Mohamed Agamy participates in the IR Global Guide – The Middle East & North Africa: A dynamic region for inward & outward investment

Foreword by Andrew Chilvers

The Middle East and North Africa (MENA) region is a hugely diverse cultural and geographical mix that stretches from Morocco in northwest Africa to Iran in Southwest Asia.

The region is home to a range of economies with vastly different levels of openness to international trade and investment. But with the help of international organisations such as the OECD and IMF, along with local and foreign investment, much of the region has started to make giant strides in economic development in recent years.

Despite the Covid-19 pandemic that resulted in negative growth of 3.8% for 2020, most analysts agree the region continues to offer ideal opportunities for businesses and investors going forward. Indeed, with the pandemic starting to ease, an estimated $4.1 trillion of projects are planned or underway in many countries across the region as they continue to diversify and expand their economies.

Moreover, to ease the stress on local companies while offering incentives to foreign investors, most MENA countries recently announced a series of fiscal stimulus packages including tax payment reductions and loan guarantees for businesses. These moves have been popular inside and outside the region for encouraging investment and many analysts predict growth increasing to as much as 3.1% for the region in 2021.

Nevertheless, this uptick in economic growth depends on several factors including the ongoing success of the Covid-19 vaccine rollout across the region and the stabilising of oil and gas prices. Furthermore, if geopolitical tensions continue to stabilise, many believe oil exports will recover to 1.8% for 2021 and this will be supported by the resumption of large-scale capital investment projects that were largely put on hold during 2020.

Egypt’s economy booms as boost in FDI and oil and gas success signal end to years of austerity

The Foreign Direct Investment (“FDI”) in Egypt has been flourished in comparison with the previous ten (10) years due to the crisis in the Egyptian investment during the revolution of 2011. However, Egypt has overcome this crisis during these ten (10) years to remain the largest FDI recipient in Africa in 2019, with a stock of USD 126,6 billion according to UNCTAD’s 2020 World Investment Report.

The latest trends that shaping the business growth and creating opportunities in Egypt are by far the Oil & Gas, followed by Artificial Intelligence (“AI”), and the real estate sectors.

Currently, Egypt is considered as one of the leading countries in the Mediterranean and the MENA region that has a hub of liquefied natural gas (“LNG”) infrastructure. Egypt used to have one of the world-class importing facilities and the country in its way nowadays to gain its position as an LNG exporting hub.

Egyptian Regulatory applied to the Gas market:

1) The Gas Market Activity Law no. 196 of 2017 (which was amended by Law no. 13 of 2019). In addition to the Prime Minister Executive decree no. 239 of 2018 for regulating the activities of the GAS market; both have been issued to regulate the natural gas activity related to the storage and pipelines before the transmission to the ports and sites, and all procedures relating to its restoration.

The government as a regulator is taking the key role in monitoring industry players to ensure the government objectives and establishing the rules and incentives to develop the market across the value chain.

2) Suez Canal Authority Circular No. 7/2017 – Concerning LNG Tankers operating between the American Gulf, the Arabian Gulf, India, and its eastern ports.

The decree is encouraging more LNG vessel’s owners and operators to have transit in the Suez Canal, the Suez Canal Authorities (SCA) has decided to grant LNG tankers in loaded or in ballast operating between the American Gulf, the Arabian Gulf, India, and Eastern ports the following Suez Canal toll discounts:

1) The Arabian Gulf and west of India up to the port of Kochi. A reduction of 30% of Suez Canal normal dues.

2) East of the port of Kochi, India west of India and up to the port of Singapore, a reduction of 40% of SC normal dues.

3) Singapore and its eastern ports, a reduction of 50% of SC normal dues.

The tanker has no right to benefit from other rebates (reduction) granted by SCA to LNG tankers, besides that rebate (reduction) subject of this circular.

Aside from the LNG project, Egypt has been concluding many deals to arise the Oil & Gas discoveries. So, the current ministry of Petroleum and Mineral Resources strategy aims to increase oil and gas discoveries by an expansion of cooperation between Egypt and the countries of the Eastern Mediterranean Gas Forum (“EMGF”).

By January 2021, a mega upstream company signed Production Sharing Contracts (“PSCs”) for offshore and deepwater concession of the Red Seas Block 3 that covers 3,097 km2 and the offshore North Kanayes of Herodotus Basin in the west Mediterranean concession; and this agreement demonstrate a strategy to expand natural gas projects in the offshore and deep-water areas in Egypt and to support the government vision to convert Egypt into a regional energy hub