Egypt: Investing

FDI in Figures

With the rapid influx of new investments over the past few years, Egypt became the first recipient of FDIs in the Middle East, and 3rd in the Arab world after Saudi Arabia and United Arab Emirates.

The dynamic growth of the Egyptian economy (around 7% in the recent years), the strategic geographical position of the country, its low labor costs and skilled workforce, a unique tourist potential, substantial energy reserves, large domestic market and the success of reforms undertaken by the authorities (including many privatizations) are all factors that may explain the sharp rise of FDI.

The regional context should also be taken into account, as Egypt has benefited from abundant liquidity coming from the Gulf countries, as a direct result of the increase in revenues generated by oil exports.

However, because of the economic crisis, FDI flows, which had been slowing down since the summer of 2008, halved in the two last years: a decrease in 40% in 2008-2009, with 8.1 billion dollars and a decrease of 17% in 2009-2010, with 6.8 billion dollars.

FDI comes mainly from the European Union, the United States and the Arab countries. The United States, for a long time the number one investor in Egypt, have now been exceeded by the European Union.

Investments focus primarily on tourism, construction, telecommunications, financial services, energy, and healthcare.

Foreign Direct Investment	2008	2009	2010
FDI Inward Flow (million USD)	9,495	6,712	6,386
FDI Stock (million USD)	59,998	66,709	73,095
Performance Index*, Ranking on 141 Economies	51	52	-
Potential Index**, Ranking on 141 Economies	93	-	-
Number of Greenfield Investments***	83	103	-
FDI Inwards (in % of GFCF****)	31.2	33.6	-
FDI Stock (in % of GDP)	36.2	34.8	-

Source: UNCTAD - Last Available Data.

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.

FDI Inflows By Countries and Industry

Main Investing Countries	2010, in billions of USD
European Union (of which UK 4.9b, Belgium 0.9b, France 286m)	6.8
USA	1.4
Arab countries (of which Saudi Arabia 320m, UAE 304m)	1.4
China	0.3
Turkey	0.3

Main Invested Sectors	2010, in billions of USD
Oil sector	3.6
Establishment of new companies and increase of capital in companies already in existance	2.7
Real Estate	0.3
Revenues from privatization	0.2

Source: Ministry of Investment - Last Available Data.

Main Foreign Companies: UNCTAD reports 271 foreign companies (that is to say companies with at least 10% foreign capital ownership) in Egypt. This figure is considered largely under-evaluated.

Why You Should Choose to Invest in Egypt

Strong Points: The country is in a geographically strategic location. Moreover, it offers a cheap and relatively qualified labor force. Its growing population constitutes a non-negligeable market in the region. Its energy resources are attractive and in addition, the country has in recent years, launched a public works policy (construction of the third metro line, expansion of the port of Sokhna and improvement and renovation of the rail network), which offers many investment opportunities to foreign companies. Finally, the government policy for large scale liberalization and improving the appeal to foreign investors are encouraging signs for foreign investment.
Weak Points: Despite privatizations, the inefficient and loss-making public sector remains ubiquitous in some sectors. In addition, the rapid population growth continues to curtail the improvement of the standard of living for Egyptians. In fact, the country registers a delay in its infrastructures in which current investments are not able to make up for.
Government Measures to Motivate or Restrict FDI: Since September 2004, the General Authority for Investment and Free Zones (GAFI) has established an economic program to attract foreign investors, together with an average reduction of 35% customs duty and tariff simplification. Though all the economic sectors are open to domestic and foreign investors, there are some that are especially targeted by the Law, which expressly provides the possibility to execute projects under the BOT (Build, Operate, Transfer) form, in the agricultural, industry, mining, tourism and hospitality, air travel, off-shore shipping transport, goods transport services, oil prospection and drilling, infrastructures more specifically for drinking water conveyance, roads, housing and used water recycling sectors. Other sectors are added to this list depending on needs (leasing, venture capital, creation of computer programs and software, etc.). Privatization programs are also open to foreign investors. Some sectors are considered strategic and hence subject to specific legislations: aerospatial, defence, newspaper publishing.

Protection of Foreign Investment

Bilateral Investment Conventions Signed By Egypt: Egypt signed bilateral agreements with more that a hundred countries, including most of the European Union countries, the United States and several African countries, the Middle-East and Asia. On the Mediteranean Basin, Egypt has signed bilateral conventions with Algeria, Spain, France, Greece, Italy, Libya, Lebanon, Malta, Morocco, Portugal, Tunisia and Turkey. These conventions can be referred to on the UNCTAD website.
International Controversies Registered By UNCTAD: Consult the Doing Business in Egypt's Guide.
Member of the Multilateral Investment Guarantee Agency: Egypt is a signatory of the MIGA Convention.

Country Comparison For the Protection of Investors

	Egypt	Middle East & North Africa	الولايات المتحدة	Germany
Index of Transaction Transparency*	8.0	6.3	7.0	5.0
Index of Manager’s Responsibility**	3.0	4.6	9.0	5.0
Index of Shareholders’ Power***	5.0	3.4	9.0	5.0
Index of Investor Protection****	5.3	4.8	8.3	5.0

Source: Doing Business - Last Available Data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

Procedures Relative to Foreign Investment

Acquisition of Holdings: The acquisition of the majority interest in a domestic company is allowed in Egypt. In fact, holding more than 49% of the capital of a local bank is authorized since law 97/1996.
Obligation to Declare: The investor has to provide the following information: the name of the contracting parties, the company's legal form, the name of the company, the type of activity, the length of existance of the company and its capital, the Egyptian and non-Egyptian contribution percentage, the means of subscription and each partner's liabilities. For more information, you can consult the GAFI investment guide.
Competent Organization For the Declaration: GAFI
Requests For Specific Authorizations: The founders of joint stock and limited liability companies must furnish a bank certificate showing that 10% of the issued capital has been paid up.

Investment Aid

Forms of Aid: A number of sectors and industries benefit from the government’s incentives and guarantees, such as zero tax over the lifetime of a project. For more information, you can consult the Ministry of Foreign Affairs.
Privileged Domains: The most privileged domain is the petroleum sector. But the Egyptian Government has recently lauched a plan to offer investment incentives and guarantees in non-traditional fields such as education, agriculture and land reclamation as well as PPP projects in water and sewage projects. For more information, you can consult the Ministry of Foreign Affairs.
Free Zones: There are investment zones in different regions of the country, as well as free zones and special economic zones.
Organizations Which Finance: You can consult the Ministry of Investment, the National Bank of Egypt and the General Authority for Investment and Free Zones.

Investment Opportunities

The Key Sectors of the National Economy: Since 2004, the Egyptian government promotes foreign direct investments, the results of this campaign are rather modest. The taxation and customs red-tape, as well as the rigidity of the labor law causes FDI to come only from big multinational companies. In order to re-establish foreign investor confidence, parliament has recently adopted laws on the promotion of exports in free-trade zones. The intellectual property sector is also benefitting from incentive mesures. Additionally, the Ministry of Investment offers investment opportunities online.
Services
The Egyptian communications and informations sector enjoys the highest growth rate in the world. Significant needs in marketing, consulting and surveying and modeling go together with the current policy of major construction work.
Industry
The need for investments can be felt in several sectors; the textile and clothing sectors and more precisely weaving, remain very traditional and very governement assisted. Other sectors also requiring investments: capital goods, cold chain, packaging, packing, etc.
Infrastructure
There is still a significant need of infrastructures and unexploited sectors, namely in the tourism and cultural sectors, while tourism is the one sector in Egypt that has the highest growth. Lastly, a major contruction works policy is the government's priority: a Tochka delta project, a new canal in the Sinai region, some projects of new towns, as well as some ten airports being offered for privatization: Marsa Alam and Borg El-Arab airports, Bahareya Oasis airport, Ain Shokhna and Assiut airports, Sharm El-Sheikh and Aswan expansion projects, and the new Hurgada terminal. In the energy sector, there is a need to build a power plant as well as to develop the gas sector.
Privatization Programs: A privatization program is planned for the banking, telecommunication, textile, transport and chemical sectors. Nearly 150 companies are yet to be privatized, amongst which approximately fifty are in the textile sector as well as some ten airports.
Tenders, Projects and Public Procurement: Globaltenders, Tenders & Projects from Egypt
Tenders Info, Tenders in Egypt
DgMarket, Tenders Worldwide

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors: The banking system is exclusively held by the State.

Finding Assistance For Further Information

Investment Aid Agency: General Authority for Investment and Free Zones in Egypt(GAFI)
Other Useful Resources: Egyptian government information website
Economic Developments and Prospects in Egypt - African Economic Outlook
Doing Business Guides: Egypt Commercial Guide 2010 - Buy USA

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