FDI in Egypt

Overview by Globlatrade.net:

FDI in Figures

With the rapid influx of new investments since 2005, 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 since 2004 (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 2007 2008 2009
FDI Inward Flow (million USD) 11,578 9,495 6,712
FDI Stock (million USD) 50,503 59,998 66,709
Performance Index*, Ranking on 141 Economies 34 51 52
Potential Index**, Ranking on 141 Economies 85 93 -
Number of Greenfield Investments*** 54 83 103
FDI Inwards (in % of GFCF****) 42.2 31.2 33.6
FDI Stock (in % of GDP) 36.7 36.2 34.8

Source: UNCTAD

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

Main Foreign Companies
In 2004, UNCTAD reported 271 foreign companies (that is to say companies with at least 10% foreign capital ownership) in Egypt.  This figure is considered largely under-evaluated.

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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.

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Experts Views (1)
  • Egypt Agriculture Economic Overview

    Only about 3 percent of Egypt’s approximately 1,000,000 square kilometers of land are arable, which percentage has hardly changed since 1972? Moreover, large arable parts of the Delta remain uncultivated while other parts do not get used to maximum capacity due to the lack of farmers’ education and lack of...

    Buhaisi Consulting International on 15 Apr 2012 related to FDI in Egypt

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