Egypt’s agriculture investment plan for fiscal year 2025/2026 is clear and ambitious. According to the Ministry of Planning and Economic Development (MPED), its annual state budget targets attracting $2.6 billion in private investment to the sector in fiscal year 2025/2026.

That might prove challenging. Research notes from the UN Conference on Trade and Development (UNCTAD), World Bank, and S&P Global collectively take a cautious stance on the future of agriculture FDI. They also highlight factors in the MENA region that undermine FDI inflows and outline how individual countries can sustain their foreign investment levels.

S&P Global: MENA’s gauntlet

The MENA region has a uniquely divergent FDI landscape. “While [oil-wealthy] GCC countries have emerged as important source countries as well as host countries for foreign investment, the focus of North African countries [which have diverse economies], including Egypt, Tunisia, and Morocco, is on attracting foreign investment,” said a June S&P Global report.

When it comes to foreign investment inflows, the report said, “after a decade of rapid growth of FDI into both [the] GCC states and North Africa, FDI flows face a slowdown.”

That is mainly due to “investor uncertainties reflecting changing U.S. trade policies [which remain unpredictable], lower prices of oil [essential to GCC national incomes] and more gradual development of GCC diversification projects [given FDI still prefers fossil fuels],” the report explained. 

It noted that MENA nations would be impacted differently by those developments. GCC nations, with their dollar-pegged currencies, can “mitigate [the] FDI slowdown,” S&P Global noted. “[The] dollar weakness would lower the cost of FDI for international investors from outside the U.S. dollar area — Europe, China, India.” 

In North Africa, currencies are not pegged to the dollar and have, therefore, recently appreciated against the greenback, making those economies less attractive for FDI, S&P Global said.

For FDI still targeting the region, interest in agriculture and food remains low despite the GCC’s efforts to diversify economies and the sector’s resilience. As of 2023, the median age in MENA was just under 30 years old, according to regional think tank IstiZada.

The French Institute for Demographic Studies, a non-profit, forecasts the Middle East’s population will increase 33% and North Africa’s 35% by 2050. 

Instead, S&P Global found “the nature and sector breakdown of FDI in the region has already migrated from hydrocarbons to areas such as infrastructure, renewable energy, logistics, tourism, and construction.”

UNCTAD: Agri-FDI

Lack of interest in agricultural investments is a global phenomenon. The UNCTAD report estimates that “agrifood systems” FDI fell 19% in 2024 compared to 2023. Meanwhile, investments in “water, sanitation, and hygiene,” which are essential for crop cultivation, declined 30% during the same period. Overall, FDI in 2024 dropped 11%. 

Those disconcerting figures are further amplified by UNCTAD revealing that agrifood investments grew by only 5% between 2015 and 2024, while water-related projects climbed 13% in the same period. During the same period, global population increased by 12%. 

UNCTAD’s report also said greenfield agri-projects declined by nearly 4% in 2024 compared to 2023; individual project sizes are decreasing; and their share of total greenfield investments remains the lowest among all analyzed sectors. 

“Over the past five years, project numbers dropped by nearly half and their value fell by more than two-thirds, to just 0.5% of total greenfield activity,” UNCTAD’s report said. “This sharp contraction stands in stark contrast to the sector’s vital importance for food security and rural development, highlighting the need to better align investment flows with development priorities.”

The report explained the “downturn was driven by a combination of climate-related risks, supply chain disruptions and weaker commodity markets, which have dampened investor appetite. Investment remained focused on food processing and agribusiness supply chains, while primary agriculture received limited attention.” 

Another reason UNCTAD mentioned is incentives for private investors have declined from the second-highest after “non industry-specific” stimulus in 2015 to the lowest by 2024, behind extractive, manufacturing and services sectors.

Bucking that trend were projects that combined agrifood and water-related initiatives with digitization and technology, particularly when the technology expands the functionality and accessibility of digital ecosystems, supports innovation, and connects agrifood and water-related projects to other sectors, according to UNCTAD. 

Despite that silver lining, the report stressed “investment is under strain.” “Developing countries – those most in need – are being left behind,” it said, and that is a “sobering message.”  

World Bank: The way forward

According to the World Bank report in June, government policies are the solution to reversing “net FDI inflows to GDP dropping from a peak of almost 5% in 2008 to just over 2% in 2023.”

The report said governments need “a comprehensive policy strategy [that] should focus on a three-pronged approach.”

The first “prong” is to “attract FDI.” That will come by “strengthening institutions and fostering an investment-friendly business environment.” Critical, “in light of heightened geopolitical tensions.” 

The other way to “attract FDI” is by “promoting macroeconomic stability, growth and financial markets,” the report said. The first step is to introduce “policies that facilitate financial development,  … reduce sovereign risk [and] improve the investment climate.” 

The report cited “reducing barriers to cross-border trade and financial flows, including through investment and deep trade agreements.” That will occur with “more open economies” and “integration agreements.”

The last two points to “attract FDI” are to “ease FDI restrictions” and “carefully consider interest promotion agencies, special economic zones, and fiscal incentives.”

The second “prong” of a “comprehensive policy” is to “amplify FDI benefits.” The World Bank said that could be achieved by “undertaking reforms to maximize the positive effects of FDI.” That could be achieved by developing a “range of country-specific conditions and policies [that] support stronger positive effects of FDI.” 

Another way to “amplify” benefits is to “channel FDI to areas that generate greater impact,” the report said. That would include “private capital mobilization and creation of new jobs,” primarily from greenfield FDI.

The third “prong” is to “advance global cooperation.” That would be possible by “improving global cooperation to mitigate risks,” the report said. “Despite rising geopolitical tensions, cooperation … should be reinforced wherever possible, with the goal of restoring a rules-based order.”

Further fortifying international links is necessary to “enhance multilateral support for private capital mobilization and structural reforms,” the World Bank said. “The global community should accelerate policy initiatives that can help direct FDI flows to countries with the largest investment gaps. Technical and financial assistance are essential to support the implementation of reforms critical for promoting FDI inflows and maximizing their benefits.”

Ultimately, the effectiveness of policies will vary among MENA nations depending on the level of exposure and domestic impact of ongoing regional geopolitical volatility. 

Accordingly, the World Bank report stressed, “The balance of risks and opportunities should be considered judiciously by policymakers in the design of FDI policies to avoid market distortions and uphold a non-discriminatory regulatory framework.”