Egypt’s FDI Moment: Turning Foreign Capital into Jobs, Innovation and Growth

Egypt has successfully attracted large amounts of foreign investment, but much of it is concentrated in capital-intensive sectors that generate limited innovation, spillovers and quality job growth. To turn FDI into a true engine of inclusive development, Egypt must strengthen local firms, boost innovation-driven sectors and deepen linkages between foreign investors and domestic businesses.

Egypt has worked hard to position itself as a major destination for foreign direct investment. A new review by the Organisation for Economic Co-operation and Development, prepared with Egypt’s Ministry of Planning, Economic Development and International Cooperation and the General Authority for Investment and Free Zones, takes a closer look at what this investment is actually delivering. National institutions such as MSMEDA, the Industrial Development Authority, ITIDA, the Technology Innovation and Entrepreneurship Centre, the Industrial Modernisation Center, the National Council for Women and CAPMAS also contributed to the analysis.

The central message is clear: Egypt has succeeded in attracting foreign capital, but the real challenge now is making that investment work harder for productivity, better jobs and long-term development.

Strong Growth, Limited Spillovers

Egypt’s economy has grown steadily over the past two decades, often faster than regional averages. However, income per person remains relatively low and productivity growth has been modest compared to some peer countries.

Foreign companies operating in Egypt are significantly more productive than domestic firms. They benefit from advanced technologies, better management practices and access to global supply chains. In theory, this should create strong spillovers to local businesses.

In practice, those benefits have been limited. The gap between foreign and domestic firms suggests that many local companies lack the skills, technology or financial strength needed to learn from multinational enterprises. As a result, productivity gains remain concentrated rather than spreading widely across the economy.

Where the Money Goes Matters

One reason for the limited spillovers is the type of investment Egypt attracts. A large share of foreign direct investment has flowed into capital-intensive sectors such as oil and gas, construction and renewable energy. These sectors are important for economic growth, but they do not always create strong linkages with local suppliers or encourage innovation.

Only a very small share of greenfield investment has gone into research and development activities. Few firms, foreign or domestic, report spending on R&D. Innovation levels remain low, and relatively few companies introduce new products or processes.

Egypt also has limited participation in global value chains compared to some peer countries. Although foreign firms source a portion of their inputs locally, deeper integration into international production networks remains a challenge.

Jobs Created, But Are They Enough?

Foreign investment has created a significant number of jobs. Between 2013 and 2023, greenfield projects generated hundreds of thousands of direct positions. Manufacturing remains an important source of employment, while renewable energy and ICT are growing sectors.

However, when measured per dollar invested, job creation is relatively low. Capital-intensive projects dominate the investment landscape, meaning that every billion dollars of investment produces fewer jobs than in many other countries. Global trends toward green and digital industries, which tend to be less labour-intensive, also reduce the number of jobs created per investment.

Wage effects are also modest. Despite higher productivity, foreign firms do not pay significantly higher wages than domestic firms on average. This means that productivity gains are not always reflected in higher incomes for workers.

Gender inequality remains another concern. Women are underrepresented in employment, management and ownership roles in both foreign and domestic firms. While foreign companies employ slightly more women in some sectors, the overall impact on gender equality is limited.

Turning Investment Into Real Transformation

The review argues that the benefits of foreign investment are not automatic. They depend on strong domestic institutions, capable local firms and well-designed policies.

Egypt has made progress in improving transparency, simplifying business procedures and developing a new National FDI Strategy for 2025 to 2030. The next step is to focus on quality. This means targeting more innovation-driven sectors such as advanced manufacturing and technology, strengthening intellectual property protection and improving coordination among government agencies.

Supporting small and medium-sized enterprises is also critical. Local firms need better access to finance, streamlined regulations and stronger links with multinational companies. Supplier development programmes and matchmaking services can help connect domestic businesses with foreign investors.

Egypt’s ambitions in renewable energy and green hydrogen present new opportunities. If combined with skills development and stronger local participation, these sectors could support diversification and long-term growth.

The overall conclusion is simple: attracting foreign capital is only the first step. To achieve inclusive and sustainable growth, Egypt must ensure that investment builds stronger domestic firms, creates quality jobs and spreads knowledge across the economy.