Egypt flag Egypt: Investing in Egypt

Foreign direct investment (FDI) in Egypt

FDI in Figures

Despite the Covid-19 pandemic, Egypt remained the largest recipient in Africa, albeit with a significant reduction (-35%) from USD 9 billion recorded in 2019 to USD 5.9 billion in 2020, according to UNCTAD's 2021 World Investment Report. In the same year, FDI stocks reached USD 132 billion. According to UNCTAD’s Investment Trends Monitor, global FDI flows showed stronger than expected rebound momentum in the first half of 2021, but the recovery was uneven. In Northern Africa, FDI flows only reached USD 5 billion during that period. As of June 2021, FDI stock amounted to USD 134.3 billion (Central Bank of Egypt). Efforts to boost FDI diversification include the agreement to reactivate the USD 16 billion Saudi-Egyptian investment fund, which lists tourism, healthcare, pharmaceuticals, infrastructure, digital technologies, financial services, education and food as priority sectors. The Sovereign Fund of Egypt (TSFE) is seeking to attract FDI into a range of economic and social development projects through public-private-partnerships. Among the areas covered are solar-powered desalination plants, digitalization of the education system, transport (electric trains), finance, as well as the restructuration of state assets in the petroleum and water sector (SWF). Nevertheless, FDI in the country is still largely directed to natural resources. This pattern has been reinforced by the discovery of the Zohr offshore gas field in the Eastern Mediterranean region. The UK is by far the largest investor in Egypt, followed by Belgium, the USA and the UAE. FDI is concentrated in the oil and gas industry (around three-quarters of total investments), followed by real estate, manufacturing, financial services and construction.

The dynamic growth of the Egyptian economy, its strategic geographical position, low labour costs, skilled workforce, unique tourist potential, substantial energy reserves, large domestic market and the success of the reforms undertaken by the authorities (including many privatisations) contributed to drive up FDIs. Egypt recently adopted an Investment Law that includes performance requirements for certain investment incentives, including labour-intensive projects and geographical location. The government has also set up special economic zones with business-friendly regulations: more liberal, more efficient administration, tax incentives, facilitation of registration and customs procedures, better infrastructure, etc. However, outside these areas, it is difficult to register a new company, and instability in the country is hindering business developments in Egypt. The country ranked 114th out 190 countries in the 2020 Doing Business report of the World Bank (latest report), gaining six spots compared to the previous year.

 
Foreign Direct Investment 201920202021
FDI Inward Flow (million USD) 9,0105,8525,122
FDI Stock (million USD) 126,639132,477137,543
Number of Greenfield Investments* 1405265
Value of Greenfield Investments (million USD) 13,7151,6295,574

Source: UNCTAD, Latest available data

Note: * Greenfield 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.

 
Country Comparison For the Protection of Investors Egypt Middle East & North Africa United States Germany
Index of Transaction Transparency* 8.0 6.4 7.0 5.0
Index of Manager’s Responsibility** 3.0 4.8 9.0 5.0
Index of Shareholders’ Power*** 3.0 4.7 9.0 5.0

Source: Doing Business, Latest available data

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.

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What to consider if you invest in Egypt

Strong Points

Advantages for FDI in Egypt:

  • Strategic geographic location
  • Low-cost and relatively qualified labour force
  • Growing population (more than 100 million inhabitants) that makes Egypt a strategic market in the region
  • High tourism potential
  • Important energy resources, notably natural gas
  • Public works policy, which offers many investment opportunities to foreign companies
  • A sufficiently diversified economy (energy, tourism, Suez Canal revenues, industrial base, etc.)
  • Government policy that aims at improving the business climate
Weak Points

Disadvantages for FDI in Egypt:

  • Political situation that remains tense and arouses uncertainty for foreign investors
  • Degraded regional security situation
  • Fragile banking sector
  • High poverty rate and persistent unemployment 
  • Infrastructure that remains insufficient
  • Omnipresent public sector and excessive bureaucracy 
  • Shortage of skilled labour
  • Cumbersome customs procedures and non-tariff trade barriers
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 duties and tariff simplification. Furthermore, Egypt enjoys the support of the FMI to put into place economic reforms (new VAT rate, reduction of subsidies on fuel and electricity, etc.). It shows the government's willingness to improve the business climate, which remains complex. Thus, after the Revolution, Egypt put into place restrictions on capital transfer. Investors are claiming that the approval of transfers may take several weeks.  

Several "megaprojects" may attract foreign investors in the coming years. Siemens already developed the largest gas power generation plant in the world, Egypt also plans to develop a large logistic and industrial platform around the Suez Canal, a new administrative capital city and large agrarian and mining projects.

In most sectors, foreigners benefit from the same treatment as nationals. A joint venture is needed to operate in certain sectors, namely hydrocarbons and real estate. The Law on Imports and Exports was amended to allow enterprises to be 51% Egyptian-owned to import (before, the enterprises had to be 100% Egyptian owned).
The country implemented a number of regulatory reforms, namely a new investment law in 2017; a new companies law and a bankruptcy law in 2018; and a new customs law in 2020 (if the establishment is under the provisions of the new investment law, it will benefit from a 2% unified custom tax over all imported machinery, equipment, and devices required for the set-up of the company).
More information on governmental measures to attract FDI in Egypt is available on the website of the
General Authority for Investment, which developed a special desk for investors. 

Bilateral investment conventions signed by Egypt
Egypt has signed bilateral agreements with more than a hundred countries, including most of the European Union countries, the United States and several African countries, the Middle-East and Asia. On the Mediterranean Basin, Egypt has signed bilateral conventions with Algeria, Spain, France, Greece, Italy, Libya, Lebanon, Malta, Morocco, Portugal, Tunisia and Turkey. An agreement with the Mercosur bloc of Latin American nations is also into force.
These conventions can be referred to on UNCTAD's Investment Policy Hub.

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Latest Update: September 2022