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

Brutality Eroding IS Financial Support

Director of National Intelligence James Clapper says IS's penchant for publicizing beheadings, other brutal forms of punishment hurts group’s bottom line More

Studies: Climate Change a Factor in Disasters in Syria, California

Studies point to possibility of clear and present dangers from a threat often considered to be far in the future More

Video Afghan Refugees Complain of Harassment in Pakistan

Afghan officials and human rights organizations assert that Pakistani authorities are using deadly attack at school in Peshawar as pretext to push out Afghan refugees 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.
Kerry Seeks Assurances of Russian Non-Interference in Ukrainei
X
March 03, 2015 3:11 AM
U.S. Secretary of State John Kerry has told his Russian counterpart, Sergei Lavrov, that his country could face further consequences to what he called its “already strained economy” if Moscow does not fully comply with a cease-fire in Ukraine. The two met, on Monday, on the sidelines of a U.N. Human Rights Council meeting in Geneva, where Kerry outlined human rights violations in Russian-annexed Crimea and eastern Ukraine. VOA State Department correspondent Pam Dockins reports from Geneva.
Video

Video Kerry Seeks Assurances of Russian Non-Interference in Ukraine

U.S. Secretary of State John Kerry has told his Russian counterpart, Sergei Lavrov, that his country could face further consequences to what he called its “already strained economy” if Moscow does not fully comply with a cease-fire in Ukraine. The two met, on Monday, on the sidelines of a U.N. Human Rights Council meeting in Geneva, where Kerry outlined human rights violations in Russian-annexed Crimea and eastern Ukraine. VOA State Department correspondent Pam Dockins reports from Geneva.
Video

Video Smartphones May Help in Diagnosing HIV

Diagnosing infections such as HIV requires expensive clinical tests, making the procedure too costly for many poor patients or those living in remote areas. But a new technology called lab-on-a-chip may make the tests more accessible to many. VOA’s George Putic reports.
Video

Video Afghan Refugees Complain of Harassment in Pakistan

Afghan officials have expressed concern over reports of a crackdown on Afghan refugees in Pakistan following the Peshawar school attack in December. Reports of mass arrests and police harassment coupled with fear of an uncertain future are making life difficult for a population that fled its homeland to escape war. VOA’s Ayesha Tanzeem reports from Islamabad.
Video

Video Ukrainian Volunteers Prepare to Defend Mariupol

Despite the ongoing ceasefire in Ukraine, soldiers in the city of Mariupol fear that pro-Russian separatists may be getting ready to attack. The separatists must take or encircle the city if they wish to gain land access to Crimea, which was annexed by Russia early last year. But Ukrainian forces, many of them volunteers, say they are determined to defend it. Patrick Wells reports from Mariupol.
Video

Video Moscow Restaurants Suffer in Bad Economy, Look for Opportunity

As low oil prices and Western sanctions force Russia's economy into recession, thousands of Moscow restaurants are expected to close their doors. Restaurant owners face rents tied to foreign currency, while rising food prices mean Russians are spending less when they dine out. One entrepreneur in Moscow has started a dinner kit delivery service for those who want to cook at home to save money but not skimp on quality. VOA's Daniel Schearf reports.
Video

Video US, Cuba Report Progress in Latest Talks to Restore Ties

The United States and Cuba say they have made progress in the second round of talks on restoring diplomatic relations more than 50 years after breaking off ties. Delegations from both sides met in Washington on Friday to work on opening embassies in Havana and Washington and iron out key obstacles to historic change. VOA’s Mary Alice Salinas reports from the State Department.
Video

Video Presidential Hopefuls Battle for Conservative Hearts and Minds

One after another, presumptive Republican presidential contenders auditioned for conservative support this week at the Conservative Political Action Conference held outside Washington. The rhetoric was tough as a large field of potential candidates tried to woo conservative support with red-meat attacks on President Barack Obama and Democrats in Congress. VOA Political Columnist Jim Malone takes a look.
Video

Video NYC's Restaurant Week: An Economic Boom in Fine Dining

New Yorkers take pride in setting world trends — in fashion, the arts and fine dining. The city’s famous biannual Restaurant Week plays a significant role in a booming tourism industry that sustains 359,000 jobs and generates $61 billion in yearly revenue. VOA's Ramon Taylor reports.
Video

Video Brookhaven at Cutting Edge of US Energy Research

Issues like the Keystone XL pipeline, fracking and instability in the Middle East are driving debate in the U.S. about making America energy independent. Recently, the American Energy Innovation Council urged Congress and the White House to make expanded energy research a priority. One beneficiary of increased energy spending would be the Brookhaven National Lab, where clean, renewable, efficient energy is the goal. VOA's Bernard Shusman reports.
Video

Video Southern US Cities Preserve Civil Rights Heritage to Boost Tourism

There has been a surge of interest in the American civil rights movement of the 1950s and '60s, thanks in part to the Hollywood motion picture "Selma." Five decades later, communities in the South are embracing the dark chapters of their past with hopes of luring tourism dollars. VOA's Chris Simkins reports.
Video

Video Deep Under Antarctic Ice Sheet, Life!

With the end of summer in the Southern hemisphere, the Antarctic research season is over. Scientists from Northern Illinois University are back in their laboratory after a 3-month expedition on the Ross Ice Shelf, the world’s largest floating ice sheet. As VOA’s Rosanne Skirble reports, they hope to find clues to explain the dynamics of the rapidly melting ice and its impact on sea level rise.
Video

Video Lao Dam Project Runs Into Opposition

A Lao dam project on a section of the Mekong River is drawing opposition from local fishermen, international environmental groups and neighboring countries. VOA's Say Mony visited the region to investigate the concerns. Colin Lovett narrates.

All About America

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