Kuwait, Saudi Arabia and UAE pledge $12b of investments, central bank deposits for Egypt


Sharm El Sheikh: Gulf countries pledged a further $12 billion of investments and central bank deposits for Egypt at an international summit on Friday, a big boost to President Abdel Fattah Al Sisi as he tries to reform the economy after years of political upheaval.

Kuwait, Saudi Arabia and the United Arab Emirates (UAE) each offered $4 billion to Egypt, which is grappling with hardline insurgents as it tries to improve the investment climate four years after a popular protests that touched off protracted turmoil.

The UAE said it would deposit $2 billion of its pledge in the Egyptian central bank, while Saudi Arabia said $1 billion of its pledge would go to the bank.

Egypt hopes the conference will project an image of stability and improve investor confidence hit by the political upheaval touched off by the fall of veteran ruler Hosni Mubarak.

Cairo wants to double foreign investment in this fiscal year to $8 billion, despite an insurgency in northern Sinai and frequent militant attacks across the country.

“I’m expecting here to see $15-$20 billion in agreements signed,” Investment Minister Ashraf Salman said earlier, adding that the deals would cover power plants, real estate and agricultural projects.

General Electric said it would invest $200 million in a manufacturing and training facility which it sees as part of an economic hub being built near the Suez Canal.

It also said it had delivered 34 gas turbines to Egypt as part of a $1.9 billion power project.

Egypt also expected to sign several memoranda of understanding at the conference, including one for the construction of a new administrative capital with a price-tag of about $40 billion, Salman said. He gave no details.

The conference shaped up as an important test of Egypt’s reform agenda under Sisi, a former army chief who wants to remove investment barriers to help turn around the ailing economy of the country.

Sisi’s crackdown on hardliners and opponents has drawn fire from human rights groups. But has won praise from foreign investors by cutting fuel subsidies that imposed a heavy burden on the state and by implementing other reforms.

He told the conference that his vision for Egypt’s economy centred on improving state finances and encouraging private sector investment through legislative reforms and respecting contracts in order to achieve growth rates of 6 per cent over five years and reduce unemployment to 10 per cent.

The head of the International Finance Corporation (IFC), a global development institution, said he was encouraged by Egypt’s reforms but called for further action to improve the investment climate.

“We are happy to see that progress but there is a lot more work that needs to be done. The sign is positive, we need to see more,” Jin-Yong Cai told Reuters at the conference.

He said Egypt’s regulations, and their implementation, needed to be improved as well.

On Thursday, Sisi ratified an amended investment law designed to create a one-stop shop for investors.

Saudi Arabia, Kuwait and the UAE have kept Egypt’s economy afloat since then with $23 billion in oil shipments, cash grants and central bank deposits.

The government targets a budget deficit of 10 per cent of gross domestic product by 2018/19, down from 15 per cent last year. Unemployment, currently around 13 per cent, is also a major challenge.

GDP is expected to grow by four percent in the fiscal year ending in June, up from 2.2 per cent last year, officials say.

Earlier in the day, US Secretary of State John Kerry urged business executives to invest in Egypt, praising the government of Sisi for “bold” economic reforms aimed at restoring investor confidence.

Addressing the US Chamber of Commerce in Egypt on the sidelines of the conference, Kerry said more private investment could help Egypt’s economy achieve annual growth rates in double digits.

He pledged US support for further reforms, which he said would make doing business in Egypt easier and protect foreign investments.

“The United States is eager, ready and willing to be a catalyst in Egypt’s economic development and we respect the efforts you’re already making and we want to help,” Kerry said.

A senior State Department official said Egypt had taken “meaningful” reforms over the past year, including tackling wasteful fuel subsidies and refining the tax code.