Egypt: Back on the investment map?

Author: | Published: 24 Aug 2015
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Mohamed Khodeir
The new legislative reforms in Egypt are taking place against a backdrop of debate over the Investment Law, that took place in conjunction with the Egypt Economic Development Conference (EEDC) held in Sharm El Sheikh last March.

Egypt's legislative structure is quite complex, with thousands of laws in force that require amendment. Egypt is a country that follows a civil code system (it does not rely on the concept of stare decisis where effectively court precedents formulate the law and judgments bind other courts in most instances). This can also help to explain in many cases why court judgments do not have to concur with one another in civil code states like Egypt, even with the moral impact of higher courts rulings.

Similarly, Egypt's bureaucratic structure is very complex and must be revamped, particularly considering the millions of incumbent government officers and their needs.

One source of legislation in Egypt is Islamic Sharia. Islamic Sharia itself, despite its sacred source, has been subject to many interpretations. This only confirms that there can be no prescriptive formula to regulate investment in Egypt. However, there are basic key principles legal experts look for to assess the validity of a legislative approach. Pure academic theory and dogmatic concepts need to give way to a more pragmatic approach. If the theory or spirit behind Egypt's legislation does not enable solutions, it needs to be reconsidered all together. The concern is not lack of legislation but the availability of provisions that can act as the starting point for reform on the ground.

The pipeline of projects resulting from the EEDC conference is not short term. The package of investments announced arguably represents a medium- to long-term project pipeline in numerous sectors for Egypt and therefore long-term legislative planning is required. In this environment, careful research on a case-by-case basis needs to be conducted in an ongoing process.

As such, one proposed approach would be to make legal revisions or unified new laws, sector by sector and in order of priority, that address the needs of Egypt. In other words, put the issue at stake into intensive care, where a unified legislation addressing all its key problems, in isolation from all other legislations that may negatively impact it, is developed.

This seemed to be the approach adopted by the government under law 17 of 2015 which amended and introduced new provisions to the previous investment regime. This law tackled many business assessment principles used by the World Bank and is a step in the right direction. Supported by a well-structured executive regulation that provides appropriate implementation machinery, this law could be considered a good template.

Additionally, the Public Service Law was another step towards addressing government bureaucracy complexities that threaten the implementation of any good laws.

Arguments have been raised against the new investment regime. However, it is necessary to work with what the interim legislature has produced, and appreciate that the legislation agenda is a long-term plan, not an overnight process.

To change a long track-record of overwhelming bureaucracy, surrounded by numerous pieces of legislation, remedies with both a wide and deep scope are required.

For investors, it is all about timing and certainty. For example, the time it takes to resolve commercial disputes in court, and certainty over the effective unified window implementation to secure government approvals under the new investment regime. This is yet to be tested in practice.

The initial signals for the rise of investment in Egypt are positive. Investor confidence has started to revive in Egypt as a result of various factors, including: the E£64 billion ($38 million) financing of the new Suez canal mega-project; the number of legislative changes undertaken to boost investment as a key resource for developing Egypt's future; and, Egypt's improved ratings.

In terms of continuing growth, Egypt needs to: regularly revise its long-term sustainable plan, which is to be proposed to the upcoming parliament; reward research and development; boost and encourage public-private partnership projects as announced by the Ministry of Finance in its strategy; support small and medium enterprises aggressively with more enabling legislation (by way of exceptions to un-enabling bureaucracy); and, ensure the implementation of amended legislation. This appears to be the approach fostered by the incumbent government

Mohamed Khodeir