Giant Saudi Investments Return Prince Alwaleed Bin Talal ushers in a new wave of Saudi investments

Alwaleed Bin Talal took the Egyptian market by storm the first week of August when he pledged new investments in the hotel sector. The announced cooperation deal with Talaat Mostafa Group (TMG) carries a total investment volume that exceeds $800 million which will be injected into the hotel sector.

The deal, which was announced by Minister of Investment Sahar Nasr, will include the expansion of the Four Seasons Resort Sharm El-Sheikh—making it the largest hotel in the world. Inaugurated in 2002, the Sharm property will add 800 new rooms at a total cost of $380 million, to reach 1,400 rooms, and t extension is scheduled to be completed by the next year.

A new hotel will be built in TMG’s Madinaty along the Suez Road and another in Al-Alamein on the North Coast; the latter is seeing increased interest, most recently from the UAE’s Mohamed el Abbar, who just days before the TalalTMG deal announced his intention to set up a number of projects in the city.

TMG and the Four Seasons brand have jointly implemented hotels such as the Four Seasons Nile Plaza in Cairo and Four Seasons Alexandria, in addition to the Sharm property.

Along with projects in Madinaty and Al-Alamein, the Group’s investments amount to $1.8 billion. Saudi billionaire Prince Talal has high stakes in Egypt, his Kingdom Holding Company (KHC) injecting investments exceeding $2 billion across various sectors.

In the hotel sector alone, Kingdom Hotels International (KHI), a wholly owned subsidiary, manages and owns direct stakes in Mövenpick Resort El Quseir and Mövenpick Resort & Spa El Gouna I also manages four of the Four Seasons hotels (two in Cairo, one in Alexandria and one in Sharm), Fairmont, Raffles and Mövenpick Hotels & Cruisers across Egypt, totaling 23 hotels.

The company’s investments involved other sectors as well, including the banking sector where KHC has presence in Egypt via Citigroup. The Saudi Prince is the principal shareholder of the diversified media company Rotana Group, the world’s largest producer of Arabic music and a key distributor and producer of Arabic movies.

In the aviation sector KHC holds substantial shares in the private global air charter company Flynas, the National Private Air Transport Services Company, which provides domestic and international flight services, private jet sales and fleet management.

Kingdom Agricultural Development Company (KADCO) was established in 1997 as an Egyptian company fully owned by KHC to undertake the development of 100,000 acres for reclamation and cultivation in the Toshka South Valley Project, a large-scale national irrigation project which involves the irrigation and development of 540,000 acres of desert land using water from the Nile River.

In 1998, the firm acquired 42,000 hectares in Toshka only to sell off KADCO Egypt this year after losses estimated at $89 million.

A New Wave of Saudi Investments Talal’s latest deal coincides with other Saudi investments, in the field of renewable energy.

The same day the Talal-TMG deal was announced, Saudi Arabia’s ACWA Power signed the Power Purchase Agreement with the Egyptian Electricity Holding Company (EEHC) for three solar power plants planned by the company under the Feed-in-Tariff (FiT) scheme.

Located in Benban in northern Aswan, the agreement allows ACWA Power to develop, build, finance, own and operate the three solar plants with a total capacity of 120MW.

The plants are expected to reduce carbon dioxide emissions by 156,000 tons per year and secure power supplies to 80,000 households, says Minister of Electricity and Renewable Energy Mohamed Shaker.

Last month the European Bank for Reconstruction and Development (EBRD) approved a total value of $28.7 million for the three plants; construction works are scheduled to be finished by the fourth quarter of 2018.

ACWA Power, which was established in 2004, is targeting other energy projects in Egypt, proposing a 2,200MW combined-cycle plant in West Damietta, a number of wind farms in the Gulf of Suez and a 2,250MW combined cycle power plant in Luxor.

Minister Nasr recently announced that Saudi investments in Egypt will rise to $51 million, after the Egyptian-Saudi Business Council expressed its plans to increase Saudi investment in the agricultural, industrial, energy, construction and tourism sectors, as well as the development of the Suez Canal axis, to ensure that Jeddah stays the top Arab investor in Egypt.

Egypt’s cooperation portfolio in the Jeddahbased Islamic Development Bank (IDB) will reach $4 billion between 2017 and 2019, up from its current level at $2 billion.

The portfolio aims to improve the livelihood of Egyptians through small and medium-sized projects in the fields of health, housing, sanitation, and agriculture.

During King Salman’s visit to Egypt in April 2016, the two countries signed several agreements at a total value of $25 billion. Ten deals financing new projects in Sinai have also been signed with the Saudi Public Investment Fund and the Saudi Fund for Development (SFD).

These projects include the establishment of King Salman University, housing complexes, a 90 km development axis to serve new housing units east of Suez governorate, in addition to 13 agricultural zones and wastewater treatment plants.

One of the most ambitious projects is building a bridge to connect the two countries, expected to facilitate access to the free trade zone planned for the Sinai Peninsula, where the Saudi partner is set to finance a number infrastructure upgrading projects.

Other projects include a $16 billion agreement to establish an Egyptian-Saudi investment fund and a $100 million deal to establish the West Cairo power plant.

Agreements worth $120 million were inked to develop the Qasr Al-Aini Hospital in Cairo. Saudi Arabia agreed to provide Egypt with 700,000 tons of petroleum products monthly for five years, which will be paid by SFD to Saudi Aramco petroleum company and eventually be returned by Egypt in installments.

The kingdom announced in March of this year that the shipments will resume after being suspended since October of the previous year. An Attractive Investment Climate Saudi Arabia has been a solid investment partner in recent years.

Following the 2011 uprising, the Kingdom offered $500 million in soft loans across various development sectors, including housing, water, irrigation, sanitation, supply, electricity, energy and health.

Over 2012, Saudi Arabia invested a total of $500 million in treasury bills and bonds and following the ouster of Mohamed Morsi in July 2013 provided Egypt with a $5 billion aid package in the form of non-refundable grants, deposits and petroleum products. But there have been several obstacles along the way.

Post-2011 Egyptian courts issued verdicts annulling privatization contracts of several Saudi companies, ordering their return to the state. In response, several Saudi investors resorted to international arbitration centers, having already spent considerable sums on these projects.

Forming the Egyptian Disputes Settlement Committee in late 2014, which fell directly under the supervision of the Prime Minister, many disputes were tackled and resolved without the need for international arbitration.

Working extensively on the Saudi disputes file, the Committee nearly 80 percent of Saudi disputes by April 2016, according to the Saudi-Egyptian Businessmen Association (SEBA).

In an interview with Business Today Egypt in June, Minister of Investment Sahar Nasr said that more than 300 disputes have been resolved since she took over the ministry in February.

“My priority is to assure investors that the government is prioritizing them and that the government will never turn its back on their concerns and problems,” she said. Working toward boosting investment levels, Egypt recently ratified the long-delayed New Investment Law, which provides a range of incentives like tax breaks and rebates while reducing red tape for new projects.

It stipulates investors get back half of what they pay to acquire land for industrial projects if production begins within two years, and provides a 50 percent tax discount on investments made in underdeveloped areas.

The executive regulations, expected to be issued by the end of August, will for the first time stipulate a specific number of days that the government will have to approve new licenses and clearances, reducing the waiting time for starting new businesses, according to the Investment Minister.

By the end of 2017, Egypt will also launch an electronic investor map, which will provide detailed information on incentives and resources available to investors based on the part of the country they plan to establish their investment project in.

Foreign direct investment is anticipated to rise as a number of foreign firms have pledged to inject money in Egypt.

In June, Mexican cement giant CEMEX Egypt said it is planning to pump $20 million in investments in 2017, President of CEMEX Egypt Ramon Rodrigo Piza announced.

Also in June, American multinational private equity The Carlyle Group also said it plans to invest $100 million in Egypt over the next few months, according to head of Egyptian Private Equity Association Abdullah el-Ebiary.

In July, the Egypt Entrepreneurship and Investment Company, to which Saudi Arabia contributes, signed an agreement with Flat- 6Labs and Egypt to invest LE 10 million ($559,070) in emerging companies.

Egypt’s net foreign direct investment declined $500 million in the second quarter of 2017, recording $2.27 billion, compared to $2.77 billion in Q2 2016, according to the Central Bank of Egypt (CBE) figures.

Arab countries injected $300.8 million of that total, with the United Arab Emirates topping the list with $161.1 million, followed by Saudi Arabia at $37.7 million.

FDI in Egypt is expected to have risen to about $8.7 billion in the 2016/17 fiscal year that ended last June, compared to about $6.9 billion the previous year, according to Nasr.