Egypt expects more investment from Gulf states as crude surges

NEW YORK — Egypt expects investment from Gulf Arab states to increase as oil prices hit records, Investment Minister Mahmoud Mohieldin said.

By (Bloomberg)

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Published: Sat 1 Dec 2007, 8:57 AM

Last updated: Sat 4 Apr 2015, 9:33 PM

"I am seeing more growth in direct investment coming from the Gulf because their capacity to invest is higher with oil prices at almost $100 a barrel,'' Mohieldin said in an interview on November 28 after an investment conference in Cairo. About a third of Egypt's inward investment comes from the Gulf, and Mohieldin said he expects that will rise, without specifying by how much.

Egypt aims to lure foreign investment as it struggles to reduce a jobless rate estimated at 9 per cent and cut the budget deficit to 1 per cent of gross domestic product from 6 per cent, officials said this month. Foreign direct investment represents 9 per cent of GDP, the minister said, below the 25 per cent the government must achieve to meet the budget deficit goal.

Foreign direct investment jumped 82 per cent to $11.1 billion in the fiscal year ended June 30 as the economy expanded 7.1 per cent, the fastest pace in two decades, Mohieldin said on November 27. Investment is also becoming more diversified.

"Just a couple of years ago, 80 per cent of investment was in oil and gas,'' he said. In the last fiscal year, oil and gas projects represented 28 per cent of foreign investments, the sale of state assets accounted for 25 per cent, and about 47 per cent were new projects or the expansion of existing projects, according to the Investment Ministry.

"It is the dynamism of the economy and the market that encourages foreign investors to come and to partner with private sector companies in Egypt,'' said Mohieldin, who has a doctorate in economics from the University of Warwick in the U.K. "We also see more investors coming from untraditional places like China, India and Turkey."

Egypt will focus more spending in less developed rural areas in northern and southern Egypt to help create jobs, he said.

"We want to create more labor-intensive industries like textiles and garments,'' he said. "Chinese and Indian investors are particularly interested in that."

Prime Minister Ahmed Nazif's government, which came to power in 2004, has cut taxes, lowered customs duties and sold state assets to boost economic growth.

Gulf investors have spent about $70 billion on overseas acquisitions this year, almost double their spending in 2006, as oil prices soared 58 per cent, according to data compiled by Bloomberg.

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