Government and private sector collaboration takes center stage as Egypt sets ambitious investment goals to propel economic growth and attract international investors.
Boosting Investment: Prime Minister Moustafa Madbouli highlights achievements from inaugural Supreme Investment Council meeting - Press Photo
Following the inaugural meeting of the Supreme Investment Council, chaired by President Abdel Fattah El-Sisi, Prime Minister Dr. Mostafa Madbouly held a press conference to present the outcomes of the council's first gathering.
The conference, attended by key government officials and ministers, highlighted the government's commitment to promoting private sector participation in Egypt's development projects, amid crucial economic junctures and global uncertainties.
During his opening statement, the Prime Minister emphasized the significance of the first Supreme Investment Council meeting, noting its timely occurrence.
He underscored the Egyptian state's transitional phase, which necessitates collaborative efforts from all stakeholders to achieve a key objective, which is increasing private sector involvement in the state's developmental initiatives.
The Prime Minister stressed the importance of bold decision-making, reviewing regulations, administrative procedures, and legislation to expedite and facilitate investment procedures while attracting larger investment volumes and encouraging private sector roles in the coming phase.
Dr. Madbouly stated that the press conference aimed to present the recommendations and proposed decisions already endorsed by the Supreme Investment Council during its previous meeting.
He highlighted the government's efforts in formulating numerous resolutions and procedures based on President El-Sisi's directives.
The conference provided an opportunity to review the state's accomplishments, particularly over the past year, from May 2022 to the present.
These decisions were the result of collaborative efforts between ministers, relevant authorities, private sector institutions, investors' associations, chambers of commerce, and export councils, as their challenges and inputs were thoroughly considered.
Furthermore, Dr. Madbouly emphasized that President El-Sisi had explicitly instructed the government to establish a timeline and assign responsibility for implementing each decision. As a result, there will be regular monitoring from the President's office, ensuring that the Council convenes monthly or, at most, every two months.
This approach enables close monitoring of decision implementation, while also considering any additional measures that can enhance Egypt's investment appeal.
During the press conference, the Prime Minister presented the evolution of investment volumes jointly undertaken by the state and private sector from 2005 to the present.
He highlighted that total investments in 2005-2006, combining both sectors, amounted to approximately EGP 115.7 billion. In contrast, the projected investment volume for the upcoming fiscal year 2023/2024 is around EGP 1.640 trillion, indicating an increase of nearly 15 times over this period.
Dr. Madbouly emphasized that maintaining the current modest growth rate of investments would not have kept pace with Egypt's expanding economy and rapid population growth. Consequently, the state would have faced significant challenges in infrastructure, services, and other crucial areas necessary for sustainable growth.
Egypt's economic growth has shown resilience in recent years, buoyed by ongoing reforms, attractive investment opportunities, and a diversified economy.
The government's commitment to promoting private sector engagement further strengthens the country's growth prospects. Egypt's strategic location, young population, and ambitious infrastructure projects continue to attract international investors, bolstering confidence in the nation's economic stability.
The Prime Minister clarified that the volume of investments had been progressing at a slow pace over the course of ten years, and then started to increase.
He pointed out that this was not due to the private sector's lack of role during this period, but rather to the role of the state, which began to increase its investments to achieve growth rates.
The state, during this period, recognized the circumstances that the private sector went through, starting from 2011 and the disturbances that occurred at that time, followed by the economic reform measures that began in 2015, and then the global conditions such as the COVID-19 pandemic and the Russo-Ukrainian crisis.
It was natural for the private sector to be apprehensive about injecting investments anywhere. Therefore, the option the state chose in the previous stage was to compensate for the slowdown caused by the private sector by injecting investments as a step to increase employment opportunities, which the state successfully utilized to reduce unemployment rates.
The Prime Minister explained that the focus at the current period, from the Higher Investment Council and under the directives of the President, lies in how to increase private sector investments to match or exceed those made by the state.
The target, after three years, is for the private sector's share of total investments to reach 60% or 65%, and efforts are currently underway to achieve this.
The Prime Minister clarified that the private sector in Egypt already dominates in terms of the size of establishments, the number of employees, and the available job opportunities, which is a natural occurrence in any country.
There are approximately 3.75 million private sector establishments, and 73% of the total workforce is employed in the private sector. Furthermore, 75% of the gross domestic product comes from the private sector.
However, the issue lies in the fact that more than 50% of the private sector operates in the informal sector, and 60% of the private sector establishments are engaged in wholesale and retail trade. The challenge lies in redirecting towards productive sectors such as industry, agriculture, and other production activities.
The Prime Minister also highlighted another challenge, which is that only 1% of private sector establishments engage in exports, indicating that 99% of them cater to the domestic market. He explained that this necessitates encouraging the private sector to engage in export activities, and this is what the Higher Export Council, headed by the President, is working on. The council will hold its first meeting under his presidency.
In his statement, Dr. Mostafa Madbouly referred to the comprehensive reforms demanded by investors regarding the allocation of industrial lands.
It is now possible for land to be granted for use alongside ownership rights, in addition to setting a fixed pricing for industrial lands, which will be declared by the Prime Minister's decision. The General Authority for Industrial Development has become the sole entity responsible for issuing all approvals to investors who approach it, while the authority itself coordinates with other relevant entities in the state.
Immediate allocation of industrial lands will be facilitated through a central committee, allowing for immediate allocation for major or foreign investors. Other measures include issuing licenses within 20 working days. The Prime Minister confirmed that he is closely following this process with the Minister of Trade and Industry, and significant improvements have been made in order to achieve this goal, even surpassing the 20-day timeframe.
Dr. Mostafa Madbouly also addressed the recent developments by the Financial Regulatory Authority and the Egyptian Stock Exchange regarding the launch of the first gold investment fund, which provides Egyptians with an opportunity to invest in this sector. Clear mechanisms have been established and will be implemented in the upcoming period.
Dr. Mostafa Madbouly explained that the private sector faces four challenges, which are company establishment, land allocation, activity licensing, and project operation.
In light of this, approximately 22 new decisions were made following the meeting of the Higher Investment Council. The President directed the formulation of a timetable and the identification of the responsible entity for implementation, in order to ensure monitoring and guarantee the implementation of the decisions within that timeframe.
Regarding company establishment, the Prime Minister mentioned that amendments will be made to existing provisions in the executive regulations of the Investment Law.
These amendments will contribute to and encourage the expansion of private free zones and facilitate the interaction between foreign investors and banks during the company establishment process. Previously, there were obstacles that required waiting until the company was established and procedures were completed, but with these amendments, foreign investors will be able to deal with banks immediately upon submitting the application.
He stated, "We have identified the responsible entity for implementation of this matter, as well as the required timeframe to complete this process, and the same applies to each decision."
Dr. Mostafa Madbouly continued, stating that the second decision involves amending Article 34 of the Investment Law to encourage industries based on natural gas as an input in production and enhance their benefits from the private free zone system.
He further explained that several international companies have expressed interest in implementing petrochemical projects within the framework of the free zones. The state had previously faced difficulties in this regard due to issues in the natural gas sector. However, with the Egyptian state now having a clear plan for natural gas, the state, through the Higher Energy Council, can grant approvals for these projects, allowing them to establish a free zone for export purposes.
Dr. Mostafa Madbouly added, "The third decision pertains to the approvals required for company establishment and implementation. There were complaints that obtaining approvals from all relevant entities took months. Therefore, we have decided to set a maximum timeframe of 10 working days to obtain all necessary approvals. As soon as the foreign or local investor expresses their intention to establish a company, they will receive the required approvals within a maximum of 10 working days. If the required documents are submitted and there is no response from the entity, it will be considered an implicit approval."
The Prime Minister then reviewed the remaining decisions, saying, "A unified electronic platform will be established in the General Authority for Investment and Free Zones for the establishment, operation, and liquidation of companies and projects. All relevant entities will be integrated into this platform, allowing companies to apply online in line with global developments and carry out all procedures through the platform."
Dr. Mostafa Madbouly emphasized that concerning land allocation, the state has confirmed that any contracts previously concluded or approved by the state will be honored as long as the investor has not violated the conditions and obligations of those contracts. He highlighted the state's efforts to expedite the registration of lands for these companies.
Despite complaints about starting the projects years ago and fulfilling the required obligations, difficulties were encountered in land registration. Thus, directions have been given to respect those contracts, facilitate procedures, and oblige the Real Estate Registry to register the lands and properties for these projects as long as there is no violation.
The Prime Minister added, "The most important thing is that the state opens up property ownership in Egypt to foreigners." He pointed out that previous regulations stipulated that the maximum number of properties a foreigner could own in Egypt was two properties in two different cities. However, the Minister of Justice will work with all relevant entities to launch a new number that allows any foreigner intending to own properties in Egypt to do so without restrictions, as long as they comply with the regulations, including payment in foreign currency.
Regarding the section on activity permits, the Prime Minister clarified that it was important not to limit the issuance of the Golden License to national or strategic projects only. Therefore, any projects in any sector deemed important by the state will expand the issuance of the Golden License to all investors, whether local or foreign.
Additionally, an important point arose regarding the limited duration of enjoying the Golden License for companies established after the 2017 Investment Law and those established before. It was agreed that any company, regardless of its establishment date, has the right to apply for and benefit from the advantages of the Golden License, as long as it meets the criteria.
Madbouly added that another regulatory aspect raised the need to establish a vision for the Egyptian state. It involves studying the possibility of making the entities responsible for monitoring and regulating services and facilities independent of the ministries providing those services.
For example, if there is a regulatory body for a certain facility and a ministry providing the service, it is expected that the regulatory body should be separate from the ministry. Therefore, the circumstances of each entity will be studied to take appropriate action, including transferring the regulatory entities' authority to the Cabinet, making the ministry a separate entity, and establishing a separate regulatory body to oversee and regulate the facility.
The Prime Minister also addressed a request from the private sector for equal treatment. It was raised that certain legal provisions granted preferential treatment to some state-owned companies and entities over the private sector. It was agreed upon to modify the regulations to ensure equal treatment for all, where the private sector is treated on an equal footing with all state entities, without granting preferential treatment to any party.
In addition, the Prime Minister addressed the issue of expediting the program of offerings and selling state-owned assets, pointing out that there are numerous entities owned by the state, including companies and assets, which are often owned by multiple parties within the state. To be able to offer or include them in the offerings program, a series of administrative and bureaucratic procedures are required, consuming a significant amount of time.
The approved concept is to propose a law for the establishment of a unit under the supervision of the Cabinet, which would gather data on all these companies and make binding decisions regarding their consolidation, liquidation, and the sale of the state's share in them.
The Prime Minister further explained that there are steps to be taken by the Ministry of Finance, including the publication and accessibility of all reports related to the government's actions aimed at enhancing governance and transparency in the upcoming phase.
An important amendment will be made to the operating procedures, allowing foreign investors to register in the importers' registry for a period of 10 years, even if they do not hold Egyptian citizenship.
Previously, company registration in the importers' registry and the ability for investors to import production inputs required the company to have 51% Egyptian ownership or for the investor to hold Egyptian citizenship. However, the amendment now states that as long as the company is established in Egypt, even if it is 100% foreign-owned, it has the right to be registered and begin importing production inputs.
During his discussion, the Prime Minister also touched upon another point that arises from the agreement with the private sector and its vision. A comprehensive decision will be issued stating that no entity is allowed to issue regulatory decisions that impose burdens or change fees or service charges that would increase the burden on investors.
However, according to the Investment Law, it is necessary to refer and obtain approval from the Investment Authority, the Cabinet, and the Higher Investment Council under the presidency of the President, in order to avoid issuing any decision that would increase the burdens on investors. Additionally, another decision will be issued by the Ministry of Justice specifying the criteria for imposing improvement fees.
This came in response to complaints from various entities about the lack of clarity regarding the application of what is known as improvement fees. The Minister of Justice has been directed to establish comprehensive regulations on this matter, which will be published for everyone's benefit.
Another issue raised as a complaint was the imposition of taxes on investors while they have outstanding dues owed by the state. In this context, an agreement has been reached to enact a settlement system, and specific controls have already been put in place. The Ministry of Finance has been instructed to activate this system so that if the investor has dues owed by the state, they can be collected, or if the investor has obligations, they can be settled.
The Prime Minister referred to another decision that will be implemented within three months, through the Minister of Finance, who has already commissioned a global consulting firm to develop a policy document for the country's tax regulations for the next five to ten years. This is in response to complaints from investors who are often surprised by tax law amendments, leading to a lack of transparency.
Therefore, the Prime Minister clarified that the forthcoming document, to be announced in three months, will clarify the tax policies for the next five to ten years, providing a clearer understanding of the working conditions and operations within the country.
Furthermore, the Prime Minister addressed another important point regarding the completion of amendments to the profit transfer law between holding companies and their subsidiaries in the private sector.
The complaint in this context was related to the double payment of taxes. Consequently, these amendments have been prepared and will be ratified in parliament at the earliest opportunity. Additionally, the Prime Minister highlighted another significant aspect of facilitation, which involves an alternative mechanism for resolving disputes, redirecting them to the judiciary and maintaining their validity throughout the litigation period.
Previously, the Economic Courts Act was responsible for resolving such disputes but imposed a maximum limit on the value of the dispute. For example, if a dispute concerned a sum of 100,000 pounds, any dispute exceeding this value would be referred to the general judiciary. These measures may result in extended time frames.
Regarding various compensations related to expropriation of properties or lands pertaining to investors, the Prime Minister pointed out the state's commitment to completing all procedures and paying compensation to investors within three months.
Furthermore, the Prime Minister highlighted the agreement to engage both the World Bank and the International Finance Corporation to collaborate with the Egyptian government in developing a comprehensive vision and strategy for investment in Egypt. This includes promoting investment opportunities in the Egyptian market, in line with the directives of President Abdel Fattah el-Sisi to the government. It is essential to utilize international offices and expertise to promote investment in Egypt.
The Prime Minister added that amendments have been agreed upon for certain articles of the Economic Zones Law, particularly the economic zone of the Suez Canal, as well as any other future economic zones. The objective is to support and enhance the attractiveness of these areas by providing incentives and facilitations that encourage various investors.
Dr. Madbouli pointed out that the decisions included the establishment of a permanent unit within the Cabinet, chaired by the General Authority for Investment and Free Zones, and composed of various relevant entities, to deal with the startup companies.
This unit will be responsible for receiving applications for the establishment of these companies and will develop a clear vision for their operations, while facilitating the necessary procedures for their establishment.
The Prime Minister also highlighted that a set of incentives has been approved for certain sectors. In the agricultural sector, there is an agreement to expand the mechanism of commodity exchange and contract farming. This success has been achieved with strategic crops, and there is a plan to apply it to various important crops and agricultural activities, ensuring that Egyptian farmers achieve higher returns through these agricultural practices.
Regarding the real estate and housing sector, Prime Minister Madbouly clarified that preliminary agreement has been reached to grant real estate developers and investment projects in new cities a reduced interest rate of 10% on installments, instead of the current rate announced by the Central Bank, for a period of two years.
Additionally, the implementation period for real estate projects will be extended by 20% of the original total duration, easing the burden on real estate investors. Moreover, the percentage required for considering a project as completed will be reduced to 85% from 90%. Furthermore, there is ongoing consideration of additional incentives to provide further facilitation for real estate developers, which will be presented at the next meeting of the Supreme Council for Investment.
The Prime Minister stated, "As for the industrial sector, it is currently our top priority, according to the directives of President Abdel Fattah El-Sisi." He added that several measures have been agreed upon regarding exemptions from customs duties and other administrative fees that were supposed to be borne by specific industries in the planned new areas or desired industrial activities that need to be encouraged.
He further explained that the Minister of Industry will be responsible for identifying specific industries and activities for which a decision will be issued.
Those who wish to invest in these industries and activities will be exempted from customs duties and various administrative fees. Additionally, some tax incentives will be announced. Today, we have agreed on the first of these incentives, which specifically applies to green hydrogen production.
He stated, "An investor who wishes to establish an industrial project will be allowed to pay an initial down payment for the land, and we will provide a grace period of two years for them to build the factory during that time. Afterward, they can repay the factory's price in installments."
He indicated that the Cabinet has approved the draft law related to the production of green hydrogen and its derivatives, which includes the initiation of a set of exceptional incentives for this industry. Additionally, there is an agreement to activate a similar set of incentives for all investment projects, not only limited to hydrogen. These incentives include a tax refund of up to 55% of the income tax, where the government will refund this percentage of the tax to the investor for the projects they have implemented. There will also be exemptions for equipment, machinery, and raw materials from value-added tax for an extended period, as well as exemption of project exports from value-added tax.
He continued, "In the transportation sector, it has been agreed that logistics zones, dry ports, and similar projects will enjoy all the incentives stipulated in the Investment Law. There will be a unification of pricing strategies inside and outside the ports, as this was a complaint from all investors."
He highlighted that there will be an expansion in activating the whitelist for manufacturers and exporters to benefit from all the incentives.
He added, "The most important thing is not only announcing the incentives but implementing them on the ground, as directed by President Abdel Fattah El-Sisi. Therefore, we have set a specific timeline commitment and identified the responsible entities for implementation and follow-up."
He explained that during the upcoming meeting of the Supreme Council for Investment, there will be a follow-up on the implementation of these measures. Until the next meeting of the Supreme Council for Investment, regular meetings will be held by the group of ministers responsible for implementation, who are present today, to periodically monitor what is happening on the ground. This will enable us to activate a larger number of decisions before the next meeting of the Supreme Council for Investment.
