CAIRO: The Minister of Investment, Minister of Communications and the Chairman of the General Authority for Investment (GAFI) are leading delegations to Hong Kong and Singapore this week to promote Asian investment in Egypt.
The annual Euromoney Egypt Investor Conference, held in London for the previous five years, took place in Hong Kong. The decision to change locations represents hope that Asia replace Egypt’s traditional investors in Europe, the US and the Gulf, whose continued economic struggles have caused foreign investment in Egypt to fall by 40 percent.
Richard Banks, Euromoney’s Middle East director, told the press, Egypt presents an excellent opportunity for Asian investors across many asset classes. While investor interest has intensified in Europe, related financial support has waned in light of the global downturn. Alternatively, Asian markets have rebounded more quickly and are looking to capitalize on the continued economic growth and relative stability of the Egyptian market.
Investment Minister Mahmoud Mohieldin addressed the audience of potential investors in Hong Kong, listing Egypt’s “modern infrastructure, competitive taxation, reform-inclined business climate, diverse economy, large consumptive market, trained labor, stable growth rate, political stability and neighborhood to global markets as incentives. Egypt’s preferential trade agreements with Europe, the US and the Gulf offer additional allure.
Egypt adopted an expansive financial policy, particularly following the global financial crisis. Tariffs were reduced from 14.6 percent to 8.9 percent. Taxes were lowered from 32 percent to 20 percent on individuals. Corporate taxes were cut from 42 percent to 20 percent, Mohieldin enticed.
He highlighted the LE 13.5 billion funneled to infrastructure projects under the government stimulus packages. He explained that investors have the opportunity to contribute to developing “roads, electricity, renewables, airports and healthcare, in addition to industrial zones in Upper Egypt, the Red Sea and northwest Suez Gulf.
China has thus far invested $307 million in Egypt, making it the 22nd largest provider of FDI.
“Chinese investments have expanded 85 percent in the past five years, Mohieldin stated. We hope in 2010 the number of Chinese companies that invest in Egypt will grow by over 10 to 15 percent, he told China Daily.
Government statistics list 1,022 Chinese companies currently on the ground, operating in the sectors of manufacturing, telecommunications and infrastructure development.
Bilateral trade has also risen, from $610 million 10 years ago to $6.4 billion in 2009. However, Egypt s trade deficit with China remains high, growing from $4.2 billion in 2007 to $5.4 billion in 2008.
Mohieldin clarified, The more investment we could get from China, the more commodities Egypt could sell back to China and other African nations.
As part of a government project to construct development zones for manufacturing investment, Egypt is currently in talks with China’s highly successful Tianjin Economic-Technological Development Area in hopes of partnering to replicate its model in the Suez Economic Zone [SEZone].
Minister of Communications Tarek Kamel said of the project, “We want [the Chinese] to create jobs for Egyptians. They can use the growth of the market and enjoy the growth but also help us with our social-economic development.
“SEZone is going to be the first of its kind linked to a big investor, Mahmoud Mohieldin told the Financial Times. “The final negotiations will hopefully be taking place very soon.
Magdy Sobhi, economic expert at Al-Ahram Center for Strategic and Political Studies, emphasized the necessity of a skilled workforce.
“You attract FDI through economic and industrial zones and well-trained workers. Egypt has to begin to implement its various plans to make us the best choice for manufacturing, which will employ the most workers. But the main difficulty now is to train our workforce in three to five years, we can’t wait another 15.
He continued, “Investment in the past focused less on manufacturing and more on tourism, housing and telecom. Investment in industry thus far has come from China and Turkey especially.
In Sobhy’s opinion, although the government has given lip service to increased manufacturing, they have not communicated a coherent strategy. This he considers a setback as Egypt strives to distinguish itself from its neighbors, all equally dependent on FDI.
“We hope to change Egypt into a hub for the Chinese to export to Europe, since by 2012 we will have the free trade agreement fully implemented. However Morocco has the same free trade agreement with Europe, and in fact France has already established a huge factory there to manufacture cars for export to Europe and the region. Tunisia also competes with us, and even Israel in the sector of IT and advanced technology.
Yet just as Egypt seeks to out-maneuver regional rivals, it courts various potential investment partners.
The ministerial delegations will visit Singapore to discuss construction of a manufacturing zone near Alexandria. Singapore’s president, N.R. Nathan is scheduled to receive the Egyptian officials after they leave Hong Kong. Talks will also focus on investment in trade, investment, services, logistics, infrastructure and tourism, according to GAFI chairman Osama Saleh.
“Egypt is economically looking more and more to Asia, Saleh told the Singapore-based publication Business Times.
Although Singapore currently ranks 65th among Egypt s foreign investors, Saleh reiterated, “Singaporean firms are looking to invest in Egypt in the areas of logistics, ports, water treatment, healthcare and education. There is continued room for Singaporean growth and expansion in the investment arena in Egypt in these sectors and beyond.
Sobhy warned, “The question is not necessarily how to shift strategies from attracting European investors to Asian, but how to attract investment at all.
“FDI levels have seen a sharp drop, from $13 billion in 2008 to $8 last year. For the 2009/2010 fiscal year we have only received $2.6 billion, of which $1.9 billion is for oil and gas, leaving only $700 million for industry and other sectors.
