CAIRO — Foreign direct investments into Egypt are projected to fall by over 40 percent, the country's investment chief said Wednesday, in another sobering reminder of how the unrest that toppled former President Hosni Mubarak is battering the economy.
The mass protests that toppled Mubarak in February prompted an exodus of tourists, and were followed by a wave of labor unrest that hammered manufacturing. Meanwhile, a surge in crime and continued worries about the overall health of the economy have further clouded investor sentiment even as Egypt's military rulers take steps toward the transition to a freely elected civilian government.
Foreign direct investment, a key revenue source for the government, had been forecast at about $7 billion for the current fiscal year. But Osama Saleh, the chairman of the General Authority for Investment and Free Zone said it was now expected to come in at around $4 billion.
"We had some positive projections" for foreign investment in the current fiscal year, Saleh told The Associated Press on the sidelines of an Egypt-Kuwait partnership and investment seminar.
"However, from the first two quarters, we see that it is $2.3 billion," attributing the figure to a drop in the oil sector. He said Egypt typically saw a surge in FDI in the second half of the year, but the recent events weighed heavily on that vital period.
Officials have already revised down the expected economic growth for fiscal 2010-2011 to between 2.5 and 3 percent, a drop that comes as tourism revenues are on the decline, exports fell sharply and consumer spending has been, at best, severely stunted. GDP growth in the weeks after the Jan. 25 uprising against Mubarak had been pegged at about 4 percent compared to a forecast 6 percent pre-uprising growth rate.
Among Egypt's key hurdles in the short to medium term will be job creation. But creating those jobs will be difficult if the country is unable to attract new investments while struggling to deal with a deepening deficit, pressure on the Egyptian pound and a decline in key revenue sources like FDI and tourism.
Saleh, in comments that partially echoed the finance minister days earlier, said Egypt was focusing on the Gulf Arab countries as a starting point in reviving investor interest in the country, the Arab world's most populous. Saudi Arabia, the United Arab Emirates and Kuwait comprise three of the top four foreign investors in Egypt, he said, with roughly 800 Kuwaiti companies working in the country in a range of sectors.
"This is the easiest. They have a lot of passion for investing in Egypt," he said, referring to the Gulf Arab states. But he stressed that officials were also reaching out to Europe and the United States.
Egyptian officials on Tuesday had met with the U.S.'s assistant treasury secretary in talks that involved how Washington and the international community could help the country cope with its present challenges.