Egypt expects another strong year for foreign investment, and sees exports growing by one fifth despite a slowdown in key developed markets, Trade and Industry Minister Rachid Mohamed Rachid said on Thursday.
Rachid told Reuters that annual foreign direct investment into the Arab world's most populous country had grown from less than $1 billion a few years ago to $11 billion last year, and would exceed that figure again in 2008.
Investment is coming in from Mediterranean countries such as Italy, Spain, France and Turkey, while Gulf states accounted for $6 billion last year, he said during the annual meeting of the World Economic Forum in the Swiss resort of Davos.
And it is coming in across the board - industry, services such as tourism and real estate, agriculture and oil and gas. Rachid said the economy could absorb the investment without overheating, with the central bank pushing inflation down from double digits to around 7 percent at the end of last year.
But rising food prices are a problem, doubling the government's food subsidy bill last year to around $3 billion, besides fuel subsidies of around $10 billion. Egypt exports food, but its exports are in fresh produce like fruit and vegetables, rather than the grain and oil staples that have hit record prices lately. The United States and Europe account for some 60 percent of total Egyptian exports, so the economic slowdown there was bound to have an impact, he said.
Export growth would slow from last year's stellar 45 percent but still come in at over 20 percent, he said. "We hope that through our competitiveness, through our location, through what is happening in the economy in Egypt we can still maintain some level of growth in our exports," Rachid said.
Rachid said he saw little prospect in the near term of an agreement in the long-running Doha round of talks to open up world trade on cotton. Developing country cotton producers including Egypt, where the industry employs half a million workers, are pushing the United States to cut its cotton subsidies which price them out of other markets.
Rachid said US cotton subsidies were even distorting asset allocation in Egyptian industry, where textile manufacturers who import cheaper US cotton may decide to build factories abroad. Rachid, who is due to meet US Trade Representative Susan Schwab and EU Trade Commissioner Peter Mandelson in Davos on Thursday, said he was not optimistic a Doha deal could be reached soon, but he disagreed it was "now or never".
"There is of course a bit of a game being played that until the other parties feel that the major players - the US and Europe - are willing really to put their cards on the table everybody is holding back because they feel that a conclusion is not near," Rachid said. With the US election approaching it was increasingly difficult for the US administration to sell domestically the kind of deal including subsidy cuts that is needed, he said.