Egypt offering investment carrot to cut its trade deficit
Egypt is seeking to boost public and private investment to help offset its balance-of-payments deficit, and the government is paying special attention to encouraging United States investment in Egypt.
A five-year plan designed to increase self-sufficiency provides for the investment of (STR)33.5 billion (Egyptian), or $23.9 billion (US), by the government-financed public sector and the private sector. It will emphasize consumer products and export-oriented industries.
Egyptian entrepreneurs are expected to inject an estimated $: 8.3 billion ($5 .9 billion) into the economy over the same period independently or in conjunction with foreign partners. To encourage Egyptian businessmen to invest, the government has recently promised them five-year tax holidays if they direct their funds to agricultural or industrial projects.
These two areas top the plan's list of priorities. The government is relying on them to solve an acute housing problem in Egyptian cities, promote tourism, and make Egypt's unexploited fertile land bloom.
Analysts believe confidence in Egyptian private capital can be expected to grow, in size and quality, under President Hosni Mubarak. Economic indicators inspire hope that Egyptian businessmen will continue to shoulder their responsibilities. Positive signs include a rise in the savings rate to 14 percent of the national income, as well as an increase in the rate of investment last year to 20 percent of national income.
The government is banking on Egyptian expatriates' remittances - $: 2.7 billion ($1.9 billion) - to finance projects outlined by the plan. It has recently lowered interest rates on loans to the private sector to 13 percent for industrial and agricultural projects. It was fixed at 16 percent for other activities.
The state-owned public sector will continue to be the backbone of the economy , providing about two-thirds of the capital investment and directing the economy toward the goals defined by the government, focusing on developing potential export industries such as textiles, and increasing domestic production of chemical fertilizers and cement to reduce imports. The government is moving swiftly to cure structural, financial, and managerial problems in the public sector, which caused one-third of the government-owned industrial companies to run losses last year amounting in some cases to half their capital.
Out of a total of about (STR)2 billion ($1.4 billion) invested in joint projects until the end of fiscal year 1981-82. The United States contributed an insignificant 2.4 percent. Despite the formal economic boycott of Egypt, Arab states provided the bulk of foreign capital invested in Egypt since the law on foreign investment was issued nine years ago, offering tax holidays on foreign capital of up to 10 years and free transfer of capital and profits.
The plan forecasts that about two-thirds of the foreign capital investment would be channeled to completing projects started earlier. One-fifth would go to maintenance and replenishment, and only one-sixth would be targeted for initiating new ventures.
Since President Mubarak took over a year and a half ago, several steps have been made to facilitate the operation of American business in Egypt. A treaty signed last September offered US businesses special incentives as well as guarantees against sequestration and nationalization. In addition to a joint business council created several years ago, an Egyptian-American Chamber of Commerce was recently formed.
Jamal al-Nazir, a former minister of tourism and minister of investment at the outset of the economic open-door policy, says: ''At the beginning we were seeking both foreign capital and technology. The capital was available in Egypt and the Gulf, but what we are still seeking is the technology.''
Mr. Nazir, now a businessman, believes that Egyptian-American investment has a long way to go. ''The chamber of commerce is interested only in commercial activities. It can help Egypt export to the US. The council is focusing on . . . how Egypt can create a modern industrialized economy.''