtaim and Emaar to set up a LE5 billion project here. Moreover, Pepsi has recently sealed another investment deal".

FDIs surged by 66 per cent in the fourth quarter of 2011/2012 to reach $1.9 billion compared to $635 million in the previous quarter.

Saleh stressed that Egypt enjoys good enough stability to attract investment even while global FDI is weakening and political risk is factored into investment decisions.

"Global investors would find good investment opportunities in Egypt, especially given that they want to get out of Europe to escape the recession there," he said.

Saleh gave further proof of efforts to address investor worries by saying that the government is trying to resolve all investment disputes with Gulf investors whose projects in Egypt came to a halt after the revolution. The ministry is also working on amending the investment law.

Earlier this week the government reached an agreement with the UAE company DAMAC which had a large dispute with the government about a piece of land on the Red Sea.

Ahmed Heikal, head of Citadel Group, said he had invested $4 billion in Egypt since the revolution, adding that there are good sources of finance in the global market, be it the Gulf sovereign funds or export credit agencies, but the real challenge remains how to convince investors to deal with Egyptian bureaucrats who are hesitant while taking investment decisions.

"How can a bureaucrat confidently take an investment decision in the morning while he knows he might be interrogated in the afternoon at the general prosecutor office and attacked at night on talk shows and in the media," Heikal said.

Alia Al-Mobayed, an economist with Barclays Bank, agrees with Heikal on the surplus in foreign liquidity, saying this money is looking for good investment projects. "We have a strong story, but the way we present it is what matters," she said. "We need to have a roadmap that satisfies investors and focus on contribute-in-growth projects and not on those pushing the economy by increasing consumption," she added.

Many of the speakers pointed to the importance of increasing the skills of local labour as a means to enhance investment. Abdallah Shehata, head of the economic committee of the ruling Freedom and Justice Party, put the percentage of unskilled labour at 85 per cent of the workforce.

Meanwhile, an investment banker angrily raised the point of the government needing to be cautious in its statements, especially ones related to listed companies and investors, as rash comments could have a grave effect on the stock market and companies.

The banker was referring to President Mohamed Morsi's stadium speech Friday where he talked negatively about three listed companies without naming them, while shareholders understood he meant their companies. "The result was that on the following two sessions the market lost dearly led by these three companies."

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