Egypt passes its new Investment Law, but investors believe that investment is not about new laws…
It is an open secret that investors, local and foreign, in Egypt face not a few hurdles in the course of conducting their businesses. Notorious among these hurdles is the mind-boggling red tape and the maze of laws and regulations that moreover were liable to unexpected changes, to say nothing of rampant corruption. Yet the market was sufficiently attractive for investors to ride out these hurdles, and Egypt saw robust growth rates of 7 – 8 per cent. That is, until the Arab Spring in 2011. The turmoil and unrest that followed resulted in a nosedive for the economy. Even when in July 2013 Egyptians succeeded in overthrowing the oppressive Muslim Brotherhood regime that came in the wake of the Arab Spring, and in establishing a secular State in its place, Islamist terrorism viciously hit Egypt from inside and outside its borders. All this was not kind to the economy. Now the country is on a steady path of economic reform which earned it the praise of the International Monetary Fund as well as many international economy monitors, and is trying hard to win back investors, local and foreign.
Where are those bylaws?
In an attempt to foster confidence in Egypt’s investment climate, Egyptian lawmakers passed a new Investment Law a few weeks ago. Its executive bylaws are not yet out, however; the law stipulates the bylaws should be issued in the space of 90 days after the law is passed.
Watani talked to a number of businessmen about how they saw the new law.
Businessman and industrialist Yehia al-Zananiri said that the law was good enough, but that everything hinges on the manner in which it is applied. “We thus wait for its executive bylaws,” Mr Zananiri said. “Until then, the law cannot be properly assessed. In a recent televised interview with Egypt’s former Finance Minister Youssef Boutros-Ghali who was the mastermind behind Egypt’s pre-Arab Spring spectacular economic growth, but who is now outside the country, Mr Boutors-Ghali said that the success he achieved had not required any new laws. It’s not the laws as such that help to achieve success, but the manner in which they are applied. So we need those executive bylaws as soon as can be.
“In general, however, the passage of the law is a good step towards improving the investment climate and facilitating procedures.”
Needed: a welcoming climate
Financier Fouad Shaker told Watani that investment is all about the general climate not about laws. “The new law took too long to be passed and this in itself aroused controversy. Why did it take so long? Was there bureaucratic resistance to ameliorating the investment climate? If this was the case, the law would be no use. Many things should change for investors to come.
“We must not overlook the fact that Egypt is the subject of tough, albeit subtle, attacks by the international media on the political and economic levels. This effectively drives away investors. We must have a powerful media to counter the negative image promoted by the international media, and to highlight that Egypt is now stable and open to investors, with attractive tax exemptions and other benefits to offer.”
Industrialist Adel Gazarin told Watani that without attractive benefits, no foreign investors will come. Saudi Arabia offers investors the land to build projects upon at attractive, reduced prices. We ought to do the same, he said. They should also be able to get loans at low interest rates, and should be granted sufficient guarantees that their problems would be resolved in case of trouble. If all this is secured, we need no new laws, he said.
Ali Tawfiq, whose business deals in vehicle spare parts, sounded worries as to whether all investors were equal. “Are foreign and Egyptian investors granted the same benefits?” Mr Tawfiq asked. “Are there fair rules that apply equally to all investors? Does the law guarantee fair competition between investors and sovereign bodies such as the Armed Forces’ industrial sector for instance? Does the new law specify any field from which foreign investment is excluded?”
Rateb Rageh, Vice Dean of Beni Sweif University’s Faculty of Law, said that the new investment law caters to the current circumstances where Egypt faces the difficult situation of having to fight terrorism and at the same time attract investment. “With this in mind,” he said, “the new law is better than the previous one in that it focuses on making the investment climate more stable and welcoming, and on providing investors with much-needed incentives.” We don’t need new laws as such, he insisted, quite the opposite; we need a better business climate which the law secures.
As for the delay in passage of the executive bylaws, Dr Rageh said that these include many details and interpretations, so it is normal they take time for drafting and revision. “They should be out, however, before 90 days on the passage of the law.”
The provisions of the new investment law apply to local and foreign investment regardless of its size, and according to the internal investment system, investment zones system, or free zone system. The law does not contradict any benefits, tax exemptions, or other guarantees and incentives provided to companies and establishments existing at the time of applying the law. The terms of the law do not contradict the 1991 law on State property, the 2002 law of Special Economic Zones, or the 2012 regarding the Integrated Development of Sinai Peninsula. Also the terms of the new law do not contradict the conditions for granting approvals and permits.
Joint-stock companies are exempted from the terms of the 1958 law that regulates hiring employees, also from the terms of the 1973 law that relate to electing workers’ representatives to the boards of directors of public sector units, joint venture companies, associations and private institutions. The internal policy of a company stipulates the manner of labour participation in management.
Disputes resulting from the application of the terms of this law shall be exempted from compliance with the terms of Law 7 / 2000 regarding the establishment of conciliation committees in cases of disputes with State ministries and public bodies.
28 June 2017