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Egypt cabinet approves much anticipated investment law

Egypt ranks 112th out of 189 countries in a World Bank report for ease of doing business, though a new law is set to make it easier for investors

Deya Abaza , Wednesday 4 Mar 2015
Ibrahim Mahlab
Egyptian Prime Minister Ibrahim Mahlab (Photo: Reuters)
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Egypt’s cabinet ratified a much anticipated “investment promotion” draft law on Wednesday, tackling some of the key concerns investors have about investing in Egypt.

The draft, which awaits presidential approval, is timed to show the government’s commitment to easing the hurdles faced by foreign investors in Egypt ahead of a major investment conference it is hosting later this month, when it will showcase over 30 projects worth some $15 billion to potential investors from around the world.

The law seeks to facilitate investment procedures for companies, guarantee their rights, and offer incentives to bolster the case for business in areas of national interest.

It also makes provisions for voluntary liquidation, setting a clear deadline of 120 days for the government to process the applicant’s request, according to a statement released by the prime minister's office outlining the contents of the amendments.

Investor protection

One of the most anticipated provisions of the law is the protection of company executives from being sentenced to jail time by holding them liable in their official capacity for legal breaches committed by the company.

Instead, the company may be liable to fines or withdrawal of its license and guilty individuals will be responsible in their personal capacity for their violations.

Rulings against high profile businessmen in the years since Egypt’s January 2011 revolution has unsettled investors, prompting calls for stronger legal protections.

“We cannot keep prosecuting company CEOs in cases where the company is accused of wrongdoing and send them to jail,” Mohamed El-Sewedy, head of the Federation of Egyptian Industries (FEI), told Ahram Online about the draft law last month.

Sewedy said on Wednesday that the FEI was satisfied with the provisions of the final draft.

Incentives

The amendments also empower the state to give non-tax incentives to investors in projects that meet certain criteria, such as being labour-intensive, or in certain sectors such as energy, or in underdeveloped regions.

The old draft, which gave the cabinet discretionary powers to issue tax exemptions to investors, had been deemed unconstitutional by legal experts, and criticised for threatening transparency by local business leaders.

One-stop-shop

The law also seeks to empower one government body, the General Authority for Investment (GAFI) to act as a one-stop-shop from which investors can receive the necessary approvals for their projects, instead of directly dealing with a staggering 78 different government bodies issuing various permits.

Egypt ranks 112th out of 189 countries in the World Bank’s Ease of Doing Business Report 2015, as the country’s notoriously cumbersome and unpredictable bureaucracy is widely seen as a major deterrent to investment.

However, GAFI will only be able to obtain the permits required for investors in certain sectors, to be determined in a presidential decree.

A previous draft of the law, which envisioned GAFI to act on behalf of investors across all sectors, had been met with scepticism from the business community, who argued that this would exacerbate bureaucratic inefficiency.

“No agency in the world can be expected to deal with 78 different government bodies,” said Tarek Tawfeek, deputy head of the FEI in a televised debate about the old draft law last month, warning of “more corruption” or a “backlog.”

Land allocation

The law also establishes new regulations for the allocation of land and real estate belonging to the state or to government bodies.

Egypt has seen several high profile land deals between the state and private investors be overturned in court over the past years due to doubt surrounding their legality.

A notable example was the sale of land to real estate giant Talaat Moustafa Group for its Madinaty development, which was overturned in 2010 until a LE9 billion settlement ended the dispute in February 2015.

Dispute settlement

The amendments also make provisions for investor dispute settlement, laying the rules for a ministerial committee for dispute resolution, and another one to mediate disputes between investors and government administrations.

Egypt has been working to resolve long-standing disputes with investors.

Eleven disputes were solved in the past six months by the prime minister’s office, investment minister Ashraf Salman told reporters earlier this week. 

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Neo
12-03-2015 03:54am
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Small Business Nightmare
Egypt is ranked so low in investment for a reason. All successful economies worldwide owe their success to small businesses. Ranging from capitalist USA to communist China, and every other successful economy in between. Unfortunately in Egypt, small businesses have to go through hoops to start, nightmares to stay alive, and eventually they have to close. Large corporations have the protection and facilities from the government, but small businesses are prey to corruption, bureaucracy, and ambiguity. Unless major efforts are considered to protect small businesses too we won’t see unemployment going down, or our ranking go up.
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Kurt Rudolf Mori
05-03-2015 01:20pm
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Foreign investor
I hope for Egypt to create a law without the old traps encouraging the Egyptians to rob the foreigner. Egypt became a very bad name already.
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Sam Enslow
04-03-2015 03:35pm
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Why not easier for ALL investors?
The laws should be equal for all. Encourage investment and start up companies by Egyptians, especially the youth. Foreign investment is necessary but Egyptian participation is even more important.
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