Egypt promised on Wednesday to pay $1.5 billion of the $6 billion it says it owes foreign oil companies, aiming to restore investor confidence in an economy damaged by nearly three years of political turmoil.
Officials speaking at an investment conference pitched at Gulf Arab states and businessmen tried to allay concerns ranging from legal uncertainty to the foreign currency black market.
“There is approval to pay $1.5 billion,” Prime Minister Hazem el-Beblawi told the gathering. He said the arrears had discouraged investment in the critical energy sector.
Gulf oil-producers rallied behind Egypt after the army ousted Islamist President Mohamed Mursi in July, pledging billions of dollar in financial support. Saudi Arabia and most other Gulf states deeply distrust Mursi’s Muslim Brotherhood.
The state-owned Egyptian General Petroleum Corporation (EGPC) plans bid rounds this month for 15 oil and gas exploration blocks in the Gulf of Suez and the eastern and western deserts, Adel Saeed, EGPC’s deputy CEO for agreements told Reuters on the sidelines of the gathering.
The state news agency reported earlier that Egypt signed agreements on Wednesday with Apache Corp, Royal Dutch Shell and GDF Suez for oil and gas exploration in the eastern and western deserts and the Gulf of Suez.
Finance Minister Ahmed Galal told the conference the central bank would supply the dollars to reimburse the oil companies and Oil Minister Sherif Ismail said this would happen within days.
Financial disclosures by firms including BP, BG Group, Edison SpA and TransGlobe Energy show Egypt owed them more than $5.2 billion at the end of 2012.
In the week after the army removed Mursi, Saudi Arabia, Kuwait and the United Arab Emirates promised Egypt a total of $12 billion in grants, interest-free loans and oil products.
Egypt hopes Gulf investors will also inject cash. Investment Minister Osama Saleh told Reuters he hoped for $4-5 billion in direct foreign investment in the year to end-June 2014.
Government officials told the conference Egypt’s political roadmap to elections and restored stability was on track.
But there is no calm on the streets, where Mursi supporters are still protesting against what they call a military coup accompanied by human rights abuses. The government calls the Brotherhood a terrorist group that imperils national security.
Gulf support has helped Egypt withstand Western criticism of its democratic credentials since the army takeover, which followed mass protests against Mursi’s year in power.
“HOW MANY FISH?”
Asked if he anticipated more aid from Saudi Arabia, Finance Minister Galal told Reuters: “I cannot tell beforehand. You go fishing, how many fish are you going to catch?”
Egypt badly needs private capital. Foreign direct investment fell to $3 billion in the 2012/13 financial year, which ended in June, compared with more than $10 billion a few years ago.
Qatar, which backed Mursi and the Muslim Brotherhood, is reluctant to invest in Egypt, but the United Arab Emirates seems keen for its companies to launch or resume projects there.
A source close to big Abu Dhabi investment companies said nearly $5 billion had been committed in loans and investments in Egypt in the last four months and there was scope for more.
Kirill Dmitriev, CEO of the Russian Direct Investment Fund, a $10 billion Kremlin initiative, said he was encouraged by the UAE’s presence at the conference. “We believe Egypt is becoming an attractive investment destination,” he told Reuters.
UAE Minister of State Sultan Al Jaber said sectors under discussion included agriculture, oil, gas and renewable energy, but called for the right legal framework to reassure investors.
The government is preparing a law to reinforce the legal standing of past contracts with the state, Mohamed Abazeid, an adviser to Egypt’s investment minister, told the conference.
Egypt’s business climate has been clouded by court cases that have challenged past state contracts, including rulings ordering the re-nationalising of state businesses sold when ousted autocrat Hosni Mubarak was in power.
The army-installed government, under pressure to produce a long-term plan to revive the economy, launched a 29.6 billion Egyptian pound ($4.3 billion) stimulus package this year after Mursi’s overthrow brought aid pledges from Gulf countries.
The economy grew a meagre 2.2 per cent in the year to June 30, far too slow to make an impact on youth unemployment estimated at over 20 per cent. Beblawi said the government aimed for economic growth of 3.5 per cent in the current fiscal year.
Egyptian tycoon Naguib Sawiris, whose family controls the Orascom corporate empire, told Reuters he would invest $1 billion in Egypt in the first quarter of 2014, mostly in construction, real estate, agriculture and microfinance.
But it will take more than one heavy hitter to fix Egypt’s finances.
The Egyptian pound is being propped up by central bank dollar sales, introduced a year ago to help counter a run on the currency as the plunge in foreign investment and tourism caused a sharp fall in foreign reserves.
Reserves, which stood at $36 billion before Mubarak fell, have been under pressure ever since. They totalled $18.59 billion at the end of October and Central Bank governor Hisham Ramez told the conference they had dipped slightly last month.
He said the black market for the pound would “not last long”. Two market sources said on Wednesday the currency had weakened against the dollar because of importer demand.