1. Openness To, and Restrictions Upon, Foreign Investment
Policies toward Foreign Direct Investment
The flotation of the EGP in November 2016 and the restart of Egypt’s interbank foreign exchange FX market as part of the IMF program was a first step in restoring investor confidence that immediately attracted increased portfolio investment and should lead to increased FDI over the long term. The stable macro-economic outlook has allowed Egypt to focus on structural reforms to support strong economic growth. The next phase of reform has included a new investment law, an industrial licensing law, a bankruptcy law and other reforms to reduce regulatory overhang and improve the ease of doing business. Successful implementation of these reforms could give greater confidence to foreign investors. Egypt’s government has announced plans to further improve its business climate through investment promotion, facilitation, efficient business services, and advocacy of more investor friendly policies.
With a few exceptions, Egypt does not legally discriminate between Egyptian nationals and foreigners in the formation and operation of private companies. The 1997 Investment Incentives Law was designed to encourage domestic and foreign investment in targeted economic sectors and to promote decentralization of industry away from the Nile Valley. The law allows 100 percent foreign ownership of investment projects and guarantees the right to remit income earned in Egypt and to repatriate capital.
The new Tenders Law No. 182 of 2018 requires the government to consider both price and best value in awarding contracts and to issue an explanation following refusal of a bid. Nevertheless, the law contains preferences for Egyptian domestic contractors, who are accorded priority if their bids do not exceed the lowest foreign bid by more than 15 percent. Additionally the new law includes a wide range of reforms, such as establishing new rules in the contracting process on good governance, sustainable development goals, transparency, competition, equal opportunity, and an improved business environment. Egyptian small- and medium-sized enterprises (SMEs) have the right under the new law to obtain up to 20 percent annually of the Government’s contracts. This aims to achieve a positive return on investment of public expenditures, along with controls to combat corruption.
The Capital Markets Law (Law 95 of 1992) and its amendments, including the most recent in February 2018, and related regulations govern Egypt’s capital markets. Foreign investors are permitted to buy shares on the Egyptian Stock Exchange on the same basis as local investors.
The General Authority for Investment and Free Zones (GAFI) is an affiliate of the Ministry of Investment and International Cooperation (MIIC) and the principal government body regulating and facilitating investment in Egypt. ”The Investor Service Center (ISC)” is an administrative unit established within GAFI that provides ”one-stop-shop” services, easing the way for global investors looking for opportunities presented by Egypt’s domestic economy and the nation’s competitive advantages as an export hub for Europe, the Arab world, and Africa.
ISC provides a full start-to-end service to investors, including assistance related to company incorporation, establishment of company branches, approval of minutes of Board of Directors and General Assemblies, increase of capital, change of activity, liquidation procedures, and other corporate-related matters. The Center also aims to issue licenses, approvals, and permits required for investment activities, within 60 days from the date of request submissions. Other services GAFI provides include:
- Advice and support to help in the evaluation of Egypt as a potential investment location;
- Identification of suitable locations and site selection options within Egypt;
- Assistance in identifying suitable Egyptian partners;
- Aftercare and dispute settlement services.
ISC Branches are expected to be established in all Egyptian governorates. Egypt maintains ongoing communication with investors through formal business roundtables, investment promotion events (conferences and seminars), and one-on-one investment meetings
Limits on Foreign Control and Right to Private Ownership and Establishment
The Egyptian Companies Law does not set any limitation on the number of foreigners, neither as shareholders nor as managers or board members, except for Limited Liability Companies where the only restriction is that one of the managers should be an Egyptian national. In addition, companies are required to obtain a commercial and tax license, and pass a security clearance process. Companies are able to operate while undergoing the often lengthy security screening process. Nevertheless, if the firm is rejected, it must cease operations and undergo a lengthy appeals process. Businesses have cited instances where Egyptian clients were hesitant to conclude long term business contracts with foreign firms that have yet to receive a security clearance. They have also expressed concern about seemingly arbitrary refusals, a lack of explanation when a security clearance is not issued, and the lengthy appeals process. Although the GoE has made progress in streamlining the business registration process at GAFI, its apparent overall lack of familiarity or experience of Egyptians working closely with foreign nationals has sometimes led to inconsistent and questionable treatment by banks and government officials, thus, delaying registration.
Sector-specific limitations to investment include restrictions on foreign shareholding of companies owning lands in the Sinai Peninsula. Likewise, the Import-Export Law requires companies wishing to register in the Import Registry to be 51 percent owned and managed by Egyptians. In 2016, the Ministry of Trade prepared an amendment to the law allowing the registration of importing companies owned by foreign shareholders, but, as of April 2019, the law had not yet been submitted to Parliament. Nevertheless, the new Investment Law does allow wholly foreign companies, which invest in Egypt to import goods and materials.
Land/Real Estate Law 15 of 1963 explicitly prohibits foreign individual or corporation ownership of agricultural land (defined as traditional agricultural land in the Nile Valley, Delta and Oases). The ownership of land by foreigners is governed by three laws: Law No. 15 of 1963, Law No. 143 of 1981, and Law No. 230 of 1996. Law No. 15 stipulates that no foreigners, whether natural or juristic persons, may acquire agricultural land. Law No. 143 governs the acquisition and ownership of desert land. Certain limits are placed on the number of feddans (one feddan is equal to approximately one hectare) that may be owned by individuals, families, cooperatives, partnerships and corporations. Partnerships are permitted to own 10,000 feddans. Joint stock companies are permitted to own 50,000 feddans.
Under Law No. 230 non-Egyptians are allowed to own real estate (vacant or built) only under the following conditions:
- Ownership is limited to two real estate properties in Egypt that serve as accommodation for the owner and his family (spouses and minors), in addition to the right to own real estate needed for activities licensed by the Egyptian Government.
- The area of each real estate property does not exceed 4,000 m².
- The real estate is not considered a historical site.
Exemption from the first and second conditions is subject to the approval of the Prime Minister. Ownership in tourist areas and new communities is subject to conditions established by the Cabinet of Ministers. Non-Egyptians owning vacant real estate in Egypt must build within a period of five years from the date their ownership is registered by a notary public. Non-Egyptians cannot sell their real estate for five years after registration of ownership, unless the consent of the Prime Minister for an exemption is obtained.
Other Investment Policy Reviews
The Organization for Economic Cooperation and Development (OECD) signed a declaration with Egypt on International Investment and Multinational Enterprises on July 11, 2007, at which time Egypt became the first Arab and African country to sign the OECD Declaration, marking a new stage in Egypt’s drive to attract more FDI.
The United Nations Conference of Trade Development (UNCTAD) signed in an Investment Policy Review with Egypt in June 1999 that recognized the efforts that the GoE had made to establish an adequate investment regulatory framework and improve the business environment.
The UNCTAD Review pointed out that overcoming the limited involvement of multinational companies in manufacturing sectors with export potential such as food, garments, and electronics, would require policy emphasis on infrastructure investments, promotion of clusters of related enterprises, and self-sustaining development. Since the publication of its policy review on Egypt, UNCTAD has assisted the government with training diplomats on investment trends, policies, and promotion, and staff on FDI statistics.
GAFI’s new ISC was launched in February 2018 at a ceremony attended by President Sisi. The ISC provides a full start-to-end service to the investor as described above. The new Investment Law also introduces ”Ratification Offices” to facilitate the obtaining of necessary approvals, permits, and licenses within 10 days of issuing a Ratification Certificate.
Investors may fulfill the technical requirements of obtaining the required licenses through these Ratification Offices, directly through the concerned authority, or through its representatives at the Investment Window at GAFI. The Investor Service Center is required to issue licenses within 60 days from submission. Companies can also register online. MIIC and GAFI have also launched e-establishment, e-signature, and e-payment services to facilitate establishing companies.
Egypt promotes and incentivizes outward investment. According to the Egyptian government’s FDI Markets database for the period from January 2003 to February 2019, outward investment indicated that Egyptian companies implemented 241 Egyptian FDI projects. The estimated total value of these projects, which employed about 48,204 workers, was USD 23.86 billion.
The following countries received the largest amount of Egyptian outward investment in terms of total project value: United Arab Emirates (UAE), Saudi Arabia, Algeria, Jordan, Germany, Kenya, Libya, Morocco, Sudan, and Ethiopia. The UAE, Saudi Arabia and Algeria accounted for about 28.6 percent of the total amount.
Elsewedy Electric (Elsewedy Cables) was the largest Egyptian company investing abroad, implementing 19 projects with a total investment estimated to be USD 2.1 billion.
Egypt does not restrict domestic investors from investing abroad.