Cairo – The president of the Egyptian Authority for Investment Promotion, Assem Ragab, announced this week a government plan to stunt the reduction of foreign investment in the country. The news was announced this week and published in several Egyptian papers, like the Al Ahram and Al Akhabar. According to Ragab, the main objective of the plan is to try to help the country face the times of crisis.
"How to reduce the repercussions of the current crisis on Egypt? We have already asked this question, but the answer is not easy," he said, adding that the difficulties should not stop the organisation from elaborating a plan aimed at this target. The main pillar is investment of 15 billion Egyptian pounds (US$ 2.7 billion) on the creation of projects that may be concluded in partnership with the private sector.
"The objective behind this initiative is to strengthen the confidence on the private sector at a moment of crisis like the one we are living," said Ragab. The minister of Finance of Egypt, Boutros Ghali, also confirmed that the government of Egypt plans to participate with 15 billion Egyptian pounds in projects in Public-Private Partnerships (PPPs).
The president of the Investment Promotion Authority, on the other hand, showed his concerns with the lower Egyptian exports, caused by the global recession and by protectionist measures that the main Egyptian partners, like the US, are planning to adopt.
Ragab also hopes to attract to Egypt some of the companies that are closing in Europe and in several other countries, defending that production costs in Egypt are much lower than in the European nations and even than in some Asian countries. "Our production cost is now equal to that of China," said Ragab. He explained that the Chinese production cost has risen allowing Egypt to make use of its proximity to these European markets and to the countries of the Middle East, which should significantly reduce the price of products due to cheaper transportation.
Apart from that, the fact that Egypt is a member of the Word Trade Organisation (WTO) and has signed several multilateral free trade agreements grants the country access to several reduced customs tariffs and, in some cases, even the elimination of tariffs. "Five thousand mills have already closed their doors in China. I think that we could attract at least some of them to Egypt," said Ragab.
The low production cost and export investment should not, however, stunt the effects of the crisis on Egypt. Ragab admits that the investment in the country is already dropping. "Certain companies that forecasted investment in Egypt have postponed their plans. And all those who used our country as a production and reexport platform should review their plans, as their own countries are in recession," he explained. Already in the third quarter of 2008, foreign direct investment (FDI) in Egypt dropped almost 44% over the same period in the previous year.
*Translated by Mark Ament
