Egypt is striving to create a better investment climate to attract foreign direct investment, and experts have unanimously agreed on some of the obstacles hindering foreign investments in Egypt, which must be overcome in the coming period.
Daily News Egypt surveyed the opinions of experts during the Egyptian Economic Conference 2022.
Sherif Samy, Chairperson of the Commercial International Bank – Egypt and former head of the Financial Regulatory Authority, said that the most prominent economic challenges facing the state currently is the shortage of foreign currency. He presented several recommendations to attract foreign direct investments to Egypt, mainly legislative stability, and not changing laws except in the narrowest extent.
Sami told Daily News Egypt that the procedures for issuing business licences must be adjusted to facilitate the speedy implementation of projects. He explained that both the local and foreign private sectors are concerned with the ease of procedures and speed of decision-making, pointing to the importance of starting the international interest in structural reforms related to the productive sectors.
He pointed to the need for a clear vision of the areas and sectors that the state wants to promote, and to give investors an opportunity.
He said that the state ownership document recently proposed by the government is a commitment from it to support the activities of the private sector, and the first direct message to open up to the private sector in various fields such as telecommunications, real estate, retail and others.
Moataz Al-Derini, founding partner of Al-Derini & Partners Office for Legal Consultations, believes that the stability of the exchange rate is one of the most important factors for attracting foreign direct investments, especially as it is related to transferring the profits of foreign investors, which requires clear liquidity, especially in the exit process.
Wael Ziada, CEO of Zilla Capital for Financial Investments, said that the challenges facing foreign direct investment in Egypt are represented in the legislative environment, the investment climate, as well as problems related to the exchange rate of the dollar against the pound, and the availability of hard currency.
Ziada told Daily News Egypt that bureaucracy, the long time of procedures related to licenses, and the delay in resolving some deals are among those challenges.
He added that the state ownership document for partnership with the private sector identified a number of strategic sectors that the government will continue to be present in, and enhance its investments like most countries in that part, as well as it identified some other sectors from which the state will exit in favour of the private sector.
He believes that the state should focus on stimulating private sector investments, which in turn needs clarity of the state’s monetary policy, pointing out that recently there has been some improvement in the state’s monetary policies.
He explained that the state’s intervention in some sectors was due to certain circumstances that Egypt is going through, and the state had to be present at the time to secure many investment sectors, but with the current stability, it was necessary to make room for the private sector and its investments.
He pointed to the necessity of automating the services of the General Investment Authority, activating some services electronically, launching the investment map, and working to overcome the obstacles facing investors and resolving disputes related to investors.
A study by the Egyptian Center for Economic Studies indicated that the private sector’s contribution to the GDP increased to 73.3% in 2020/2021, compared to about 60% in China, 51% in Saudi Arabia, and 41.3% in Turkey.
On the IMF loan, Ziada explained that if a final agreement is reached on the loan, and Egypt obtains financing, it will become a great outlet for the Egyptian economy in terms of currency problems.
He pointed out that the loan will also push to liberalize the exchange rate of the pound against the dollar, which will reflect positively on the economy, explaining that import problems are among the most prominent problems that will be resolved at that time.
He stressed that the issue of exchange rate stability is a top priority for the Central Bank of Egypt during the current period, explaining that there is control over the parallel market for the currency over the past period.
He pointed out that what concerns the foreign investor in the first place is the stability of the dollar’s price against the pound.
Al-Derini also said that providing a clear tax system to stabilize tax transactions, and interpreted application mechanisms, is a very important step to attract investments.
He pointed to the importance of procedural deadlines in finalizing the approvals related to permits for foreign investors, citing an example that prevails in transactions that “the period begins with the completion of the file,” which is a matter subject to the discretionary authority of the government employee, or the entity to which the file is handed over.
He stressed the need for clarity in the timing of procedures and their implementation, whether in project or land licenses; So that the legal consultancy offices give clear advice to foreign investors, especially that time equals money.
He added that there are forms of bureaucracy in government departments, and despite the great improvement at the level of heads of departments or departments, dealings at the level of a government employee still witness a lot of bureaucracy.
“The quality of the government employee who works in the sectors that serves the foreign investor must be taken care of at the level of educational, cultural, and linguistic quality, and the correct implementation of the work,” he concluded.