Egypt should receive record net foreign direct investment of more than $10 billion in the current fiscal year ending in June, according to the country’s primary governmental authority on investment.
Foreign direct investment reached $9.2 billion in the first three quarters of this fiscal year and will exceed $10 billion this month, said Egypt’s General Authority for Investment and Free Zones (GAFI) in a statement Monday.
Investment in Egypt has skyrocketed over the past five years. In 2002 and 2003 foreign companies invested only $0.7 billion; in contrast, by last year FDI climbed to $6.1 billion.
Government reform measures in areas such as privatization of state-owned assets, tax, customs and banking, have played a key role in attracting foreign investment, GAFI said.
“It’s by far the largest country in the Middle East in terms of population,” said Charles Hollis, head of the Middle East practice at Kroll in London.
“Its labor force is relatively cheap,” he said. “Thirdly, gas and oil is there, so there are some feed stocks for certain industries that rely on gas and oil. But mainly, the new government under Prime Minister Nazif has really started to accelerate legal and structural reforms.”
Many companies, particularly in the financial sector, are being privatized.
A country of 75 million people, Egypt has the second-largest economy in the Arab world after Saudi Arabia. GDP has been growing at a rate of about 5% a year in 2005 and 2006. Egypt mainly exports crude oil and petroleum products, cotton, textiles, metal products and chemicals.
The government of Prime Minister Ahmed Nazif has lowered personal and corporate tax rates, reduced energy subsidies and privatized several companies.
“People do believe that it’s been a friendlier environment to invest in,” Hollis said. “Prime Minister Nazif is very much seen as a technocrat.”
The United Kingdom, the largest European investor in Egypt, continued to invest heavily in the country in the last year, GAFI said.