Interview: Mohamed Khodeir
What are the drivers behind the recent increase in foreign direct investment (FDI)?
MOHAMED KHODEIR: Egypt’s net FDI has risen by 54.6% since the 2011 revolution, reaching $6.8bn in the fiscal year ending June 30, 2016. As announced by the Central Bank of Egypt, EU investments topped investment inflows in FY 2015/16 with 63.2% of the total – the UK making up 75.6% of the EU share – and Arab countries accounted for 18.3%. This increase follows some fiscal and legislative reforms adopted by Egypt since the beginning of FY 2014-15, and comes during the country’s first period of sustained political stability since the revolution in 2011.
The government put into effect a law that safeguards signed contracts between the government and investors, and it has amended the current investment law to improve the business climate while in the process of promoting a new law. Reforms to the tax regime were introduced by removing distortions to the current tax code, and the energy code now organises the participation of the private sector in power generation and distribution, and also introduces a pricing system. These reforms work together in favour of raising FDI inflows.
What are the biggest challenges that foreign investors face in Egypt today?
KHODEIR: The greatest challenge facing foreign investors in Egypt is the difficulty and length of the investment process. While significant progress has been made in collaboration with the World Bank, efforts are still being directed towards enhancing information disclosure, transparency and accountability to investors, and towards process automation and streamlining to establish a company with the introduction of a new comprehensive online system.
The reduction in licensing time, the automation of property registration and the introduction of the dispute settlement law together with the bankruptcy law – allowing restructuring of insolvent companies and easier exit from the market – will create a more secure and stable investment environment. In addition, finalising the provision of a full database of available land, having an updated nationwide map of land allocation for investment, and activating the one-stop shop for lands registry and permit issuance will drastically simplify these processes for new development projects.
Attention is also being given to the development of an initial public offering programme, to the provision of new investment incentives – particularly in Upper Egypt – and to the creation of new investment zones. This will benefit the broader economy while directing investment towards key areas of interest.
How is Egypt generating foreign interest in its free zones, and why are they beneficial?
KHODEIR: Attracting FDI has an important impact on the national economy. To achieve Egypt’s goals in this area, policies and laws have been developed that provide financial benefits and strengthen the free zones’ infrastructure. The integration and interconnectivity of the zones enables more efficient production and effective services. The aim is to propose future free zones near industrial clusters where the vertical and horizontal coordination in all stages of the production process creates an entire chain of added value from products to services, information, expertise and human resources.
Industrial clusters are crucial for the country’s planned sustainable development. They can play a role in raising economic and social growth rates, optimising exploitation and full operation of state resources, boosting industrial development, attracting local and foreign investment, developing small and medium-sized enterprises, reducing poverty and unemployment, increasing exports and aligning educational curricula with labour market needs.
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