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.
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.
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.
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.”
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.
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.