European Companies Sign Multibillion-Euro Deals in Egypt as EU Strengthens Ties

European companies have entered into agreements potentially worth over €40 billion with Egyptian partners, according to EU Commission President Ursula von der Leyen. The announcement was made at an investment conference in Cairo, underscoring the EU's commitment to bolstering Egypt's economy amidst regional instability.

Key Highlights:

• Investment Focus: The deals and memoranda of understanding (MOUs) largely centre on the energy sector. Additional investment areas include water management, construction, chemicals, shipping, and aviation.
• EU Support: This wave of investments follows a €7.4 billion EU funding package and enhanced bilateral relations established in March. The goal is to help Egypt stabilise its economy, which has been impacted by conflicts in Gaza and Sudan, and to manage migrant flows across the Mediterranean.
• Economic Strategy: The investments are part of a broader strategy to fortify Egypt's economy by promoting the private sector and resilience against global economic shocks.

Context and Challenges:

Economic Weaknesses: Repeated crises, including the war in Ukraine and the COVID-19 pandemic, have highlighted structural weaknesses in Egypt's economy.

Human Rights Concerns: The funding for Egypt comes amid ongoing concerns about human rights under President Abdel Fattah al-Sisi's administration, which has been marked by a decade-long crackdown on political dissent.

Strategic Importance: Egypt's geographical location makes it a strategic partner for Europe, offering potential in clean energy exports and affordable skilled labor for European firms looking to nearshore operations closer to home markets.

Recent Developments:

• Foreign Financing: Egypt has benefited from significant foreign financing and pledges this year from the UAE, IMF, World Bank, and the EU. This influx has alleviated a prolonged foreign currency crisis and spurred commitments to economic reforms.
• Reform Commitments: These reforms include a more flexible exchange rate, stricter controls on off-budget spending, and reducing the state and military's dominance in the economy. However, such commitments have previously failed to significantly boost the private sector.
• Ongoing Issues: Despite these efforts, challenges persist, including routine power cuts and production halts at fertiliser and chemical plants due to gas shortages.

Political and Economic Strategy:

Government Transparency: There are ongoing concerns about the transparency of Egypt's economic strategy. The resignation of the current cabinet almost four weeks ago has left the country without a new government, adding to the uncertainty.

Population Pressure: Egyptian officials emphasise their efforts to manage external pressures and cater to the needs of a rapidly growing population, now at 106 million.

European Perspective:

Von der Leyen's visit to Cairo coincides with her bid for a second five-year term as Commission President, seeking approval from the European Parliament. While EU leaders have nominated her, the upcoming secret ballot vote in the parliament is expected to be challenging.

The Egypt-EU investment conference highlighted the critical need for coordination between Europe and Egypt amidst ongoing regional and international crises, aiming for mutual economic stability and prosperity.