Egypt has recently undergone a series of major political developments, and the country is now facing a number of economic challenges. Just as the revolution brought about fundamental political change and lifted the country from its state of stagnation, it was also a direct cause for interruptions in commercial activity, which led to a prolonged stock market closure and a drop in tourism receipts. In the years leading to the revolution, the general trend in the laws and regulations affecting the investment climate was toward fewer restraints and more incentives for investors.
The Companies Law – in addition to the 1974 Investment Law, which was superseded by subsequent investment laws – was passed during the Sadat administration and is still being implemented. The law opened the door to investors, both domestic and foreign. It re-sparked the free enterprise system domestically and entrepreneurs began flourishing. One of the most important features of the Companies Law is that it allowed for 100% foreign ownership of legal entities in Egypt, excepting a handful of activities.
Since the early 1990s, the financial system, with its three main sectors – capital markets, banking and insurance – has been undergoing ambitious legislative reforms to enhance performance and encourage competition, especially within the private sector. The government is now focused on reactivating the bond market, creating new financial institutions and building links with international financial institutions.
Serious efforts are also being made to divest state ownership of joint ventures, public banks and insurance companies, and to increase private sector involvement in the financial sector. Full private sector ownership, including foreign ownership, has been allowed in the banking and insurance segments. As a result, several financial intermediaries representing international financial institutions are now operating in Egypt.
Related to the relatively recent trend towards privatisation, Public Enterprise Law 203 of 1991 was the first step towards the privatisation of public sector organisations in Egypt. The Public Enterprise Law paved the way toward transforming public sector organisations and the companies they controlled into holding companies and subsidiaries or affiliate companies. Shares of public subsidiary companies may be traded on the stock exchange – a measure that has been considered by many as substantially facilitating Egypt’s privatisation programme. Reforms in Egypt’s privatisation laws have greatly increased local and foreign private investment in the public sector.
To promote and increase private sector involvement in the country’s economic and social development plan, the concept of public-private partnership was introduced through the Public-Private Partnership Law 67 of 2010. In line with the above, trade has played a significant role in Egypt’s economic development. Egypt has considerably liberalised its economy and opened it up to foreign trade. In this context, the country has made significant progress in reducing administrative and other non-tariff barriers to trade.
It goes without saying that there have been numerous misapplications and often bad practices. Egypt however, must look ahead. In the coming years, and for Egypt to minimise the adverse effects and impact that comes in the aftermath of any revolution, it needs to firmly foster foreign investment by continuing to build up a legal framework conducive to achieving sustained economic reform. Egypt needs to amend existing laws or introduce new ones that promote an investor-friendly environment, reduce bureaucracy, introduce additional incentives, and comply with international business standards.
Additionally, the long-shelved Unified Companies Law must be revived and adopted to meet global corporate standards. The enforcement of these new regulations must be fast-tracked to ensure that the goals laid out by the legislation are duly achieved.
These are challenging times, but with a sincere desire to improve, supported by collective efforts of the entire society, we can rise to overcome these difficulties.
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