Dubai: UAE-based companies in Egypt, who have $10 billion (Dh36.7 billion) in investments at stake, are in “wait and see” mode as the uprising raises uncertainty and political risk.

Projects will slow down and investors will perch on the sidelines until key questions are answered about President Hosni Mubarak’s future, the Egyptian government’s response to protestors’ demands and who the next presidential candidate for the September elections may be, analysts said.

“As a business, we don’t comment on political situations. Emaar is in 18 countries and Egypt is one of the important markets for the company.

“We are monitoring the situation closely,” a spokesperson for Emaar Properties told Gulf News. Emaar Misr for Development claims to be the single largest foreign direct investor in Egypt’s real estate sector with an investment portfolio of $7.97 billion.

Al Futtaim Group, which expects to open Cairo Festival City by 2015, is also “watching the situation closely”, according to a spokesperson.

Majid Al Futtaim Group, which invited bids for its Mall of Egypt project in November, declined to comment.

Retail stores operating in Egypt, such as Carrefour, will be affected in the short term by the rampant lootings in Cairo, said Sana Toukan, senior research analyst with Euromonitor International.

Outlaws and escaped prisoners have roamed the streets looting stores, destroying property and breaking into residential apartments.
Lack of safety

“We do not expect any international retailers to operate as usual during this time, as we expect disruptions due to the lack of safety measures, especially in the capital — although these disruptions are not expected to remain in the long term,” she said.

It is unlikely that they will withdraw from the market completely, judging by the scenario in Tunisia, where similar riots erupted recently, she added. The UAE’s investments in Egypt have reached $10 billion in 520 projects, according to a report by the UAE Minister of Economy released in December.

“If they can, they will slow things down and watch how they develop,” Richard Fox, head of Middle East and Africa sovereign ratings at Fitch Ratings, told Gulf News.

“The sort of people protesting are those who are going to be shopping in these Western-style malls.”

They are young, educated protesters who want more political freedom like the West and if that’s what they get, foreign investors “will be more than happy”, he said.

On the sidelines

“But they have to wait and see because the Muslim Brotherhood is there and it’s not clear what role — if any — it will play.”

Investors will “stay on the sidelines” until they see the resolution of this process and although the Egyptian economy is “very resilient” the government has to act quickly and decisively, Fox said.

There will be “substantial” foreign capital flight, but the more serious concern is if Egyptians withdraw their money from the banks, he said.

Foreign direct investment (FDI) is based on more long-term planning, said Fox. “[Foreign investors] want to know what sort of government they’re going to deal with,” he said.

By Deena Kamel Yousef, Staff Reporter

Gulf News