Foreign Direct Investment in Egypt
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.
Country Comparison For the Protection of Investors
|Egypt||Middle East & North Africa||United States||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
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.
|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|
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.
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.
- 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.
Procedures Relative to Foreign Investment
- Freedom of Establishment
- In theory, it is guaranteed (except for setting up in Sinai or the military domain). In practice, foreign companies can face some discriminations compared to their competitors from the Egyptian public sector. Their main difficulty is to obtain local bank credit which is still highly state-controlled.
- 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
- 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 Agency
General Authority for Investment and Free Zones in Egypt(GAFI)
- Tenders, Projects and Public Procurement
Globaltenders, Tenders & Projects from Egypt
Tenders Info, Tenders in Egypt
DgMarket, Tenders Worldwide
- Other Useful Resources
Egyptian government information website
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