Launching a campaign in the Egyptian media to promote Egypt’s new Foreign Direct Investment (FDI) law is sufficient proof that the Egyptian government still does not know what is required to entice foreign investors to expand into Egypt. Pushing our country as a good investment destination in domestic media clearly is not the way forward. To anticipate what foreign investors truly need, or what is missing, from our mechanism, the government simply needs to place itself in their position.
Two years ago, at the Sharm El-Sheikh Economic Development Conference, the government presented plenty of good business opportunities to hundreds of serious foreign investors it had managed to attract to the event through good marketing. All of them eventually disappeared — discarding their investment pledges. This turn of events should have made the government realize that to attract FDI you need more than slick promotion.
Capitalists will consider investing in new countries that offer good returns on their money through a clear and transparent process. Investors need to know when they will be able to make returns on their investments and that a sound legal system is in place to secure their capital in case of disagreements. Egypt has plenty of very good business opportunities that could yield excellent returns on investments (ROI); however, any investors wishing to seize these opportunities must enter a murky world of uncertainty, not knowing when or how they will reap their rewards. Our policy of pushing investment opportunities while neglecting to mend the system is our true failure.
Foreign investors who already have a footprint in Egypt are confronted by one surprise after another. Our tendency to change laws during the investment process not only negatively affects their returns, but also diminishes their appetites for prolonging their investments in the country — all of which obviously discourages new investors from coming to Egypt.
Foreign investors who already have a footprint in Egypt are confronted by one surprise after another.
The lack of understanding of investors’ needs and outlooks is not just a shortcoming of the government either. It is shared by Egyptian capitalists! Foreign investors want to invest in existing projects to avoid the complicated process of green field investments and to reduce the time before they begin to see ROI. However, in an attempt to maximize their wealth, Egyptian partners often tend to exaggerate their share prices. Moreover, most Egyptian companies are not interested in merging with a larger entity or opening international branches, so they often decline international partnerships.
Egypt’s urgent socioeconomic need is to create new jobs for its millions of unemployed youth. Since we cannot rely on domestic investment to do this, we desperately need FDI. The Egyptian government has to accord equal, or higher, importance to the issue of investors’ returns than to polishing up available business opportunities. Offering real incentives and advancing the Egyptian investment process should be a non-negotiable duty. Egypt is a promising investment destination, but it lacks dynamism. When it comes to FDI, what really matters is the inflow and outflow of capital through equally smooth two-way channels. But the Egyptian state seems to believe that FDI is a one-way inflow of funds.
The Egyptian government habitually resorts to asking GCC countries to invest in Egypt. We encourage people who love and respect our country to expand their businesses in Egypt. I trust that we have drained this avenue dry.
True FDI depends on successfully attracting cold-blooded business people who only want to maximize their profits. Amending our business and legal structures to attract this category of foreign investor will lead them to invest in Egypt of their own accord, without the need for marketing campaigns. The true measure of success of investment in Egypt is substantial FDI growth — not domestic propaganda.
• Mohammed Nosseir, a liberal politician from Egypt, is a strong advocate of political participation and economic freedom. He can be reached on Twitter @MohammedNosseir