Chinese investment helps Egypt top Africa’s FDI inflows

Egypt emerged Africa’s most preferred investment destination in 2017 as a large increase in Chinese investment across light manufacturing industries, supported inflows from investors, to make the country first in Africa in terms of foreign direct investment (FDI) flows.

According to the ‘World Investment Report 2018: Investment and Industrial Policies’ released recently by the United Nations Conference on Trade and Development’s (UNCTAD), the Egyptian economy recorded inflow of $7.4 billion in 2017, as a result of wide-ranging economic reforms such as financial liberalisation, which fostered more reinvestment of domestic earnings.”.

Egypt’s ranking came despite an 8.8 percent decrease in FDI flows compared to 2016.

In Africa, FDI inflows declined by 21 percent to $42 billion.

Africa’s FDI flows represent only a 2.9 percent share of the global FDI flows.

“The decline in FDI flows to Africa was driven by weak oil prices and lingering effects from the commodity bust, as flows contracted in commodity-exporting economies such as Egypt, Mozambique, the Congo, Nigeria and Angola,” the report said.

The report took note of investment liberalisation measures in Egypt.

“Egypt introduced a new law for the setting up of a natural gas regulatory authority charged with licensing and devising a plan to open the gas market to competition,” the report said.

It also mentioned simplifying administrative procedures in Egypt.

“Egypt promulgated the Industrial Permits Act and its executive regulations, aiming to ease procedures for obtaining licenses for industrial establishments,” the report said.

“The country also put into effect a new investment law, aiming to promote domestic and foreign investment by offering further incentives, reducing bureaucracy and simplifying administrative processes,” the report added.

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The report also noted that Egypt issued a decree establishing the “Golden Triangle Economic Zone” as part of ongoing efforts for investment facilitation and promotion.

On production, Egypt ranked 12th among the top 25 exporting developing economies by Global Value Chain (GVC) participation rate for 2017, after Morocco, with a 52 percent GVC rate.

In 2010, Egypt ranked 11th among the top 25 exporting developing economies in terms of GVC.

In terms of gross exports, Egypt ranked 21st among the top 25 exporting developing economics in 2017.

FDI inflows to developing economies remained stable in 2017, at $671 billion, close to their 2016 level, while FDI flows declined sharply in developed economies and economies in transition.

Developing economies accounted for 47 percent of total global FDI inflows in 2017, up from 36 percent in 2016.

Global foreign direct investment (FDI) flows fell by 23 percent in 2017, down to $1.43 trillion from $1.87 trillion in 2016.

The fall in global FDI came despite a remarkable pick-up in GDP and trade.

This global decline was mainly driven by a decrease in the value of net cross-border mergers and acquisitions (M&A) to $694 billion, from $887 billion in 2016.

Another factor was the value of announced greenfield investment, which indicates future trends, and which fell by 14 percent to $720 billion.

“Intra-African M&A was largely concentrated in Morocco and Egypt,” the report notes.