Tourism investment needs restructuring, and the Ministry of Tourism should have a vision for their future application, Elhamy Elzayat, Chairman of the Egyptian Tourism Federation (ETF) told Daily News Egypt.
Egypt’s tourism industry was one of the sectors that suffered most after 2010, particularly after the political turmoil that left many tourism companies with millions of pounds in losses.
By 2014, companies started to recover and generate profits. The companies that witnessed losses and which began to recover recently were the Egyptian General Company for Tourism and Hotels EGOTH, Orascom Development Holding (ODHN AG) and Mena for Touristic and Real Estate Development, amongst others.
Although the government is taking action to lure foreign investments and tourism, Egypt’s most important sources of foreign currency, the security situation remains challenging, with the number of bombs across Egypt rising.
“Lack of stability and security remains an issue creating a barrier at the entrance of investments in the tourism sector,” Samy Soliman, Chairman of the Nuweiba-Taba Investors Association said.
In 2010, approximately 14.7 million visitors came to Egypt, but the situation worsened and numbers decreased after the 25 January Revolution that ousted former president Hosni Mubarak.
Moreover, Egypt’s security situation further weakened after the 30 June protests that ousted former Islamist president Mohamed Morsi, and political instability led some countries to impose travel restrictions to Egypt.
In the early to mid-stages of 2014, however, following the establishment of the new government, several countries lifted travel restrictions to Egypt. In 2014, tourists arriving to the country increased to 10 million, compared to 9.5 million tourists in 2013.
Even with visitors starting to return to the country, there are still obstacles facing touristic investors in Egypt, and the numbers have yet to return to previous levels.
Touristic influx is a very important derivative for increasing investments in the country, as with low occupancy rates, investors will not be interested in financing tourism projects in Egypt.
In April 2015, an official with the Chamber of Hotels in Sinai said low tourist occupancies in hotels located in Nuweiba/Taba and Ras Sedr have affected construction rates, as well as projects over the last four years.
As a result, the chamber requested a delay in repaying overdue loans for tourist projects established on lands allocated for tourism development in those areas, until the end of 2015.
The past four years have negatively affected investment in this sector, especially with the reduction of revenues and the increase of operational costs, said Elzayat. He added that tourism investment should be planned according to the yearly tourism flows coming to Egypt, as it is not possible to establish new rooms with the current insufficient influx.
According to Elzayat, there are currently around 151,000 hotel rooms under construction or development, and that there are currently 225,000 rooms available. The latter figure illustrates the high room availabilities against the limited tourist influx.
Elzayat also said there should be a stable taxation climate to make Egypt attractive for investors in the sector.
A new tax law was issued by the Egyptian government, but the legislative regulations are yet to be implemented.
On 1 May 2015, Chairman of the Egyptian Stock Exchange Mohamed Omran, told Al-Masry Al-Youm newspaper that the stock market was negatively affected due to some ambiguous items in the tax law’s regulations.
Elzayat further criticised the amount of interest rates imposed on loans provided by banks, which he described as high. He said that whilst the government competes to take loans from banks, banking institutions prefer to loan the government, rather than investors, as it is less risky.
He then specified that interest rates imposed on bank loans, acquired by the government exceed the 13%.
Soliman further noted that the single-window system has not yet been applied, thus investors have to gain approval and finish procedures for investment from different entities, and in some cases different governorates, making the process very difficult for investors.
The single window system, or the one-stop-shop, is one of the legislations highlighted in the newly introduced investment law.
On 4 March, nine days before the Sharm El-Sheikh Economic Summit, the cabinet agreed on the draft presidential decree approving the draft investment law. The draft law includes a bundle of legislative amendments to stimulate investment in Egypt, and was welcomed by various entities, foreign companies and governments. However, the law has, until now, not been put into effect.
“I’m calling upon the Egyptian government to expedite their steps and to actually implement the legislative regulations of the investment law in order to grasp the real attention of investors, as having the law just like that is not enough to satisfy them,” said Fayez Ezzeldin, Chairman of the Canadian Chamber of Commerce in Egypt and the Middle East.