Deepening political and economic ties between Egypt and France are paving the way to new investment opportunities in the Arab world’s most populous country, whose economic resilience stood out during the pandemic.
While COVID-19 sent most global economies into a downturn, Egypt has managed to keep growing despite a hit to its vital tourism sector. A government-sponsored emergency package of fiscal, monetary and social measures absorbed some of the impact.
With a fast-growing, young population of 100 million, Egypt has the potential to leverage its strategic location, considerable market size and workforce to attract untapped investment.
In its 2020/21 investment plan, the government aims to enhance financing in health and telecommunications to accelerate access to an integrated digital economy, according to Egypt’s Minister of Planning and Economic Development Hala al-Saeed.1
Moreover, Egypt’s growth story is now anchored by a robust commitment to delivering price, fiscal and currency stability, a policy which will be a catalyst for future expansion.
Its Vision 2030 outlines ambitious goals to nearly triple GDP growth to 12 percent, reduce unemployment to 5 percent and advance within the list of top 30 countries in terms of doing business.
Its landmark new investment law, ratified in 2017, changed the landscape of business in Egypt, reducing red tape and barriers for international companies, and offering a wide range of tax breaks.5
In January, the International Monetary Fund (IMF) projected Egypt’s growth to decline slightly to 2.8 percent in 2021/22 before rebounding to 5.5 percent the following fiscal year, one of the strongest rates among major developed and emerging economies.3
In recent years, Egypt has become an increasingly important investment destination and trade partner for France. The two countries signed 18 economic memorandums of understanding (MoU) and agreed a EUR1.2 billion (U.S.$1.5 billion) deal to extend Cairo’s metro system in 2016. Other deals included financing for a wind farm and a solar power plant.
In 2019, Egyptian and French officials signed 40 a further agreements worth U.S.$1.8 billion, covering infrastructure projects for the new administrative capital, electric vehicle production, education, economic and social development, healthcare, culture, women’s empowerment and energy.7
During a visit to Egypt that year, French President Emmanuel Macron also pledged U.S.$1.1 billion in financial support.
At the time, Egypt’s Minister of Investment and International Cooperation Sahar Nasr said the government hoped to partner with more French investors in national projects such as the development of the Suez Canal area, the new administrative capital and smart cities.
Both sides also signed an agreement to finance the fourth phase of construction of the Cairo-Heliopolis metro line through a loan of EUR336 million (U.S.$406 million).8
The Egyptian government wants to expand the metro network to ease congestion on the streets of the capital Cairo, which, with its greater metropolitan area, is home to more than 20 million people.
In September 2020, Egypt signed a 15-year, EUR1 billion (U.S.$1.2 billion) contract with French transport operator RATP Dev to manage Cairo's third metro line, the transport ministry said.9 In the same month, several French companies expressed interest in Egypt’s oil and gas sector.10
To help Egypt curb its dependence on climate-harming fossil fuels and boost renewable energy use, development bank Agence Française de Développement last year signed a EUR75 million (U.S.$90.6 million) financing agreement, the first of two equivalent credit facilities.11
In October, Planning and Economic Development Minister Hala al-Saeed hosted a virtual seminar with representatives from 70 French companies to discuss post-pandemic investment opportunities in Egypt.
During the call, French Ambassador to Egypt, Stéphane Romatet, told the panel that this is the right time to invest in Egypt as it is witnessing rapid change and high growth despite the challenges resulting from COVID-19.12
French investments in Egypt stood at EUR5 billion (U.S.$6 billion) in July 2020, and mutual trade reached EUR3 billion (U.S.$3.6 billion), according to Hassan Behnam, Managing Director of the French Chamber of Commerce and Industry in Egypt.13
Before the pandemic, overall foreign direct investment (FDI) in Egypt jumped 10.7 percent to U.S.$9 billion in 2019, data from the United Nations Conference on Trade and Development (UNCTAD) showed.14
Still more than half of all FDI inflows go to Egypt’s oil sector. Natural resources and agriculture comprise more than 50 percent of its net exports, while oil and gas alone account for over 30 percent, according to the OECD.
While sectors such as natural resources, real estate, construction and light manufacturing have limited innovation-creating potential due to their relatively low complexity, greenfield FDI is taking place in promising sectors such as chemicals and renewable energies.
France was Egypt’s 11th-largest trading partner with total trade of U.S.$2.7 billion in fiscal year 2018/19, or 2.9 percent of overall trade, data from the Observatory of Economic Complexity (OEC) showed.15
Some 165 French companies are currently established in Egypt, mostly large firms listed in the CAC 40, employing around 38,000 employees, according to the French Chamber of Commerce.
Most of the French-owned firms – in a variety of sectors including agri-food, transport and manufacturing – produce for the domestic or regional African market. Some companies have invested in R&D in sectors such as automotive equipment.
French companies are increasingly considering Egypt as a location for efficiency-seeking investments in connection with regional and global value chains, the OECD said.
A massive construction drive to build Egypt’s new administrative capital in East Cairo, which is expected to house 6.5 million people and feature a 650-km road network, offers French firms a lucrative business opportunity.16
In addition, French investors in Egypt can benefit from free trade agreements such as the Common Market for Eastern and Southern Africa (COMESA). With 21 member countries, a combined population of over 520 million and global trade in goods worth U.S.$235 billion, COMESA is a major marketplace for trade on the African continent.17
Egypt presents French companies with a compelling investment opportunity: strong population growth, a strategic location and substantial natural resources. Add to these a growing economy, an educated workforce and favourable government policies, and the case for investing now becomes unequivocal.