Saudi Arabia, Egypt finalize investment protection agreement

Egypt and Saudi Arabia announced on Tuesday the formation of a new cooperation council and the forging of an agreement to encourage and protect mutual investments, according to a statement issued by the Egyptian presidency on Tuesday evening.

The statement followed the arrival of Saudi Crown Prince Mohamed bin Salman on Tuesday to Cairo, where he was received by President Abdel Fattah al-Sisi in a meeting that was widely broadcast across national television channels.

The agreement apparently deferred eagerly anticipated Saudi investments in Egypt. Prime Minister Mostafa Madbuly has said in recent weeks that bin Salman has given directions for US$5 billion to be injected into Egypt’s economy, while newspapers have circulated stories that Saudi Arabia could be set to acquire developmental rights for a piece of coastal land, akin to the landmark Emirati deal to develop Ras al-Hikma.

But sources who spoke to Mada Masr in recent weeks said that protecting Saudi investments in Egypt emerged as a key priority in talks between the two since Prime Minister Mostafa Madbuly paid a visit to Riyadh in September.

Speaking to Mada Masr on condition of anonymity, a source from the Saudi Chamber of Commerce said that the Saudi Investment Protection Agreement holds Saudi investors in Egypt at the top of its priorities as it aims to facilitate and incentivize their operations. Investors themselves requested the agreement, the source said.

The source, who attended a meeting between Madbuly and a number of Saudi investors during the PM’s recent visit to Saudi Arabia, added that the Egyptian government had pledged to resolve all obstacles facing Saudi investments and finalize the agreement as soon as possible.

Although details of the investment agreement weren’t announced on Tuesday, sources told Mada Masr that Saudi investors have voiced grievances over several key obstacles, including the following:

Liquidity shortage hampering profit repatriation

An Egyptian investor who attended the Riyadh meeting told Mada Masr on condition of anonymity that Saudi companies in Egypt had accumulated $5 billion in profits that were stuck in the country. 

Saudi Arabia has previously expressed frustration over complications preventing the repatriation of profits from investments, a financial consulting firm manager told Mada Masr on condition of anonymity. 

A chronic scarcity of foreign currency liquidity in Egypt prevented the withdrawal of large sums from the country until March this year, when the pound was devalued and a bailout program worth US$35 billion restored greater flexibility in Egypt’s banking system.

“Saudi Arabia was upset because the UAE was able to repatriate its profits, while Egyptian authorities argued that the Emiratis acted independently without receiving any special concessions by Egypt regarding foreign currency access,” the consulting firm source said. “In practice, the Emiratis were actually able to do this by using branches of Emirati banks in Egypt, particularly Mashreq Bank, an option not available to Saudi Arabia.”