### A Reflection on Foreign Investment: The Case of the Norwegian Sovereign Wealth Fund in Egypt
The year 2024 marks a new era for foreign investment in Egypt, particularly with the Norwegian sovereign wealth fund’s report revealing a significant decline in its investments in companies listed on the Egyptian Stock Exchange. From $134.6 million in 13 companies in 2023, the fund reduced its commitment to $100.3 million in 11 companies by the end of the following year. This figure, while seemingly small at first glance, resonates more broadly in a changing global economic context.
#### A Global Investment Trend
The Norwegian fund’s pullback is symptomatic of a broader trend of disengagement and volatility observed within emerging markets. Globally, many institutional investors are withdrawing from their positions in risky countries, due to various economic, geopolitical and regulatory factors. In Egypt, foreign capital outflows of 1.6 billion Egyptian pounds underscore a growing distrust of local economic conditions, amplified by currency volatility and a lack of predictability in decision-making.
#### Regional Comparisons
It is crucial to put these figures in perspective with other countries in the region. The fund invested approximately $3.06 billion in the Emirates, $1.1 billion in Qatar, and approximately $730 million in Kuwait. These amounts reflect a marked preference for economies considered more stable and predictable compared to Egypt. The dynamics of investments from sovereign wealth funds could be explained by regulatory certainty, stable economic growth, and an easy access framework for businesses in these Gulf countries.
This collective memory of investors only highlights the risk associated with engaging in transition economies such as Egypt. References to the fluctuations of the Egyptian currency and decision-making uncertainties then become crucial elements justifying the outflow of foreign investments.
#### The Impact of Stock Market Revisions: An Enlightening Signal
In light of the results of the recent biannual review of stock indices, a clearer picture is emerging. The inclusion of six new companies in the main index underlines a desire for renewal and inclusiveness. However, this adjustment compared to the exclusion of other companies raises questions: how are the selection criteria set? If some companies are deemed eligible, what about the algorithms and methodologies that decide their relevance to the Egyptian stock market?
Bassem Abu Ghoneima, a financial expert, suggests notable reforms to make the Egyptian Stock Exchange more representative of the real economy. His call for the repeal of relative weights within the main index and the integration of an equal weight format could revitalize the market potential. Thus, the measures implied by this reform could attract new investors, moving the stock market ecosystem towards more transparency and fairness.
#### Reflection on the Future of Investments in Egypt
Beyond the numbers and statistics, the future of foreign investment in Egypt will depend essentially on the country’s ability to restore investor confidence. Monetary instability and economic reforms will have to go hand in hand with clear and consistent communication to market participants. If Egypt can position itself as a less volatile and more attractive environment for investment, it could then see a return of interest not only from sovereign wealth funds, but also from diversified foreign investors.
Perhaps it is time for Egyptian policymakers to explore beyond the borders of the local market, cultivating strategic alliances with investors who see Egypt not as a declining market, but as a long-term growth opportunity, fortified by a dynamic workforce and favorable geographic location. Ultimately, Egypt must ask itself: how do we transform the perception of a declining economy into a vision of a booming economy?
This transition will not be without challenges, but with solid strategic planning, international collaborations, and a commitment to transparency, the country could be on its way to a thriving economic future, attracting investment, talent, and innovation.