CAIRO: Foreign direct investment (FDI) in Egypt is likely to rise to at least $8 billion in 2010/11, Investment Minister Mahmoud Mohieldin said on Monday, adding that investors should not be deterred by any uncertainty before upcoming elections.
His forecast for FDI, however, is much lower than a government forecast in May for FDI of $10 billion in 2010/11.
Egypt’s economy fared better than many more developed economies during the global downturn, expanding by around 5 percent even though FDI slowed to $6.8 billion in the 2009/10 financial year.
Fund managers and other investors have been eyeing Egypt for its resilient growth but some voice caution ahead of a November parliamentary election and a presidential vote next year.
The polls are being watched closely because President Hosni Mubarak, 82, who has ruled Egypt since 1981, has not said if he will run again. If he does not, many Egyptians believe he will lever his son Gamal, 46, into office. Both deny any such plan.
Mohieldin said similar questions about the political outlook were raised before Egypt’s first multi-candidate presidential race in 2005 but investment inflows still rose. In some years FDI soared above $10 billion.
"They (investors) shouldn’t actually (be concerned) because it is a country that is based on a constitution, that has very strong institutions, that has a very solid legal system," he told Reuters in an interview at his ministry.
"Egypt has been, is and will continue to be a very stable country," he added.
Mohieldin joined the cabinet in 2004 and leaves next month for a senior World Bank post. He was one of the key drivers of economic liberalization that drew praise from foreign investors but complaints from the poor, who say reforms aided just the rich.
The ministry was created on his appointment to oversee files for investment, financial supervision and asset management. Mohieldin would not comment on who could succeed him or on whether the ministry would stay in charge of the same files.
Safe bet
Despite last year’s dip, he said he expected FDI to rebound in 2010/11.
"I think the $8 billion in net FDI is a safe bet for the current fiscal year," he said. "If some activities in the infrastructure side would take place … the FDI figure is going to be improving even further."
Economists say Egypt must draw more investment from other emerging markets, like those in the Gulf and Asia, to keep flows rising, rather than rely on more traditional Western sources.
"There has been a great deal of change in terms of sources of FDI during the last five to six years," Mohieldin said, adding that the share of investment from countries east of Egypt was now about a third of flows compared to 10-15 percent before.
Egypt was seeking investment in a range of areas, including infrastructure, small- and medium-sized enterprises such as food processing and garments, and renewable energy, Mohieldin said.
The country has been seeking to encourage public private partnerships (PPPs) although the minister said such ventures did not yet represent a significant level of investment flows. Egypt still depended on state spending for infrastructure, he said.
On the ministry’s asset management work, he said a draft law had been drawn up to create an asset management agency, which he compared to Malaysia’s state investor Khazanah.
A 30-strong committee, already set up, could become the basis for such an agency after the cabinet sends the law to parliament for approval. The asset management law would also cover any possible future privatizations, Mohieldin said.
