Interview: Alaa Omar
To what extent has foreign direct investment (FDI) returned to pre-revolution levels?
ALAA OMAR: While FDI is on the rebound it has yet to reach pre-revolution levels. Leading up to the revolution, FDI levels fell precipitously, from $8.1bn in fiscal year 2008/09 to $6.8bn in 2009/10, before dropping to $2.2bn in 2010/11, as the revolution set in. Since then, investments have begun to recover, albeit at a slower pace, with FDI totalling $4.0bn in 2011/12, $3.8bn in 2012/13 and $4.1bn in 2013/14. However, there are signs that the recovery is picking up pace – $6.4bn in FDI for the financial year 2014/15, which is almost as high as the figure recorded for fiscal year 2009/10.
The new and renewable energy sectors have been the main recipients of new investment, but the agriculture, construction, spinning and weaving, and tourism industries have also benefitted.
The government has launched several new initiatives to boost FDI levels. The Ministry of Finance, for instance, has consolidated the tax regime by bringing the various tax departments under one roof, and standardising taxes on Customs, income and sales. Additionally, the Ministry of Planning is working to meet IMF standards for developing a modern system of national accounting, aimed at producing credible economic data. GAFI’s role has also been transformed from regulatory body to promoter and facilitator of domestic and foreign investments. As such, we are working to convey investment-related policy developments to global investors through varied communication channels, including Egyptian embassies and commercial offices abroad.
How can the memoranda of understanding (MOUs) signed at the Egypt European Economic Development Council become formal contracts?
OMAR: The Ministry of Investment and GAFI have formed committees together with the relevant ministries to follow up on the memorandums, with notable success: Four of these, worth $10.5bn, have already progressed into construction and infrastructure contracts, and six other agreements worth $29.4bn have been signed in the oil and gas, electricity and transport sectors. That being said, there is still a significant amount of work to be done in this area, and both the minister of investment and the prime minister are receiving weekly updates on all currently outstanding MOUs.
What specific issues do the amendments to Egypt’s investment law aim to resolve?
OMAR: The aim of the new investment law amendments is to attract fresh investment to Egypt by offering further incentives and guarantees, removing obstacles and streamlining procedures. The incentives, for instance, include trimming sales taxes from as much as 10% to as little as 5%, and setting Customs duties on equipment used for production at 2%. Further non-tax incentives are being offered for labour-intensive projects, investments in remote areas and for investments in specified sectors such as energy, agriculture and transport. Long-awaited guarantees for investors have also been included to shield company executives from criminal prosecution for legal violations committed by the company. The amendments also authorise GAFI to act as a one-stop shop. This will enable investors in certain sectors to obtain all necessary licences and approvals needed to establish and run their businesses more easily. In addition, a brand new system for allocating, pricing and zoning state land has been introduced.
Having said this, details regarding the ways in which the investment law amendments will be administrated have yet to emerge. They are dependent on a significant number of executive regulations due to be issued at some point in the near future.
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