Inward FDI in Egypt and its policy context

Abstract

Egypt, starting from the second half of the first decade of the 21st century, has begun to realize its potential as an important recipient of foreign direct investment (FDI) among developing economies. Having received only US$500 million of inward FDI (IFDI), amounting to 0.5$ 9.4 billion (approximately 5.7% of GDP), in 2008. While investment in oil and gas accounted for a large share of IFDI (over half in 2006-2009), the remainder is fairly well diversified. Developed economies account for three-quarters of Egypt's IFDI, but the share of emerging markets has risen recently. Largely because of the global financial crisis, inflows dropped in 2009, by 30%. IFDI is likely to be adversely affected in 2011 following the political turbulence associated with the January 25 Revolution. However, this democratic transformation carries the seeds of genuine political stability based on effective institutions and the rule of law, which would encourage long-term domestic and foreign investment