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Tourism Ministry to offer incentives to attract foreign investment: Investment adviser

Ministerial committee convenes today to review property ownership laws in the Sinai

Investment adviser to the Minister of Tourism Hisham Zaazou Ibrahim Al Ashmawi (DNE photo by Mohamed Omar)
Investment adviser to the Minister of Tourism Hisham Zaazou Ibrahim Al Ashmawi
(DNE photo by Mohamed Omar)

By Abdel Razik Al-Shuwekhi

Tourism is a strategic asset, and it has not received the attention it deserves recently, said Ibrahim Al Ashmawi, investment adviser to the Minister of Tourism Hisham Zaazou, in an interview with Daily News Egypt.

“We will work to issue a bundle of laws and mechanisms to incentivise investment in the sector and attract huge foreign companies.”

Al Ashmawi graduated from the Technical Military College in 1986, earned a master’s and a doctorate in the United Kingdom in 1993, worked for foreign banking institutions operating in Egypt and Europe, and was the top adviser to the investment minister between 2007 and 2011.

He was in the running to possibly take over the Ministry of Investment within the government of  Prime Minister Ibrahim Mehleb in February; however, he declined the position. He currently works as an investment adviser to Tourism Minister Hisham Zaazou.

Al Ashmawi said tourism could potentially create investment opportunities that could jumpstart the economy. Here is what else he had to say:

Q: First, how do you plan to improve the Egyptian tourism sector and create opportunities to invest in it?

Of late, the process of investing in the sector has lacked direction. All of the tourism industry’s many resources have been focused on creating small-scale projects that did not meet tourists’ demands.

Egypt is a tourist destination and it will be able to attract tourists in all seasons, not only in winter, and not only on the Mediterranean coast in the country’s north or on the Red Sea coast to in its east. We have 14 resorts that could attract 25 million tourists with $30bn in revenue.

Q: How can we attract such numbers? We face a number of infrastructure and cultural impediments.

No, no. These issues can be easily resolved. All we need do is benefit from the examples set by neighbouring countries that have surpassed us, despite the fact that they do not possess Egypt’s touristic resources.

Did you know that tourist spending in Turkey exceeded $287 per person per day, and that in Dubai it exceeds $312? Egypt is capable of producing such numbers, provided it has an organised plan that incorporates tourism, security, transportation, and tourist sites, down to the vendor in the streets.

In 2010, tourism accounted for $12.5bn in income, and comprised 11.3% of GDP.

Q: However, the revenue from the sector declined over the past three years.

Yes, revenues have decreased. Last year it dipped to $5.9bn which is still more than the Suez Canal produces, not to mention it employs 3.8 million people directly and indirectly.

Security will return to Egypt after the presidential elections at the end of the month. We will strive to regain the trust of investors and tourists in two ways. First, we will promote Egypt in various markets for both investors and tourists. Second, we will re-evaluate the investment structure that currently governs the sector.

Q: Will there be a new investment body overseeing the sector in the near future?

Yes, there is a ministerial committee that will convene on Sunday to consider Law No. 14, which governs ownership of land in the Sinai. It will also consider new mechanisms for selling property.

Q: Can you explain more?

There are many complaints amongst investors regarding Law No. 14 for the development of Sinai. We will work to resolve these issues and attract investors to the region, while adhering to the laws of the state.

As for the new mechanisms for selling property, we will consider other modes of selling property, so that the ownership model is not the only mode available.

Q: In what ways could property be exchanged in the future?

We will consider the usufruct system and joint-ownership with a dimension of developing infrastructure.

Q: The Egyptian investor does not respond well to usufruct land deals. This was the system used in 2012, and not a single person came forward.

I am against the land sales. We ought to try the experiment again, and change the investor culture by using a range of incentives through public auctions for long-term usufruct systems, up to 99-years. We will also incentivise joint infrastructure projects. Privatisation can be done in 28 different ways, so we need not be restricted to the ownership model.

Selling means that the state will get paid by the metre just once, regardless of the price. In Ain Sokhna, project land sold for $160 per metre.

For instance, we will auction off land under the long-term usufruct system in several regions with joint infrastructure projects.

This method will lure private investors, especially foreigners. However, foreign investors will not come to Egypt until they see Egyptians profiting.

We will require that Egyptian investors coordinate with foreigners on tourism projects. Both groups will benefit from Egyptian capital and expertise.

Q: Are there other ways to attract investors?

There is a comprehensive system of land management under the jurisdiction of the General Authority for Tourism Development. This management system determines the best ways to use property, and adapts to the nature of the projects.

Land areas managed by the authority that are potential investment opportunities exceed 3bn sq metres. As of now only 300m sq metres have received investment. We have a large portfolio of land, and we must work to utilise it so as to ensure the state secures its rights and the future for generations to come. This will maximise the value of the area by adding developmental projects.

Q: Foreign investment on the authority’s land does not exceed 5%. What are your plans to attract foreign companies?

Total investments on the authority’s territory stands at approximately EGP 68.5bn. Foreign investment does not exceed 5% of that. Attracting them will take place by changing and revising legislation, and the government is already serious in this regard.

Q: You participated in a tourism investment conference in mid-April in Moscow. What were the investment opportunities you offered?

We put forth private residence projects in some areas of Ain Sokhna and Ras Sidr. We are attempting to attract investment worth $5bn by 2020 in this manner.

These accommodations were able to create a first class tourist sites in the western Mediterranean, France, Spain, and Turkey.

These units will increase the rate of reoccurring tourist visits to Egypt and increase their spending. One Turkish company asked for land in which they would invest an excess of $500m. Yes, Turkey: the economy is stronger than political bickering.

Q: Are there investment opportunities that you are promoting in other conferences?

We are already working on marketing schemes for four huge projects, one of which accounts for 5m metres in the Red Sea and South Sinai, at an Arab Gulf States event this May. Investments will range between $3bn to $5bn. We will also be marketing a range of incomplete projects belonging to sovereign Gulf funds.

Q: How many of these projects are there?

We hope that there will be a hundred separate projects. We have contacts with the Emirati expert houses. These projects will be put to auction back by the guarantee of the Egyptian government.

Direct investment is a lifeline for the Egyptian economy. Egypt has lost $60bn over the past three years. The Egyptian government must act to restore investor confidence. It would be a big mistake to enter into disputes with investors.

Q: But there are contracts tainted by corruption.

Yes, there have been some cases of corruption; the majority have not been as such. We must renegotiate these contracts. Egypt has seen a response from investors due to prohibitive legislation and instability.

New investment contracts and limiting the right of appeal to the investor and the state will once again restore confidence regarding investing in Egypt. There have been terrible numbers of lawsuits raised against some of these projects.

Q: Returning to tourism, will you be advertising hotel projects?

We will reduce the amount of hotel projects. We will promote integrated development projects that comprise 1m sq metres. We will offer commercial and recreational facilities and services. This will raise average spending levels, which have fallen to about $63.3 per night as of now.

Q: But how do you price land under the usufruct system? Investors always ask about the price of the land.

The price per square metre used in many countries is 10% of the value of the price of the land. However, I prefer that the price be set at 1%. Many countries are working to attract foreign investors, such as Turkey, Poland, and Spain.

It will benefit from the participation of the investor as well as the reasonable annual increase.

Q: What about the Ras Sidr Airport in the South Sinai?

Ras Sidr Airport is located on an area of ​​20m sq metres and will be constructed under build-operate-transfer method. It also will receive low-cost aircraft.

The airport will help revive the tourism sector and industrial parks Ras Sidr in parallel with the Authority’s plan to link the east and west banks of the Gulf of Suez by constructing two marinas.

Pull-out quotes:

We aim to attract investments towards residential units amounting to $5bn by 2020

Some countries, including Poland, Spain, and Turkey, offer land at 1% its price using the usufruct system

A Turkish company requested land be made available to it in which it would invest $500m

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