{"id":18683,"date":"2024-02-28T17:15:35","date_gmt":"2024-02-28T15:15:35","guid":{"rendered":"https:\/\/zawia3.com\/?p=18683"},"modified":"2026-10-09T02:50:31","modified_gmt":"2026-10-09T00:50:31","slug":"investment","status":"publish","type":"post","link":"https:\/\/zawia3.com\/en\/investment\/","title":{"rendered":"Why Does Egypt Give Priority to the Foreign Investor?"},"content":{"rendered":"

Since the first of February, the Egyptian government has successively announced its intention to invest in a number of areas near or adjacent to the shores of the Red Sea and the Mediterranean, most notably the city of Ras El-Hekma on the North Coast, within Matrouh governorate. Only a few days passed before the government also hinted at the Ras Gamila area, overlooking the Red Sea coast in Sharm El-Sheikh, facing the islands of Tiran and Sanafir. Meanwhile, the names of the United Arab Emirates and Saudi Arabia stand out as the main investors in the planned deals (1).<\/p>\n

The questions lead us to the State Ownership Policy Document issued in December 2022, announced in parallel with the government starting its negotiations with the International Monetary Fund in October of the same year to obtain its fourth loan<\/a> in six years, worth USD 3 billion, a loan the Cairo government recently negotiated to increase to about USD 7 to 10 billion. The document emerged as the Egyptian authorities’ response to the Fund’s conditions on improving the investment climate in Egypt, as an initial step contributing to better chances of obtaining future loans or completing negotiations already under way.<\/p>\n

According to the Malcolm H. Kerr Carnegie<\/a> Middle East Center, the Egyptian government, which has become unable to pay the instalments and interest on its debts to the International Monetary Fund, found no option but to sell public assets. It therefore announced in February 2023 its intention to sell stakes in 32 state-owned companies by March 2024. It also announced its intention to increase investment to 25 to 30 per cent of gross domestic product.<\/p>\n

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Before the Document<\/h3>\n

To talk about the reasons the scene in Egypt has reached where it is now, we must first go back to before the State Ownership Document was issued, specifically to 2013, when the governments of Abu Dhabi and Riyadh became the biggest backers of Sisi’s regime, which rose after the Muslim Brotherhood left power and President Mohamed Morsi was ousted. The aid the regime has received since then became a lifeline.<\/p>\n

Since the 1970s, the policy of Gulf governments<\/a> has relied on what is known as “rescue diplomacy”, providing financial rescue packages to countries in the Middle East and North Africa, including Egypt, which between 1974 and 2023 amounted to about USD 231 billion, compared with USD 81 billion provided by the International Monetary Fund to the same countries over the same period. These take the form of financial loans, deposits in central banks, budget support, non-refundable grants or oil subsidies, and Egypt’s share of all these packages alone amounted to about 35% over the last four decades (Gulf capital’s share of foreign direct investment reached 25% in 2007, and it accounted for 37% of the value of privatisation between 2000 and 2008, while Gulf deposits from four countries, the UAE, Saudi Arabia, Kuwait and Qatar, at the central bank in the period from 2013 to 2023 reached about USD 28 billion, of which short-term financing amounted to USD 13 billion, while medium- and long-term deposits amounted to USD 14.961 billion).<\/p>\n

Before 2024, Gulf governments, especially Saudi Arabia and the UAE, managed to penetrate deeply into a number of important Egyptian sectors, strategic industries and services. In food, by 2016 Gulf investors had managed to acquire, fully or as minority stakes, about 14 of the 31 food companies listed on the stock exchange, thereby controlling about half of poultry production and fruit and vegetable exports (such as Dina Farms, Juhayna and Farm Frites, partly or wholly owned by Gulf investors). In real estate, the value of Gulf investment in real estate investment companies reached about 44% of capital estimated at about USD 100 million between 2008 and 2017.<\/p>\n

In 2022, the Saudi and Emirati sovereign funds bought stakes exceeding 40% in the Abu Qir and MOPCO fertiliser companies, two companies that produce 20% of Egypt’s fertiliser output and own shares in five other companies operating in the same sector. 2022 emerged as a watershed year in Gulf funds’ policy of acquiring Egyptian assets, as acquisitions by Abu Dhabi’s sovereign wealth fund (ADQ holding company) and Saudi Arabia’s Public Investment Fund reached USD 3.1 billion.<\/p>\n

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How Did the Gulf Support the Current Authorities?<\/h3>\n

Gulf states, especially the UAE and Saudi Arabia, began supporting Sisi immediately in 2013, following the 30 June protests against Muslim Brotherhood rule in Egypt. Riyadh granted aid worth USD 5 billion and Abu Dhabi aid worth USD 3 billion, while Kuwait gave Cairo aid worth USD 4 billion, only two weeks after the protests that toppled President Mohamed Morsi’s rule. The value of that aid in the first year of Sisi’s rule reached about USD 20 billion, according to statements<\/a> by him.<\/p>\n

Since 2013, Cairo has replaced international financial institutions with Gulf donors<\/a>, so that Gulf aid and loans became a cornerstone and imposed on Egypt a policy of appeasing the Gulf donor states in order to get out of its deteriorating economic situation, especially after those states pumped in billions of dollars that supported the regime at the start of its rule. In 2013, the UAE provided a USD 1 billion grant, an additional USD 2 billion deposit at the Central Bank of Egypt and in-kind oil and gas aid (worth USD 225 million), while Saudi Arabia provided a set of aid worth USD 5 billion, in the form of a USD 1 billion cash grant, USD 2 billion in in-kind aid (oil and gas) and a USD 2 billion deposit at the Central Bank of Egypt, while Kuwait provided a USD 1 billion cash grant and a USD 2 billion deposit at the Central Bank of Egypt.<\/p>\n

In 2014, the UAE provided USD 3.21 billion in the form of investment in developing infrastructure and the oil and agriculture sectors. The following year it provided a set of aid worth USD 4 billion to Egypt, USD 2 billion for the Central Bank of Egypt and USD 2 billion to finance projects, while Saudi Arabia pledged USD 1 billion for the Central Bank of Egypt and other investments worth USD 3 billion, and Kuwait pledged to invest about USD 4 billion. In 2016, Abu Dhabi renewed its pledge of support worth USD 4 billion: USD 2 billion as a deposit at the Central Bank of Egypt and the same amount as foreign direct investment, while Riyadh deposited a USD 500 million cash grant as a first instalment of a USD 1.5 billion loan, as part of a larger USD 25 billion package including an investment fund and investment projects.<\/p>\n

Corrado \u010cok<\/a>, consulting analyst at “Gulf State Analytics”, says in an economic analysis that after Gulf states pumped billions of dollars into supporting the Egyptian regime for years, they expect the authorities in return to facilitate the transfer of ownership of, or the acquisition of, important assets. He adds: “We often forget that Egypt promised to transfer sovereignty over the islands in the Strait of Tiran to the Saudis in exchange for financial support”.<\/p>\n

\u010cok believes the Gulf states benefit more, because, as he describes it, they are expanding in Egypt and imposing their control over assets and companies owned by Egyptians, suggesting they are targeting “important geo-economic and strategic projects, such as the Suez Canal economic corridor”, which meets local popular resistance and objection, and sectors such as telecommunications, banking, agribusiness and the financing of arms purchases. He stressed that since announcing the “NEOM” project, a smart city planned to be built in north-west Saudi Arabia that is intended to extend across the Strait of Tiran into Sinai, Saudi Arabia has been seeking to control real estate development on Egypt’s Red Sea coast (according to circulating news, there are indications that Riyadh is the next strong investor to buy or invest in the Ras Gamila area in Sharm El-Sheikh, facing the islands of Tiran and Sanafir). The UAE and Qatar, on the other hand, are more interested in ports, which provide them with geopolitical benefits regardless of the economic benefits<\/p>\n

(In 2022, Transport Minister<\/a> Kamel El-Wazir revealed that there is competition between Doha and Abu Dhabi to operate Egypt’s ports, and Sisi had earlier said he had offered them to investors for operation, like airports, railways, infrastructure and electricity).<\/p>\n

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Assets in Exchange for Debt<\/h3>\n

In 2015, Sisi launched an economic conference<\/a> to support the Egyptian economy, at which Gulf officials promised Cairo to pump in investments worth USD 100 billion. But the Abu Dhabi government refused to inject new deposits at the Central Bank of Egypt. Then, the following year, Egypt applied for a USD 12 billion loan from the International Monetary Fund, and the Fund made floating the local currency a condition for obtaining the loan and starting an economic reform programme. This forced the Egyptian regime into a new deal with Saudi Arabia to provide foreign liquidity, and the result was its ceding of the islands of Tiran and Sanafir in return.<\/p>\n

Cairo stumbled in implementing the economic reform programme it announced in 2016, which slowed the process of attracting capital from strategic Gulf investors. That moment was the beginning of a change in the policy of the Gulf states that had supported Sisi’s regime unconditionally. The Gulf states did not deliver what they had promised Cairo at the 2015 economic conference, according to economists we spoke to.<\/p>\n

According to Al-Ishtiraki portal<\/a>, the billions of dollars with which the Gulf states and the UAE supported the revolt against the “Morsi” regime in Egypt made the Egyptian economy hostage to Gulf deposit money and to Gulf bargaining over selling assets in exchange for debt. This was confirmed by economists who spoke to Zawia3: negotiations with Gulf governments have not gone well<\/a> since Cairo announced the sale of 32 state-owned companies to close a financing gap that Standard & Poor’s estimated at about USD 37 billion of external financing until June 2024. That is because Cairo insisted on selling its assets at a large price difference, which the governments of Qatar, the UAE and Saudi Arabia opposed<\/a>, leading Egypt to turn to the International Monetary Fund to negotiate a new loan; but the Gulf governments, especially the UAE, in turn pressured the Fund’s management to delay approving the loan until Cairo backed down on its price offers, and also loosened the army’s grip on the Egyptian economy by offering some of its companies on the stock exchange or for direct sale.<\/p>\n

This tension became clear when Saudi Finance Minister Mohammed Al-Jadaan announced that they “used to provide grants and direct aid without conditions, but they have changed that now, because they need to see reforms”. At the same time, the Qatar Investment Authority rejected an offer to acquire a stake in an army-owned biscuit manufacturer, while in May 2023, Abu Dhabi’s sovereign fund<\/a> froze its investment projects, according to the Financial Times<\/a>, after spending about USD 4 billion in 2022 to acquire minority stakes in Egyptian companies.<\/p>\n

After the Gulf policies changed explicitly, Cairo gave in and increased the number of Gulf acquisition deals, with the number of completed deals rising to 66 in 2022, as Saudi Arabia and the UAE alone took part in 40 acquisition deals in 2022, mostly in banking and financial services, industry and energy, followed by 16 merger and acquisition deals in the banking and financial sector.<\/p>\n

After the acquisitions began, the Saudi and Emirati wealth funds took control of a number of Egyptian assets, such as the Emirati ADQ and the Saudi Public Investment Fund owning 41.5% of Abu Qir Fertilizers and 45% of Misr Fertilizers Production Company “MOPCO”.<\/p>\n

ADQ bought a 17.2% stake in Commercial International Bank for USD 911.5 million and 11.8% of Fawry for USD 55 million. It acquired a controlling stake in Auf Group for Healthy Food, owner of the Abu Auf food brand. ADQ, in partnership with the Emirati company “Aldar Properties”, also acquired Sixth of October for Development and Investment Company (SODIC) in 2021, as well as a third of Alexandria Container and Cargo Handling Company, listed on the Egyptian Exchange, for USD 186.1 million. Abu Dhabi Ports paid USD 140 million to buy a 70% stake in the Egyptian shipping and logistics company “International Associated Cargo Carrier (IACC)”, owner of two maritime logistics companies: Transmar and the terminal operator Transcargo International “TCI”. The Emirati “Chimera Investments” acquired 56% of “Beltone Financial Holding” for USD 20.3 million, followed by the purchase of a 22% stake in the Dutch “MNT Investments”, majority-owned by GB Capital for financial investments.<\/p>\n

At the same time, the Saudi Public Investment Fund acquired a 25% stake in the state-owned “e-finance” and 4.7% of the Egyptian International Pharmaceutical Industries Company (EIPICO), and became the second-largest shareholder in Tenth of Ramadan for Pharmaceutical Industries and Diagnostic Reagents (Rameda). It also acquired 34% of “B.Tech”, which specialises in retail and the distribution of home appliances and electronics, while the fund entered the education sector by acquiring a 15% stake in CIRA Education. It also acquired a 20% stake in Alexandria Container and Cargo Handling Company for USD 156.3 million.<\/p>\n

Gulf deals in Egypt followed one after another until the latest deal, the city of Ras El-Hekma on the North Coast, which experts regard as a “qualitative leap” given the size of the deal, which the government said is the largest direct investment deal in Egypt’s history.<\/p>\n

According to economists who spoke to Zawia3, the current authorities are unstable and have no clear economic policies. According to what has been announced about the Ras El-Hekma deal, USD 11 billion of Emirati deposits came out of the deal’s value, deposits that Egypt cannot use and that represent about a third of Egypt’s foreign reserves. They suggested the Egyptian regime has reached the stage of bankruptcy and is therefore now resorting to selling Egyptian land in a new escalation, instead of investing it through Egyptians and launching an international subscription to develop it, and that what is happening now is “a complete surrender to the Gulf states, not entry into direct investments”.<\/p>\n

Economic and political researcher Zuhdi El-Shamy, deputy head of the Socialist Popular Alliance Party, told Zawia3: “There is in fact no serious foreign investment; what is happening is selling assets to pay off debts. It is well known that there is a stifling cash liquidity crisis, in addition to about USD 48 billion in debt payments due from Cairo this year”. He stressed that the series of asset sales began last year as a result of the government’s wrong policies in past years.<\/p>\n

He continues: I consider that selling assets is not investment; investment is what gives the state added value. Worse still, the regime has begun selling prime state land without specific controls, but what drives it is the default in paying debts, and part of it is linked to the negotiations with the International Monetary Fund to obtain a new loan, as the Fund requires Cairo to sell assets. He stressed that what is happening now cannot save the Egyptian economy; for example, the latest deal, for Ras El-Hekma, with an announced value of USD 35 billion, will not in fact be received by Egypt in full, since USD 11 billion is the value of Emirati deposits at the central bank. This means the regime may be able to pay half of its debts this year, but it may resort to selling other land and profitable companies to provide foreign currency.<\/p>\n

The deputy head of the Socialist Popular Alliance Party concluded that the expropriation of the original inhabitants from land that is under way is not for public benefit, as the law says, and that ambiguity surrounds the sale and investment operations currently under way, stressing that the population faces other crises, most notably rising prices, which he expects will not fall in the coming period.<\/p>\n

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Priority for the Foreign Investor<\/h3>\n

“Foreign investment may be a solution if there is an economic plan and vision, meaning that the state offers the projects it needs, and then investors come to implement them in order to serve Egypt and meet its basic needs,” economist Elhamy El-Merghani says in a statement to Zawia3. He adds: “Unfortunately, foreign investment in Egypt focuses on tourism and real estate and is not directed at the commodity sectors in agriculture and industry, which are the only way out of Egypt’s economic crisis”. El-Merghani believes it is one of the oddities of Egyptian economic policy that it provides incentives and exemptions to the foreign investor, who will transfer his profits abroad, while leaving the Egyptian producer to suffer without protection, and hundreds of Egyptian projects are faltering without assistance.<\/p>\n

El-Merghani stresses that after Egypt sank into debt, selling assets became the means to pay instalments and interest and obtain more new loans, and it does not matter whether the assets are sold to the Gulf states or to the Zionist enemy; what matters is selling, at any price, because the obligations are large, and if Egypt stops paying or defaults it will not obtain new loans; so it borrows and sells to pay some instalments and interest and obtain new debts. The problem is that the asset we lose cannot be replaced, and therefore dependence on abroad increases.<\/p>\n

Answering the question of whether the recently announced investment inflows actually support the Egyptian economy, he says no is the definitive answer, as there are “11 billion from the UAE within the foreign reserves, which reached USD 35.2 billion, meaning about 33% of the reserves, and Egypt cannot withdraw it and transfer it to another activity. But the Ras El-Hekma deal converted it from a loan into part of the project’s investments, so it is merely a change in the description of this deposit without any real transformation or addition”.<\/p>\n

He continued: “The economy has been transformed for decades, but unfortunately the economic policy applied in the last decade relies on selling all the assets, and even people: the government announced to us that it will export 3 million Egyptians abroad in the coming years, because it is unable to export Egyptian goods and products, and people are not for sale, because the ages of slavery are over. So it saw that the solution to the crisis is selling assets and exporting people, as evidence of the failure of these economic policies, which lead from one failure to another”.<\/p>\n

The economist also believes the government offers no solutions and no way out of the crisis, but rather temporary painkillers whose effect will wear off, and the crisis will return more fiercely. We will sell all the assets, Egypt will lose control over its resources, and project profits will go to foreign investors, while borrowing and wasteful spending continue on unnecessary projects whose cost the ordinary Egyptian citizen, his children and grandchildren will pay. We lose the assets and add new loans, which means the economic crisis will continue and worsen, as he put it.<\/p>\n

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  1. You can learn more about the Ras El-Hekma deal through our report published on 13 February, at the following link: Ras El-Hekma Residents… We Will Confront the Sale of Our City<\/a>.<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"

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