Cairo- Decypha: After more than two years of drafting by the Egyptian government, the parliament has approved on 7 May the long-awaited new Investment Law, to be one of the most prominent legislative milestones of 2017.
The idea of a new investment law had emerged in 2014, and it was due to be issued before the Egypt Economic Development Conference, which took place in March 2015 in Sharm El Sheikh. However, it was amended several times, to come at a final form two weeks ago.
Offering incentives for investors, the new law limits bureaucracy procedures facing businesses and industries and targets attracting foreign investments to Egypt.
Promising to pay back 50% of what the investors pay for obtaining land if production started within two years of acquisition date, the investment law shoots for attaining a large value of FDI, which has recorded $4.3 billion in the first half of FY2016/17, marking a 39% year-on-year increase, according to a statement by the country’s Investment Minister.
In more incentives, the investment law also provides investors a 50% discount in case they invested in underdeveloped areas, participating in developing infrastructure and utilities for their projects. Additionally, to boost investment land in areas seemed crucial for the country’s economic strategy will be offered to investors for free. Furthermore, the law has allowed up to 20% of foreign labour in projects.
Expected to be effective after one month of its issue, Minister of Investment, Sahar Nasr, said in an official statements that the executive regulations, which will be prepared in coordination with all economic ministries, will determine methods and tools of implementing the law.
Law Effectiveness
Under the new law, a Single Window concept will be introduced, where an authorized employee will have the legal right to grant business or activity expansion licenses.
The government will ensure the effectiveness of the law through offering investors automated surveys where they can evaluate the authorized employee, who will approve the license, said CEO of the General Authority for Investment and Free Zones (GAFI), Mohamed Khodeir, in a televised interview in May.
Explaining the Single Window concept, Khodeir said it will only work in cases of founding new companies, allocating lands, obtaining business licenses and issuing licenses for factories.
According to the law, investors will find out investment opportunities through GAFI’s investment map, to know the available land plots.
"These incentives will give a push to investors to come to Egypt," Mohamed Abu Basha, an Economist at EFG Hermes told Reuters earlier this month.
Land incentives and the cost of establishing a project are the main concerns of investors who are willing to pump money into the country, Reham El-Desouki, an Economist at Arqaam Capital told Reuters as well.
Controversy
When the law was under discussion by the parliament, members of parliament (MPs) disagreed on a specific article, which addressed restoring the private sector free zones, as these tax and custom-exempt areas reduce potential revenue for the government.
Causing a couple of days delay in the law approval, the latest amendments stipulated that the new zones will only be approved by a cabinet decree, Deputy Finance Minister for tax affairs, Amr El Monayer told local media.
Despite the fact that the parliament has changed 75% of the original law submitted by the government, according to Minister of the Legislative Affairs, Omar Marawan, MPs disagreed on some other items even after its issuance.
After investors got the business approval from the Single Window, concerned authorities will have to issue a license for them, MP Medhat El Sherif told local TV channel, adding that GAFI will issue the business license if the concerned authorities did not approve the activity within 60 days after the Single Window approval.
Disagreeing on that, head of the parliament’s housing committee, Alaa Waly, said that the Single Window “cancels” the job of other authorities, like the New Urban Communities Authority (NUCA), adding: “I’m against this window because the investor will have to get back to the concerned authorities anyways,” he said.
Meanwhile, MP Alaa Abdel Moneim said that the new law will not bring foreign investments, “it only offers incentives for local investors.”
Businessmen Views
Majority of businessmen and investors are positive about the potential of the law in moving the calm waters. Chairman of Al Ahly for Real Estate Development and former Head of Egyptian Businessmen Association, Hussein Sabbour, said that the law achieved its main goal, which was adopting the Single Window, adding that if implemented properly, it will cause a boom in investments, he told MBC Masr TV channel.
To be effective, the law should be accompanied by amendments in the Companies, Bankruptcy and Labour Laws, Sabbour said, highlighting that it facilitated the procedures of exiting the market.
Sabbour’s negative take was that the law has a large number of items, which he said might be hard for investors to understand, adding that it needs three years to have its impact felt and to judge its success.
Meanwhile, Chairman of real estate company Shobokshi Group, Hassan Shobokshi, told local media on 8 May that he is optimistic about the new law, adding: “I also think Minister of Investment Sahar Nasr is one of the most active ministers in the region and she is always in contact with investors to learn their requirements,” he said.
Other businessmen were not welcoming the law. CEO of Egyptian-Kuwait Holding, Moataz Al Alfi, commented that the old investment law No.8/1997 was better than the new one. “It is better for each sector it have its own authority…now if I want to expand my factory, who will I go to; GAFI or the industry ministry,” he asked.
The new law means the government is still have a lot of work to do, in order to introduce the new measures stated by the law and implement it effectively. “The law itself is not enough,” minister of investment Sahar Nasr during a meeting with investors and businessmen last month.
The authorized employees, who will grant approvals, at the Single Window are yet to receive intensive training to be equipped for that role, according to GAFI.
By Doaa Farid
