Garnering more investment, loans and assistance packages than had been widely expected, Egypt’s Economic Development Conference (EEDC) secured investment contracts worth $36.2bn, an additional $18.6bn in infrastructure contracts to set up power plants, and $5.2bn in loans from international financial institutions.
More commitments are expected to arise from the EEDC, held in March, in the medium-term as a result of several memorandums of understanding (MOU) inked during the event.
Total investment commitments far outweighed original estimates. Speaking ahead of the conference, the minister of investment, Ashraf Salman, forecast projects would attract in the range of $15bn-$20bn. The level of commitments represents a welcome return of foreign investment after years of muted inflows and compares favourably to the $13.2bn worth of FDI Egypt attracted in 2007-08 during the height of its pre-revolution growth.
Gulf states lead investments
During the opening ceremony at the three-day event, held in Sharm El Sheikh, Saudi Arabia, Kuwait and the UAE – which combined have already disbursed billions in grants and concessionary loans to Egypt in recent years – pledged an additional total of $12bn in economic assistance to the country.
The financial packages included a combination of aid and investment: the UAE pledged $2bn as deposits in the Central Bank of Egypt (CBE) and an additional $2bn in investments; Saudi Arabia promised to make $3bn worth of investments and add a further $1bn to the CBE; and Kuwait brought the total assistance received from the Gulf to $12bn by promising $4bn worth of investments. Oman also pledged $500m, half aid and half investment, over the next five years.
Onlookers described the event as a demonstration of political and economic support for Egypt from the Arab world, coming at a much-needed time for the Egyptian economy. “A portion of the aid committed by the Gulf countries is expected to be placed as deposits in the Central Bank, which could bring some much-needed foreign currency liquidity if the CBE decides to inject some of these funds into the banking system via special forex auctions,” Nadir Shaikh, country officer for Citibank, told OBG.
Focus on energy
More encouraging for Egypt’s prospects of economic recovery was the interest shown by multinationals in the energy sector. BP committed to invest $12bn over four years in the natural gas fields it operates in the West Nile Delta, which represents the single-largest foreign investment deal in Egypt’s history. Additional deals signed by Italy’s Eni, UK’s BG Group and UAE’s Dana Gas should help expand Egypt’s upstream activity, which in recent years has struggled to meet rapidly expanding domestic demand.
Egypt’s electricity minister was also busy over the weekend, signing an MOU with Germany’s Siemens to establish power stations at the cost of $10bn with a total production capacity of 6.6 GW. In addition, an MOU was signed with Saudi Arabia’s ACWA Power International and UAE’s Masdar to construct a number of power plants, including solar plants and a wind energy project. The companies will invest $2.4bn with a production capacity of up to 4400 MW, adding much-needed capacity to the national grid’s 27 GW (as of the end of 2013, according to the US Energy Information Administration).
Other significant commitments came from a range of UAE firms, including Majid Al Futtaim, which plans to invest LE5bn ($653.4m) in eight real estate projects over the next five years; Al Swidan Group, which plans to invest $6bn in a grain logistics hub in Damietta; and Khalifa bin Butti Bin Omeir (KBBO) group, which plans to invest $2bn in key sectors such as health, waste management, money exchange and renewable energy.
“These investments – especially the large amounts announced by the oil and gas majors – represent a much-needed boost to FDI,” said Shaikh. “According to the recently released balance of payments report for the first half of the fiscal year, FDI has already begun to pick up.”
Hussein Choucri, chairman and managing director of HC Securities and Investment, told OBG that the success of the event was underpinned by government changes to the investment law and other initiatives to improve the business environment. “Local investment banks worked hand in hand with the government to present various investment opportunities during the conference,” said Choucri.