The Supreme Investment Council: what’s new?

Ziad Bahaa-Eldin
Saturday 16 Jul 2016

The official media welcomed last week the president’s decision to create the Supreme Investment Council, seeing it as a sign of renewed state interest in investment and investors and an auspicious beginning for the new investment minister. So what promise does the council hold? And how significant is its formation?
Media reports in the last few days indicate that the Supreme Investment Council will be chaired by the president and include several ministers, heads of public agencies, and few private sector representatives. This means that the council will be able to respond better and more swiftly to investors’ grievances, because as the highest executive authority, the will be best able to spur ministers and officials to action.

Many therefore hailed the formation of the Council, seeing it as an effective, timely response to the severe deterioration in the investment climate, which the Investment Law issued shortly before the Sharm al-Sheikh economic conference in March 2015 was unable to address.

But while the Supreme Investment Council will likely make rapid progress and solve several pressing problems, its reflects a trend prevalent not only in investment, but in various economic and social fields: a tendency to turn to the presidency or the armed forces engineering corps to solve problems that the state bureaucracy seems unable to tackle.

The problem is that while such solutions may have rapid and tangible gains, they do not help build civil institutions or invigorate and develop the state bureaucracy.

In fact, it risks further isolating and marginalizing these institutions and encouraging them to further obstruct reforms that they are not included in devising and implementing. And, meanwhile, ordinary citizens continue to interact with the conventional bureaucracy, not supreme committees and high-level councils that focus on large investors and firms.

The Supreme Investment Council is a case in point. The Investment Law describes the role and powers of the General Authority for Investment and Free Zones (GAFI) headed by the Investment Minister (Article 88), a National Center for Investment Promotion (Article 96), an appeals committee from GAFI decisions (Article 101), a ministerial committee for investment dispute resolution (Article 104), and another ministerial committee to settle investment contract disputes (Article 108). This is in addition to specialized economic courts and investment circuits in the Administrative Court.

The creation of the Supreme Investment Council means that all these other agencies and committees are in fact unable to address investment problems on their own based on existing laws and regulation and that accordingly the only way to attract investment is to form this new Council, give it new powers on top of existing ones, and support it with the full weight and authority of the president.

The Investment Council may well help resolve problems and outstanding issues. But more important is to identify the body competent to draft a general investment policy and an overall state economic vision, because this is the source of the current troubled situation. What we need today is not just to solve urgent problems. We must set a course: what is the state’s role in economic development? What is the private sector’s role? Will the state intervene to fill a gap left by the private sector or to compete with it? What is parliament’s oversight role? Is there a body dedicated to the development of small and medium enterprises? What is the state policy to encourage exports? What is the future of tax policy, exchange rate, and public debt management?

As long as these urgent questions go unanswered, we’ll keep addressing our economic problems largely through damage control, without taking the initiative and laying out a clear path to the future.

The formation of the Supreme Investment Council may be a positive step to swiftly respond to the most pressing problems and focus state attention on investors’ concerns. But it cannot replace ordinary state institutions and should not express the hopelessness of reforming and reinvigorating the bureaucracy. And it can’t impede the more pressing task of setting the state’s economic course for the future.

*The writer holds a PhD in financial law from the London School of Economics. He is former deputy prime minister, former chairman of the Egyptian Financial Supervisory Authority and former chairman of the General Authority for Investment. This article was published in Arabic in El-Shorouq newspaper on Monday, 11 July.

 

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