Although FDI coming into Egypt remains highly concentrated on oil, it struck a decade-high in 2019 thanks to Chinese investment, money coming into its renewable energy sector and an ongoing economic recovery.

Egypt welcomed $8.5bn of headline foreign investment in 2019, a modest increase from a year earlier, but the highest figure since 2009, according to preliminary data from Unctad.


Foreigners welcomed 

More noteworthy was Egypt’s reception of job and facility-creating foreign investment – known as ‘greenfield’ FDI – which hit an all-time high of 133 investment projects in 2019, according to greenfield investment monitor fDi Markets. 

Andrew Jefferys, chief executive of research and consultancy firm Oxford Business Group, says: “Since the Arab Spring, Egypt has taken some time to get back on its feet. [But] we’ve had three years of increasing levels of growth and confidence in the country’s huge domestic market.” 

Egypt’s improved political stability and the government’s commitment to economic liberalisation and foreign investment are also boosting economic growth, adds Mr Jefferys.

Rise in investment

Following the Egyptian revolution in 2011, foreign investment to north Africa’s most populous country dropped sharply. However, over the past six years it has gradually recovered. 


Indeed, fDi Markets reports that the number of greenfield projects announced in Egypt has grown non-stop since 2013, while capital from headline foreign investment has also displayed a largely positive trend, according to Unctad.

“Egypt’s economic recovery was underpinned by a bold macroeconomic stabilisation and structural reform programme, with four cornerstones,” says Ibrahim Chowdhury, senior economist in the World Bank’s Cairo office.

These cornerstones – a fiscal consolidation programme, exchange rate liberalisation, energy sector reforms and legislative reforms – form part of a three-year $12bn IMF loan programme, and have improved Egypt’s macroeconomic situation.

The country’s real GDP has continued to pick up since plummeting in 2011, hitting 5.6% in 2019 – its highest level since the 2008 financial crisis, according to the World Bank. 

Secure tourism

Increased stability in Egypt, especially in terms of security, is highlighted by growth in the country’s tourism industry in recent years. Although still below pre-2011 levels, the number of international tourist arrivals to Egypt has increased over the past three years, the UN World Trade Organisation reports, thanks to a cheaper Egyptian pound and increased government incentives for charter airlines operating international flights.

The number of foreign investment projects to Egypt’s hotels and tourism market hit an all-time high in 2019, with Turkey’s Rixos Hotels and Cyprus’s Steigenberger Hotels breaking ground, according to fDi Markets. Travel and tourism contributed 11.9% to Egypt’s GDP in 2018, and accounted for one in 10 jobs, according to the World Travel and Tourism Council. As with the rest of the world, however, the coronavirus outbreak looks set to hit Egypt's tourism sector hard.

Chinese tourists have become one of the fastest growing demographics to Egypt in recent years, while Chinese investment to the country has also risen sharply. Insignificant and inconsistent before 2016, Chinese FDI has shot up since then, according to fDi Markets, and China is now Egypt’s second top source of greenfield FDI, both in terms of projects and capital invested since 2015. 

In the zone

Half of China’s investment into Egypt since 2015 has gone into manufacturing, namely consumer electronics, automotive components and the food and beverage sector.

Among others, textile manufacturer Shandong Ruyi Technology Group invested $830m in the Suez Canal Economic Zone (SCZone). It is Egypt’s largest free zone and part-owned by TEDA, a Chinese state-owned industrial developer that began discussions in 1994 – the first instance of Chinese involvement in free economic zones in Africa. 

Early in 2020, Chinese investment into SCZone came under legal scrutiny. Jushi, a Zhejiang-based glass fibre manufacturer that set up operations in the zone in 2012, was in the crosshairs of EU antisubsidy and antidumping actions, following a tripling of EU-bound exports of glass fibre products from Egypt between 2015 and 2018.

Nonetheless, SCZone is achieving its objective of attracting FDI, and Egyptian prime minister Mostafa Madbouly approved plans to set up seven new free zones in mid-2019. 

Gateway country

Chinese-led investment in Egypt’s infrastructure and industrial sectors has also shot up over the past few years, not least because China sees the country as the main gateway to Africa and Europe, as part of its Belt and Road Initiative, according to Nida Raza, head of capital markets for the Middle East and north Africa at US commercial real estate firm JLL.

“In terms of real estate quality, the standards in Egypt are generally not very restrictive, which may be attractive to certain Chinese companies who have the ability to design and rapidly build real estate assets of average quality,” she adds.

Besides China, another key source of greenfield FDI to Egypt recently has been Germany, which had a record high number of greenfield projects in 2019, according to fDi Markets. BMW, Mercedes, Bosch and Allianz were the major companies in the frame, but significant German investments into Egypt’s chemicals, pharmaceuticals, food and beverage and tourism sectors were also recorded.

Diversification agenda

The share of total FDI in Egypt's petroleum sector, meanwhile, has gradually increased since 2017, to almost three-quarters of total FDI in fiscal year 2019, according to data from the Central Bank of Egypt. International interest in Egypt’s oil sector peaked in 2015, following a major offshore gas discovery, while Egypt’s liquefied natural gas exports more than doubled in 2019, according to S&P Global.

“President Abdel Fattah al-Sisi wants to consolidate Egypt’s position as a hydrocarbons producer, hub and conduit in the region. Doing so is not only bolstering Egypt’s energy security but also enhancing the regime’s standing in the eyes of the US, Israel and Europe,” says Anthony Skinner, Middle East and Africa director at risk consultancy Verisk Maplecroft. 

At the same time, Egypt’s renewable energy market has experienced stellar greenfield FDI growth since 2015, before which the market was very quiet, according to fDi Markets. Egypt is second only to South Africa as a destination for FDI in renewables in the Middle East and Africa. For example, Egypt’s Benban Solar Park is one of the world’s largest and most ambitious projects, backed by a $3bn loan from the World Bank. 

However, the Egyptian government is still struggling to create the fiscal space necessary to shift towards a human capital-focused policy, where policies and social programmes are geared towards a wider concept of social safety nets, according to the World Bank’s Mr Chowdhury. “This would include productive spending on education, health, social protection and government services, while mobilising the needed domestic resources through effective and equitable taxation,” he adds.

The interviews in this article were conducted before the global impact of the coronavirus was fully known.

This article first appeared in the April-June edition of fDi Magazine. The full digital version of the magazine is available here