Responding to the requests of Egyptian investors, the Supreme Council for Investment approved 22 decisions to encourage foreign direct investments (FDIs) and private investments in Egypt, including licensing facilities and a host of legislative reforms.
The decisions aim to streamline the business establishment process by lowering costs, simplifying approvals and shortening timeframes. They also aim to expand the Golden Licence programme.
The council introduced incentives for investors in various sectors, as well as draft resolutions on legislative amendments which the government should draft and present to parliament for discussion and approval.
Reassuring the market
"There has been a state of concern and uncertainty among investors. The latest decisions send a message of reassurance to the market, as they reflect the state's seriousness about addressing all the obstacles facing the market," Alaa El-Sakty, vice chairperson of the Egyptian Federation of Investors Associations (EFIA), told Ahram Online.
"The decisions are the result of discussions and cooperation with the EFIA in which the government listened to the requests of investors," El-Sakty added.
"Incentives related to facilitating the procedures of opening, closing, and changing the activities of companies are far more important to investors, who need legislative flexibility more than just tax incentives.
"Among the key requests of the EFIA that were answered by the government is cooperating with the International Finance Corporation (IFC) to contract a global consulting firm to develop a clear shared vision and strategy for investment in Egypt," he stated.
El-Sakty highlighted that "having a clear strategy that determines the sectors that need and offer more investments is indicative of the state's keenness in creating a more suitable environment for investors."
Demanding more legislative reforms, bylaws
"The new decisions will affect the investment climate in Egypt positively, and now the government should issue bylaws required to take them into effect, in order to set a clear action plan," Sherif El-Gabaly, chairman of the Egyptian Chamber of Chemical Industries at the Federation Of Egyptian Industries (FEI), told Ahram Online.
Hany Abul-Fotouh, a banking expert, said that "the Egyptian economy needs legislative reforms to encourage investments and attract more foreign investors."
Abul-Fotouh stressed that Egypt should create a better climate for investment and production and remove obstacles for local investors even before it does for foreigners.
"Foreign investors would be reluctant to come to Egypt unless Egyptian investors are fully secured," the expert noted, adding that some local investors are already exiting the market to invest in neighbouring countries.
New laws needed to support startup growth
"The EFIA’s latest decisions send a positive message to investors, especially endorsing a 10-day approval process for all necessary requirements when establishing a company," Ahmed Hazem, CEO of Falak Startups, told Ahram Online.
Hazem said Egyptian and foreign investors have had some concerns that were compromising their confidence in investing in Egypt, including the complexity of the litigation process with regard to the settlement of trade disputes.
He noted that another issue dissuading many investors is the obstacles restricting the transfer of foreign currency abroad.
Some investors establish their head offices outside Egypt and operate in the country through a subsidiary to avoid the painstaking legal processes that hit them hardest when they decide to close businesses, Hazem said.
He suggested that startups need more legislative reforms to facilitate funding and operations, pointing to drafting laws allowing and regulating SAFE notes as a good example.
These, he explained, enable startups to raise capital from foreign investors in exchange for a specific number of shares at an agreed-upon price at some point in the future, usually when the startup has a subsequent funding round.
Room for the private sector
Egypt is currently under the first review for a $3 billion loan programme by the International Monetary Fund (IMF) and privatization is among the key issues in the fund's negotiations with the Egyptian government.
Egypt is preparing two state-owned companies to be offered as investments before the end of the current fiscal year, in addition to seven companies planned to be offered by Q1 of next year in the oil, petrochemical, and transport sectors, according to Mohamed Metwally, CEO of NI Capital, the Egyptian government's financial adviser.
On Sunday, the Egyptian government offered a 10 percent stake in Telecom Egypt in two tranches totalling 170.7 million shares. This was part of the government's privatization programme.
Prime Minister Mostafa Madbouly announced in February government plans to offer shares in 32 state-owned companies operating in 18 sectors to strategic investors within a year. However, Telecom Egypt was not on the list.
Egypt's Paint and Chemicals Industries (PACHIN) was the first company on the list to be sold after the UAE's National Paints acquired 81 percent of the company's shares for EGP 770.4 million (about $25 million) in early May.
Two other companies on the list, the National Company for Producing and Bottling Water (Safi) and Wataniya Petroleum Company, have seen little progress despite being mentioned in several statements. The government announced in mid-May that it was starting to accept bids for the companies.