Madbouly unveils reform package to boost investment: Prime Minister Moustafa Madbouly held a press conference yesterday to elaborate on each of the 22 decisions taken by the Supreme Investment Council during its first meeting on Tuesday. During an hour-long presser (watch, runtime: 54:57), Madbouly broke down the decisions and what they mean for the investment climate in Egypt.

The rationale: “Our goal is to speed up and facilitate the investment process with the aim to attract the largest number of investments,” Madbouly said, adding that “the circumstances the world witnessed — the covid-19 pandemic and the ongoing war on Ukraine — naturally made the private sector more wary of investing large sums.”

The goal: More investments + more exports. “Our focus as an investment council is how to make the private sector increase its investments until they’re on par with the government’s or even more,” the prime minister said. The council also wants to push more private-sector players towards exporting, as currently only 1% of private-sector players contribute to our exports. The government is hoping to raise total investments worth EGP 1.64 tn for the coming fiscal year.

REMEMBER- The government is aiming to increase exports to USD 100 bn a year by the middle of the decade, and attract USD 40 bn in private investment by 2026 as it looks to increase the private sector’s economic footprint.

THE DECISIONS-

Making it easier to set up a business: The government will respond to applications to establish new businesses in no more than 10 working days. If the process takes longer than the set amount, then the company is automatically approved. It will also consider amending the Investment Law to allow foreign investors to open accounts at local banks while they’re in the process of incorporation. Currently, foreigners can only work with banks after they’ve established a local unit.

Making it easier to do business…:

#1- Better licensing: A wider variety of projects will be able to apply for a fast-track license (a ‘golden’ license) after the council decided to expand eligibility. Currently, only projects of national or strategic importance are eligible for the licenses, but these will be expanded to include any sector the government considers “important,” Madbouly said, without elaborating. The council also wants to introduce five-year operation licenses for factories. At the moment the licenses are renewed annually.

#2- More privileges: The cabinet will draft legislative amendments to improve privileges in special economic zones, and allow foreign investors to be registered on the importers register. Meanwhile, land repayments for real estate, agriculture, industrial, and tourism projects will be charged a reduced 10% rate of interest rather than the central bank rate.

#3- Transparency and competition: Among the decisions are several aimed at leveling the playing field and improving transparency of state-owned enterprises. The cabinet will amend some as-yet undisclosed laws that hand preferential treatment to state companies, and a new cabinet department will be tasked with collecting data on state companies, though it has not been confirmed whether this data will be made publicly available. Meanwhile, the government will look into making regulators independent from their ministries, which has raised concerns about conflicts of interest when making decisions on ministry-affiliated companies.

#4- Faster dispute resolution: It will also look to improve contract enforceability by expanding the jurisdiction of economic and district courts to resolve commercial disputes. Under a draft legal amendment, economic courts will be able to take on cases worth more than EGP 100k, speeding up the dispute resolution process.

…and keeping it easy to do business: The council has decided to ban any state agency from imposing regulations that add financial or administrative burdens on projects subject to the Investment Law.

Opening up the real estate sector to foreign ownership: The council decided to lift controls on foreign ownership of real estate, and will now allow non-residents to buy as many properties as they want. Currently, foreigners are allowed to purchase a maximum of two properties.

Getting your money back: The Finance Ministry will roll out a clearing system making it easier to claim tax refunds while the Justice Ministry will issue a decision decreeing that investors who have their assets seized will be entitled to receive compensation within a maximum of three months.

**Some of these decisions aren’t set in stone and are subject to further approvals or studies by the relevant authorities before they're actually carried out.

What’s next? The council has ordered that the relevant government agencies carry out the decisions in full within time frames ranging between one week and six months. Ministers will hold periodic meetings to follow up on progress ahead of the investment council’s next meeting.

REMEMBER- The SIC was established to replace the investment council formed in 2016 as part of the state’s efforts to boost investment and stimulate economic growth. The council is chaired by the president and includes 22 ministers and state officials, including the prime minister and the central bank governor.

ALSO FROM MADBOULY-

  • Speeding up privatization: The council will set up a separate authority to remove decision-making about privatization from the shareholders of the state companies.
  • The real value of privatization: Privatization will bring in more than the EGP 70 bnwritten into the draft FY 2023-2024 budget because the proceeds from some asset sales will not be going to the state budget.
  • Tax strategy coming in three months: The government will unveil its tax policydocument for the next five years within three months.
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