From the private sector to government assets.. the expansion of Emirati investment in Egypt

CAIRO

- The shortage of dollar resources in Egypt has paved the way for the UAE's investment plans to buy more Egyptian companies and banks;

As a result of the exit of indirect foreign investments from the market, the increasing pressure of the repercussions of the Russian war on Ukraine negatively on the import bill of wheat, grain and oil, and the decline in tourism revenues.

But what is new in the matter is that the UAE’s investment plans have gone beyond private companies and banks to the assets of the Egyptian government in a number of the largest and most successful banks and companies, in a direction that appears to be an alternative to the policy of lending to the Egyptian regime that has continued over the past years, especially since it, along with Saudi Arabia, is one of the most financial supporters and politically him.

It seems - according to observers - that the current crisis will accelerate the process of offering Egypt's attractive assets for sale to investors, and put an end to the Egyptian government's reluctance to offer the shares of a number of its companies and those of the armed forces for sale, which it announced in 2018 (23 companies) to raise tens of billions of pounds, but It was only partially implemented.

In order to strengthen its financial conditions, the Egyptian government agreed with a sovereign wealth fund in Abu Dhabi to sell assets owned by it in a number of companies;

These are Abu Qir Fertilizers and Chemical Industries, Egypt for the production of fertilizers “MOPCO”, (the two most important companies in the fertilizer sector), and Alexandria for the handling of containers and goods, with a value of two billion dollars, in addition to the purchase of 18% of the shares of the Commercial International Bank (CIB), the largest bank in the private sector in Egypt And a stake in Fawry for electronic payments, according to sources who spoke to Bloomberg.

It showed the latest consolidated business results of Commercial Bank;

His net profit rose to 13.2 billion pounds during the year ending in December 2021, compared to a net profit of 10.2 billion pounds during the year 2020. (a dollar equals 18.28 Egyptian pounds).

The UAE owns 18% of the largest bank listed on the Egyptian Stock Exchange “CIB”, according to a “Bloomberg” report pic.twitter.com/oPXqzGmR2X

— Al Jazeera Egypt (@AJA_Egypt) March 23, 2022

Government welcome to sell

The Presidency of the Egyptian Council of Ministers announced, last Monday, in a statement, that Egypt's sovereign fund succeeded in attracting investments worth two billion dollars in the first phase directly and through the Egyptian Stock Exchange, and the details of those investments will be announced during the next few weeks.

Minister of Planning and Economic Development Hala Al-Saeed praised the move, and said that "these investment deals will contribute to enhancing the country's economic development, and consolidating Egypt's position as one of the leading investment destinations in the world, and with the economic growth that Egypt is witnessing," explaining that "more partnerships and investment deals will be implemented." similar".

The acquisition of the Abu Dhabi Holding Company (ADQ) is not the first, but it comes after several acquisition deals were made in Egypt recently, as it acquired with Aldar Real Estate the leading real estate development company SODIC, as well as Amon Pharma Company, and 75% of the Ismailia Company for Agricultural and Industrial Investments Owner of the trademark "Atyab".

In 2019, Egypt and the UAE established a strategic investment platform worth $20 billion to invest in many vital sectors and assets, to be managed by the Egyptian Sovereign Fund and ADQ Holding.

Pressures from the Russo-Ukrainian War

Egypt is facing increasing pressures on its dollar resources in the wake of the outbreak of the Russian-Ukrainian war and its negative repercussions on the global and local economy.

The debt instruments market witnessed the exit of about 15.8 billion dollars from Egypt, according to many economic reports, as well as the transformation of the net assets of foreign banks from a surplus of 6.8 billion dollars in February 2021 to a deficit of 7.1 billion dollars at the end of November of the same year, which means That banks' foreign exchange obligations exceed what they own of it.

And last month, the First Abu Dhabi Bank made a financial offer to acquire a majority stake in "Hermes", the strongest and largest investment bank in Egypt.

If the deal is completed, the UAE bank will become the main reference in the investment banking sector in the region, and this will be the second major deal for the UAE bank, which acquired Bank Audi Egypt last year, thus becoming one of the largest foreign banks in Egypt in terms of assets exceeding 130 billion. pounds ($8.5 billion).

No loans, but assets

It is not expected that the Egyptian government will resort to obtaining new deposits from the Gulf Cooperation Council countries, although there is a desire among policy makers to extend Gulf deposits in the Central Bank of Egypt, which are believed to amount to about $15 billion, according to informed sources

specialist, instead, policymakers will speed up the process of offering attractive state assets for sale to Gulf buyers.

The balance of Gulf deposits in the Central Bank of Egypt amounted to 12 billion dollars at the end of September of last year, including 5.7 billion dollars for the UAE, 4 billion for Kuwait, and 2.3 billion dollars for Saudi Arabia, according to the report on the external situation of the Egyptian economy issued by

, which revealed an extension The maturity of a Saudi deposit with Egypt of $2.3 billion until 2026.

Professor of Economics in America Dr. Mostafa Shaheen: Buying government shares and assets in companies and banks affects Egypt’s economic and political decisions and mortgages them to other governments

What is the reality of the crisis in Egypt?

Economists, who spoke to Al Jazeera Net, believe that the shortage of dollar resources in Egypt is not caused by, as the Egyptian government and media promote, the Russian war in Ukraine and its negative repercussions, but rather it is the result of wrong economic policies that spanned for years that did not create a strong economy capable of facing a crisis. Thousands of miles away from him as if it happened in Egypt.

Professor of economics in America, Dr. Mostafa Shaheen, said, "Egypt currently has no choice but to borrow or sell some assets, in light of the reluctance of supporting countries such as the UAE and Saudi Arabia to provide them with huge deposits, as Sisi's recent visits to Saudi Arabia and the UAE did not result in any monetary support in light of The current crisis the country is facing.

He believed, in a statement to Al Jazeera Net, that these countries prefer, instead of cash support and loans, to buy government shares and assets in companies and banks, but it may affect Egypt's economic and political decisions and mortgage them to other governments, and will not contribute to promoting the country's economic development;

Because the Egyptian government will use the revenues to either support the budget or pay some of its foreign obligations.

UAE investments in Egypt

Early this month, UAE-based Gulf Capital Asset Management announced its intention to invest about $250 million in Egypt over the next five years, in the technology, healthcare, and e-commerce sectors, according to the

company's CEO and co-founder,

The Emirates Investment arms had acquired years ago a number of major private hospitals in Egypt, reaching 15 hospitals, such as: Nile Badrawi, Cleopatra, and Cairo Specialist.

The Emirati company, "Abraaj Capital", took control of two of the largest chains of analysis laboratories, namely "Al-Borg", which includes 926 branches and 55 biological laboratories, and "Laboratory" laboratories, which includes 826 branches in all Egyptian cities and centers.

The number of Emirati companies operating in Egypt currently exceeds 1,100, with investments amounting to more than $7 billion - according to government estimates - in the sectors of oil and gas, seaports, health, real estate, telecommunications, agriculture, education, retail trade and others.

The number of Emirati companies operating in Egypt currently exceeds 1,100, with investments amounting to more than $7 billion, according to government estimates

wrong choice

Political economy researcher and director of the International Center for Development Studies, Mustafa Youssef, described the sale of government assets as "the most wrong choice."

He said that "the policies of selling assets to bring in financial resources reflect the deteriorating situation of the Egyptian economy, and they will not be suitable for the situation of the economy, and they are temporary solutions such as painkillers for the patient and nothing more."

He stressed, in statements to Al Jazeera Net, that the crisis is a structural problem in the Egyptian economy, which depends on collection, loans and the establishment of projects that have no financial return, and there is no evidence for this that Egypt suffers from a large and permanent deficit in the trade balance amounting to about 40 billion dollars annually, and imports 60% of its food comes from abroad, and the real value of the country's wealth is wasted through unfair agreements in the field of natural gas, and other strategic mistakes.

However, Youssef added that borrowing voraciously from abroad to finance the budget deficit and non-productive projects undoubtedly paved the way for the current crisis, which we have repeatedly warned of, and stressed that Egypt will face a large deficit in its foreign exchange resources unless it relies on a production and industrial strategy and rationalizes non-development projects until a time later.

Fahd Iqbal, head of the Middle East Research Department for Private Banking Services at Credit Suisse Group, based in Dubai, Fahd Iqbal, says, “The central bank’s move indicates that conditions in Egypt are worse than we expected, and we cannot exclude the risk of further currency devaluation at some stage.” suffix".