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Foreign investment on the rise amid improved business climate

Article - April 14, 2019

A new investment law has provided a particularly important landmark in Egypt’s bid to boost the business environment, leading to increased private investment and improved confidence.



Following some difficult measures taken to stabilize the economy, in the context of a complex global economic environment, Egypt’s recent package of reforms have been specifically aimed at revitalizing local and foreign investment and positioning the country as a business and trade gateway to the African continent, and the world.

More than two years since the start of the reform program, analysts argue that these actions – such as devaluing the Egyptian pound and slashing energy subsidies – are now showing gains.

While the fiscal reforms and a weaker Egyptian pound have made it easier to do business, the drive to open up the private sector to foreign investment has included the passing of other crucial legislative and institutional reforms, ranging from a new investment law to the cutting of red tape. As a result, the Egyptian government is today reporting a spike in new companies coming to its shores, as well as an expansion of existing ones, and a rise in foreign investment.


Tax incentives

“Our economic reform measures were indeed bold and ambitious— and are paying off, setting the economy on the right track to achieve inclusive and sustainable growth,” explains the Minister of Investment, Dr. Sahar Nasr. “The Government achieved progress on fiscal consolidation efforts, eliminated foreign exchange distortions, encouraged domestic and foreign investment, and increased the private sector contribution to growth and job creation.”

“Improving the business environment with the aim of promoting a more competitive and dynamic economy was a key pillar of these reforms and has significantly contributed to increased productivity and employment generation,” the Minister says. “This entailed comprehensive legislative reforms, ranging from a new Investment Law, and Factoring and Leasing Law, to amending the Companies Law and Capital Markets Law, and introducing, for the first time, a Bankruptcy and Insolvency Law.”

The new investment law, ratified in May 2017, has provided a particularly important landmark in Egypt’s bid to improve the business climate. With an aim to modernize and reduce barriers to how international companies invest and operate in Egypt, it looks to facilitate economic growth, domestic production, exports and foreign investment, and is designed to boost employment opportunities and increase Egypt’s competitive edge across the region. The law is also helping to improve equality of opportunity, empowering youth, protecting the environment and public health, and enhancing good governance and transparency.


Investments in key sectors

In order to specifically attract more global capital to Egypt, a number of new safeguards and incentives were written into the law, including certain guarantees of residency and tax exemptions for foreign investors.

“Alongside the investment law, this full-fledged parcel of reforms, which entails an attractive package of incentives and guarantees, has led to a marked improvement in investor confidence, which has translated into increased investments in key sectors and regions, and subsequently boosted economic growth,” the minister affirms.

Consequently, companies in Egypt are now able to establish  themselves faster and more efficiently, while small businesses have increased access to lowcost debt. Meanwhile, the country is seeing the formation of public private partnerships and large private sector investments in mega-projects, including the energy sector, new cities such as the New Administrative Capital, and in developing public services.

Public-private sector collaboration in Alamein, Galala, the Suez Canal Economic Zone and the New Administrative Capital have accelerated the development of these regions particularly, and supported the government’s urban development plan.

“In addition, legislative reform to promote financial inclusion, including the Leasing and Factoring Law, is continuing to boost private sector participation through SMEs,” explains Minister Nasr. “We are committed to working full force to increase access to finance to smaller companies, as well as provide them with the technical assistance they need to operate more effectively and grow.”


Strengthened relationships

On the foreign investment front, bold policy reform, political stability, and a resilient economy are also helping to build trust and strengthen mutually-beneficial relationships with its international business partners, with Egypt maintaining its position as the leading destination for foreign direct investment (FDI) in Africa last year.

Egypt witnessed the highest percentage of foreign direct investment flows in Africa during 2018, accounting for 19.8 percent of total foreign investments. The value of foreign investments received in Egypt increased by 7 percent during 2018 to reach $7.9 billion, compared to $7.4 billion dollars in 2017. Most of the  investments in 2018 have been concentrated in the real estate, food, oil and gas and renewable energy sectors, according to the World Investment Trends report of the United Nations Conference on Trade and Development (UNCTAD).

“In addition, it is very important to note that while FDIs globally have been on a downward trend, Egypt’s share of global FDIs is increasing, which is a positive signal that we are on the right track and that our reforms are bearing fruit,” says Minister Nasr. “We’re already achieving promising results, signing investment  agreements worth almost $2 billion during the Africa 2018 Forum.”

Egypt’s economy, particularly in light of the improved business environment, offers ample opportunities to foreign investors in a variety of sectors. International businesses can partner with the government on urban development projects in mega-projects, including but not limited to the construction, IT, healthcare and education sectors, while its Investment and Economic Zones are also of noteworthy importance, leveraging on enabling infrastructure and strong incentives within the investment law, and aiming to drive strategic sectors, such as ICT, renewable energy, and quality public services.


Gateway to Africa

Besides being home to 100 million consumers of its own, Egypt also aims to become a gateway to Africa and the Middle East, positioning itself as a technology, energy, manufacturing and trade hub in the region.

“Our objective is to continue supporting the continent’s transformation into a global economic powerhouse by responsibly capturing the full potential of its resources and capabilities,” says Minister Nasr. “Egypt strongly believes in facilitating the movement of capital, labor and goods and fostering pan-African investments, while building stronger and more mutually-beneficial partnerships.

“I strongly believe that the African Continental Free Trade Agreement is creating opportunities for producers to access a wider market and, by reducing costs and barriers to trade, creating a more competitive landscape that will drive nations toward further economic diversification.”

“Africa, with a GDP of $3.5 trillion and 1.2 billion consumers, will witness 50-percent trade growth under the AfCFTA, as per the UN Economic Commission on Africa, and Egypt is committed to playing a pivotal role in this development,” stresses the minister.

“Today, Egypt has invested almost $10.2 billion across Africa, and our regional agreements serve as a powerful catalyst to further encourage such investments.”