Dr Abou Shoka offers insight into Egypt's new investment laws
Egypt’s new investment laws were passed on Sunday 7 May by the House of Representatives, with the aim of repositioning the country as an ideal place for international investors to do business, and encourage companies back into the area post-Arab-Spring. The spotlight is now on whether these new investment laws have gone far enough, and what more could have been done to help re-position Egypt as a key destination for foreign investment. Egypt now needs to continue to focus on building a much more solid and dependable legal system, which will put the country back on the map as a go-to destination for business.
Just now, Egypt has a window of opportunity to take advantage of the current global political position, as given current disarray in Europe, all of a sudden investment opportunities in North Africa are looking more appealing in relative terms. The opportunities available in Egypt are looking more attractive now that business people are becoming nervous of the after-effects of the European debt crisis and the fall-out around Brexit. Egypt should maximise on its position – geographically, it is important on the world stage as it links Africa to the Middle East, and for many European countries Egypt is the gateway into Africa.
The Bill was put to the government in December 2016, at which point the state Council Legislation Department highlighted 23 problematic points in February 2017 which the Cabinet needed to consider so the passage from Bill to new law has been challenging. However, there has been a great amount of expectation within the business community around these new investment laws, reflected in recent foreign investment figures– up 39% from USD 6.8 billion in the fiscal year ending June 2016, to USD 4.3 billion for just the first half of the next fiscal year.
So, what do these new laws actually cover in practice?
- There is now new legislation to include provisions in returning to investors the price they pay for acquiring land for industrial projects, especially if work is started on production within two years.
- There are now new laws offering tax exemptions of up to 70% for those investing in the poorest regions of Egypt, and also to direct focus towards certain key sectors e.g electricity and renewable energy.
- Also there is legislation to improve and make the administration process easier and simpler, which has been done by creating an “investment window” where investors will only have to deal with one single body, rather than vast numbers of different government departments, and applications will have to be answered within 60 days.
Another explanation for the positive rise in foreign investment is due to the new Corporate Governance Code which was introduced last August as part of Egypt’s National Anti-Corruption Strategy, designed to restore faith in the region. The anti-corruption strategy is focussed on making Egypt’s marketplace more approachable for outsiders, and provide more transparency within the business community.
The National Anti-Corruption Strategy was launched by the Egyptian Government in December 2014. However as with any jurisdiction going through a post-revolution transition, confronting issues around bribery and corruption is not easy. Post-Arab-Spring there has been an onslaught of bribery and corruption allegations and cases being brought within the Egyptian community – both genuine and trumped up, many of the false accusations are politically motivated. Egypt’s penal code criminalises several forms of corruption, such as active and passive bribery and abuse of office. However, in practice it can be hard to untangle the truth from the try-ons.
For the new investment laws and corporate governance codes to have real traction with the international investment community, they need to go hand-in-hand with the government’s anti-corruption policies. Egypt has not yet achieved the required separation of political motive and criminal accusation, and the new investment laws have also remained silent on this.
So what more can be done in Egypt to encourage foreign investment? Egypt could adopt a similar model to Dubai, establishing an independent legislative zone for foreigners to do business based on international standards and principles of common law [Dubai’s International Finance Centre (DIFC)]. Dubai’s independent jurisdiction has done well in attracting international trade and business activity, and Egypt can take lessons from the example this sets.
The new investment laws being passed through Parliament has demonstrated positive change occurring in Egypt and is a good start in attracting foreign investors back into the region. However, much more still needs to be done to ensure that this doesn’t become a missed opportunity. For the business community to really thrive in Egypt, greater certainty and transparency is needed, especially to demonstrate that the Egyptian playing field is becoming fairer for all involved.
Dr Abou Shoka is a Cairo-based lawyer and founder of Abou Shoka Law
Sisi's re-election campaign submitted 173,000 citizen endorsements to Egypt elections authority
Egyptian President Abdel-Fattah El-Sisi’s campaign for re-election said it had presented 173,000 citizen endorsements for the president’s candidacy to the National Elections Authority, among other necessary documents to qualify him to run for a second…
Boosting and incentivising investments
Dr Abou Shoka examines Egypt's new investment laws and whether other initiatives, such as the country's National Anti-Corruption Strategy, go far enough in enticing foreign investors back into the countryEgypt’s long-awaited investment laws were passed…
Bahaa Eldin Abou Shoka
Mohamed Bahaa Eldin Abou Shoka is an Egyptian lawyer and politician. He is a professor of public law, and vice-chairman of the New Wafd Party.He is the founder of Abou-Shoka Advocates, a Cairo law practice, and has been a member of the Shura Council.In…
Egypt wooing FDI back with new investment laws
Egypt wooing FDI back with new investment laws