Last week the Supreme Council for Investment (SCI) presided over by President Abdel-Fattah Al-Sisi, has issued 22 decisions intended to boost private sector participation in the economy and facilitate foreign direct investment.

“Our goal is to speed up and facilitate the investment process and ensure the private sector increases its investments until they are on par with the government’s or even bigger,” Prime Minister Mustafa Madbouli said during a press conference last week to announce the decisions taken by the SCI. The new set of incentives aims to make it easier to do business through faster and easier licensing and simplified procedures.

The SCI decisions showcase the government’s commitment to enhancing Egypt’s business environment and increasing its appeal to investors, reflecting the dedication of the political leadership in promoting investment and removing obstacles, Sherif Fahmi, chief operating officer of N Gage Group, a government relations and business lobbying firm, told Al-Ahram Weekly.

Madbouli said consultations had shown that the main challenges facing the business community include setting up companies, securing industrial land, and acquiring the necessary permits. The SCI’s decisions address these obstacles, as well as reducing import procedures and financial burdens faced by investors. They also seek to strengthen the legal framework surrounding commercial disputes and contract enforcement, thereby enhancing investor protection and safeguarding property rights.

By providing incentives to improve the investment environment, the decisions underscore government commitment to moving forward with the implementation of the State Ownership Policy Document, approved in December 2022, which aims to increase private sector participation in the economy to 65 per cent of investments within three years. The government is also hoping the private sector will help boost exports to $100 billion. Currently, only one per cent of private sector entities export, Madbouli said during the press conference.

The State Ownership Policy Document also sets out government plans to reduce its involvement in the economy via public share offerings, stake sales to strategic investors and an expansion of public-private partnerships.

Fahmi believes the latest measures are important because they address aspects of the investment ecosystem, including reducing bureaucratic burdens, enhancing transparency, providing incentives, protecting property rights and strengthening legal frameworks, that had previously deterred investors. He singles out decisions related to taxation, including banning any state agency from imposing regulations that add financial or administrative burdens on projects subject to the Investment Law, for particular praise.

“The commitment to announcing the state’s tax policy document for the upcoming five years provides clarity and stability in tax legislation, enabling investors to analyse their respective costs and profits and make informed decisions,” he said. Other key decisions that will aid the private sector include speedier issuing of licences and regulations allowing companies to be set up within 10 days.

Fahmi also lauded the intention to create a single online platform for project establishment, operation, and settlement under the supervision of the General Authority for Investment and Free Zones (GAFI) in collaboration with the relevant authorities. He stressed, however, that investors require more clarity on the approved decisions, especially proposed amendments to the executive regulations of the Investment Law 72/2017 and the E-Signature Law 15/2004, and changes to the Importers’ Registry Law 7/2017.

While Ziad Bahaa-Eldin, a former deputy to the prime minister and economic and legal expert, said the wide-ranging decisions send the message Egypt is keen to support investment, he cautioned that they “do not address the most pressing investment impediments which are the unstable forex market, the difficulties investors face in importing machinery, raw materials and repaying their dues abroad, and high interest rates which make borrowing to start a new business or expand existing activities very costly.”

Writing in Al-Masry Al-Youm, Bahaa-Eldin questioned the new structure of the SIC. While previously it included 11 state officials and two representatives of the private sector, it now includes 19 state representatives but just two more from the private sector. “Does this reflect the partnerships and openness to the private sector being foreseen,” he asked.

Magdi Ghazi, a former head of the Industrial Development Authority, shares Bahaa-Eldin’s reservations, arguing the private sector should have been better represented because its representatives “can pinpoint the problems the sector faces”.

While commending the new SCI incentives, Fahmi says their impact and effectiveness will lie in how successfully they are implemented.

“We have a lot of regulations that already cover the industrial sector and we would be in a totally different economic situation had they been implemented rather than waiting for new ones to be discussed, approved, and implemented,” argues Ghazi. He cited the example of the government’s regulations on industrial licences adopted in 2017.

“Had we implemented them there would have been no need for golden licences. We would have saved a lot of time and attracted a lot of investors. We excel in new regulations and incentives, but we fail to implement them. We need qualified independent cadres to apply these decisions.”

Golden licences were introduced by the government to speed the process for companies to begin operating in Egypt, bypassing the need for approvals from multiple government bodies.

Ghazi is optimistic that this time the decisions will be applied. The council is presided over by the president so its decisions will be enforced within a fixed timeframe, he said. The president has instructed the council to set a strict timeline and specify the parties responsible for implementation.

The pressing economic conditions that Egypt currently faces also mean there is no room for backsliding on implementation. The government has already taken steps to improve the investment environment, facilitating land allocation for manufacturing projects, expediting the work of the dispute settlement committee and supporting industries by offering lower interest rates on their loans.

Fahmi offered suggestions for additional privileges, including offering industrial lands at reduced prices and granting tax exemptions for a period of 10 years to foreign investors. He also said there was a growing consensus on the importance of the council intervening in matters relating to core industrial operations, including facilitating the import of raw materials which are vital for production and meeting export agreements, and reducing production costs and enhancing competitiveness by eliminating customs duties on imported inputs and providing incentives for technology-intensive components.

 

---

* A version of this article appears in print in the 25 May, 2023 edition of Al-Ahram Weekly