Foreign investors have been given top priority in a round of legislative and economic reforms to boost private sector participation in Egypt’s economy.
Amendments to various articles of the country’s laws were announced by Prime Minister Mostafa Madbouly on Wednesday. They are intended to speed up the formation of companies, acquisition of land and issuance of state permits to foreign investors and private sector companies.
The amendments were made following repeated complaints from private sector investors, both Egyptian and foreign, that red tape, variable tax laws and favouritism towards state companies were discouraging them from investing in Egypt, Mr Madbouly said.
Following a Tuesday meeting of the Supreme Council of Investment, a once-dormant government body that was formed in 2017 and reactivated earlier this year, President Abdel Fattah El Sisi, who heads the council, announced that it had agreed on 22 decisions to promote private sector participation in the economy, without revealing details.
Increasing the role of the private sector and reducing the role of state companies in the Egyptian economy was a key condition upon which the International Monetary Fund agreed to give Egypt another round of funding worth $3 billion earlier this year.
The latest amendments include changes to a law stipulating that foreigners could not legally own more than two properties in Egypt, each in a different city. The restrictions on the number of properties they can own has now been lifted.
Lands intended for industrial projects have been set aside and uniformly priced, Mr Madbouly explained, which was also a prior complaint from foreign investors who would be given vastly different quotes.
Additionally, an usufruct option has been initiated for investors who do not want to buy land outright.
Usufruct is a legal right accorded to a person that confers the temporary right to use and derive income or benefit from someone else's property.
Long processing times, both from banks when investors need to set up financial mechanisms to launch companies, and from state agencies for the issuance of permits, have been a hindrance for foreign investment in Egypt, Mr Madbouly said.
Banks have been instructed to process requests from foreign investors instantly and state agencies have been given a maximum of 10 working days to process permits, he said.
In the past, companies could not register on the country’s official importers list unless 51 per cent of their owners were Egyptian nationals. This has now been amended to allow entirely foreign-owned companies to register for a period of 10 years as an importer, Mr Madbouly said.
Foreign investors have also complained that Egyptian tax laws are always subject to change, which makes their costs unpredictable, he said.
To remedy this, the state will, in three months, announce a fixed tax policy for foreign investors that will remain unchanged for between five and 10 years.
Additionally, golden licences, a special kind of permit limited to new companies that operate in fields that the Egyptian government considers strategic or that are undertaking national projects, could be expanded to include others, Mr Madbouly said.
The licence offers incentives, tax breaks and expedited permits if a company meets a set of conditions that include that their funding be entirely from abroad and that they boost Egypt’s exports among many other requirements.
He also said that 20 industrial sectors would be given tax exemptions this year and companies manufacturing green hydrogen rebated up to 55 per cent of their income taxes.
A number of private sector business leaders have said in the past that state companies are shown favouritism, with military companies in particular receiving more tax exemptions and other perks.
Mr Madbouly reaffirmed the government’s prior position that it was not averse to more private sector participation in the economy but that the state had to move in to fill a vacuum in the economy following the 2011 uprising that ousted former president Hosni Mubarak and the crises of Covid-19 and Russia's war in Ukraine.
“We understand why the private sector would be afraid to invest during such trying times. Which is why we moved in at the time to fill that space to lower unemployment,” said Mr Madbouly.
To meet the requirements of the IMF, Egypt last year announced a large-scale state asset sale meant to boost foreign investment.
The initial public offering programme, through which it has pledged to sell at least 32 of its companies to foreign investors, will most likely take longer than anticipated, Mr Madbouly said.
Since many of the companies are owned by different entities in the government, it will take time to determine who is owed what, he added.