Gulf capital and state power: Does foreign investment threaten Egypt’s sovereignty?

Much of the investment news today carries a distinct whiff of politics. Nowhere is this more evident than in the debate over Gulf acquisitions and the concerns they have generated about the concentration of economic power, and, ultimately, the extent to which it might constrain the independence and sovereignty of Egyptian decision-making.

That sensitivity is hardly new. It reflects a longstanding Egyptian wariness of placing strategic or fixed assets in foreign hands, a sentiment with deep historical roots, stretching back to the relinquishing of Egypt’s Suez Canal shares in the second half of the 19th century.

It is little surprise, then, that concerns over sovereignty have resurfaced whenever major deals have involved the sale of thousands of feddans to Gulf investors, the granting of concessions over public utilities, or the easing of restrictions on foreign real estate ownership. These fears came into particularly sharp focus during the recent controversy over Emirati developer Emaar’s tightening of beach-access rules at Marassi, an upscale North Coast resort.

What began as a local dispute quickly became a national talking point, dominating social-media discussion for days and exposing the depth of public unease over the growing Gulf presence in Egypt’s property market.

So should we be worried about our national independence at a time when the government is striking massive deals for multibillion-dollar coastal developments like Ras El-Hekma and Alam El-Roum to maintain the stability of its financial relations with the outside world?

Neoliberalism behind the fears

One of the founding traumas of modern Egyptian nationalism was the British government’s 1876 purchase of Suez Canal shares from Egypt’s bankrupt Khedive, the Ottoman-era viceroy Ismail Pasha. This move paved the way for the British occupation of Egypt six years later in 1882, an occupation that would last more than 70 years.

That experience left a lasting mark on the Egyptian legal system following independence and the declaration of the republic. Until 1996, legislation continued to prohibit foreign ownership of real estate. And even after this ban was lifted, foreigners remained barred from owning property in border regions or areas of special sensitivity, such as the Sinai Peninsula.

In theory, therefore, Egyptian legislation defends the country’s sovereignty over its assets and public utilities, as do the foundations of international law since the wane of the colonial powers after World War II. This legal foundation paved the way for the waves of nationalization and expropriation that swept across many countries during the 1950s, 1960s, and 1970s.

The greatest risks lie in the fine print of financial and regulatory terms, not in ceding control over land

But with the spread of neoliberal policy from the early 1980s onward, the influence of foreign companies began to grow, and practice on the ground increasingly diverged from the spirit of the legislation still on the books.

Perhaps the clearest example is the bilateral investment treaties concluded during that era. These agreements frequently included clauses restricting host countries’ right to exercise their own sovereignty. They went as far as limiting the passage of new legislation or recourse to national courts, replacing these mechanisms with international arbitration or the jurisdiction of a third country, often the home state of the individual investor or corporation.

So people, and Egyptians among them, have every right to be wary of any expected expansion in foreigners’ right to own assets, whether that means land, as with the Ras El-Hekma and Alam El-Roum projects, or buildings, ports, and other public facilities. While state sovereignty is theoretically protected, in practice, a host country’s retention of its sovereignty has become hostage to the balance of power with the investor and, sometimes, with the countries backing them.

That concern only deepens when the companies or investment funds involved are owned by foreign states themselves. This is the case with sovereign wealth funds, public authorities, and state-owned enterprises, a dynamic that characterizes much of the Gulf and Chinese capital flowing into Egypt and other countries around the world.

A counterweight that preserves balance

Yet, for all that, state sovereignty has remained fairly durable in dealings with investors, particularly regarding the ownership of fixed assets located within national territories.

Some of that sovereignty might be eroded by the financial consequences written into contracts, such as compensation and penalties, or even by conditions attached to regulatory enforcement in areas like labor and the environment. However, we have not yet reached a point where an investor, however powerful, or however powerful the state behind it, can translate ownership into the actual exercise of sovereignty over part of another country’s territory.

Djibouti’s experience with DP World, the Dubai-based ports operator, comes to mind here. In 2005, DP World secured a 50-year concession to develop Djibouti’s ports.

Although it is a small, impoverished country, Djibouti managed to leverage the importance of its uniquely strategic location at the entrance to the Red Sea. It hosts permanent military bases for major powers such as the United States, France, Japan, Italy, and China.

Yet Djibouti aspired to move beyond military bases. It shifted toward exploiting its location to develop a seaport that could provide logistical services and capture a share of global trade. DP World positioned itself as a developer capable of orchestrating this leap by operating the port of Doraleh.

A dispute subsequently broke out between the state and the company after some development work in areas surrounding the port was awarded to a Chinese firm. DP World viewed this as a breach of its contractual terms with the Djiboutian government. The crisis escalated until Djibouti unilaterally canceled DP World’s concession in 2018 and expelled the company from the country.

Analysts linked Djibouti’s move against the Emirati company to regional developments affecting the fragile balance of power in the Horn of Africa involving Eritrea, Somaliland, and Ethiopia. Others viewed the issue as an extension of strategic rivalry between the United Arab Emirates and other heavyweight Gulf states.

The matter did not end quickly. DP World resorted to international arbitration and indeed succeeded in obtaining a compensation ruling against the Djiboutian government. In response, however, Djibouti refused to recognize the ruling, arguing that unilaterally canceling an unfair concession was an exercise of its core sovereignty. The judicial and diplomatic crisis between the two countries continues to this day.

With all due respect to Djibouti, of course, a country like Egypt possesses far more leverage and power by virtue of its location, size, population, military strength, and economic weight. If Djibouti could utilize its network of regional and international allies to push back against what it deemed an unfair concession with a foreign investor, Egypt’s resources in this arena are vastly greater.

If anything, the port of Doraleh itself may illustrate the weight Egypt continues to wield, having secured development contracts at that very port in 2025. This move was viewed as an effort to curb the ambitions of Ethiopia and its allies to gain access to the shores of the Red Sea.

What emerges from all this is that foreign investment in fixed assets undoubtedly carries risks. But those risks should neither be exaggerated nor presented as a wholesale threat to national sovereignty on the scale of what Egypt experienced with the Suez Canal. The more consequential risks lie in the financial and regulatory terms on which investment is attracted: the concessions granted, the obligations assumed, and the degree of control surrendered through the fine print of individual agreements. The mere transfer of land ownership within the state’s sovereign territory is not, in itself, equivalent to a loss of sovereignty.

The distinction matters particularly for smaller states in the international system; states whose room for manoeuvre is constrained by rules and power structures they cannot readily rewrite on their own terms.