Egypt’s new trade order: friendshoring, energy and AI

For centuries, Egypt’s fortunes have been tied to global trade routes. From the spice trade of the Middle Ages to the Suez Canal, which normally handles 12% of world trade, geography has been kind to Egypt. But as geopolitics and climate change disrupt trade flows and force companies to reconfigure supply chains, Egypt is adapting. To remain a vital link in global commerce and expand its industrial base, Egypt is accelerating its shift to renewables, strengthening regional trade ties and upgrading its infrastructure.

Trading through trouble

Geopolitical risks loom large over Egyptian trade, but businesses are adapting. According to our survey, 42% of Egyptian firms are “friendshoring” their supply chains—that is, restructuring them across allied geographies—significantly higher than the global average of 34%. A broader de-escalation of regional tensions could help restore confidence in trade flows, leading to a rebound in canal revenue and a recovery in Egypt’s foreign-currency reserves.

Egypt is also working to attract foreign direct investment (FDI) to boost its economy. Inward FDI jumped to $40.3bn in 2024, equal to 13.1% of GDP—a sharp rise from previous years.¹ Regional alliances have been a significant force behind this influx. Saudi Arabia and the United Arab Emirates (UAE) pledged billions to Egyptian projects. This includes the $35bn Ras el-Hekma development—a joint project between the UAE and Egypt to build a new city—which could eventually draw $150bn in investment, according to officials.²

Beyond capital inflows, Egypt’s strategic positioning as a neutral player in a fragmented world is proving to be an advantage. Egypt’s executives value its geopolitical non-alignment: 87% see neutral countries as reliable partners, compared with just 71% globally. Egypt can leverage its neutrality to strengthen trade relationships and secure further investment.

Powering manufacturing

Egypt’s factories are humming again, bolstered by a wave of reshoring. About 32% of domestic firms say they have moved production back home—far higher than the global average of 20%. Multinationals are also increasingly choosing Egypt as a manufacturing hub. For example, a Chinese firm has proposed a $500m textiles complex that will export 90% of its output to Europe, underscoring Egypt’s appeal as a low-cost, strategically located production base.³

To sustain this momentum, the government is working to ensure reliable energy supply. Power disruptions in 2024 prompted swift action, with $1.2 billion invested in emergency fuel imports to stabilise supply.⁴ But Egypt is also securing its long-term energy future, with investments in clean energy now reaching $73bn.⁵ Major projects include floating solar farms on Lake Nasser, a wind-energy corridor in the Gulf of Suez and new hydrogen-production initiatives under the EU-Egypt Renewable Hydrogen Partnership.^6,7 These efforts bolster energy security and position Egypt for sustained industrial growth and exports to Europe.

As manufacturing grows, Egypt is also strengthening its trade links to maximise its regional reach. Although 29% of Egyptian firms cite transport and infrastructure as challenges to trade, particularly in accessing African markets that are part of the African Continental Free Trade Area (AfCFTA), investment is increasing. Efficiency is also improving through new trade facilitation agreements under AfCFTA, such as protocols on trade in services and rules of origin.^8,9

The promise of technology

Persistent inflation was cited as a top concern by 36% of the Egyptian business leaders we surveyed, meaning cost control is a priority for many firms. In response, companies are turning to technology to streamline trade and manage supply chains more efficiently. About 33% of Egyptian executives reported that implementing artificial intelligence (AI) has improved resource and supply-chain planning, higher than the global average of 28% (see Figure 2). Meanwhile, 26% of them credit AI with enhancing cash management, compared with just 16% globally. If these gains continue, technology could help Egypt sharpen its competitive edge as a trade and manufacturing hub.

Yet rapid technological adoption comes with risks. As firms digitise operations, cyber threats are mounting. A notable 37% of Egyptian businesses say they have adopted cyber-security measures to protect their supply chains. But as cyber threats grow more sophisticated, firms globally—including in Egypt—face increasing pressure to enhance data security and cyber resilience to keep pace with evolving risks.¹⁰

Reforming for the future

Egypt has historically thrived as a trading hub due to its geographical position, but its future depends on strategic economic and trade policies. By deepening regional ties, expanding renewable energy and harnessing AI, the country is adapting to shifting supply chains and rising geopolitical tensions. With investment flowing in and manufacturing on the rise, Egypt has the opportunity to turn today’s challenges into long-term competitive advantages.