Since 2004, EGYPT has widely received foreign investment with arms wide open and the economic growth in Egypt has been strengthening since then. Egypt was rated 120th on the Human Development Index in 2003. The country’s GDP totaled US$89.8 billion in 2002 and in 2001 attracted FDI worth US$509.9 million.

Egypt has made considerable progress over the past twelve years in liberalizing its business environment and encouraging foreign direct investment. Egypt has managed to attract growing sums from foreign investors during the 1990s, branching out from a largely Arab base to attract significant investment from North America and Europe.

Egypt's economy is on a dramatic growth curve and in the last quarter of 2005, the annual growth rate in Egypt rose for the first time to 6.1% and inflation dropped dramatically from a huge 18.1% in 2004 to only 3.1% in 2006. The IMF, with which Egypt long had bad relations, now glows with pride over the Egyptian government's stabilization program – all great news for today's investors in Egyptian property.

Egypt has made impressive progress in reforming its investment policies in recent years. Foreign direct investment inflows increased twelve-fold between 2001 and 2006.
They reached USD 9 billion in the first three quarters of its 2007 fiscal year, up from just over USD 0.5 billion in 2001. This compares with USD 6.1 billion for the whole of 2006.

Egypt has never witnessed an investment environment better than the current one. Besides, the fall in the inflation rates, high economic growth and the social and economic environment have managed to attract more Arab and Foreign investments.

Why Invest in Egypt?

The current economic policies of the Egyptian government have created a positive environment for investors looking at new and emerging markets.
Barriers to entry have been eased for both domestic and foreign investors, customs procedures streamlined and a dedicated ministry set up in 2004 to promote and manage investment. The tax system in particular has been streamlined, with a reduction in the corporate income tax rate from between 32% and 40% to a uniform 20%.
Foreign investment in manufacturing has been fully liberalized, with the exception of defense-related industries. Foreign equity participation in financial services and privately-owned telecommunications services are permitted up to 100%. Registering property has become much quicker and cheaper, with costs capped and the setting-up of a “one-stop-shop” that has cut the average time from 193 days to just one week.
The Egyptian government's efforts towards the reduction in custom taxes and easing the process for establishing companies are some of the noteworthy factors which have made Egypt one of the most attractive options for investors willing to venture into the region's emerging markets.

Why Egypt?

• Developed infrastructure "roads, electricity, CIT, ports, airports"
• Availability of qualified labor force at competitive cost
• Access to one of the largest markets In the region
• Diverse economy
• Large local market. Proximity to gulf region, north African and European markets
• Financial stability and strong banking sector
• Political stability
• Available energy with competitive cost

Since 2004, reform efforts by the GOE have focused on:

1) endorsing an ambitious economic and structural reform program.
2) Improving the investment climate.
3) Enhancing the growth rate.
4) Creating an enabling environment for the private sector to increase job opportunities.

Institutional and legal reforms to enhance the investment climate:

- Simplifying procedures through establishing the One-Stop-Shop at the General Authority for Investment and Free Zones.
- Cutting down income tax by 50%.
- Decreasing weighted average tariff rate and tariff dispersion.
- Revitalization of the asset management program.
- Banking sector reform and developing the financial sector.
- Broadening free trade agreements (FTAs) to cover major trading blocks.
- Providing access to low cost priced lands.
- Improving dispute settlement mechanisms.
- Forging new partnership modalities between the public and private sectors.

Economic Factors

The economic climate in Egypt is ready for investment with a number of government incentives now attracting a growing native middle class, and giving foreign investors a wider market than ever before for their investments in Egyptian property.
So far the Egyptian government's commitment to economic growth and reform has paid off and since 2004, a number of new Customs reforms, tax incentives and privatizations have created an economic climate that encourages foreign investment in Egyptian property. Today, several heavy weight international property developers have invested in Egypt and worldwide purchasers widely regard Egypt as a safe and solid investment for s set of factors among them:
- Property price returns of up to 30% per annum in some locations.
- Low cost of living and very low property prices.
- Strong economic growth in recent years (GDP 4.5% in 2005).
- Government reforms and incentives for foreign investment, making the investment process easier than ever before.

Opportunities:

Infrastructure and services:

• Maritime, river and land transportation
• Communication and information technology
• Housing and utilities
• Education

Productive sectors:

• Tourism sector
• Petroleum sector
• Agricultural sector
• Industrial sector
• Real estate sector

Under the support of the World Bank and IMF, the government launched a comprehensive Economic Reform and Structural Adjustment Program (ERSAP) in 1991.

As a manifestation of its commitment to a growing role for the private sector, after the ERSAP, the government started to invest in projects that would crowd-in the private sector; the ERSAP had stressed the role of private investment in growth. New legislation in recent years has contained provisions for the private sector to invest in infrastructure and telecommunications. These moves have been quite successful; the World Competitiveness Report of the World Economic Forum (WEF) ranked Egypt 5th out of 59 countries in terms of having investment in infrastructure as a priority for the government.

As a result of these changes, private sector participation in the construction sector has been growing, increasing the growth rate of the sector to an average of 7 per cent between 1999 and 2003. This is in line with the government’s long-term plan to increase the habitable area of the country from 3 to 20 per cent by the year 2020. Also the government has approved private sector investments in the form of Build Operate Transfer (BOT) projects in power generation, telecommunications, airports and highways that will substantially increase the number and quality of service of infrastructural projects. The implementation of new industrial projects in industrial zones and new communities (such as the 10th of Ramadan and the 6th of October cities) have been specially constructed to host heavy as well as light industrial projects,
an contain infrastructure, electricity, water and environmental protection.

One of the main objectives of the ERSAP program was to reduce the public sector share of the economy. The privatization program in Egypt was considered one of the most successful in the world in its starting phase. In 1999, the IMF announced that Egypt’s privatization program ranked fourth in the world, with proceeds from privatization amounting to 1.5 per cent of GDP per year.

Good governance and transparent and efficient institutions are key issues to promote and encourage investment. The 1990s in Egypt marked tremendous government efforts to orient economic policies towards an open free market.

Some positive steps have been taken to upgrade the financial sector towards
International standards with respect to the variety of services, quality, price and efficiency. These include the introduction of new financial instruments and services, development of stronger institutions through mergers and acquisitions, further strengthening prudential regulations and a monetary policy that is punctually reactive to the market demand. The government declared the Central Bank to be independent from the end of 2001.

The highest frequency of firms is concentrated in three main sectors: infrastructure and construction, financial and business services and intermediate products respectively. Of those three, intermediate goods producing companies are the largest in size, in terms of number of workers, with 57 per cent of these companies employing more than 100 workers, while 50 per cent of infrastructure firms are small (10 to 50 employees). Tourism is a mainstay of economic activity in Egypt and represents around 25% of Egypt's total foreign currency income. With strong policies in place to attract foreign investment and improve infrastructures in tourist hotspots, this sector continues to develop steadily.

The highest concentration of FDI originates from European countries (43 per cent), followed by Arab countries (33 per cent) and North American countries (19 per cent) respectively. This suggests that more recent investments have tended to come from Europe and North America rather than Arab countries. European firms are mainly concentrated in producing intermediate products; infrastructure and construction; trade and tourism; and pharmaceuticals. Arab FDI is more evenly distributed among economic activities, with at best, minor concentration in the financial sector, machinery and equipment and infrastructure and construction. Asian investment, though very modest, is concentrated in the machinery sector, and North American companies are concentrated in the financial sector. More than one third of all American investments go to this sector. The banking, insurance and financial investment have become a thriving and growing field in Egypt since the early 1990s. US firms, with less tradition in the region but international experience obtained elsewhere in banking, have entered the financial sector disproportionately.
As to the concentration of new foreign investments in infrastructure and construction, this could be explained by the fact that there is a growing demand for housing in Egypt, and foreign companies may have ventured into the sector to benefit from this momentum.

The new investment law was implemented, giving more incentives to foreign investors and allowing full foreign ownership.

Location of Foreign Investments

Almost 73 per cent of firms are located in Cairo. Most service firms are located in Cairo, while the location -where the service is provided- depends on the project. In the construction sector, for example, the location of most of all firms is in Cairo, whereas the projects are often located outside Cairo.

Distribution by Nationality of Investors

In Egypt, more than half of the stock of foreign investors is from neighboring Arab countries, amounting to 57.1 per cent in 2001 and 57.6 per cent in 2002. The largest Arab investors are from Saudi Arabia, with a share of 14 per cent of total foreign firms in the FDI stock. Europe’s share comes second amounting to 26.1 per cent of total firms in 2001 and 25.7 per cent in 2002.