Geopolitical tensions, economic slowdown and increased global fragmentation were just some of the many issues on the minds of investors over the last two years. According to the UN Trade and Development (UNCTAD)’s World Investment Report 2024, global foreign direct investment (FDI) fell 2% to USD 1.3 trillion in 2023, with a 26% drop in international project finance deals . Developing countries were the hardest hit according to the report, with FDI inflows dropping 7% compared to 2022.
Meanwhile here in Egypt, FDI net inflows have seen an upswing, reaching USD 46.1 billion in FY2023/24 – the highest level ever recorded – compared to USD 10 billion in FY2022/23. While this was largely due to the one-off, USD 35 billion Ras El Hekma investment from the UAE, the growth is representative of a wider government drive to attract FDI, with a target of USD 30 billion in FY2024/25. The influx of foreign capital is expected to reinforce economic growth, create jobs, and facilitate technology transfer, ultimately contributing to Egypt's overall development.
And while this FDI growth trajectory signifies increased confidence in the Egyptian economy and its investment climate despite domestic challenges, much is still left to be done to ensure Egypt’s long-term fiscal sustainability and that economic growth trickles down to benefit all citizens.
While Europe has historically made up the lion’s share of investment into Egypt, over the last three years neighboring Arab countries and China have also made key contributions. This is due in large part to more attractive valuations, the government’s pro-business reforms such as liberalizing foreign investment policies, and improving infrastructure.
Egypt has become a prime destination for investment in service sectors such as finance, real estate, technology and tourism. In FY2022/23, investment in services (which includes real estate, finance, tourism, communication and IT) represented almost 60% of total net FDIs at USD 5.9 billion of the total USD 10 billion reported for the year. The figure was followed closely by manufacturing at USD 3.3 billion.
Egypt's financial sector, one of the largest in the Middle East and North Africa, has witnessed significant foreign investment in recent years. This influx of capital, particularly from Gulf nations like the UAE is proof positive of the sector’s importance and growing potential, particularly when it comes to digital intermediation in the wake of the government’s push toward financial inclusion.
Emirati investors have been particularly active in acquiring major assets within Egypt's financial services landscape. A prime example of this is ADQ, a prominent Abu Dhabi-based investment and holding company, which has alone acquired a stake in Commercial International Bank (CIB) and in the leading electronic payments company, Fawry.
Real estate has long been touted as one of Egypt’s most stable and sustainable sectors for investment by local and foreign investors alike. The sector has acted as a haven against inflationary pressure and weakened currency concerns. Today, with attractive valuations and lower barriers to entry, the sector has attracted even more interest, particularly from Gulf neighbors.
Led by the UAE’s sovereign wealth fund ADQ, the Ras Al-Hekma investment on Egypt’s Mediterranean coast is the largest FDI in the country’s history and is expected to contribute USD 25 billion annually to Egypt’s GDP by 2045. The deal, which was signed in 2024, bookends a series of interest Gulf investors are showing in coastal and urban developments alike such as New Alamein and Ain Sokhna. In fact, in 2021, a consortium comprising UAE’s Aldar Properties and ADQ successfully acquired approximately 85.52% of the outstanding share capital of The Sixth of October for Development and Investment (SODIC).
Hospitality remains a central focus for Gulf investors, particularly in popular destinations such as Sharm El Sheikh, Hurghada, and Sahl Hasheesh along the Red Sea. With favorable valuations, wealthy GCC investors are reshaping Egypt’s hospitality sector, introducing luxury resorts and five-star hotels. In fact, in January 2024, ADQ and ADNEC acquired 40.5% of Talaat Moustafa Group’s hospitality arm, ICON, giving it ownership in several of Egypt’s most renowned heritage hotels such as the Cairo Marriott Hotel in Zamalek, Marriott Mena House, Steigenberger Hotel El Tahrir Cairo, Steigenberger Cecil Alexandria, Sofitel Legend Old Cataract Aswan, Mövenpick Aswan, and Sofitel Winter Palace Luxor, with additional properties in Cairo, Luxor and Marsa Alam.
Chinese companies have established manufacturing facilities in industrial zones like the Suez Canal Economic Zone (SCZONE), focusing on sectors such as textiles, electronics, and automotive components. Underscoring the Belt and Road Initiative (BRI) between Egypt and China, the SCZONE brought in over 140 companies and investments worth over USD 1.6 billion by July 2023. GCC involvement also extended to manufacturing, with ADQ acquiring assets in companies like Abu Qir Fertilizers, MOPCO, and Alexandria Container and Cargo Handling.
FDIs in Egypt have been a crucial strategy to stimulate economic growth and bolster the Egyptian pound. As such, Egypt has prioritized large-scale development projects such as the construction of the New Administrative Capital and the Ras El Hekma development. However, FDIs have often been government-centric due to economic nationalism, especially in key resources and industries.
While ensuring political stability and high government funding, especially in infrastructure projects, this attracts speculative foreign investors who seek safe havens for their deposits for a short period. Investors are primarily driven by short-term gains rather than long-term economic growth leading to speculative capital known as hot money.
Egypt's recent reforms and increasing emphasis on private sector participation signal a positive shift towards a more diversified, sustainable, and market-driven investment landscape. By fostering a competitive environment and reducing barriers to entry, the government can attract more sustainable FDI and promote long-term economic development.
To do this, the government has committed to making concerted efforts to:
1. Grow private sector participation in the economy
The government has in recent years worked to address issues related to crowding out of the private sector in the economy. The country’s State Ownership Policy outlines how the government intends to more than double the private sector’s role in the economy to 65% and attract USD 40 billion in private investment by 2026.
As part of the government’s commitment under its loan deal with the International Monetary Fund (IMF), 40 companies across 18 sectors were set to be listed on the EGX or partially sold to strategic investors to raise the private sector’s share in the economy, reduce public debt, attract foreign investment, create job opportunities, and expand GDP growth. In November 2024, the cabinet announced that stakes in state-owned entities in the fields of banking, airports, pharma, plastics, glass, and petrochemicals will be offered up by the end of June 2025, according to a cabinet statement.
2. Streamline regulation and enhance the ease of doing business
A stable and predictable regulatory environment is essential for building investor confidence and discouraging speculative behavior.
As of late, the Madbouly government has unveiled several facilities that aim to enhance the relationship between the private sector and the government and include easing the burden on taxpayers, unifying and improving tax services, and clearing the backlog of current tax disputes.
The reforms – which include targeted efforts to make it easier for taxpayers to receive their VAT refunds, raising the threshold for requiring transfer pricing studies for transactions between related entities, and simplifying the process of filing tax returns – are just the beginning of several measures the government has been alluding to in recent months that serve to enhance transparency, improve the ease of doing business in Egypt and position the country as a global investment hub.
3. Enhance tax incentives and procedures to stimulate investment in key sectors
Tailored incentives not only attract investors to sectors that contribute to sustainable economic growth, but they can be funneled toward areas in need of economic development or job creation.
In 2023, the government introduced several incentives to stimulate FDI, including making significant amendments to the Investment Law to boost special incentives granted to foreign investors, developing the distribution of investments across the country, and expanding the range of eligible companies to establish, operate and manage projects in Egypt.
More recently, the government has discussed a series of incentives targeted toward export-oriented businesses and sectors. Earlier this year, the cabinet issued a decree granting cash incentives for industrial projects in the sectors of metal, chemicals, engineering, healthcare and pharmaceuticals, textiles, and mining, with the highest cash incentives going toward projects for which foreign funding made up 90% or more.
Egypt's strategic location, coupled with a proactive government approach to economic reform, has made it an attractive destination for foreign direct investment. By prioritizing sectors such as finance, real estate, tourism, and manufacturing, Egypt is positioning itself as a regional hub for investment. However, to further maximize its potential and drive exports, the government must continue to implement reforms that enhance the ease of doing business, streamline regulations, and provide a stable and predictable investment climate. By doing so, Egypt can attract sustainable, long-term foreign investment that drives economic growth, creates jobs, and improves the lives of citizens.
