Saudi king's visit political, economic push to Egypt

The ongoing five-day visit of Saudi King Salman bin Abdulaziz to Egypt represents Riyadh's political and economic support for Cairo to overcome current challenges, said Egyptian experts.

The visit saw the signing of agreements of Saudi investments in Egypt worth about 25 billion U.S. dollars, according to a statement from Egyptian International Cooperation Minister Sahar Nasr on Sunday.

The visit comes at a time when Egypt is suffering political and economic pressures due to years of domestic political turmoil that led to economic recession and security challenges resulting from regional chaos.

"The Saudi investments show awareness that investment in Egypt is investment in the future, because politically Egypt represents a political weight and strategic depth for the Gulf region, and economically investments in Egypt are promising and fruitful," said Amr Saleh, professor of political economy at Cairo-based Ain Shams University and former World Bank project officer.

Saudi investment in Egypt is nothing new, as Saudi business tycoons have been investing in the country over the past few decades, the expert told Xinhua.

"But today, it is the Saudi government that pumps investments into Egypt, which is a new and positive aspect and an indicator of the soundness and healthiness of the investment environment in Egypt," Saleh explained.

Over the past five years, Egypt's foreign currency reserves declined from 36 billion U.S. dollars in 2011 to 16.5 billion dollars as of end of March 2016, and the government is currently struggling to reduce an ongoing budget deficit of about 36 billion dollars.

"After the 2011 turmoil, the economic growth was as low as 1.5 percent and it gradually increased until it reached 4.5 percent in the current fiscal year and is expected to reach 5.5 percent in the coming fiscal year as the government stated, which shows that Egypt is on the rise economically," the political economy professor illustrated.

Among the agreements signed by Egypt and Saudi Arabia during the visit are those related to housing projects in the Egyptian Sinai peninsula, the establishment of King Salman University in Tur town of South Sinai, the development of Egypt's largest public hospital Qasr al-Aini, the building of a power station in western Cairo and the formation of a joint investment fund with a capital of 60 billion Saudi riyals (about 16 billion dollars).

"All these agreements show the seriousness of the Saudi side to support the Egyptian economy, as there will be capital flow to Egypt which means there will be more employment and economic movement in the country in the near future," said Alia al-Mahdi, professor of economics at Cairo University and former dean of the Faculty of Economy and Political Sciences.

She expressed belief that Egypt has been in need of this "economic push," arguing it comes at a time when the country is suffering declining foreign currency reserves, shortage of U.S. dollars and low investment growth rates.

"I believe all these investments will have a very positive effect on Egypt," the professor told Xinhua, noting it needs at least until the end of 2016 to evaluate the investments based on how much funds will have been pumped into Egypt, what investments will have been initiated, etc.

For his part, Mahmoud al-Batanoni, professor of economics at Cairo-based Future Academy, expressed hope that Egypt has conducted feasibility studies for these Saudi projects to ensure their benefit to the Egyptian economy.

"When the Saudi funds are transferred to Egypt, they will positively affect the value of the U.S. dollar compared to the Egyptian pound as they will increase the currency reserves at the Egyptian central bank," Batanoni told Xinhua, arguing "if they do not devaluate the dollar, they will at least stop the current deterioration of the Egyptian pound."

He stressed that Saudi investments in Egypt may lead to more Gulf investments in Egypt, "since the Gulf Cooperation Council (GCC) states are greatly interrelated politically and economically."

Egypt has been facing Western political pressure, particularly from Italy, after the recent death of an Italian young man in Cairo and Italy's suspicion of the involvement of the Egyptian police in the tragedy, to the point that the Western country recalled on Friday its ambassador to Cairo for consultations.

"Saudi King's visit has a political dimension, as it indicates a sort of support to Egypt amid some political challenges, including the case of Italian student Giulio Regeni's death in Cairo," Professor Batanoni said.

Source: XINHUA