Round table – 5th June 12.00 pm Cairo time.

Round table “The Egyptian Investment law in the times of change.” – 5th June 12.00 pm Cairo time. 

5th June, 2024 a Round table will take place discussing the current challenges and legislative initiatives, implemented by the Egyptian legislator for boostering investor relations in Egypt. 

Recently, Egypt adopted a flexible exchange rate policy to adjust the pound’s value against the US dollar to meet a 39.61 rate starting from 2024. The Central Bank of Egypt (CBE) applied a free-float system under which the USD/EGP rate approached EGP 40.

Since October 2022 Egypt has been suffering an economic crisis, which resulted in the pound losing more than half of its value, dropping against the USD from EGP 16 to EGP 31 in the official market. However, measures were undertaken to overcome an economic crisis.  A deal was signed with the United Arab Emirates to develop a stretch of its Mediterranean coast that brought $35 billion of investments to Egypt with last tranche received in April this year. As planned, development of the Ras El Hekma peninsula could eventually attract as much as $150 billion foreign investment outside the hydrocarbons sector. 

Also, under IMF programme Egypt is provided with the ample liquidity to cover financing gap over the next four years. Currently, the banking sector’s foreign-currency (FC) liquidity is improving significantly as along with the devaluation, the external liquidity strains was relieved and investor confidence is rising because the Egyptian authorities demonstrated continued commitment to structural reform, and a durable move towards a flexible exchange-rate regime. Egypt has been actively completing the four-year loan programme with the International Monetary Fund (IMF), which allows the country to access $3 billion in eight installments. The commitments for Egypt under this programme include implementing flexible interest and exchange rate regimes, promoting private sector participation, reducing debt and inflation levels to pre-pandemic figures and offering shares in  state-owned companies in energy and industrial sectors to strategic investors in 2024.

Types of companies 

As we discussed in the previous event, the main forms of legal entities to establish a business in Egypt are: 1) Joint stock company, 2) LLC, 3) Representative office, 4) Foreign branch, 5) Sole proprietorship company (one-person trading entity that an individual owns).

Also, the ARE has substantial economic relations with Russia. The two largest projects include Russia state-owed Rosatom`s undertaking of the construction of a nuclear power station in Dabaa, a project worth at least USD 26 billion and a Russian industrial zone in the Suez Canal Economic Zone, the construction of which was supposed to begin in 2022 and continue over 13-year period.

As we know, the Egyptian Investment Law No. 72 of the year 2017 allows companies established pursuant to it to benefit from a set of incentives, equal opportunities and enhances competitiveness to avoid monopolization. It also focuses on simplifying the incorporation process and all corporate procedures through electronic systems. The Law No 160, introduces amendments to the current Investment Law No. 72 of 2017. According to the cabinet resolution dated January 3, 2024, the eligibility of the investment projects to benefit from the Investment Incentives has been extended for a further 3 years starting July 2023.

Additionally, The Prime Minister's Decision No. 1203 of 2024 was issued to amend the Regulation of Law No. 72 of 2017 (Investment Law), adding the New Administrative capital and the Ras Al-Hikma area to the investment areas, with benefits of the tax incentives up to 80% from the paid-up capital and 50% investment costs.

Supreme Council for Investment

On 11 April 2023, the Government of Egypt published Decree No. 141, which was issued by the President to establish the Supreme Council for Investment. The Council, presided by the President of the Republic, replaces the Investment Council that was established by a previous presidential decree in July 2016. The new Council has more members, including the chairman of the General Authority for the Economic Zone of the Suez Canal and the executive director of the Egyptian Sovereign Fund for Investment and Development. This move is part of the ongoing reform program adopted by the Egyptian government to boost investments and economic growth in the country.

Relocation 

Numerous Russian businesses are relocating their operations outside of Europe, which imposed sanctions on Moscow. While most businesses are often affected by sanctions and embargoes, we will discuss also which requirements must be fulfilled to get “Made in Egypt” mark (The percentage 70% of local component is required in line with 30% of foreign one. There are also specific requirements to materials considering that these percentage can be flexible as an exception upon the discretion of the authorized minister).

Migration law

As our law firm deals also with the migration law, we will also touch upon the new regulations on foreigners` residency application fees. Striving to bolster its foreign currency reserves, Egypt’s Cabinet has regulated residency application fees, contributing further to its financial goals. Egypt currently hosts more than 9 million foreigners from more than 133 nationalities. In August 2023, Prime Minister issued Decree No. 3326 of 2023 which stipulates that foreigners applying for a residency permit, whether for touristic purposes or other purposes must provide evidence of converting the relevant fees from USD (or its equivalent in free currency) to EGP. This conversion must be done through any licensed bank or exchange company.

Import companies 

In light of encouraging foreign investment in the Arab Republic of Egypt, new mechanisms have been updated in the Egyptian law to facilitate the registration of the importation companies in Egypt and not to impose any restrictions on foreigners and their ownership over the company. This is in accordance with Law No. 173 of 2023, which entitled foreigners to fully own the importation companies in Egypt without any restrictions. 

The decision states that, as an exception to Article 2.2.h of Law No. 121 of 1982 regarding the importers' registry, it is permitted to register joint-stock companies, limited by shares companies, (it is a hybrid entity, having two different groups of owners: the first are limited liability shares owners in common understanding and the second groups are owners liable in solidarity, i.e their liability extend to personal assets), limited liability companies, and all one person companies (even if their shares are not owned by Egyptians or owned by them in less than 51% of the company’s shares.

However, the total duration of registration in the registry should not exceed ten years from the date of obtaining the importation license. Moreover, it can be extended for only one time, for a further maximum period of ten years, upon a decision by the Council of Ministers based on a proposal from the concerned Minister of foreign trade. 

Based on this, the condition of Egyptians owning a 51% stake of the company's capital has been dismissed, and the only condition related to Egyptians is that the person who is responsible for import and signing import contracts should be an Egyptian manager.

Requirements for golden licenses

One of the several economic incentives provided by the Egyptian government in recent months to draw foreign investment to Egypt is the Golden license.

Companies that apply for the Golden licenses should meet the following requirements:

1. Companies that incorporated to set up strategic or national projects that contribute to the achievement of sustainable development in accordance with the State`s economic development plan.

2. Companies that are incorporated to set up a partnership between the private sector and the State, the public sector or the public business sector to perform the following activities (public utilities and infrastructure – new and renewable energy – roads and transportation - ports – telecommunications and information technology).