News / Middle East

Boom or Bust: Will Expats Invest in Egypt's Economy?

People walk past a foreign currency exchange center in Cairo (file photo).People walk past a foreign currency exchange center in Cairo (file photo).
x
People walk past a foreign currency exchange center in Cairo (file photo).
People walk past a foreign currency exchange center in Cairo (file photo).
Cecily Hilleary
For the first time in their history, Egyptians are about to freely choose their president. While the outcome is still anybody’s guess, one thing is clear – whoever it might be, he will face the daunting task of rebuilding Egypt’s economy, which took a tremendous hit during the uprisings of last year’s Arab Spring. Egyptians living abroad, as many as 6.5 million of them, could provide a huge stimulus, but there are few indications about how deep, if at all, they are willing to reach into their pockets.

Egypt’s GDP has fallen from 7.2 percent in 2008 to a paltry 1.5 percent forecast for this year, and as many as 40% of Egyptians are now believed to be living below the poverty level. In fact, Egypt’s main share index has dropped 6.2 percent since the first-round of voting May 23-24, a sign showing investors are worried that the country might be in for further instability. The International Monetary Fund says it’s willing to consider a $3.2 billion aid package for Egypt, but only after political leaders in Cairo come up with a comprehensive economic recovery plan.

The IMF package represents a large chunk of money, but it’s considered only a drop in the bucket if held up against Egypt’s total financial needs. Many Egyptians are hoping that their country is back on the path to political stability, and that assistance and investments from abroad, including from expatriates, will soon follow.

A vendor sells cigarettes on Cairo's Tahrir Square May 25, 2012.A vendor sells cigarettes on Cairo's Tahrir Square May 25, 2012.
x
A vendor sells cigarettes on Cairo's Tahrir Square May 25, 2012.
A vendor sells cigarettes on Cairo's Tahrir Square May 25, 2012.

Meanwhile, Egypt’s General Authority for Investment (GAFI), which regulates and facilitates outside investment, has recently set up a special division of Egyptian expatriates’ affairs, to communicate with the diaspora and make it easier for Egyptians abroad to take part in the country’s development process.  On its website, GAFI outlines reasons why investing in Egypt makes good sense: It has a large, skilled workforce and a large consumer market. It boasts a developed infrastructure and competitive tax rates. Its position on the world map offers it proximity to key global markets, and Egypt’s Suez Canal accommodates some 8 percent of world shipping.

Diaspora dollars

Dilip Ratha is a lead Economist and Manager of the Migration and Remittances Unit at the World Bank and a specialist on innovative financing.  He says the millions of Egyptians now living outside of Egypt invest in their former homeland in two ways: through remittances to family members and friends, and, to a much lesser degree, through direct investment in the Egyptian economy itself.
To put things in perspective, remittances to Egypt have always been larger than revenue from the Suez Canal.


Just how much money do Egyptian expatriates send home? According to Ratha, in 2011, even while the uprisings were taking place, the global Egyptian diaspora sent home $14 billion, double what it sent home in 2009.

“To put things in perspective, remittances to Egypt have always been larger than revenue from the Suez Canal,” Ratha said.  And that, according to the expert, makes Egypt the fifth largest recipient of remittances in the world.

Studies show most Egyptians spend remittance money on household goods, but this also stimulates the greater economy.  “When people buy things from the stores,” Ratha said, “that creates profit and employment.  Thus, there is a multiplier effect that benefits the population in general.”

In addition, nearly 20 percent of Egyptians abroad reportedly invest money directly into the Egyptian economy, i.e., real estate, small business, agriculture, transportation, group saving schemes or industry.  “With housing prices going down because of the economic and political situation, [expatriates] are taking advantage of that and sending money home to invest,” Ratha said.  And he believes they would be able to do even more.

A man pulls a camel carrying a lone tourist at the Pyramids of Giza near Cairo October 19, 2011.A man pulls a camel carrying a lone tourist at the Pyramids of Giza near Cairo October 19, 2011.
x
A man pulls a camel carrying a lone tourist at the Pyramids of Giza near Cairo October 19, 2011.
A man pulls a camel carrying a lone tourist at the Pyramids of Giza near Cairo October 19, 2011.
“We know that for every dollar [an expatriate] sends home,” Ratha explained, “it’s quite likely they save as much and more in the country of destination itself.  Most of the time, they save in the form of bank deposits or cash.” By investing in Egypt’s economy through diaspora bonds or certificates, they would see an even higher return on their investment dollars, said he.

​As for the roughly 80 percent of expatriates who do not invest in Egypt, the International Organization for Migration reports the largest percentage cite financial difficulty, followed by fears that investments in Egypt are too risky. A significant number say they don’t know how to invest – or where.  These concerns would suggest that the onus will be on the new Egyptian government to improve the climate for investment and provide better investment advice.

Reluctant investors

Most of the Egyptian expatriates we talked to say they’re not ready to part with their savings, at least not yet. Not until the country stabilizes.
We love Egypt,...but from an economic point of view, if we want to invest, we need to see something to invest in. We need some stability.


Dr. Wagdi Attia is a prominent Washington, D.C., physician who emigrated to the U.S. He believes he speaks for many in the Egyptian diaspora in the United States. He recently returned from a visit to his home country and came back devastated by the state of an industry that was once a staple of Egypt’s economy – tourism. “Could you believe the pyramid area is empty of tourists?  In the past, you’d stand in lines for a long time. Now, nobody was there, except camels, horses and a few people looking for business.”

”We love Egypt,” he said, “we are concerned about Egypt, we are a part of Egypt and we will never be aborted from Egypt… but from an economic point of view, if we want to invest, we need to see something to invest in. We need some stability.”We love Egypt,...but from an economic point of view, if we want to invest, we need to see something to invest in. We need some stability.

Others say it will depend on who of the two polarizing candidates currently running for the presidency actually comes to power and which, if any, changes they may bring to the country.

Dr. Tawfik Hamid, an Egyptian scholar living in Washington, D.C., says that if Islamist candidate Mohamed Morsi becomes Egypt’s next president, Islamists might be willing to invest in the country, but more liberal and Coptic Egyptians in the diaspora would be reluctant to contribute to Egypt’s economy because they wouldn’t yet know what role they might play in an Islamic-style state.

If, on the contrary… Ahmed Shafiq comes [to power], who represents the liberals, and at the same time has international experience, so he will not put the country at high risk, then many people, including myself, would be interested in making some sort of investment or contribute to it, because we would believe that a stable and enlightened Egypt could positively affect the whole area, the whole Arab world, and probably the Muslim world as well.”

Amid all the uncertainty, political and economic chaos, however, many Egyptians at home and abroad seem to communicate a sense of optimism and hope for the future. For them, Egypt has chosen democracy over dictatorship.  Everything else, including the economy, they trust will eventually fall into place.

You May Like

Obama: Alaskans Feel Signs of Climate Change

They're seeing bigger storm surges as sea ice melts, more wildfires, erosion of glaciers, shorelines More

Katrina Brought Enduring Changes to New Orleans

The city’s recovery is the result of the people and culture the city is famous for, as well as newcomers and start-up industries More

Magical Photo Slides Show Native Americans in Late 1800s

Walter McClintock spent 20 years photographing the Blackfoot Indians and their vanishing culture at the dawn of the modern age More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Colombians Flee Venezuela as Border Crisis Escalatesi
X
August 27, 2015 2:08 AM
Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Colombians Flee Venezuela as Border Crisis Escalates

Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Is China's Economic Data Accurate?

Some investors say China's wild stock market gyrations have been made worse by worries about the reliability of that nation's economic data. And some critics say the reports can mislead investors by painting an unrealistically-strong picture of the economy. A key China scholar says Beijing is not fudging ((manipulating)) the numbers, but that the economy is evolving quickly from smoke-stack industries to services, and the ways of tracking new economic activity are falling behind the change. V
Video

Video Next to Iran, Climate at Forefront of Obama Agenda

President Barack Obama this week announced new initiatives aimed at making it easier for Americans to access renewable energy sources such as solar and wind. Obama is not slowing down when it comes to pushing through climate change measures, an issue he says is the greatest threat to the country’s national security. VOA correspondent Aru Pande has more from the White House.
Video

Video Shipping Containers Provide Experimental Housing

Housing prices around the San Francisco Bay area are out of reach for many people, so some young entrepreneurs, artists and tech industry workers are creating their own houses using converted shipping containers. But as VOA's Mike O’Sullivan reports from Oakland, the effort requires ingenuity and dealing with restrictive local laws.
Video

Video Arctic Draws International Competition for Oil

A new geopolitical “Great Game” is underway in earth’s northernmost region, the Arctic, where Russia has claimed a large area for resource development and President Barack Obama recently approved Shell Oil Company’s test-drilling project in an area under U.S. control. Greg Flakus reports.
Video

Video Philippine Maritime Police: Chinese Fishermen a Threat to Country’s Security

China and the Philippines both claim maritime rights in the South China Sea.  That includes the right to fish in those waters. Jason Strother reports on how the Philippines is catching Chinese nationals it says are illegal poachers. He has the story from Palawan province.
Video

Video Technique May Eliminate Drill-and-Fill Dental Care

Many people dread visiting dentists because they're afraid of drills. Now, however, a technology developed by a British firm promises to eliminate the need for mechanical cleaning of dental cavities by speeding a natural process of tooth repair. VOA’s George Putic reports.
Video

Video China's Spratly Island Building Said to Light Up the Night 'Like A City'

Southeast Asian countries claim China has illegally seized territory in the Spratly islands. It is especially a concern for a Philippine mayor who says Beijing is occupying parts of his municipality. Jason Strother reports from the capital of Palawan province, Puerto Princesa.
Video

Video Ages-old Ice Reveals Secrets of Climate Change

Ice caps don't just exist at the world's poles. There are also tropical ice caps, and the largest sits atop the Peruvian Andes - but it is melting, quickly, and may be gone within the next 20 years. George Putic reports scientists are now rushing to take samples to get at the valuable information about climate change locked in the ice.
Video

Video French Experiment in Integrating Roma Under Threat

Plans to destroy France’s oldest slum have sparked an outcry on the part of its Roma residents. As Lisa Bryant reports from the Paris suburb of La Courneuve, rights groups argue the community is a fledgling experiment on integrating Roma who are often outcasts in many parts of Europe.
Video

Video Kenyans Turn to Agriculture for Business

Each year Kenyan universities continue to churn out graduates for the job market despite the already existing high rate of unemployment among youth in the country. Some of these young men and women have realized that agriculture can be as rewarding as any other business or job, and they are resorting to agribusiness in large numbers as a way of tackling unemployment. Rael Ombuor reports for VOA.
Video

Video First Women Graduate Elite Army Ranger School

Two women are making history for the U.S. Army by proving they are among the toughest of the tough. VOA's Carla Babb reports from Fort Benning, Georgia as 94 men and those two women rise as graduates of the difficult Ranger school.

VOA Blogs