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

Egypt's Suez Canal Dreams Tempered by Continued Unrest

Seen as a potential driver of recovery, Cairo’s plan to expand waterway had been raising hopes to give country much needed economic boost More

Ebola Maternity Ward in Sierra Leone First of its Kind

Country already had one of world's highest maternal mortality rates before Ebola arrived, virus has added even more complications to health care More

Malaysia Flight 370 Disappearance Ruled Accident

Aircraft disappeared on March 8, 2014; with ruling, families of 239 passengers and crew can now seek compensation from airline 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.
Groundbreaking Hand-Painted Documentary About Van Gogh in Productioni
X
George Putic
January 29, 2015 9:43 PM
The troubled life of the famous 19th century Dutch painter Vincent van Gogh has been told through many books and films, but never in the way a group of filmmakers now intends to do. "Loving Vincent " will be the first ever feature-length film made of animated hand-painted images, done in the style of the late artist. VOA’s George Putic reports.
Video

Video Groundbreaking Hand-Painted Documentary About Van Gogh in Production

The troubled life of the famous 19th century Dutch painter Vincent van Gogh has been told through many books and films, but never in the way a group of filmmakers now intends to do. "Loving Vincent " will be the first ever feature-length film made of animated hand-painted images, done in the style of the late artist. VOA’s George Putic reports.
Video

Video Rock-Consuming Organisms Alter Views of Life Processes

Scientists thought they knew much about how life works, until a discovery more than two decades ago challenged conventional beliefs. Scientists found that there are organisms that breathe rocks. And it is only recently that the scientific community is accepting that there are organisms that could get energy out of rocks. Correspondent Elizabeth Lee reports.
Video

Video Paris Attacks Highlight Global Weapons Black Market

As law enforcement officials piece together how the Paris and Belgian terror cells carried out their recent attacks, questions are being asked about how they obtained military grade assault weapons - which are illegal in the European Union. As VOA's Jeff Swicord reports, experts say there is a very active worldwide black market for these weapons, and criminals and terrorists are buying.
Video

Video Activists Accuse China of Targeting Religious Freedom

The U.S.-based Chinese religious rights group ChinaAid says 2014 was the worst year for religious freedom in China since the end of the Cultural Revolution. As Ye Fan reports, activists say Beijing has been tightening religious controls ever since Chinese leader Xi Jinping came to office. Hu Wei narrates.
Video

Video Super Bowl Ads Compete for Eyes on TV, Web

Super Bowl Sunday (Feb. 1) is about more than just the NFL's American football championship and big parties to watch the game. Viewers also tune in for the world famous commercials that send Facebook and Twitter abuzz. Daniela Schrier reports on the social media rewards for America’s priciest advertising.
Video

Video Theologians Cast Doubt on Morality of Drone Strikes

In 2006, stirred by photos of U.S. soldiers mistreating Iraqi prisoners, a group of American faith leaders and academics launched the National Religious Campaign Against Torture. It played an important role in getting Congress to investigate, and the president to ban, torture. VOA's Jerome Socolovsky reports.
Video

Video Freedom on Decline Worldwide, Report Says

The state of global freedom declined for the ninth consecutive year in 2014, according to global watchdog Freedom House's annual report released Wednesday. VOA's William Gallo has more.
Video

Video MRI Seems to Help Diagnose Prostate Cancer, Preliminary Study Shows

Just as with mammography used to detect breast cancer, there's a lot of controversy about tests used to diagnose prostate cancer. Fortunately, a new study shows doctors may now have a more reliable way to diagnose prostate cancer for high risk patients. More from VOA's Carol Pearson.
Video

Video Smartphones About to Make Leap, Carry Basic Senses

Long-distance communication contains mostly sounds and pictures - for now. But scientists in Britain say they are close to creating additions for our smartphones that will make it possible to send taste, smell and even a basic touch. VOA’s George Putic reports.
Video

Video Former Sudan 'Lost Boy' Becomes Chess Master in NYC

In the mid-1980’s, thousands of Sudanese boys escaped the country's civil war by walking for weeks, then months and finally for more than a year, up to 1,500 kilometers across three countries. The so-called Lost Boys of the Sudan had little time for games. But one of them later mastered the game of chess, and now teaches it to children in the New York area. VOA’s Bernard Shusman in New York has his story.
Video

Video NASA Monitors Earth’s Vital Signs From Space

The U.S. space agency, NASA, is wrapping up its busiest 12-month period in more than a decade, with three missions launched in 2014 and two this month, one in early January and the fifth scheduled for January 29. As VOA’s Rosanne Skirble reports, the instruments being lifted into orbit are focused on Earth’s vital life support systems and how they are responding to a warmer planet.
Video

Video Crowded Republican Presidential Field Off to Early Start for 2016

It seems early, but the 2016 U.S. presidential election campaign is already heating up. Though no one has officially announced a candidacy, several potential Republican contenders have been busy speaking to conservative groups about making a White House run next year. Many of the possible contenders are critical of the Obama administration’s foreign policy record. VOA national correspondent Jim Malone reports.

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

All About America

AppleAndroid