In cooperation with the finance and business communities, the Ministry of Investment is conducting a comprehensive revision of the laws regulating investment in Egypt, as a prelude to deciding on either amending the Law of Investment Guarantees and Incentives, or issuing a new law. Up until now, Minister of Investment Dalia Khorshid has met with about 500 investors.
In an interview with Daily News Egypt, she said that she is conducting a legislative agenda that contributes to improving the environment of doing business. The parliament will discuss the agenda in the next legislative session. One of the main pillars of the agenda is the bankruptcy law, which the ministry is intending to submit to the cabinet soon, before presenting it to the parliament. The law stipulates providing legal alternatives to restructure the debts of defaulting companies.
What are the latest developments in the initial public offerings (IPOs) programme?
The programme is progressing quickly and the work groups entrusted with the programme are regularly meeting under the supervision of the tripartite committee that consists of myself, the minister of finance, and the deputy governor of the Central Bank of Egypt (CBE).
What has happened in the discussions with the Ministry of Petroleum about offering its affiliate companies in the stock market? Have specific companies been chosen?
The team entrusted with the initial public offering (IPO) programme consists of the minister of investment and NI Capital, which is owned by the National Investment Bank and is affiliated to the Ministry of Planning. It works as a consultant for the ministry in conducting the programme. The team is now closely working together with the officials of the Ministry of Petroleum. We will start the programme with the petroleum sector, as it is currently one of the most important and most promising sectors.
NI Capital is now conducting the initial investigation of the companies chosen by the Ministry of Petroleum. However, no specific companies have been shortlisted yet. We will announce their names directly after finishing the investigations.
Have you started to negotiate with local and international investment banks to participate in the programme?
NI Capital will consult local and international investment banks to help it with the IPOs.
When will the companies affiliated to the electricity sector be offered? In that regard, have the negotiations with the ministry started?
The next period will see the restructuring of a large number of companies, on the top of which are the electricity companies, as they will be prepared to be offered in the stock market.
How does the programme reflect on the investment climate? Does it benefit ordinary people?
The programme’s period ranges between three to five years throughout which we are targeting to expand the ownership base for individuals and companies, achieving transparency and governance in the work of these companies, and activating the stock market. We are targeting to attract $5-10bn through these IPOs.
The programme consists of three levels. The first level targets the average citizens through strengthening their participation and providing a mean for individuals to invest, instead of depositing their money in banks or buying real estate. The second targets local investors, while the third includes the international offering that aims to attract foreign investors.
The state’s share in the offered companies, whether through offering stocks or increasing the company’s capitals, will remain over 50%. However, the final offering percentages will be decided after the approval of the companies’ boards. The amounts that will be collected from offering the companies in the stock market will contribute to bridging the deficit of the state’s general budget.
Some investors complain about the legislative environment governing investments—how does the ministry deal with this?
Since I took office at the end of March, I formed a committee to prepare a full legislative agenda to improve the investment climate. The agenda’s implementation will occur on both the short and long terms, and includes a group of urgent draft laws. We already presented the law to establish one-man companies, and within a few weeks, we will be getting ready to present the bankruptcy law.
Will the upcoming period witness the passing of a new investment law?
The investment law comes within the legislative agenda of the ministry. Due to its importance, the ministry has prepared more than 500 meetings with different investors, and a survey in Arabic and English on the agency’s website. The survey was directed at investors, businessmen, and associations of the chambers of commerce, with the aim of compiling the opinions of stakeholders in the issuance of the new law, and whether the current law needed urgent amendments or not. After the survey period, we will announce the results.
Does your approval of modifying the law or issuing a new one worry investors, especially foreign ones, from the instability of the legislations governing investment?
We have a clear vision that aims to improve the business environment, but we are keen on the business community’s participation in the legislative reform plan to enhance Egypt’s investment climate. We have formulated convenient legislations and we would like to support them with the participation of stakeholders, whether foreign or local.
Are there any updates regarding the private free zones?
We are still negotiating the private free zones with the Ministry of Finance. We hope to reach quick solutions because these areas are crucial for the national economy.
Will the ministry keep its role in allocating lands, or will this term be subject to modifications?
The ministry is currently working on activating a law for investment guarantees and incentives in terms of land allocation, in cooperation with concerned authorities. The goal is to invest in several activities. We seek to quickly look into the requests of investors in all governorates. The concerned decision committee will travel to conclude procedures of the allocation requests.
The Investment Ministry’s concerned committee, affiliated with the General Authority for Investment and Free Zones (GAFI), held a session from April to August. During the session, it looked into 85 lands on an area of 18,800 acres worth $4.7bn in Marsa Matrouh, Port Said, New Valley, and Beheira. The goal was to invest in industrial and service activities, in addition to infrastructure, land reclamation, real estate, and tourism investment.
What is the ministry’s plan to resolve investment disputes?
The ministry, in cooperation with GAFI, seeks to settle all disputes. This year, we aim to resolve 80% of the disputes.
Since the committee started its work on 10 August 2015, members of the ministerial committee resolved investment disputes, headed by the minister of justice, and managed to look into 311 cases throughout 15 sessions, out of a total of 400 cases.
Since I presided over the general technical secretariat of the ministerial Committee for Dispute Settlement, 111 cases were looked into in only five sessions. This represents 36% of total cases. We have also improved the secretariat’s work mechanism in order to look into the largest possible number of disputes. According to the prime minister’s instructions, the committee meets twice a month in order to speed up resolving the problems of investors.
Over the past period, we have managed to cooperate with the ministries of justice, petroleum, commerce, and industry and trade to settle one of the major disputes—namely the investment contracts with Kuwait Gate Holding. It has waived the lawsuit before the International Centre for the Settlement of Investment Disputes in Washington, DC.
Throughout the upcoming period, we seek to settle the files of investment companies that have resorted to international arbitration in a way that maintains the state’s rights, and additionally guarantees a healthy investment climate for the companies to operate in.
What are the latest developments in the establishment of the two Egyptian-Saudi Arabian and Emirati funds?
The Egyptian government has agreed with the Emirati side to establish a joint investment fund. An agreement was reached in terms of choosing an independent management of the fund. The ministry seeks to follow the same method with the Egyptian-Saudi Arabian fund, which was agreed upon during the visit of Saudi King Salman bin Abdulaziz Al-Saud to Egypt in April.
Did Arab countries—particularly Saudi Arabia and the United Arab Emirates (UAE)—make any promises to inject new investments into Egypt?
The Saudi and UAE investments rank first and second among the top 10 Arab countries in terms of capital-exporting, reaching 33.9% and 24.7%, respectively. The number of companies that have been established by the largest 10 Arab investing countries reached about 15,400 companies since the establishment of the authority until the end of fiscal year (FY) 2015/2016, with a total exported capital of $64bn.
How much in foreign direct investment are you targeting this year?
The total foreign direct investment in Egypt reached about $5.8bn from July 2015 until March 2016. It is expected to reach nearly $7bn by the end of FY 2015/2016. The CBE has not announced the results of this period yet. The ministry aims to increase foreign investments to reach $10bn over the next FY.
What is the current situation of the capital gains tax? Will the government apply this tax after the end of the delay period?
The Ministry of Finance had said it is still studying the capital gains tax law in the stock market, and we cannot talk about its details until the ministry concludes its studies.
How far along are the bankruptcy and one-person company (OPC) laws?
The legislative environment for investment in Egypt is not only limited to the investment guarantees and incentives, but it is also affected by a range of other legislations governing economic activity. The ministry currently seeks to present a coherent legislative agenda to develop the investment climate and keep up with global developments.
A part of that legislative agenda is the OPC law, which has been recently approved by the cabinet and submitted to the State Council for review, in preparation for submission to the House of Representatives for approval and implementation. The draft law—if implemented—will allow the establishment of companies by one person with an independent legal identity. Such companies have limited liabilities as much as the capital provided by its owner. This law aims to keep up with global developments in the organisation of companies, and encourage small- and medium-sized enterprises.
Soon, we will present the bankruptcy law to the cabinet. The new draft law aims to provide legal alternatives to allow companies to restructure their debt and correct their financial situation before declaring bankruptcy. This is to ensure the continuation of project implementations. It also simplifies and facilitates necessary procedures of the projects’ liquidation, and shortens the time of their implementation through setting deadlines.
What is the ministry’s plan for the organisation of regional conferences in governorates?
Throughout the past period, the General Authority for Investment and Free Zones (GAFI) delegation conducted a number of tours in various governorates to determine the investment conditions and deal with investors’ problems there. The development of Upper Egypt is one of the government’s top priorities in general, and the ministry’s in particular. We seek permanent coordination with Upper Egypt governors and stakeholders to showcase available investment opportunities and to properly present Upper Egypt. Furthermore, we plan to establish a public free zone in Minya and an investment zone in Beni Suef, as part of our interest in promoting investment in those areas.
We will establish five branches of the investment services complex in 6th of October City, Gamasa, Marsa Matrouh, New Valley, and Aswan, as well as two public free zones in Nuweiba and Minya, and investment zones in Mit Ghamr, Banha, Beni Suef, and Giza.
What is the ministry’s role in reforming Egypt’s business atmosphere, in terms of legislative, administrative, and promotional measures?
The ministry is working on a reformation of the atmosphere of doing business in Egypt through an urgent legislative reform plan, and improving the ranking of Egypt in next year’s Doing Business Report. As you know, there are 10 indicators in the annual report, which is published by the International Finance Corporation (IFC) and the World Bank. These indicators are the establishment of companies, access to electricity, obtaining credit facilities, protecting rights of small shareholders, dealing with construction permits, registering properties, in addition to paying taxes, cross-border trading, enforcing contracts, and settling insolvencies
We have already implemented a number of procedures affecting the performance of a number of indicators, including establishing companies. GAFI began automating certificates, abbreviating and integrating a number of establishment procedures, as well as introducing an email service with the National Organization for Social Insurance.
These measures are expected to push Egypt’s global ranking in the index from 73 to 28.
In terms of the electricity index, positive steps are taken. The frequency and durations of power outages have been reduced, and the required number of days to finalise electricity connection procedures has been limited. These measures are expected to improve Egypt’s international rank from144 to 71.
In terms of small shareholders rights protection, some of the stock exchange enrollment rules amendments were issued and are expected to help Egypt’s position on the index to progress from 122 to 36 globally.
These procedures target to improve Egypt’s ranking among the indices of the Doing Business Report issued by the World Bank, and will help Egypt move from rank 131 to 90—given of course that the World Bank computed all these reforms, and the ranks of other countries remained unchanged.
Is the Egyptian market still attractive for investment? What is your plan to create an attractive investment environment?
The ministry exerts all possible efforts to create a stimulating investment environment that grants Egypt a distinctive stature on the global investment map.
This will happen through the important measures and procedures that were taken—starting from the presidency’s approval to form a supreme council for investment, headed by the president himself. This council will contribute to activating different investment decisions, updating the investment map, drafting the country’s investment policy, promoting investment through local and international communications, and launching a new offerings programme. This will be accompanied by the preparation of a new investment strategy through GAFI, according to international practices and standards.
All of the ministry and authority’s employees are working together as partners and consultants to all investors. Their target is to protect the investors’ rights, as well as the state’s rights.
What do you think about the Euromoney conference this year?
The annual conference held by Euromoney Institutional Investor PLC in Cairo is considered significant proof that Egypt was and still is an attractive centre for international investments, despite the challenges that the Egyptian market and economy have been facing recently.
I expect this conference to witness the great participation of global companies. This includes companies that already exist in the Egyptian market and are looking forward to expand the size of their investments, and other companies that want to enter the market and inject new investments in Egypt.