Egypt poses as business-friendly hub, scores high in economic conference

Mariam Rizk , Sunday 15 Mar 2015

Sharm El-Sheikh summit draws initial investment deals of up to $60 billion, as well as $12.5 billion in Gulf aid

Egyptian President Abdel-Fattah El-Sisi greets delegates as he walks to the podium before speaking on the final day of a major economic conference that has injected billions of dollars' worth of aid and investment in his country, in Sharm El-Sheikh, Egypt, Sunday, March 15, 2015 (Photo: AP)

At the close of a three-day international economic summit in Sharm El-Sheikh, Egypt seems to have succeeded in marketing itself as a business-friendly environment, securing billions of dollars in investment and aid.

Egypt signed deals worth a total of $60 billion during the conference, Egyptian prime minister Ibrahim Mahlab said at the closing ceremony.

Investment deals worth $36.2 billion were signed, Mahlab said, in addition to $18.6 billion for engineering, procurement and construction (EPC) contracts and loans totalling $5.2 billion.

Egypt's wealthy Gulf allies Saudi Arabia, the United Arab Emirates, Kuwait and Oman pledged an additional $12.5 billion in aid and investments.

Four years of political turmoil in Egypt have taken their toll on the economy, including in the tourism sector, one of the country's main sources of foreign currency.

At the conference, Egypt however posed as a confident country open to business and willing to undertake tough economic reforms.

Despite near-daily media reports of low-impact explosives in the Egyptian capital and nationwide over the last few months, around 2,000 delegates from 112 nations, including 30 heads of state and executives of multinational companies, attended the event.

The UAE-based companies claimed the lion's share of all the different signed deals.

Most of the announced investments went to the energy and real estate sectors, while little investment appears to have gone to agriculture and industry.

The largest deal was signed with energy giant British Petroleum, which committed to investing $12 billion in natural gas fields in the West Nile Delta.

“Egypt needs at least $200-300 billion to produce real hope,” President Abdel-Fattah El-Sisi said in a speech on Sunday.

During his speech, he repeated his trademark slogan of “Long Live Egypt,” to the echo of young organizers who had previously posed with him for a selfie.

El-Sisi said Egypt would hold a similar economic conference annually and invited all attendees to visit again next year.

A new capital and an industrial hub

The government has revealed plans for a new Egyptian capital to be built on an area of 700 square kilometres east of Cairo, at a total cost of $45 billion.

The city will be located between Cairo and the planned Suez Canal hub north west of the Gulf of Suez, flanked on both sides by two of Egypt’s major highways, the Suez Road and the Ain Sokhna Road.

The city will include 1.1 million residential units to house five million inhabitants and an administrative area with a presidential palace, ministries, government bodies and embassies, as well as a financial district.

A new company called Capital City Partners (CCP) will be responsible for the development plans for the new city. CCP is co-founded by Mohamed El-Abbar, a business tycoon and the chairman of the Emirati construction company Emaar.

No bid for the mega-project was made public before the government presented its plans at the conference.

The government also elaborated on the investment opportunities within one of two large projects linked to the Suez Canal: the Suez Canal industrial and logistics hub. The project, to stretch across the three governorates of Port Said, Ismailia and Suez, will require $15 billion to be spent on utilities.

The project is expected to attract $220 billion of investments over 15 years, according to earlier statements.

The second large project linked to the Suez Canal is a new parallel waterway expected to more than double the canal's revenues by 2023.

Making Egypt 'investor-friendly'

One day before the conference, Egypt’s El-Sisi ratified a long-awaited investment law in the continued absence of an elected parliament.

The law empowers one government body to act as a one-stop-shop from which investors can receive the necessary approvals for their projects, instead of directly dealing with a staggering 78 different government bodies issuing various permits.

Despite being investor-friendly, the law raised questions over some provisions giving the government freer rein in dealing with public land and property.

According to the law, starting from April 2015, authorities have the liberty to hand over state-owned land and property free of charge to investors for five years for development purposes in areas to be specified by the president and the cabinet.

The government has undertaken a series of economic reforms, including the tough step of lifting subsidies on energy products last summer, a move that raised the fuel products prices by up to 80 percent.

Also aiming to stimulate investments, the government last week cut the income tax ceiling to 22.5 percent for individuals and corporations, from the current level of 30 percent.

Questioned 'inclusiveness'

As the government announced deals worth billions of dollars at the conference, concerns were raised about how inclusive these projects were, or to what extent they would trickle down to benefit the general population.

While economic growth under former president Hosni Mubarak amounted to 7.2 percent in 2008/2009, it did not affect the larger population which remained poor, with high levels of unemployment, social injustice and inequality of wealth distribution.

Recent statistics indicate that more than a quarter of Egypt's population of nearly 90 million live below the poverty line, while another 20 percent hover around it.

During the conference, the government shed light on its economic policy for the coming period: a free market with an initial promise to pay attention to inclusiveness in education and healthcare projects.

At the conference, both International Monetary Fund managing director Christine Lagarde and World Bank managing director Sri Mulyani Indrawati stressed the need for Egypt's growth to be inclusive in order to be sustainable.

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