Power cuts dogging Egypt have become the biggest obstacle to luring back foreign investment after three years of political upheaval, the country’s investment minister said on Tuesday.
Electricity shortages mean the country often has intermittent outages for hours a day, hitting factory production, frustrating many Egyptians and raising questions over whether foreign firms can operate here effectively.
Although he did not offer short-term solutions, Investment Minister Ashraf Salman said the government hoped foreign investment would help alleviate the problem in the long run.
“It’s a top priority for investment attraction,” he told Reuters in an interview, promising that the government would soon unveil solar and wind power projects that he hoped would draw in foreign funding.
Blackouts deepened discontent with Islamist President Mohamed Mursi before then army chief Abdel Fattah al-Sisi ousted him last year following mass protests against his rule.
Sisi has since taken over as head of state and although his supporters credit him with a magic touch, there is no quick fix for the decrepit power grid, which, like much of the economy, has suffered decades of mismanagement.
Most officials cite political turmoil and militant violence as the biggest impediments to foreign investment, but Salman, a former investment banker, appeared more worried by the daily blackouts. “Energy. The gap in energy,” he said, when asked what was the biggest challenge facing the nation.
GRAFT AND BUREAUCRACY
Before an uprising toppled Hosni Mubarak in 2011, foreign direct investment in Egypt stood at about $8 billion a year. It subsequently tumbled to some $3 billion, before recovering to $6 billion in the last fiscal year, which ended in June.
Salman said he was hoping for $10 billion in foreign investment in the current fiscal year and hopes Egypt will attract $18 billion a year by 2018 — highly ambitious targets.
For that to happen, Cairo must tackle longstanding problems, such as Egypt’s notorious bureaucracy and corruption.
“The second (challenge) is the bureaucracy and inconsistencies of policies. We are trying very much to work on that on the presidential and cabinet level,” said Salman.
When it comes to tackling graft, Salman says major work was needed. “We are fighting it everywhere. It’s not easy. It is even an impediment for the local investment not just foreign investment. We are putting this at top of the agenda,” he said.
Foreign investors have also been unnerved by legal challenges to deals. In April, Egypt’s cabinet approved a draft investment law that prevents third parties from challenging contracts between the government and an investor.
Investors are also watching the case of billionaire Egyptian businessman Nassef Sawiris, who is locked in a tax dispute dating back to Mursi’s year in office. An Egyptian court is due to issue a final ruling on Oct. 28 and the case has raised concerns in the business community.
“These are people who put big investments into the country. And they can invest more. They are international players,” said Salman, appearing to express concern that the trial might deter others from investing in Egypt.
Salman said the cabinet was also expected to consider in about three weeks a new law that was designed to lure foreign cash and would tackle issues such as bankruptcy and labour.
“The unified investment law will not solve problems like a crystal ball. We have to work on simplifying business procedures,” said Salman.
Economic reforms could make it easier for Egypt to secure an International Monetary Fund loan if needed. Mursi failed to seal a $4.8 billion deal because he was unwilling to implement politically-explosive reforms.
“No doubt we need the IMF. … The IMF is a signal of restoring investor confidence,” said Salman.
Earlier on Tuesday, Egyptian Finance Minister Hany Kadry Dimian would not be drawn on whether Cairo would resume its bid for the loan package.