Egypt lies at the heart of the Middle East and North Africa region and remains its most populous country and one of its largest economies. The country is of vital importance to regional and continental allies, with whom trade, investment, and security ties have seen growing relevance in recent years.
Support & Investment
Following the 2011 revolution, and again after the military takeover in July 2013, Egypt’s Gulf allies stepped in with funds and resources to support Egypt’s flagging economy and boost government stability. Together, Saudi Arabia, the UAE and Kuwait extended $12bn in aid to Cairo in the days after the 2013 change of government, showing their support for Egypt at a particularly difficult time. Indeed, since the 2011 revolution Egypt’s foreign reserves had dropped rapidly as authorities looked to shore up the Egyptian pound. Meanwhile, political uncertainty made a new deal with the IMF a more distant prospect.
Saudi Arabia’s support package totalled $5bn, with $2bn as a deposit with the Central Bank of Egypt (CBE) to boost foreign currency reserves, $2bn in energy products and $1bn in cash, according to Saudi officials. The UAE offered $3bn, with $2bn in an interest-free loan to be deposited with the CBE and $1bn in a grant. Kuwait extended a total of $4bn, with $2bn going to a CBE deposit, $1bn in oil products and a $1bn grant. As well as easing pressures on the budget, foreign reserves and the current account by providing energy aid, the support helped Egypt pay back a loan of $6bn extended by Qatar to the previous administration.
The immediate support offered by the Gulf countries is indicative of Egypt’s importance to its regional allies, and their support of the current government. This was further underscored at the Egypt Economic Development Conference in Sharm El Sheikh in March 2015, attended by more than 1700 investors, government officials and other delegates from around the world. Once again Saudi Arabia, the UAE and Kuwait stepped in, offering $4bn each. Kuwait announced a package of $4bn in investment by Kuwaiti entities, while the UAE and Saudi Arabia’s packages comprised $2bn and $1bn, respectively, in deposits with the CBE. Oman also pledged Egypt $250m in investments and a further $250m in grants over five years. Other countries and private firms from around the world were attracted, with the largest deal being a $12bn pledge from energy firm BP and Russian partner DEA.
The Egyptian government is keen to underline the fact that it is not only a recipient of support from Gulf leaders, but that the country is also an attractive investment destination for Gulf companies, including private sector firms. In December 2015, Prime Minister Sherif Ismail met Saudi officials and investors as part of an ongoing drive to secure concrete investments in Egypt. The meetings followed a visit by Ismail and other ministers to the Kingdom to present potential investment projects and work on pledges made at the Sharm conference.
Projects under discussion include a hydroelectric plant at Assiut in central Egypt, and developments at Sharm El Sheikh. Egyptian officials are also working on strengthening the business environment and addressing legal disputes that have held back investment in the past, with an eye towards attracting private Gulf capital.
International bank HSBC suggests that investments from GCC member states in Egypt may total $150bn between 2015 and 2020. The UAE is also inking billions in investment and trade deals with Egypt, with particular interest in the developments of and around the Suez Canal, which have boosted the financial case for investment. Particular areas of interest to UAE investors thus far appear to include port infrastructure as well as capital markets.