Egypt's coastal areas, such as Ras El-Hekma and Ras Banas, boast tremendous investment potential, thanks to their strategic location on major international trade routes.
Moreover, they are investment opportunities for establishing export-oriented industrial and logistical centres.
Recent developments
The government has recently announced its plans to offer four to five large areas along the Red Sea coast for investment to attract FDIs and promote sustainable economic development, Prime Minister Mostafa Madbouly stated.
Madbouly said these areas would include integrated development projects targeting the development of promising regions, modelled on the success achieved in deals like the Ras El-Hekma project.
FDI attraction factors in Ras El-Hekma, Ras Banas
Investment attraction primarily depends on the investment climate, Vice President of the Real Estate Development Committee at the Egyptian Businessmen’s Association (EBA) Alaa Fekry told Ahram Online (AO).
Fekry asserted that the more favourable the climate, the more attractive it becomes to local and foreign investors.
"This ensures a steady flow of foreign investments and keeps local and international investors competing for a share of the Egyptian market,” according to Fekry.
"As for the Ras El-Hekma project, we cannot consider it a completed project since it is still in its early stages. Nevertheless, Ras El-Hekma is an integrated project that includes residential units, serving as summer resorts for Egyptians and foreigners. The project also includes hotels, which are crucial as a constant source of foreign currency,” he explained.
The project's launch is expected to commence in 2025, with total FDIs of $150 billion expected to be attracted through this development project.
The real-estate sector's contribution to Egypt's economy has gradually increased in recent years, accounting for 20 percent of the country's GDP by the end of 2023, Karim Adel, head of the Al Adl (Justice) Centre for Economic and Strategic Studies, told AO.
"This makes real estate and tourism-related investments a store of value for individuals, companies, and even governments. Therefore, maintaining the balance in this sector is a strategic goal to stabilize Egypt's economy, which in turn supports the economies of countries investing in Egypt," he added.
Adel emphasized that tourism investments represent the future of investment, particularly in areas with both geographical and logistical advantages.
“Ras El-Hekma and Ras Banas, for instance, are located along maritime routes, enhancing the prospects of establishing industrial and manufacturing hubs for international companies, especially with access to global shipping lanes, enabling export to all parts of the world. This boosts the potential for the success and growth of producers and manufacturers and enhances international trade opportunities,” Adel explained.
"The state cannot achieve all development goals without investments, especially since it does not possess the necessary financial and technological capacities. However, attracting foreign investments requires a secure investment environment, a stable work and production system, and balanced financial and monetary policies," he continued.
How can the government build on the Ras El-Hekma deal?
AO also discussed with banking expert Marwa El-Shafei how Egypt can replicate the success of the Ras El-Hekma project, which attracted $24 billion in FDIs including $11 billion reinvested locally, in other coastal areas.
"Providing a combination of tax exemptions, flexible regulatory frameworks, and speeding up the land acquisition process will be crucial,” said El-Shafei.
She added that strategic reinvestment of the proceeds from these projects into more profitable sectors will help reduce the payment balance deficit. She also stressed the importance of ensuring that these revenues are not solely allocated to debt servicing, which should follow a downward trajectory to ensure long-term financial sustainability.
Per its commitments with the International Monetary Fund (IMF), the Egyptian government will use 50 percent of its sales proceeds under the IPO programme to lower its debt ceiling.
According to the Central Bank of Egypt (CBE), the net FDI inflows into Egypt reached their highest level in late FY2023/2024, recording $46.1 billion, compared to $10.1 billion in FY2022/2023.
The $35 billion Ras El-Hekma deal, the largest direct investment transaction in Egypt’s history, has helped bring net investment inflows to this level.
"This is an extraordinary experience and a success story that is difficult to replicate. Conducting transactions of this magnitude is complex," Fekry noted.
He said: “The deal was successful and unique. We must be realistic and work to improve Egypt’s investment climate to retain Egyptian investments that have already exited, as 30 percent of foreign investments in Saudi Arabia are Egyptian, and Egypt is also the second-largest investor in the UAE."
Adel believes that leveraging the success of this experience and maximizing its economic return, while attracting more investments, requires providing all incentives and facilitation to expedite agreed-upon investments.
“This must be accompanied by disciplined financial and monetary policies that support the stability of the exchange rate,” he affirmed.
Furthermore, he pointed out that a portion of the proceeds from these investments should be directed toward supporting and developing production, industrial, technological, and tourism sectors in Egypt amid the ongoing harsh challenges.
“Attracting more foreign investments requires an advanced and competitive economic environment that supports these investments and helps them achieve their goals within the country,” Adel added.
El-Shafei explained that Egypt should diversify its industrial focus to include emerging industries like green energy, to attract more foreign investors.
She emphasized that based on the memorandums of understanding signed with the European Union to support green energy initiatives, Egypt should prioritize activating these agreements to enhance its attractiveness to global investors.
"A key factor in the success of these efforts will be launching a strong global marketing campaign to propagate Egypt’s competitive advantages, particularly in its coastal areas. This campaign will help position Egypt as a leading global investment destination by highlighting its strategic location, rich resources, and advanced infrastructure," El-Shafei stated.
Ras Banas supports growth and currency stability
El-Shafei said large-scale projects like Ras Banas are an essential part of Egypt's strategy to attract foreign direct investments and stimulate economic growth.
"By establishing industrial zones focused on high-value exports, these projects can generate new revenue streams and provide additional foreign currencies,” she added.
Additionally, she pointed out that expanding the industrial and tourism sectors would create job opportunities, thereby boosting economic stability and increasing disposable income.
"The inflow of foreign direct investment, combined with increased dollar revenues from tourism, real estate, and exports, will support the stability of the Egyptian pound and bolster foreign currency reserves," said El-Shafei.
Meanwhile, Adel indicated that in the short term dollar inflows from these investments will contribute to stabilizing the local currency exchange rate against the dollar and other foreign currencies.
"In the medium and long terms, the sustainability of exchange rate stability will depend on improving the economic sectors and their dollar resources, especially the production and export sectors. This would create sustainable dollar revenues, protecting the exchange rate from any disruption in the flow of foreign direct and indirect investments," Adel concluded.
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