Investment bonanza

Gamal Essam El-Din , Tuesday 9 Aug 2022

What will the setting up of the Saudi-Egyptian Investment Company this week mean for Saudi investments in Egypt, Gamal Essam El-Din investigates

Investment bonanza
MOPCO

 

Saudi Arabia’s Public Investment Fund (PIF) announced this week that it has set up a company to invest in Egypt.

The $620 billion Saudi sovereign wealth fund said on 5 August that its new investment arm in Egypt, the Saudi-Egyptian Investment Company (SEIC), will target “priority sectors” including, but not limited to, infrastructure, real estate, healthcare, financial services, food and agriculture, manufacturing, and pharmaceuticals.

The company will also contribute to enhancing access to investment opportunities in Egypt for PIF and its portfolio companies, as well as the Saudi private sector.

On Tuesday there were media reports that PIF is looking to acquire an 18 per cent stake, worth LE7 billion, in Misr Fertilisers Production Company (MOPCO). The transaction would make PIF the second sovereign Gulf shareholder in the company. The Abu Dhabi sovereign wealth fund (ADQ) already has a 20 per cent stake in the state-owned company.

PIF’s Deputy Governor for Middle East and North Africa Investments Yazeed Al-Humeid said that the launch of SEIC aims to “increase Saudi investments in Egypt and support PIF’s expansion domestically and globally in line with our 2021-25 strategy.”

“SEIC will capitalise on lucrative investment opportunities within a number of promising Egyptian sectors.”

The launch of SEIC was welcomed in Egypt’s official and business circles. It comes two months after a visit to Cairo by Saudi Arabia’s Crown Prince Mohamed bin Salman which saw the signing of 14 investment agreements worth $7.7 billion.

Ahmed Samir, head of Parliament’s Economic Committee, said in a statement that the setting up of SEIC reflects the excellent relations that exist between the political leadership of Egypt and Saudi Arabia.

“SEIC is a giant investment step forward that compensates for recent falls in foreign exchange revenues, and will generate a large number of new jobs,” said Samir. He argued that careful targeting of SEIC investments in the agricultural and manufacturing sectors could help cut Egypt’s soaring import bill and thus ease the pressure on foreign exchange reserves.

Mohamed Khodeir, former chairman of the General Investment Authority, said the launch of SEIC comes at a crucial time, following May’s announcement by the government that it plans to put $40 billion worth of state-owned assets up for sale to make room for the private sector.

SEIC is placed to make Saudi Arabia the largest Arab investor in Egypt, according to Abdel-Hamid Abu Moussa, head of the Egyptian-Saudi Business Council.

“Saudi investments in Egypt already cover 5,300 projects, with a total value of $54 billion,” said Abu Moussa. The investments, he continued, reflect the closeness of the relationship between the two countries and the keenness of the Saudi leadership to support Egypt. As evidence of the latter, he cited the Saudi Arabia decision in March to deposit $5 billion with the Central Bank of Egypt in a bid to shore up foreign exchange reserves.

According to a report by the Economic Committee, trade between Egypt and Saudi Arabia increased by 62 per cent in 2021, hitting a record $9.1 billion. Remittances from Egyptian workers in Saudi Arabia also increased by 17 per cent in 2020-21 to reach $11.2 billion.

Fathallah Fawzi, head of the Egyptian Business Association, said in a press interview that SEIC has the option of either buying assets being sold as part of Egypt’s new privatisation programme, or investing in new projects. He also pointed out that real estate and hotels have been among the most attractive sectors for Gulf investors in Egypt.

Egyptian-Saudi Business Association member Mohamed Guindi argues that cooperation between the Egyptian government and SEIC should focus on agricultural and industrial projects to cover the gap between imports and exports rather than “real estate, tourist and shopping mall projects which guarantee quick returns”.

*A version of this article appears in print in the 11 August, 2022 edition of Al-Ahram Weekly.

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