As a result of the crisis in Southeast Asia and Russia, investors are more cautious, which has led to large amounts of capital searching for places to invest. Egypt looks good by comparison and is probably a net beneficiary of what happened in Russia and Asia. The lack of a long-term track record in how foreign investment are dealt with, seems to be what is holding investors back, since the idea of attracting foreign investments is relatively new in Egypt. Capital may have also been held back because of a lack of well-structured projects. However, this is changing.
Many projects are currently able to get financing from local banks.
The new development is that much larger projects are now in need of huge funding, thus creating the need to seek financing outside of Egypt. For Economy Minister Youssef Boutros Ghali, Egypt s biggest challenge is to implant economic reforms in its institutions to build a mature market economy. Egypt, whose economy is growing by more than five per cent a year, now enjoys a stable exchange rate, low inflation, a small budget deficit and ample foreign exchange reserves. Egypt launched a widely praised economic reform program with International Monetary Fund backing in 1991, liberalizing its exchange rate and interest rate structure. It started privatization drive seriously in 1996.