Reforms under way to improve Egypt's business environment

 

The implementation of Egypt’s new investment law in 2017 was broadly welcomed as an important advance in the country’s bid to make itself more attractive to domestic and foreign capital. However, the six-place decline of Egypt in the World Bank’s “Doing Business Report 2018” is a concern for a government keen to kick-start private sector growth and demonstrate that the country is open for business.

Official reaction to the report, which measures performance in areas such as starting a business, dealing with permits, paying taxes and getting electricity, included criticism of the way the data is formulated, as well as accusations that it did not properly take into account Egypt’s recent steps to make the country a more attractive destination for capital. However, the government was also quick to issue a number of policy announcements in the days and weeks after the publication of the World Bank’s report, many of which – if fully implemented – will bring immediate benefits to the country’s business community.

Short-Term Advances

Tarek Kabil, the minister of trade and industry, for example, announced in November 2017 that the government will review the procedures at Egypt’s ports to produce a more streamlined system for import and export activity. In the Doing Business report Egypt was ranked 170th out of 190 assessed economies in the area of trading across borders, and therefore any reform of the processes associated with transport, clearance, inspections and port handling have the potential to make a significant difference to the country’s overall ranking.

Kabil revealed that a committee has already been established to study the current framework and report on areas where the amount of paperwork required to transfer goods through the country’s ports might be reduced. In addition, the reform effort will also include the creation of a central office at all Egyptian ports, where businesses can obtain the necessary shipping, import and export licenses from a single location.

Other areas of government also reacted in 2017 to the World Bank’s latest findings. Amr Al Monayer, the deputy minister of finance for tax policy, who had earlier taken issue with the Doing Business survey’s ability to accurately assess the efficacy of Egypt’s recent tax reforms, made an important policy announcement in the wake of the report’s publication. Speaking a day before the Ministry of Trade and Industry’s communication, Al Monayer revealed that the government would make a number of changes to the taxation collection framework in a bid to reduce the number of hours it takes businesses to pay taxes – an area where Egypt ranked 167th globally.

Looking Ahead

The areas where Egypt performed poorly in the World Bank’s recent report, such as the legal frameworks and bureaucracy surrounding paying taxes, trading across borders and enforcing contracts, require a long-term process of reform – not only of legislation but also the institutions which apply it. Some of the key elements of this reform process, however, are already in the pipeline. In terms of major changes to the legislative framework, the long-bankruptcy law, first approved by the Cabinet in January 2017, is high on the agenda. The legislation, which was passed by the Parliament in January 2018, aims to close a gap in the legislative framework which has meant that winding down a distressed company usually resulted in a costly and time-consuming court process. The new law, the first dedicated bankruptcy legislation in Egypt, will minimise the use of courts in bankruptcy scenarios, making it easier for distressed companies to resolve their affairs. It will also abolish imprisonment in cases of bankruptcy.

There is clearly much work to be done if the country’s business climate is to be upgraded to the extent which the government would wish. However, the speed of the official response to the systemic vulnerabilities revealed in 2017 is an indication of the government’s determination to achieve its ambitions.

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The Report: Egypt 2018

Economy chapter from The Report: Egypt 2018

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