Egypt is seeking increased direct investment from China in a bid to shore up dwindling overseas backing for the northern African country amid the global economic downturn.
The two countries are expected to iron out the details of support for the Suez Economic and Trade Cooperation Zone in November, a key project backed by the Forum of China-African Cooperation, which was launched last year.
Tianjin-based TEDA Investment Holding Co Ltd is expected to invest $200 million in the infrastructure and basic construction of the Sino-Egyptian economic zone. The project, scheduled for completion in 2018, is expected to require a total investment of around $2 billion from around 150 businesses. It is largely dominated by Chinese firms in the automobile, textile, home appliances, and furniture and petroleum equipment sectors.
Commenting on the initiative, the Egyptian Investment Minister, Mahmoud Mohieldin, said: "It has been very positive and successful time for us as far as Chinese investment is concerned. We have seen more than 82 percent of all the Chinese investment made since the 1970s occurring over the last five years."
Mohieldin is currently in China attending the annual Summer Davos meeting that opened yesterday in Dalian.
Foreign direct investment in Egypt declined by 39 percent to $8.1 billion last year due to the financial crisis. Investment from Chinese companies, however, has been growing at a rapid pace.
There are currently 865 Chinese companies investing and operating in Egypt, representing a total investment of $200 million, according to Egypt's General Authority for Investment (GAFI). Most of the companies are in the construction, service industry and manufacturing sectors.
Mohieldin said the advantage of Chinese investment, compared to investment from Europe or the US, is the cost effectiveness of components, technology and the streamlined approach.
He added that, in coming years, he expects to see further growth in investment from China, currently ranked 23rd among all foreign investors in Egypt. "I expect China to be among the top 10 investors in Egypt in the next four to five years," he said.
The development of key projects in Egypt, such as the Suez zone, is being supported by the China-Africa Development Fund (CADFund), a dedicated fund that helps Chinese companies looking to invest in the African market.
The China Development Bank (CDB) is the provider of the first-phase funding of $1 billion, eventually conceived as reaching $5 billion. In 2007, a memorandum of understanding was signed between the CADFund and GAFI, which laid the groundwork for the development of trade relations and economic cooperation between China and Egypt.
The CDB is also planning to open its first representative office in Egypt in November. This will help to facilitate more Chinese investment in Egypt and to further strengthen the economic and financial ties between the two.
Mohieldin said: "The fund is very helpful in supporting the specialized economic zone and other developments in this area, which are being funded by this particular agency.
"It provides a clear indication of the continuity and sustainability of the project. It also demonstrates the backing of the Chinese government and its commitment to invest and see projects through."