Viewpoint: Mohamad Talaat
Egypt has undergone a series of dramatic political developments, leaving the country with various economic challenges to address. While the uprisings lifted the country from stagnation, they also interrupted commerce, leading to a prolonged closure of the stock market and a marked drop in tourism.
In recent decades, the focus has been on providing greater incentives for investment. The Companies Law of 1981 opened the door to domestic and foreign investors, removing the hindering effect of prior statutes and reviving free enterprise. One of the most important features of encouraging investment is the allowance for 100% foreign ownership of legal entities in Egypt, with the exception of companies in strategic areas such as the Sinai Peninsula .
Since the early 1990s the financial system and its three main segments – capital markets, banking and insurance – have undergone legislative reform to encourage greater competition. The government is focused on reactivating the country’s bond market, and in particular, 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 exchange rate and encourage investment and tourism in the country. This has shown positive signs, but has yet to materialise in terms of foreign direct investment and the resumption of tourism flow.
In addition, the government has presented a bill for a new Investment Law. However, my personal position is that the government should instead consider amending and reforming the current laws and regulations for the purpose of providing a conducive environment to all types and categories of investment. The concept of an investment law being an incentive, ad hoc law has not proved successful in encouraging entrepreneurs to invest in Egypt. The emphasis has to be on creating an environment with less of the bureaucracy and red tape that has obstructed investment for years. I adhere to the position that the investment law is an insufficient basis for entrepreneurs to rely on for the purposes of investing in the country.
Earlier efforts were 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 segments. As a result, several financial intermediaries representing large international financial institutions are now operating in Egypt. Additionally, the government introduced public-private partnerships (PPPs) through the enactment of the PPP 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 affiliate companies. Furthermore, the shares of public subsidiary companies can be traded on the Egyptian stock exchange – a measure that many view as central to facilitating the country’s privatisation programme.
Reforms to Egypt’s privatisation laws have successfully increased local and foreign investment in the public sector. Unfortunately, privatisation is experiencing a setback due to the de-privatisation of some firms in response to recent judgments by the Council of State. In an attempt to surmount such judgments, the legislature issued a statute confirming the right to file cases to the contractual parties. The statue is pending a decision from the Supreme Constitutional Court.
Trade has played a significant role in Egypt’s development, and the country has progressively liberalised its economy, with particular efforts being made to reduce administrative and other non-tariff trade barriers. Alongside this, Egypt has been engaged in legislative reforms to bring domestic laws into compliance with its international and regional agreements. Therefore, we can say that the years leading to the popular uprisings were a period of growth, and that the current government maintains a legal framework conducive to reform.
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