Last week, Egypt announced a move that it hopes will revitalize foreign investments in the country. What does that move entail exactly?
Passports for everyone
Egypt is now permitting foreigners to acquire the Egyptian passport on one condition: that they deposit $392,000 (7 million EGP), and then hand it over to the Treasury after five years, an amendment passed by parliament on Monday said.
Egypt has been looking to boost its finances and draw back foreign investment that fled the country after its 2011 uprising, notably through a series of tough reforms tied to a $12 billion IMF loan programme it began in late 2016.
Under the new law, foreigners who make a deposit of 7 million Egyptian pounds or the equivalent in foreign currency receive the option of taking citizenship if they surrender the deposit after five years.
The head of parliament’s defense and national security committee, General Kamal Amer, said the new law compliments recent amendments to an investment act that grants incentives to foreigners to invest in the country.
He said foreigners who acquire citizenship would enjoy no political rights until after five years of citizenship and would need 10 years to be eligible for election or appointment to a representative body.
Spouses and children will not be eligible for citizenship unless they reside in Egypt, he added.
Is an Egyptian passport truly enough to attract investors?
Holders of the French passport enjoy many privileges, such as the ability to exit and enter the EU unhindered, the right to government health care, and the ability to enter many countries visa-free worldwide.
The benefits of holding an Egyptian passport aren’t as pronounced and well-known as those of an American or French passport. It is therefore not immediately clear why the Egyptian government would offer such a boon to potential foreign investors.
In fact, and according to the passport index, the Egyptian passport ranks 169th out of 199 countries globally, effectively making it one of the weakest passports in the world.
Was this really the right approach to attract investors?
Egypt looks abroad for investment
One element that the country is using to sway investors is the setting up of a sovereign wealth fund that the government announced last week. The fund will have capital worth $11 billion (200 billion EGP).
“The fund aims to contribute to sustainable economic development through management of its funds and assets,” the Middle East News Agency (MENA) explained.
The fund will be eligible to participate in all economic and investment activities, including setting up companies, investing in financial instruments, and other debt instruments in Egypt and abroad, the statement said.
The law, passed by parliament on July 16, approved a $279 million (5 billion EGP) start-up capital for the fund called “Egypt Fund”, with $55.8 million (1 billion EGP) to be transferred immediately from the treasury, MENA said.
Following the Arab Spring, Egypt has had an all-around rough time. In 2017, the national debt of Egypt amounted to an astonishing 103.26% of the GDP, Statista revealed. Its national debt is expected to arrive at $224.93 billion in 2018.
To make matters worse, the monthly minimum wage rests at approximately $67 at this current point in time, according to Trading Economics. This follows efforts by the country to float the Egyptian pound in 2016, which resulted in the significant devaluing of the currency by 50%. This, in turn, resulted in a 33% increase in inflation following the decision by the Egyptian government, according to Bloomberg.
Recently, however, the country has been making an incremental improvement. The International Monetary Fund (IMF) recorded a 4.6% growth in GDP in the first half of 2017, with prospects for a better future for the country. Following the Arab Spring, the country’s unemployment rate has also been making a slow, gradual improvement, with unemployment in the country dropping from 13.2% in 2014 to 11.6% in 2017.
With the announcement of an international wealth fund and passport availability for foreigners, Egypt’s economy is looking to enter a healing period.
Time will tell if these new pieces of legislation and investments will help bring the country back onto its feet in the long run.