Monday,18 December, 2017
Current issue | Issue 1316, (20 - 26 October 2016)
Monday,18 December, 2017
Issue 1316, (20 - 26 October 2016)

Ahram Weekly

FDI galore?

Did Egypt really receive $20 billion in foreign direct investment this year, asks Nesma Nowar

FDI galore?
FDI galore?
Al-Ahram Weekly

Egypt was one of the world’s top five recipients of foreign direct investment (FDI) during the first seven months of 2016, according to the Financial Times (FT).

The FT said in an article last week that Egypt had moved to fifth place globally in 2016, up from 15th the previous year, in greenfield FDI inflows to a total of $20 billion. 

A greenfield investment is a form of FDI in which a parent company builds its operations in a foreign country from the ground up or expands its business including by building new distribution hubs and offices.

The news raised eyebrows in Egypt because of the harsh economic situation of the country, especially amid the acute foreign currency shortage caused by the drying up of foreign currency sources, including FDI.

Egypt is still reeling from the repercussions of two revolutions that strained its economy and scared off investors and tourists. 

“Despite the drought of foreign currency. the decline in imports and exports, and the private sector suffering from recession for a whole year, as well as chaos in the dollar exchange rate, Egypt was able to jump into fifth place in the increase of foreign direct investment flows,” the FT said.

But did Egypt really receive this amount of FDI? Official figures from the Egyptian government do not confirm this. 

Figures from the Central Bank of Egypt (CBE) show that FDI inflows to Egypt in the financial year 2015-2016, ending on 30 June, did not exceed $6.8 billion, of which $4.5 billion went to establishing new companies and increasing the capital of existing ones, while $1.6 billion was in the form of investment in the petroleum sector. 

However, the $6.8 billion figure represents an increase in FDI inflows to Egypt in 2015-2016, compared to $6.4 billion the previous year. In April, Minister of Investment Dalia Khorshid said that the government was targeting FDI worth some $10 billion in the current fiscal year.

Courtney Fingar, the FT reporter who wrote the article, told the Aswat Masriya Website that the variations between the figures mentioned in the FT article and the official Egyptian ones could be attributed to the fact that the newspaper got its figures from its own FDI markets database.

This is an online database tracking cross-border greenfield investment covering all sectors and countries worldwide. It provides real-time monitoring of investment projects, capital investment and job creation with tools to track and profile companies investing overseas.

Fingar said the database included executed projects as well as announced or impending ones. She added that the database added the total value of the projects to the year in which they were announced, even if they would not be executed for several years, which was the reason why the FT figures appeared higher than the Egyptian ones.

As a result, Egypt has not actually received $20 billion in FDI inflows over the past seven months. 

Nonetheless, the FT article, entitled “Emerging Markets displace US and UK in FDI League Table,” said that Egypt had made great efforts to attract foreign direct investment through major projects and the approval of President Abdel-Fattah Al-Sisi of a Higher Council for Investment in July with a number of private-sector representatives that would work to improve the investment environment.

The article further pointed to the government’s efforts to improve and amend the investment laws to boost investments, including attempts to encourage out-of-court forums to settle disputes between the state and investors and investment incentives such as the possibility of partial payment of the costs of public utilities.

According to the article, the pharmaceuticals industry, the telecommunications sector, automobiles, and raw materials have become attractive targets for investment in Egypt.

India and China are the biggest FDI recipients of the year, according to FT, followed by Indonesia, the US and Egypt.

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