When Abdel Fattah al-Sisi, Egypt's former army chief, became president in June, he pledged to sort out Egypt's troubled economy. Eight months later, on Feb. 11, the International Monetary Fund said it was starting to see signs of "a turnaround," and upped its growth forecast for the year to 3.8 percent. Prodded by a gaggle of new PR men, ministers have become more eager to talk. "Egypt has lots of competitive edges," boasts Ashraf Salman, the minister for investment.

The economy has been in the doldrums since 2011, when turmoil spread across the region and tourists and investors fled. Growth has since hovered around 2 percent; unemployment and poverty are in double digits. Foreign oil and gas companies have gone unpaid because the state is broke, says a Cairo-based economist. So far the government has survived on more than $20 billion in largesse from Gulf states that were happy to see the back of the previous government, which Sisi ousted in 2013. Sisi needs to make Egyptians feel richer or risk the same fate.

Reason for hope

There is some reason for optimism. Egypt, the Arab world's most populous country with 90 million people, has recently attracted business delegations from Japan, led by Shinzo Abe, the prime minister, and Britain, whose oil and gas companies make it Egypt's largest source of investment. Private-equity fund managers in Dubai see it as by far the Middle East's most interesting market. BP, a British energy giant, said it will funnel $12 billion into its Egyptian operations over the next five years. Nestlé, a Swiss food group, said it'd invest $138 million over the same time period.

Like the IMF, investors have been cheered by a handful of reforms adopted by Sisi. In 2014 he removed some fuel subsidies that had helped drive the deficit to 12 percent of GDP. This year's shortfall will be closer to 10 percent. The government has also liberalized its exchange-rate regime slightly, allowing the Egyptian pound to depreciate. That should bolster both exports and tourism.

But most of the companies investing are ones already in the country, such as Nestlé and BP, or Gulf companies following their governments' cash. The tourism industry, which contributes over 10 percent of GDP, is in a dire state: The number of visitors last year was a third below the level of 2010. Moreover, Egypt needs to do much more than simply get back on its feet. It is short of power, roads, schools, hospitals and housing for a population predicted to reach 116 million by 2030.

The World Economic Forum ranks the country 100 of 144 for the state of its transport, electricity and telephone connections. Yet investment is just 14 percent of GDP. "In a developing, industrializing economy, investment needs to be much higher — around 25 percent of GDP for many years in a row," says Simon Kitchen of EFG Hermes, an investment bank.

Public debt is 86% of GDP

The government cannot close this investment gap. Public debt is 86 percent of GDP. Moreover, subsidies, public-sector wages and debt service continue to gobble up most of the budget. Economists reckon Egypt needs foreign direct investment of $60 billion (some $10 billion-15 billion per year) to reach its target of 5 percent GDP growth by 2018. In the last fiscal year net foreign direct investment was a measly $4 billion — a third of the level of 2008. Parlous politics and the weakness of the Egyptian pound mean returns have to be good. Salman says generous incentives are being put in place: The government will guarantee power providers a lucrative price for renewable energy for 25 years, for example, and pay 85 percent of it in foreign currency. A new investment law is promised. "You don't have conditions that favorable anywhere," he says.

Not all are convinced that Egypt is quite such an attractive prospect. Regulations are still a jumble. Too much public money ends up in the pockets of army businesses. And then there is the sort of turmoil that brought Sisi to power. The World Economic Forum ranks Egypt 140 of 144 countries for security, below the likes of Chad. That is not a statistic Egyptian officials have been eagerly repeating.

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