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Egypt to Investors: Autocratic Government Means We’re Safe for Business
Egypt hopes to jump-start its economy by attracting foreign investors and is touting itself as a stable destination for foreign capital.
A year and a half after Egypt’s generals seized power in a coup from the Muslim Brotherhood, Investment Minister Ashraf Salman arrived in Washington this week with a simple, two-pronged message: Egypt is open for business, and the revolutions of recent years are a thing of the past.
Since the unrest of the Arab Spring erupted in Egypt in January 2011 and felled then President Hosni Mubarak’s government a month later, the country’s economy has struggled amid repeated mass protests and turbulent leadership. Already hobbled by Egypt’s famously inefficient bureaucracy, the economy sagged as tourism revenue plummeted by more than half in 2013 and as its capital city frequently ground to a complete halt. Now, Egypt’s unemployment rate remains at an eye-popping 13.1 percent. Among young people that figure is even higher, with more than a quarter out of work. A staggering budget deficit has undermined investor confidence.
The government of current President Abdel Fattah al-Sisi has embarked on an ambitious economic reform agenda, a key to which is attracting foreign investors. And that’s where Salman comes in; he arrived in Washington this week from London, where he met with investors.
To stimulate employment and the broader Egyptian economy, which grew a mere 2.2 percent during the 2013-2014 fiscal year, the government is planning a series of megaprojects, including an expansion of the Suez Canal that has been contemplated since the 1990s. To pay for these projects, Salman is seeking to partner with private-sector investors.
So the head of Egypt’s effort to attract foreign capital came to Washington speaking the language of neoliberal economics and speaking about a more well-functioning government and efficient state. “This is a market-mechanism economy,” Salman said in an interview Wednesday, Jan. 21, with Foreign Policy at the Egyptian Embassy in Washington. “This is an economy that relies on the private sector, an economy that relies on demand and supply, an economy that relies on the private sector to drive growth and drive targeted growth.”
Speaking in Davos, Switzerland, on Thursday, Sisi extended a similar invitation to investors. “We need to guarantee a decent life to the people of Egypt through private-sector-led growth,” Sisi said. “This means providing social justice, reducing red tape, creating equal opportunities for all investors, and ensuring sound fiscal and monetary policies.”
Sisi also said the government is aiming for 7 percent GDP growth, a highly ambitious — and unlikely — goal. In March, Egypt will be hosting a conference for investors and political leaders at the resort city of Sharm el-Sheikh.
In Washington, Salman said he met with lawmakers in Congress, the U.S. Chamber of Commerce, and a slew of heavyweight corporations, including Exxon Mobil, the energy company Apache, Kellogg, and IBM. He later headed to New York for additional meetings.
Exxon and Kellogg declined to comment on the meeting in Washington. IBM did not return requests for comments. Salman specifically singled out Kellogg, as well as its recent acquisition of Egyptian biscuit-maker Bisco Misr, as evidence of foreign interest in the country’s market.
And as Western companies contemplate such expansions in Egypt, Salman is making a case that the unrest that has marked recent history is a thing of the past. He said Cairo has slashed fuel subsidies and plans to impose a value-added tax on top of other tax increases to boost coffers. Despite these measures, Salman said, widespread protests haven’t returned to Egypt.
Analysts have cited the reduction in energy subsidies as evidence of the current government’s commitment to structural reforms to the Egyptian economy. That move has led some analysts to conclude that energy companies may now be willing to make additional investments in the country’s energy markets. Apache confirmed that its officials met with Salman and his delegation and said that the company’s assets in Egypt include large holdings in the western desert. According to the company’s website, 72 percent of that acreage is undeveloped and could be expanded.
Tourism, meanwhile, is beginning to return to levels not seen since before Mubarak’s fall, Salman said, noting that hotel and resort bookings have seen marked increases. Last August, for example, just short of 1 million tourists visited Egypt, compared with the approximately 560,000 visitors a year earlier.
These, then, are the fruits of a return to the strongman era of Egyptian politics, including a possible return of foreign cash as well.
Photo credit: Andrew Burton/Getty Images