Prior to the onset of Egypt’s political crisis, the rapid influx of new investments over the past few years made the country the largest recipient of foreign direct investments (FDI) in the Middle East and third in the Arab world, after Saudi Arabia and the United Arab Emirates.
The dynamic growth of the Egyptian economy (about 7% before 2011), its strategic geographical position, low labor cost and skilled workforce, unique tourist potential, substantial energy reserves, large domestic market and success of reforms undertaken by the authorities (including many privatizations) were all factors that may explain such sharp rise of foreign direct investment.
The regional context should also be taken into account, as Egypt benefited from abundant liquidity coming from the Gulf countries—as a direct result of the increase in revenues generated by oil exports.
While many foreign investors fled Egypt in the wake of political and economic turmoil, Arabs have showed a greater willingness to stay despite possible risk. Real estate is one of those areas that continued to benefit from FDI.
Foreign direct investment in Egypt averaged $2,234.19 million from 2002 until 2014, reaching an all-time high of $5,572.50 million in the fourth quarter of 2007 and a record low of $40.70 million in the second quarter of 2002.
In the three years since the 2011 revolution, FDI in Egypt dropped from almost $10 billion in 2010 to just $3 billion by the end of the fiscal year 2012/13.
While many foreign investors fled Egypt in the wake of political and economic turmoil, Arabs have showed a greater willingness to stay despite possible risk. Real estate is one of those areas that continued to benefit from FDI. “Many Arabs want to own an apartment in Egypt; the prices of apartments in Egypt are good and fair, which make it a very desirable location,” said Darwish Ahmed Hassanin, CEO of Saudi Egyptian Construction Company (SECON), one of the key real estate developers in the country.
The new government certainly understands the need to attract foreign direct investment and be supportive of current investment in the country.
According to Hisham Fahmy, Executive Director of American Chamber of Commerce in Egypt, "The most attractive investment opportunities that lie within the Egyptian economy reside in three main sectors. The three key sectors that uphold great potential to investors are as follows: ICT, real estate and agriculture.”
A question that is currently being frequently asked is what in particular should prompt investors to choose Egypt as their investment destination.
The country is in a geographically strategic location. Moreover, it offers a cheap and relatively qualified labor force.
Its growing population constitutes a non-negligible market in the region. Hassanin from SECON shares this view too: “With such a large population of 90 million, some would say this is a difficult challenge but I disagree and think that our large population is our advantage if we take into account that 40% of those 90 million are the younger generation, who have lots of energy and are ready to work hard for the country.
Its energy resources are attractive and in addition to that, the country has in recent years launched a public works policy (e.g. 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.
Foreign and local businessmen believe that Egypt's President Abdel Fattah el-Sisi can deliver stability to open up investment opportunities in this most populous Arab nation.
To many investors, including Egyptians, President el-Sisi offers the hope of relief from three years of political turmoil that began with the Arab Spring uprising.
In a push to restore confidence in the economy and attract investment in Egyptian equities and government papers, the Central Bank of Egypt (CBE) covered the entire backlog of dollars owed to foreign investors seeking to repatriate funds from the country. The CBE had covered 50% of the backlog on 13 March 2014.
The government policy for large scale liberalization is an encouraging sign for investors.
Competitive tax rates: Corporate taxes top out at only 20%
Personal taxes have been divided into three sections:
First: 5,001 < 20,000 the tax will be 10%
Second: 20,001 < 40,000 the tax will be 15%
Third: more than 40,000 the tax will be 20%
Reformist Investment Climate: The government has embraced an intensive three-dimensional promotion strategy based on business reform, foreign direct investment attraction and investor care.
The “Contracts Committee”, which the General Authority for Investment and Free Zones (GAFI) is a member of, was established to resolve any conflict that might arise between the investors and different governmental bodies over previously signed business contracts. Moreover, the Investment law No.8/1997 was modified to allow the reconciliation between the investor and the government in the cases of proven fraud.
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