Egypt's Cabinet agreed at its Wednesday meeting to allow foreigners to invest in the Sinai Peninsula, Legal Affairs Minister Mohamed Mahsoub told reporters on Thursday.
Foreign investors, however, will only be allowed to hold a maximum 45 per cent stake in any Sinai-based venture. And while foreigners still can’t fully own assets in Sinai, they can obtain concession contracts from the government.
The move was welcomed by Egyptian businessmen in Sinai.
"The decision will revive investment in the region, which declined markedly following the revolution," Sami Soliman, head of the Taba-Nuweiba Investors Association, told Ahram Online. "Especially since local banks aren't keen to provide financing for projects in Sinai."
He explained that most investment in Sinai, especially in the peninsula's south, goes into projects related to tourism, a sector that has suffered in the wake of last year's revolution.
The Egyptian government has historically prohibited foreigners to invest directly in Sinai for security reasons. Even for local investors, land ownership in Sinai has been tightly controlled so as to prevent foreign elements – especially the next-door Israelis – from surreptitiously acquiring land in the strategic border region.
Egyptian investors with a non-Egyptian parent, for example, can only obtain concessions contracts in Sinai – but they can't own land.
"This new decision still doesn't allow foreigners to own land in Sinai, which I agree with," Hesham Ashmawy, head of the Egyptian-American Business Association, said. "Foreign investors can work perfectly well via concessions and BOT [Build, Operate, Transfer) schemes."
Ashmawy added that Sinai was rich in investment opportunities in a range of sectors, including agriculture, mining and industry – in addition, of course, to tourism.
Early next year, the government plans to launch a new state authority, 'the National Authority for the Development of Sinai Peninsula,' to be affiliated with the prime minister's office. The new authority, dedicated exclusively to the development of the region, has been given an LE1 billion budget ($50 million of which was granted by the US government).
All decisions adopted by the new authority, however, must be approved by the interior and defence ministries, along with Egypt's intelligence apparatus.
"I understand the sensitivity of the situation in Sinai in terms of national security, but these conditions will hardly help facilitate investment procedures," commented Ashmawy.