Legal 500: Doing Business in Egypt
Introduction:
E
gypt has been open for business since the late President Sadat announced the open-door policy in the October Paper of April 1974. During those 47 years, Egypt has amassed considerable experience and benefited from top international practices in attracting investments. In July 2004, Ahmed Nazif became prime minister of Egypt. He adopted a policy of integrating businesspeople into government offices. This included the all-powerful Ministry of Information as well as ministries of Trade and Industry, Ministry of Tourism, and the Ministry of Housing. The integration of businesspeople also took place at the level of government-owned companies including Telecom Egypt, the Smart Village, and the Egyptian Post Office, to name a few. A new trend is taking place now. Businessmen are not to be involved in politics in any major way. The Government of Egypt (“GOE”) has also become more active through government-owned companies in various economic fields such as construction, oil and gas, heavy industry, health, and media. They operate with a for-profit mandate. The result is a vigorous economic performance of such companies which positively impacts the overall economic performance in Egypt. The GDP growth peaked to 7,157% in 2008. Even during the time when Egypt was in a revolution, the growth of the GDP did not go below 1,756%. In the doldrums of the Covid 19, Egypt standed tall at a GDP growth of 2,9%.
The general investment atmosphere is becoming more and more sophisticated. Non-exhaustive examples of such changes are:
- The GOE issued its proposed law of the non-banking financing including fintech. Egypt is having the discussion at the same time as this issue remains a burning issue that China is currently dealing with.
- Law 70/2021 which amends Law 87/2015 on electricity. The law addresses the Holding Company for Egyptian Electricity (“HCEE”). It requires it to present a policy paper enforceable within a transitional period of ten years. The policy paper should set HCEE operations within a competitive market environment.
- The Decree of Prime Minister No. 654 of 2021 promulgating the Executive Regulation of the Law No. 152 of 2020 on the Development of Micro, small, and medium-Sized Enterprises.
- The Ministerial Decree No. 286 of 2021 promulgating the Executive Regulation of the Unified Tax Procedures Law No. 206 of 2020.
- The Ministerial Decree No 198 of 2021 by the Minister of Trade and Industry promulgating the Executive Regulation of the General Authority for Industrial Development Law No. 95 of 2018.
- The Presidential Decree No. 28 of 2021 amending certain provisions of the Law No. 14 of 2012 on the Development of Sinai concerning Dahab and Sharm El sheikh cities.
- The Ministerial Decree No. 90 of 2021 promulgating the Executive Regulation of Law on the Establishment of the Authority for International and Domestic Land Transport.
- The Law No. 11 of 2021 amending certain provisions of Restructuring, Preventive Composition and Bankruptcy Law No. 11 of 2018.
The GOE embarks on many mega projects. The private sector, that is capable of cooperating with the government, benefits from the opportunities. There are emerging opportunities in the high-tech. But some face challenges in the growing regulations around data protection. To navigate this, requires not only knowledge of increasing regulations in the field, but also an understanding of the concerns and attitudes of officials.
The governmental mega projects are numerous. The New Administrative Capital project is estimated to cost $58 billion. It is expected to host seven million people. China State Construction Engineering Corporation is a major partner in this project. The City Gate Project is constructed over 2100 acres. It is sponsored by the Qataris. Its first phase is estimated at $54 billion. The Dabaa Nuclear Power Plant is expected to produce 4,200 megawatts. It is 85% financed by the Russians. The Hurghada-Alamain High Speed Rail is estimated to cost $23 billion. Siemens Mobility is a main partner of the project. TahyaMisr Bridge is engineered by the Engineering Authority of the Army. It is rumoured to cost $9,6 billion. The October Oasis is a development in Giza. It is estimated to cost $8,5 billion. Tahrir Petrochemical Complex in Suez produces Ethelyn and polyethene. The New Alamein City is conceived to be a tourist and educational city, in addition to becoming the summer seat of the GOE. China State Construction is a main partner. The Capital Medical City project is expected to have 2000 beds. Smart Engineering Solutions, an Egyptian electricity distribution company is working on a concentrated solar power plant. It is expected to cost $1.25 billion. Seventy percent of the project is financed by international financing institutions.
The above projects are not only about the appetite and ambition of the GOE but also about a potential ripple effect that would have an impact on many small- and medium-sized projects. It is a story of a country in a race to build. But with this comes challenges. Laws and regulations are becoming more complex. Even worse, the developments are sometimes quicker than the promulgation of laws and the passing of ministerial decrees. We need to know the concerns of those in charge…it is not about who you know…it is all about knowing how they think.
Business Environment:
Changes in 2021 – What has changed in the last year that has impacted the way business is conducted?
- Rise and growth in the start-up scene. Uber, Swvl, Trella, Paymob, Telda, etc. Incubators and accelerators are also active as of recently in support of the start-ups
- Continued growth in construction.
- Real estate continues to be a main repository of wealth.
- Data protection: The GOE is becoming more and more aware about the importance of controlling and handling of personal data.
- Growth of the fintech sector (public and private sectors). Banking sector of the population, shall bring positive rewards and will contribute to the increase in the GDP.
- Covid drawbacks, such as in the tourism industry
- What are the advantages of your country as a business location?
- It is a hub to address Africa, Middle East, Europe, Near Asia.
There are two structures that provide a limited liability to shareholders; namely, limited liability and a joint stock companies. Other business structures involve an unlimited liability to at least one of the shareholders or partners, making them less common.