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Investing Egyptians’ money abroad… Will it be a lifeline for the dollar crisis in Egypt?

Cairo- The idea of ​​establishing a company to invest the money of Egyptian expatriates has returned to the fore, after the Minister of State for Immigration and Egyptian Affairs Abroad, Suha Gendi, announced work to establish a company concerned with investing the surplus savings of Egyptians residing abroad.

The idea that the Egyptian government is seeking to implement has emerged again, in light of the dollar resource crisis that the country is suffering from and has negatively affected the local currency, as it has lost more than half of its value since last March.

The Egyptian pound fell to more than 24.5 pounds to the dollar in local banks, after the Central Bank of Egypt decided to adopt a flexible exchange rate regime, in conjunction with reaching an agreement at the expert level to obtain a $ 3 billion loan from the International Monetary Fund that has not yet entered into force.

During her meeting with some members of the Egyptian community in Saudi Arabia, Gendi expected that the company would be completed next year and its shares listed on the Egyptian Stock Exchange, noting that Egyptians abroad can invest directly in the company or by buying shares, without revealing more details.

According to the Egyptian minister, the new company is one of the demands of Egyptians abroad, and that all national activities and projects in which investment is targeted are being researched and identified in order to achieve large investment returns.

The idea of ​​establishing an Egyptian joint stock company for the purpose of investing Egyptians abroad in national projects is one of the recommendations that came out of the third conference of Egyptian entities abroad, which was held in mid-August 2022 in the New Administrative Capital.

Initiatives that did not see the light

The past few years witnessed many initiatives to benefit from the savings of expatriates, which is one of the most important sources of hard currency in the country, especially after it reached record levels, but it remained just wishes and did not materialize on the ground.

In July 2018, the first forum for Egyptians abroad, organized by the Egyptian Ministry of Immigration, recommended a number of proposals, including investing the money of Egyptians abroad by launching a fund to invest their money to support the Egyptian economy.

Earlier in the same year 2018, initiatives were launched to establish a $10 billion fund to invest the money of Egyptians abroad. The idea was popular in the local media, some supported it, and others were not enthusiastic about it.

Remittances from Egyptians working abroad witnessed a big jump in 2021, recording $31.9 billion, an increase of 1.6% from the previous year and an increase of $500 million, supported by the recovery from the effects of the Corona pandemic.

However, it decreased slightly in the first eight months of this year, by 2.3%, to $20.9 billion, from $21.4 billion on an annual basis, according to Central Bank of Egypt data.

Egypt is among the top 5 countries receiving labor remittances abroad, and it ranked fifth among the countries in the world receiving most remittances during the year 2020, according to World Bank data.

Opinions about the new company

Opinions differed on the Egyptian minister’s announcement of the government’s intention to launch the company next year to take advantage of the rapid growth in expatriate remittances to support the Egyptian economy, which is facing a hard currency shortage crisis.

The Secretary-General of the Union of Arab Investors, Ambassador Jamal Bayoumi, described the step as “important”, but he staked its success on “providing a real media and investment climate, and taking into account previous experiences aimed at attracting the savings of Egyptians abroad, because the savings at home are not sufficient to finance investment projects.”

He said – in statements to Al-Jazeera Net – that the idea had previously been implemented by the Egyptian state in the eighties of the last century, by establishing a company for the sons of Egypt abroad, and I was a shareholder in the company and it has a headquarters in central Cairo, but since that time I have not heard anything about it.

One of the surprises, according to Bayoumi, who also held the position of former assistant foreign minister, is that the investments of Egyptians outside Egypt are estimated at tens of billions of dollars, and there are some Egyptian businessmen who invest 90% of their money outside Egypt, and this cautious national investment is the result of the absence of a real investment climate.

Bayoumi expected that the idea would succeed if it was applied professionally, avoiding bureaucracy, improving the banking system that complicates financial procedures, and studying projects and their returns thoroughly. He warned against mismanagement of the file because its consequences would be disastrous.

The government agreed to exempt expatriate cars from tax fees, in return for depositing them in dollars in an account of the Ministry of Finance (Shutterstock)

Various initiatives

In the framework of maximizing the benefit from the money of Egyptians abroad, the Egyptian government approved a draft law that allows workers abroad to import passenger cars without customs duties, provided that a dollar deposit equivalent to the value of customs duties is placed in a government account for a period of 5 years without interest, provided that it is recovered at the end of the year. The period is in Egyptian pounds at the current currency rate.

And the Egyptian Minister of Finance said, last month, that the decision to exempt the cars of Egyptian workers abroad from fees and customs will be available for a period of 4 months only, and he expected that the dollar proceeds from the decision would reach 10 billion dollars.

Some concerns arose among expatriate Egyptians. In this regard, the head of the Customs Authority, Shahat Al-Ghatouri, said that the low demand of expatriates to import cars from abroad is due to fears, including fear of imposing taxes on their accounts after transferring deposits, and this is not possible and not true.

The Egyptian government launched an electronic platform for the initiative to facilitate the import of cars for the personal use of Egyptians residing abroad, indicating that the number of those registered on the platform is constantly increasing.

The dollar crisis is the impetus

Economic researcher Elhamy Al-Mirghani attributed the reason for announcing again the establishment of a company to manage the money of Egyptians abroad, to “the lack of dollar resources. In this context, the government resorted to more than one method to attract expatriate funds, such as allowing the import of cars in exchange for a dollar deposit and offering land and housing units in dollars.”

He added to Al Jazeera Net that remittances from abroad are pumped into different paths, and the investment decision is up to each expatriate separately, and savings owners have the right to choose the form of investments or savings vessels without being imposed on them.

The expert in the field of economic and administrative consulting warned against playing with the savings of Egyptians abroad, and all caution must be exercised when dealing with them. Because it will lead to the reluctance of Egyptians to send their money to their country through legitimate methods and channels, and thus the results will be counterproductive.

Al-Mirghani believed that the chances of success in establishing the company are weak, pointing out that there are no previous experiences that can be built upon, especially in light of the difficult economic conditions the country is going through, and the existence of a history of frustrations between citizens and governments.

Source: Aljazeera

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