How professional services help investors navigate a turbulent market: Legal professionals are usually the first point of contact for local and international investors exploring the market, providing assurance and professional services for clients when navigating Egypt’s financial climate and regulatory challenges.

We brought together a panel to explore the legal perspective on Egypt’s investment climate during the second day of the Enterprise Finance Forum.Joining us were Kamel Saleh, managing partner at Saleh, Barsoum & Abdel Aziz; Lamyaa Gadelhak, partner at Baker McKenzie; and Said Hanafi, partner at MHR & Partners in association with White & Case. The session was co-moderated by Bahaa Alieldean, senior and managing partner at Alieldean Weshahi & Partners.

Uncertain times? It’s nothing we haven’t seen before: “When clients come to us, they are more concerned about the uncertainty than we are. We’ve seen the ups and downs, and we know how the recovery can happen and how things can turn around,” Saleh said. “The fundamentals are there for the economy, so our role as advisors in general is to give a calming message that this volatility or this uncertainty is not the end of the world.”

But there’s still room for growth: Investors have negative views about the Egyptian tax system and tax policy, Saleh added, pointing to the need for tax reforms, namely ones “rooted in communication and addressing issues quickly which would reduce one of the biggest impediments to investors.”

A crisis isn’t always bad: “We’ve faced a decade of different sorts of challenges which led us to build up resilience and we have seen clients also build resilience … the trick is being creative and resourceful,” Gadelhak said.

Why are startups leaving the country? “Egypt produces a lot of startup ideas … but when it comes to raising capital, the venture capitalists and investors advise them to leave Egypt and start setting up outside Egypt,” Saleh said. Startups are advised to “keep the operations in Egypt but have their holding company outside Egypt, where funds are raised and where further investments happen.”

“This is really a regulatory issue in the first place,” Saleh said. “We have the ideas, the talent pool, and the economy that supports and makes all these startups successful, so why do they leave in search for a better ecosystem? … From a corporate law point of view, all the arrangements and the shareholder agreements are better regulated and easily enforced outside Egypt,” he added.

More support needed: “It is important that [the regulations hindering startups] be looked into very seriously,” Gadelhak said. “The green industry, for example, needs to be centralized from a regulatory and institutional perspective in order to avoid any conflict of interest. There needs to be a coherent strategy to which all relevant stakeholders abide by whether or not it benefits them on an individual basis,” she added.

“I’m actually calling for deregulation completely,” Hanafi said, calling for the removal of all legislations that exist in freezones. He pointed to Saudi Arabia and the efforts being done there “creating this whole concept of economic zones that is completely detached from the base economy.”

Is there a silver lining to this crisis?The silver lining to these difficult times is that Egyptian companies are looking to expand abroad, Hanafi said. “Because of what’s happening they are trying to open up new markets. Investors are looking into Africa — and we were not competing in Africa like we should have been.”

Brain drain is an issue, but there’s a solution: “Every time there’s devaluation, there’s a brain drain and people leave the country,” Saleh said, explaining that firms accept it’s part of the business. “We hire large numbers of people and invest in their training because we know that the turnover rate will be high,” after which they will have the choice between working locally or exporting their professional services to a different market.

But it’s not all bad: Even if the employees eventually leave due to competitive compensation in the Gulf, it ultimately comes back full circle when they return as clients, Saleh added. “Every organization boils down to the people and we expose them to other markets to help fulfill a certain intellectual challenge,” Gadelhak said.

Tags: