Egypt trying hard to open up to foreign investment

By Hisham Abu Bakr Metwally Source:Global Times Published: 2017/6/24 0:49:19

Illustration: Peter C. Espina/GT

Currently, Egypt faces challenges including terrorism and a decline in tourism revenues, as well as a significant decline in reserves of foreign currency and a large increase in the trade deficit. So the Egyptian government has had to take steps to overcome these chronic problems.

The Egyptian government started to take many hard decisions years ago, and at the same time was preparing a new investment law to encourage foreign investment.

The Central Bank of Egypt liberalized the exchange rate of the Egyptian pound against the US dollar, which led to the devaluation of the pound by more than 50 percent, pushing inflation to rise sharply, reaching 32 percent during April 2017. Sharply rising prices not only caused severe pressure for Egyptian families but also pushed unemployment rates to a high level, so the new investment law was a must to attract foreign investment, which Egypt desperately needs at this stage to save the economy and increase growth rates and thus provide employment opportunities and increase income rates for citizens.

In March 2015, Egypt held an economic development conference in Sharm El Sheikh, aimed at attracting foreign investors. But the outcome of the event was not as expected. International investors still have serious concerns about Egyptian bureaucracy, including land allotment difficulties, the long period for issuing licenses and the multiple ministries to be dealt with, along with various other concerns. Egyptian President Abdel Fattah al-Sisi ordered action on the new investment law and in May 2017 the Egyptian parliament finally approved the new guarantees and investment incentives law.

With the new law, first, the investment approval procedure will be greatly shortened. Before, it could take about three months, but now the General Authority for Investment is obliged to decide on the application within just one working day.

Second, full investment protection regulations are in place. For example, as for the guarantees and incentives for investment, the Egyptian State undertakes to treat foreign investors with the same treatment as Egyptian investors and to offer protection against nationalization and expropriation of property except for the public benefit and in exchange for compensation. The law also protects investment projects from arbitrary decisions such as revocation of licenses issued, or decisions that add financial or procedural burdens or impose fees.

Third, investors will have more flexibility for importing or exporting things they need. This will cover raw materials, production requirements, machinery, spare parts and means of transportation appropriate to the nature of the project without the need for registration.

Fourth, the establishment of the Investors' Services Center will offer assistance. The center can provide establishment services for investing companies, such as help with the necessary approvals, permits and licenses.

The new law will undoubtedly improve the country's investment climate and thus promote the link between Egypt and China's Belt and Road (B&R) initiative. Chinese President Xi Jinping visited Cairo in 2016 and during his visit President Abdel Fattah al-Sisi approved Egyptian participation in the initiative.

Egypt has huge potential and competitive advantages for economic development. The new Egyptian policies will have a positive impact on the B&R initiative, and can aid trade with Arab countries. China aims for its trade with Africa to reach $400 billion by 2020, and the new investment law will help with this as well.

In accordance with the principles of mutual complementarity and mutual benefit, China is promoting in-depth cooperation with other countries along the B&R route in new-generation information technology, biotechnology, new-energy technology, new materials and other emerging industries, as well as establishing entrepreneurial and investment cooperation mechanisms. Connectivity projects for the initiative will help align and coordinate the development strategies with Egypt under the B&R, tap market potential in this region, promote investment and consumption, create demand and job opportunities, enhance people-to-people and cultural exchanges among the peoples of the relevant countries, and enable them to understand, trust and respect each other and live in harmony, peace and prosperity.

The author is the first economist researcher at the Central Department for Export & Import Policy under the Egyptian Ministry of Foreign Trade and Industry.


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