Q. Aren’t these companies manufacturing here in Egypt? How come foreign investment will increase the unemployment rate in Egypt?
A. There are a few reasons actually…For instance; often investment actually means buying existing companies and facilities, not creating new ones. Once facilities are taken over, the multinationals usually cut staff to maximize profitability.
Also, the entrance of multinationals into any industrial sector undermines competition within that sector by smaller enterprises, and these local companies may be forced to streamline their operations and cut staff, or they may close down altogether.
You can look at Turkey, for example; unemployment has risen almost parallel to the rise in Foreign Direct Investment over the last 10 years. The same is true in Argentina, Chile, Colombia, Philippines, and Uruguay, etc etc.
When there actually is job creation, it is usually very minor, and depends on the industrial sector receiving the investment.
So, investments in construction, commerce, and certain types of manufacturing create on average only seven jobs for every $1 million invested. In automotive manufacturing and agribusiness there may be about four jobs for every $1 million invested. In the oil and gas sectors, investment only creates one single job for every $2 million invested.
That is assuming any jobs are created at all.