When the Senate approved amendments to the 2017 investment law two weeks ago many senators complained the changes did not contain enough incentives to boost the flow of foreign investments into Egypt.
The Senate’s Economic and Financial Affairs Committee this week began holding hearing sessions on a study “Foreign Direct Investments in Egypt: Obstacles and Incentives”. Following the hearings, the committee will prepare a report to be debated in an upcoming plenary session, said Senate Speaker Abdel-Wahab Abdel-Razek.
The study, prepared by Yasser Zaki, a member of Mostaqbal Watan and deputy chairman of the Senate’s Financial and Economic Affairs Committee, “reflects the Senate’s vision for a future strategy not only for foreign investments but for investments in Egypt in general”.
In line with the State Ownership Policy Document and the recommendations of the 23-25 October Economic Conference, the strategy will aim to lay out a roadmap that raises the competitiveness of the Egyptian economy by doubling foreign and local private investments.
The war in Ukraine has underlined the importance of foreign direct investments (FDIs) in cushioning Egypt against economic blows, said the report. It cites 16 factors that affect the flow of FDIs to Egypt, including: “bureaucracy and red-tape; corruption; the absence of tax and custom incentives; gaps in digital government services; a lack of transparency and accountability; weak intellectual property protection; trade barriers; lack of non-tax incentives; inadequate watchdog institutions; high inflation rates and instability of the foreign exchange market; lack of raw materials and production inputs; shortages of skilled labour and transport facilities; a weak infrastructure; lack of political and security stability and inconsistent monetary policies.”
The study concludes that Egypt desperately needs to simplify licensing measures for foreign businesses, registering property and paying taxes. It cites a number of US companies saying that corruption is a major obstacle to their increasing investments in Egypt, and recommends that “Egypt reinforces transparency, accountability and integrity.”
Egypt ranked 117 of 180 countries in Transparency International’s Corruption Index for 2021, down from 106 in 2019.
Egypt launched an anti-corruption strategy eight years ago. The first stage covered 2014-2018. The second stage, covering 2019-22, aimed to improve public and administrative services, transparency and law enforcement.
According to the study, FDIs take three forms: cross border mergers and acquisitions; new greenfield projects and international project finance.
“The last few years have seen a preference for international project finance based on dividing risks among several investors,” said the study.
“It has been the dominant form of direct foreign investment in Africa in recent years, attracting $26 million to the renewable energy sector and $56 billion to non-renewable energy sectors.”
The 190-page study is divided into 10 chapters, of which the second and third deal with the factors affecting the flow of FDIs to Egypt and international investment trends.
Elsewhere, the report reviews the future of FDIs in Egypt, outlines existing opportunities and compares Egypt’s success in attracting FDIs with a number of emerging markets, including Saudia Arabia, the UAE, Turkey, Singapore, and Malaysia.
*A version of this article appears in print in the 8 December, 2022 edition of Al-Ahram Weekly.