x Abu Dhabi, UAETuesday 25 July 2017

Asian firms bullish on Egypt investment

Egypt Focus: Unperturbed by unrest gripping Egypt, Chinese and Indian companies are pushing ahead with expansion plans.

Essar Energy bought Shell's Stanlow oil refinery in England and is reported to be interested in building a refinery in Egypt. Paul Thomas / Bloomberg
Essar Energy bought Shell's Stanlow oil refinery in England and is reported to be interested in building a refinery in Egypt. Paul Thomas / Bloomberg

Asian investors are seeing opportunity in Egypt where many of their western counterparts see risk.

The bullishness of Chinese and Indian companies contrasts with some western companies re-evaluating their presence in Egypt.

Mass protests crippling the economy have dominated the headlines this year.

Asian tiger economies are focused on the rapidly growing population and proximity to European and African consumers that, they say, still make Egypt among the most attractive emerging markets in the long term.

Jangho Curtain Wall, a Chinese construction company, wants a share of the many infrastructure projects planned across the north African country. Jangho has already completed 25 projects in the Middle East.

"Egypt is the biggest market and has the biggest potential for construction," said Brian Wu, who is based in the company's regional Abu Dhabi office. "We do worry about the situation but in the future there will be big projects."

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Chinese companies are no strangers to embracing Middle East markets beset by turbulent conditions.

Chinese construction companies were early entrants to Lebanon after the war in 2006 and were also among the first wave of foreign concerns entering Iraq following the overthrow of Saddam Hussein. Chinese companies already have a solid base in Egypt, especially within construction and manufacturing.

"Chinese companies do see opportunities in unrest," said Ben Simpfendorfer, the editor of China Insider, a website analysing that country's economy.

"Particularly smaller companies are not shy of operating in difficult conditions if profit margins are high."

But it is not just the Chinese who are eyeing openings in the Egyptian market. The Indian conglomerate Essar Group has been reported to be interested in building a US$3 billion (Dh11.01bn) refinery in Egypt and buying a steel company there but those talks are "on hold", said Sreehari Iyer, the company's Dubai-based director of finance for the Middle East and Africa.

But he said the company was "definitely" interested in Egyptian projects in the near future.

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The Asian interest in Egypt is partly linked to the desire to globalise.

However, the country does have significant investment attractions too. Its location makes it cheaper to manufacture and export goods to Europe than it does from the Far East. The country has a free trade agreement with the EU and is part of the Common Market for Eastern and Southern Africa (Comesa), aimed at promoting trade and investment among countries.

"India, South Korea and China have been in Egypt for a long time but in the last few years there's been a surge of interest from those countries," said Abdel Rahman Raouf, the commercial affairs councillor at the Egyptian embassy in Abu Dhabi.

The continuing interest from the Far East comes as some western firms reconsider their positions. Microsoft has already begun to move some of its work out of Egypt after the government initially blocked internet access in the wake of civil unrest.

The country had been viewed as one of the next big hopes in the outsourcing market because of a large labour force with good education and language skills

"Many service providers, as well as their clients, are re-evaluating whether Egypt is still the right location for outsourcing deployments," said Peter Ryan, the lead analyst at the advisery firm Ovum.

 

tarnold@thenational.ae

breagan@thenational.ae