(Bloomberg) — U.S. Secretary of State John Kerry arrived on Friday in the Egyptian Red Sea resort city of Sharm El Sheikh to lend American support to a conference intended to shore up foreign investment in Egypt.
The conference is designed to showcase changes initiated by Egyptian President Abdel-Fattah El-Sisi to simplify the tax code and streamline bureaucracy to make the Arab world’s most populous country more attractive for foreign investment.
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Net foreign direct investment in Egypt has almost doubled to a projected $6.9 billion in 2014-2015 from $3.7 billion in 2011-2012, according to a February 2015 International Monetary Fund report.
U.S. companies are the second-largest source of foreign direct investment in Egypt, and the U.S. is one of Egypt’s top three trade partners, according to U.S. government figures. Major U.S.-based multinational companies including Redmond, Washington-based Microsoft Corp. and General Electric Co., based in Fairfield, Connecticut, are attending the conference, and Kerry’s first stop Friday morning will be at a meeting sponsored by the U.S. Chamber of Commerce.
Egypt’s economic output grew 5.6 percent in the second half of 2014, signaling that a long-awaited revival may be under way. The nation’s benchmark stock index climbed to a seven-year high in early February, but has since retreated about 5 percent, while the $300 billion economy has again been sending distress signals.
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The Purchasing Managers’ Index, a measure of health for manufacturing, hit a 17-month low in February. London-based HSBC Holdings Plc, which sponsors the report, said it presented a “bleak picture.” After a recovery in the first half of 2013, Egypt’s foreign reserves have steadily declined, and now barely cover three months of imports.
Still, there are no plans for Kerry to offer additional U.S. economic assistance to Egypt during his visit. The country needs a substantial influx of private capital far more than it needs government aid to spur and sustain growth, said U.S. officials traveling with Kerry who spoke on condition of anonymity because of diplomatic protocol.
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The U.S. provided more than $1.45 billion in economic aid to Egypt in fiscal 2015, and the Obama administration has requested an almost equal amount for the next fiscal year, according to a March 3 report by the Congressional Research Service.
The U.S. aid includes $120 million to promote small- and medium-size enterprise, a fund that will grow in coming years to $300 million, according to one State Department official. The U.S. Overseas Private Investment Corporation also backs loans to businesses that invest in Egypt.
Egypt’s government has taken significant and difficult steps to reduce subsidies on fuel, rationalize the tax code and make the tax environment more transparent, and eliminate red tape that has made the country frustrating for foreign investors, the U.S. official said. Kerry’s attendance at the conference is intended to highlight that progress.
Kerry also will meet with the Egyptian president and Foreign Minister Sameh Shoukry to discuss bilateral issues, including security cooperation and the threat to Egypt’s Sinai peninsula and beyond from Islamic State extremists. The Egyptian side will raise its frustration over the freeze on U.S. military assistance in the aftermath of El-Sisi’s ouster of Egypt’s former elected president, Mohammad Morsi of the Islamist Muslim Brotherhood party.
No decision has been taken on the U.S. side to release that military aid, and Egypt is likely to argue that it needs the assistance to protect the Sinai, which borders Israel and Gaza, and fend off violent extremists such as those who kidnapped and beheaded 21 Egyptian Christians who went to Libya in search of work. The U.S. side will raise human-rights concerns as it does in every high-level conversation with the Egyptian government, the officials said.
Kerry also will meet on the sidelines of the conference with Palestinian Authority President Mahmoud Abbas and Jordan’s King Abdullah, leader of the only Arab country other than Egypt that has a peace treaty with Israel. Kerry and Abbas are expected to discuss the financial crisis facing the Palestinian Authority.
Kerry will raise the issue of stalled Arab-Israeli peace efforts, which came to a halt when talks brokered by Kerry to reach a two-state solution fizzled last April.
To contact the reporter on this story: Indira A.R. Lakshmanan in Sharm el Sheikh at firstname.lastname@example.org
To contact the editors responsible for this story: John Walcott at email@example.com Larry Liebert
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