Viewpoint: Mohamad Talaat
Due to the political climate, Egypt has faced a number of economic challenges. While the uprisings have brought the country out of stagnation, they have also interrupted commerce, which had led to a prolonged closure of the stock market as well as a drop in some of the country’s main industries, such as tourism.
In recent decades, however, the focus has been on incentivising investment. The Companies Law No. 159 of 1981 and the Investment Law No. 72 of 2017 have opened the door to domestic and foreign investors by lifting many of the restrictions that were previously in place, which in turn has revived free enterprise. The fact that foreigners can now obtain full ownership of legal entities in Egypt – with the exception of companies in certain strategic areas, such as those in the Sinai Peninsula – has also encouraged investment.
Furthermore, Law No. 7 of 2017, an amendment to the Importers Register, allows foreigners to own 49% of an importing company. This is considered to be a landmark reform as it facilitates the liberalisation of the economy. Parliament, by virtue of a newly passed Companies Law No. 4 of 2018, now allows for the setting up of a sole-owned entity. This is expected to encourage investment in Egypt as entrepreneurs will no longer be compelled to have more than one shareholder. Furthermore, the Industrial Permits Act has been modified to facilitate and expedite the issuance of permits.
Since the early 1990s the financial system and its three main segments – capital markets, banking and insurance – have undergone legislative reform to encourage competition. The authorities are focused on reactivating the bond market, particularly by building crucial links with international financial institutions. In an attempt to reform the economy, the government floated the Egyptian currency in 2016 in a bid to unify the official exchange rate with that of the unofficial market, which resulted in the depreciation of the currency. As such, the currency float has encouraged both investment and tourism. This has shown positive signs but has yet to materialise in terms of foreign direct investment and the resumption of tourism flows.
Earlier efforts were also made to divest state ownership of joint ventures, public banks and insurance firms, as well as increase private sector involvement in the financial sector. Full private ownership – including by foreigners – is permitted in the banking and insurance sectors. As a result, several financial intermediaries representing large international financial institutions are now operating in Egypt. Additionally, the government introduced public-private partnerships through the enactment of Law No. 67 of 2010.
In terms of privatisation, the Public Enterprise Law No. 203 of 1991 paved the way for transforming public sector organisations and the companies they control into holding firms and subsidiaries, or into affiliate companies. Furthermore, the shares of public subsidiary companies can now be traded on the Egyptian Exchange, which many view as central to privatisation.
Reforms to privatisation laws have increased local and foreign investment in the public sector. Unfortunately, there have been setbacks due to the de-privatisation of some firms as a result of recent judgments by the Council of State. In response, the legislature issued a statute confirming the right to file cases against the contractual parties, which is pending a decision from the Supreme Constitutional Court.
Trade has played a significant role in domestic development, given that the country has liberalised its economy by reducing administrative and non-tariff trade barriers. Egypt has also reformed its domestic laws to comply with international and regional agreements. An excellent example of these efforts to encourage foreign investment is the Africa 2018 – Business for Africa and the World conference, held in Sharm El Sheikh in December 2018. This promoted intra-African trade, investment and cross-border collaboration. It also provided a platform for government and private sector leaders to discuss various business issues in Africa.
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