Egypt is facing a serious economic crisis that includes a sharp drop in its currency against the dollar, food insecurity, a soaring cost of living and a large foreign debt. Its allies in the Gulf are playing a key role in keeping its economy afloat through heavy investment, but this also brings great benefits to the investing countries which get to fulfill their own interests in return.
The roots of Egypt’s deteriorating economic condition date back at least a decade, but it has been exacerbated by the COVID-19 pandemic and the Russo-Ukrainian war.
"Egypt is strapped for cash and has been in a dire economic situation. Gulf investments represent a real lifeline for the country," Emma Soubrier, an associate researcher at the Institute for Peace and Development in Nice, France and at the World Peace Foundation, told The Media Line.
With the spark of the Arab Spring in 2011, then-Egyptian President Hosni Mubarak, who had ruled the country for three decades, was overthrown. In June 2012, Mohamed Morsi, a politician affiliated with the Muslim Brotherhood, was elected to the presidency and a year later was removed from power by President Abdel Fattah el-Sisi, who has remained in power since then.
Gulf countries such as Saudi Arabia and the United Arab Emirates supported el-Sisi during the 2013 coup and have economically supported his government since then.
"The Egyptian economy has remained very fragile and has recurrently needed financial boosters from Riyadh and Abu Dhabi, which in turn needed Cairo not to slip back under the control of the Muslim Brotherhood," Corrado Čok, a consultant analyst at Gulf State Analytics with expertise in the regions of the Gulf and the Horn of Africa, told The Media Line.
Now, the debt and food security crisis are a serious threat to Egypt's stability, with the cost of grain very high in the global market, and most of the country’s debt due to be repaid soon.
"Gulf funds provide relief to Egypt's battered economy and some investments will probably have a positive economic turnout," he said.
Gulf states expect value assets in return for investments
But after the billions invested in Egypt by the Gulf countries, they expect value assets in return, such as Egypt's ports. "It is often forgotten that Egypt even promised to transfer sovereignty of the islands in the Strait of Tiran to the Saudis in exchange for financial support," he said.
"The Gulf countries are certainly gaining the most, as they extend partial control over relevant state assets and companies, especially for the projects based in and around the (Suez) Canal, due to its geo-economic and strategic value," Čok said.
In addition, Saudi Arabia needs Egypt as a military power, to help it fill its defense capability gaps, he added.Today, Gulf investments are mainly taking over Egypt's publicly owned shares in the infrastructure, hotels and real estate sectors, Čok said.
Real estate is a “classic investment sector” for companies and sovereign funds from the countries in the Gulf Cooperation Council since they guarantee a return, according to Čok. Meanwhile, tourism “is a key sector where Gulf authorities want to have a stake, since it is part of their domestic transformation program," he said referring to the vision plans that countries such as Saudi Arabia and the United Arab Emirates have set to achieve in the future.
For Saudi Arabia in particular, due to the NEOM project – a planned smart city set to be constructed in the northwest of the kingdom that aims to create a very attractive tourist area spanning across the Strait of Tiran to Sinai, "it makes sense to try to take control of real estate development on the Egyptian shore," he noted.
The UAE principally and Qatar to a lesser extent are more interested in ports that provide them with geopolitical benefits apart from economic benefits, according to Čok.
Soubrier adds that telecommunications, banking, agribusiness and, lately, financing weapons procurement are also industrial spheres where the Gulf countries invest in Egypt.
"These are all strategic sectors of the economy, which present opportunities for internationalization and further accumulation of Gulf capital and are likely to give any major investor key geopolitical leverage."Emma Soubrier, associate researcher at the Institute for Peace and Development
"These are all strategic sectors of the economy, which present opportunities for internationalization and further accumulation of Gulf capital and are likely to give any major investor key geopolitical leverage," she noted.
But the Gulf's investment is not welcome on every single horizon.
Čok says that there is some domestic resistance to foreign investments in the Suez Canal Company, so it is unknown to what extent the Gulf countries have invested in it.
However, he notes that Saudi Arabia and the UAE are investing in the Free Trade Zone and the infrastructure around the canal and the Gulf of Suez.
"The Gulf of Suez, indeed, is a hub of global connectivity that not only allows the passage of 13% of global trade but also of most of the internet data between Europe and the Indo-Pacific region through submarine cables," he pointed out.
Soubrier says that the Gulf's interest in the Suez Canal Company makes perfect sense.
"Several Gulf countries, but especially the UAE, have deployed a strategy of investing in port infrastructures and securing or controlling strategic regional trade routes. The symbolism of becoming key investors in such a historically significant company is most probably not lost on Gulf leaders," she added.