Viewpoint: Mohamad Talaat
Egypt has experienced several dramatic political developments, leaving it with some economic challenges. While the uprisings lifted the country from stagnation, they also interrupted commerce, leading to a prolonged closure of the stock market and a drop in tourism.
In recent decades the focus has been on incentivising investment. The Companies Law No. 159 of 1981 and the Investment Law No. 72 of 2017 opened the door to domestic and foreign investors, lifting restrictions 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 certain strategic areas such as the Sinai Peninsula.
In addition, Law No. 7 of 2017, an amendment to the Importers Register, allows foreigners to own 49% of a company. This is a landmark reform towards the liberalisation of the economy. There is also a bill being debated in Parliament, including the possibility of setting up a sole-owned entity. If approved, it will also induce investment, 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 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.
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 sectors. 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 into affiliate companies. Furthermore, the shares of public subsidiary companies can be traded on the Egyptian stock exchange, which many view as central to privatisation.
Reforms to the privatisation laws have increased local and foreign investment in the public sector. Unfortunately, this is experiencing a setback due to the de-privatisation of some firms in response to recent judgments by the Council of State. In response, the legislature issued a statute confirming the right to file cases to the contractual parties, which is pending a decision from the Supreme Constitutional Court.
Trade has played a significant role in domestic development, and the country has progressively liberalised its economy, with an emphasis on reducing 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 administration maintains a legal framework conducive to reform.
An excellent example of these efforts to encourage foreign investment is the “Africa 2017 – Business for Africa and the World” conference, held in Sharm El Sheikh in December 2017. 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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