FDI Update
After four years of challenges in the social, economic and political space, Egypt rolls out the welcome mat for foreign direct investors.
US cereal maker Kellogg’s offer of $144 million for Egyptian snackmaker BiscoMisr ended a bidding war with UAE’s Abraaj—and ended a year that saw appetite return from foreign direct investors wishing to tap the largest market in the Arab world.
Political and economic turmoil in the years since the 2011 revolution had resulted in Egyptian FDI inflows’ nosediving from almost $10 billion in 2010 to just $3 billion by the end of fiscal year 20122013. FDI levels for 20132014 have doubled to $6billion, and the Egyptian government says it is targeting $10billion in FDI by the end of the current fiscal year.
At just shy of 90 million people, Egypt’s population offers companies enormous scope for growth. Biopharmaceutical company AbbVie hopes to take advantage of that potential. The company recently opened an office in Egypt, where it hopes to serve a sector, healthcare, which is set to grow 10% per year for the next few years. “It was marking a significant milestone in our global expansions and setting foot in a highly promising market at such a dynamic time,” notes Nibal Dahaba, director, public affairs, AbbVie Middle East and North Africa. AbbVie executives were part of a US business delegation to Cairo in November 2014, one “which gave to all of us strong signals that Egypt is restoring its capabilities in attracting foreign investment,” says Dahaba.
“The help and support we got from the Egyptian government was just great,” says Dahaba. “We had [at] our launch two ministers [attending]—and the minister of Investment hosted the event inside his ministry. The minister of Health was also willing to facilitate many [logistical issues] that faced us during the paperwork. We can feel the change and the dramatic shift in the mind-set of the new government.”
DRIVING CHANGE
Over the past few months, Egypt had been taking serious steps to attract foreign investors, says Dahaba—including drafting a new investment law, working on removing bottlenecks in the pharmaceutical industry (registration, pricing and intellectual property issues), setting up a new taxation system and putting in place various other incentives for investors.
Both aid and FDI revenue from the Gulf helped keep Egypt from falling into bankruptcy during turbulent times after the revolution, and president Abdel Fattah al-Sisi has undertaken more economic reform measures than were requested of the Morsi administration in order to receive IMF backing, which is an endorsement to foreign investors that Egypt is very much open for business. Egypt’s Central Bank governor, Hisham Ramez, has said that while an IMF loan is likely, he realizes that Egypt cannot exist on foreign assistance alone, which is one reason the current government is focusing it’s attentions on attracting more FDI.
Suresh Narayanan, chairman and CEO, Nestlé Northeast Africa region, says: “Egypt has a pivotal geopolitical and economic role to play in the Arab world, and the various steps now being taken to reduce subsidies, streamline laws and foster a better investment climate should help to accelerate economic growth.”
Prime minister Ibrahim Mahlab has promised that Egypt’s new investment law will be in force before an economic conference in Sharm el-Sheikh in March 2015, where Egypt will highlight a series of projects with investment opportunities, such as the Suez Canal expansion and other infrastructure projects.
Nestlé opened a new confectionary plant in Egypt in June 2014, and Narayanan believes that now is the perfect time to invest in Egypt. He notes: “Today there are real signs that the country is resuming strong economic growth—you have a very large and young population that has high demands. Moreover, Egypt has an abundance of talent that is very skilled. Collectively, this should create a sense of confidence and optimism as international markets demonstrate their confidence through big increases of foreign investment, a return to Egypt’s stock market and upwards revisions from ratings agencies.”
Nevine Loutfy, MD and CEO of Abu Dhabi Islamic Bank Egypt, agrees that Egypt enjoys a young, trainable workforce but says there are not enough technical schools, although this is now under review by Egypt’s Ministry of Higher Education and Ministry of Education. She thinks the government should speed up reforms but praises it for maintaining stability for the past 18 months and embarking on a series of structural changes. “The government is undergoing major strides and effort to change the laws, [has] created a conflict resolution committee to resolve outstanding investor disputes and [is] rethinking its bureaucracy to create a one-stop shop for investors.”
