Does Egypt’s Growth Spell Opportunity for Investors?
Shaken by years of turmoil, since the 2011 uprising, the Egyptian economy is showing signs of recovery. In line with the 2016 IMF loan programme, Egypt has been implementing severe austerity measures in order to improve the country’s finances. These measures have included the slashing of subsidies, raising the price of public transport, fuel, and electricity, and providing a currency float. As of July 2018, it appears as though these measures are beginning to pay off. Egyptian Prime Minister Mostafa Madbouly recently announced that Egypt’s GDP have grown by 5.4 percent in the 2017/18 fiscal year. This marks the fastest growth rate in a decade. Moreover, Madbouly provides that the government are anticipating growth of up to 8 percent in the 2021/22 fiscal year. Finance Minister Mohamed Maait has also stated that the Egyptian deficit has now fallen below 10 percent, the first time since 2011. Medhat al-Sherif, deputy of the Economic Committee of the parliament provides that the economic measures taken by the government has led to the stability of the Egyptian pound in addition to a legislative base to ensure opportunities for investors in Egypt.
While IMF recommendations for Egyptian economic reform include a reduction in government investment, Maait has announced a 30 billion Egyptian pound increase in the 2017/18 fiscal programme. Proposed measures by the IMF were intended to encourage private-public partnerships (PPs) and an expansion of the private sector. However, the Ministry of Finance has provided that government investment will not hinder private sector expansion as most of the projects earmarked for investment are PPPs. Here, most project include key partners from private sector companies such as BP, Seimens AG, Orascom Construction Ltd., and Eni SpA.
In 2015, the Egyptian authorities unveiled plans for a new administrative capital. The so far unnamed city, under construction 45 kilometres east of Cairo, is thus far being funded entirely by the domestic economy. However, the authorities are now calling for foreign investment in the new city. The new capital is planned to house 7 million people including the government, businesses, and young, professional residents. Companies here have been increasingly moving to the east of Cairo and thirty banks have committed to relocating their headquarters to the new capital. Although the majority of corporations are expected to move by 2021, the government district is planned to be occupied by 2019.
In order to facilitate a smooth transition for foreign investment, the government has introduced a number of reforms. Here, tax incentives, the flotation of the Egyptian pound, the introduction of a new investment law, the streamlining of foreign investors to the General Authority for Investment and tax-free zones, have encouraged investment. Certainly, Egypt’s various tax-free zones benefit a wide range of sectors and should be considered upon investment. Examples of these include the Media Public Free Zone in suburban Cairo, the Shebin El Kom Public Free Zone for textiles and weaving, and additional free zones in Alexandria, Damietta, Nasr, Suez, Ismailia, and Port Said.Such developments provide a means for an increase in foreign investment.
Tourism and Travel
Following a seven-year slump in the tourism sector, and the downing of a Russian plane in 2015, Egypt is beginning to re-emerge as a popular tourist destination. Although the UK Foreign Office (FCO) still advises against travelling by air to the previously popular resort of Sharm el-Sheikh, the Egyptian government provided that the army has almost entirely uprooted militants from the north of the Sinai Peninsula. However, the successes of the army here have not been externally verified as journalists and humanitarian workers have continued to be denied access to the area.
In July 2018, the FCO updated its advice and suggestions list to warn UK citizens visiting Egypt to avoid writing any negative opinions on the country or making any political comments. This is because, in some cases, such comments have led to custodial sentences. Moreover, tourists and travellers have been advised to avoid photography of any military installations, in addition to public displays of affection and immodest dress. Despite such warnings, Thomas Cook has announced that 500,000 tourists will be visiting Egypt this year, already having experienced a 50% increase in bookings in the first half of 2018. Here, tourism revenues have risen to USD 2.27 billion from USD 1.256 billion the previous year.
After a seven-year hiatus, beginning with the 2011 uprising, it appears as though investment opportunities in Egypt are on the rise. Here, tax incentives, the flotation of the Egyptian pound, the introduction of a new investment law, the streamlining of foreign investors to the General Authority for Investment, and tax-free zones, have encouraged foreign investment in the country. Moreover, the building of Egypt’s new capital may provide further opportunities for businesses and foreign investors.
Moreover, Egypt’s revival of the tourism sector looks set to benefit travellers and investors alike. However, the FCO have warned against political commentary, photography of any military installations, public displays of affection, and immodest dress while inside the country.
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