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Business

German investors wait optimistically as Egyptian protests rage

While clashes in Cairo between demonstrators and security forces continue to rage, businesses in Egypt are still cautiously optimistic about an economic recovery after the upcoming elections.

Cairo skyline

Business in Cairo are cautiously optimistic

Despite the dramatic pictures coming out of Cairo of armed security personnel charging protestors in Tahrir Square and some 11 deaths since the latest bout of violence flared on Dec. 16, many business leaders say the country's economic outlook in the mid-term is still fairly positive.

Rainer Herret, director of the German-Arab Chamber of Industry and Commerce (AHK), says he is convinced the Egyptian economy will move in a positive direction, if the current economic framework remains intact after the dust settles.

"Right now, there are no large-scale investments taking place because investors want to know a few things first," he said. "Will the country in the future have a socialist or liberal government, or will it be one that is religious in nature? Or will it be a mix of all of those?"

Open for business

Only when that becomes clear can an economic recovery get underway, Herret said.

But in the short term, some are concerned that the clashes could further undermine the ailing economy, whose growth slumped dramatically earlier this year while its budget deficit has increased.

Rainer Herret

Rainer Herret is director of the German-Arab Chamber of Industry and Commerce

Continuing unrest could "increase pressure on vital economic indicators such as currency reserves, foreign direct investment and tourism," Wael Ziada, Cairo-based head of research at EFG-Hermes Holding SAE, told Bloomberg. "The longer such a situation persists, the longer is the recovery."

Herret of the AHK expects that recovery to start sometime in the second half of 2012, after parliamentary and presidential elections take place. Until then, companies will continue to keep their operations running as normally as possible.

Their track record is good, he added, and even during January and February when hundreds of thousands of protestors took to the streets of Cairo and other cities and swept the government of Hosni Mubarak from power, the 2,200 members of the AHK were largely able to stay in business.

"German companies worked pretty much though the entire revolution," Herret said. "When German employees were evacuated, Egyptian workers were able to keep production going."

Waiting game

Of course, the turmoil did have a negative effect on sales figures, and revenues dropped. But German companies in Egypt are still trying to hang on to their local employees so that they can get back up to full speed once political stability returns, according to Herret. Unlike most Egyptian companies, German firms provide training to their Egyptian employees themselves.

violence in Cairo

The unrest is making investors take a wait-and-see attitude before committing

"If would be a bad investment if we let go of people on short notice who had proven themselves to be valuable to the company," he said.

While the strategy of companies in Egypt is to largely sit tight and wait for parliamentary elections in January and then the presidential ballot set for June, German firms are taking part in an initiative to create thousands of new jobs in Egypt. Called the "National Employment Pact" and launched in April, the goal is to create 5,000 new jobs, thereby giving 5,000 families a solid economic footing.

According to Herret, the German government and industry hope that investing in new jobs will help bring down Egypt's crippling unemployment rate and contribute to both political and economic stability. The jobless rate in Egypt was running at just under 12 percent this summer. Among young people aged 15 to 24, one in four is without a job.

The jobs project is supported by the Germany's development and economics ministries, which provide the financing. The AHK in Cairo is offering its know-how in the field of management and Germany's GIZ, which works globally in the field of sustainable development, is in charge of carrying out interviews and training.

By the mid-December, 3,800 positions had been advertised and 1,900 employment contracts signed.

The green light?

One of the AHK's central tasks now is to keep German companies considering investments in Egypt up to date on conditions in the country.

Container ship in Suez Canal

The economy functioned even during the height of the revolution, but is shaky

Only a few companies have decided the time is right to move now. One of those is RWE Dea, a subsidiary of energy giant RWE, which is only waiting for the green light for the Egyptian government to start drilling for natural gas in the Nile Delta.

AHK chief Herret expects to see momentum after the presidential elections scheduled for June.

"A large majority of people want to see the situation calm down again so they can get their lives back in order and get back to work," he said.

Despite the ongoing unrest, the Egyptian economy is actually in a good position to rev up its business engine once stability returns, Herret added. Luckily for the country, many of its production facilities were idle only for a short time and even during the most intense phase of the resolution, were spared destruction.

Author: Thomas Kohlmann / jam
Editor: John Blau

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