Prime Minister Moustafa Madbouli examines the results from the initial session of the Supreme Council for Investment - Press Photo
Following the first meeting of the Supreme Investment Council, which was presided over by President Abdel Fattah El-Sisi, Prime Minister Dr. Mostafa Madbouly gave a press conference to discuss the council's findings.
The conference, which was attended by top government officials and ministers, emphasised the government's commitment to encouraging private sector engagement in Egypt's development programs in the face of critical economic junctures and global uncertainty.
The Prime Minister emphasised the importance of the first Supreme Investment Council meeting during his opening remarks, highlighting its timely occurrence.
He emphasised the Egyptian state's transitional era, which requires coordinated efforts from all stakeholders to achieve a fundamental goal: boosting private sector participation in the state's developmental programs.
The Prime Minister emphasised the necessity of bold decision-making, updating rules, administrative procedures, and legislation, and attracting higher investment volumes and encouraging private sector participation in the coming phase.
Dr. Madbouly added that the purpose of the press conference was to deliver the suggestions and suggested actions that had previously been approved by the Supreme Investment Council at its previous meeting.
He emphasised the government's efforts in developing a slew of resolutions and procedures in response to President El-Sisi's directions.
The conference provided an opportunity to look back on the state's accomplishments, notably those from May 2022 until the present.
Ministers, competent agencies, business sector organisations, investor's organisations, chambers of commerce, and export councils worked together to make these decisions, and their problems and inputs were carefully examined.
Dr. Madbouly further emphasised that President El-Sisi had clearly directed the government to create a timeframe and allocate responsibility for implementing each decision. As a result, the President's office will monitor the Council on a regular basis to ensure that it meets monthly or, at most, every two months.
This strategy allows for close monitoring of decision execution while also taking into account any new actions that may improve Egypt's investment appeal.
The Prime Minister outlined the evolution of investment volumes conducted jointly by the state and private sectors from 2005 to the present during the news conference.
He stated that overall investments in both industries were around LE115.7 billion in 2005-2006. In comparison, the expected investment volume for the following fiscal year 2023/2024 is roughly LE1.640 trillion, representing an almost 15-fold growth over this timeframe.
Dr. Madbouly emphasised that maintaining the existing modest rate of investment growth would have been insufficient to keep up with Egypt's burgeoning economy and rapid population expansion. As a result, the state would have faced enormous hurdles in infrastructure, services, and other critical areas required for long-term growth.
Egypt's economic growth has shown resilience in recent years, buoyed by ongoing reforms, attractive investment opportunities, and a diversified economy.
The government's commitment to promoting private sector engagement further strengthens the country's growth prospects. Egypt's strategic location, young population, and ambitious infrastructure projects continue to attract international investors, bolstering confidence in the nation's economic stability.
The Prime Minister clarified that the volume of investments had been progressing at a slow pace over the course of ten years, and then started to increase.
He pointed out that this was not due to the private sector's lack of role during this period, but rather to the role of the state, which began to increase its investments to achieve growth rates.
During this time, the state recognised the circumstances that the private sector faced, beginning with 2011 and the disruptions that occurred at the time, followed by economic reform measures that began in 2015, and then global conditions such as the COVID-19 pandemic and the Russo-Ukrainian crisis.
It was natural for the private sector to be apprehensive about injecting investments anywhere. Therefore, the option the state chose in the previous stage was to compensate for the slowdown caused by the private sector by injecting investments as a step to increase employment opportunities, which the state successfully utilized to reduce unemployment rates.
The Prime Minister explained that the focus at the current period, from the Higher Investment Council and under the directives of the President, lies in how to increase private sector investments to match or exceed those made by the state.
The target, after three years, is for the private sector's share of total investments to reach 60 percent or 65 percent, and efforts are currently underway to achieve this.
The Prime Minister underlined that the private sector already dominates in Egypt in terms of the size of establishments, the number of employees, and the number of accessible job possibilities, as is natural in any country.
There are over 3.75 million private sector firms, and the private sector employs 73 percent of the total workforce. Furthermore, the private sector accounts for 75 percent of the total domestic product.
However, the problem is that more than half of the private sector is informal, and 60 percent of private sector businesses are engaged in wholesale and retail trade. The task is to divert resources to productive areas such as industry, agriculture, and other manufacturing activities.
The Prime Minister also highlighted another challenge, which is that only 1 percent of private sector establishments engage in exports, indicating that 99 percent of them cater to the domestic market. He explained that this necessitates encouraging the private sector to engage in export activities, and this is what the Higher Export Council, headed by the President, is working on. The council will hold its first meeting under his presidency.
Dr. Mostafa Madbouly pointed to the comprehensive reforms required by investors regarding the allotment of industrial lands in his remarks.
It is now feasible to provide land for use with ownership rights, in addition to establishing a fixed pricing for industrial sites, as announced by the Prime Minister's decision. The General Authority for Industrial Development has been designated as the sole entity responsible for giving all approvals to investors who approach it, while the authority itself coordinates with other necessary state bodies.
Immediate allocation of industrial lands will be facilitated through a central committee, allowing for immediate allocation for major or foreign investors. Other measures include issuing licenses within 20 working days. The Prime Minister confirmed that he is closely following this process with the Minister of Trade and Industry, and significant improvements have been made in order to achieve this goal, even surpassing the 20-day timeframe.
Dr. Mostafa Madbouly also addressed the recent developments by the Financial Regulatory Authority and the Egyptian Stock Exchange regarding the launch of the first gold investment fund, which provides Egyptians with an opportunity to invest in this sector. Clear mechanisms have been established and will be implemented in the upcoming period.
According to Dr. Mostafa Madbouly, the private sector has four challenges: business formation, land allocation, activity licencing, and project implementation.
In light of this, about 22 additional decisions were taken following the Higher Investment Council meeting. The President directed the development of a timetable and the designation of the responsible entity for implementation in order to ensure monitoring and the timely implementation of the decisions.
Regarding company establishment, the Prime Minister mentioned that amendments will be made to existing provisions in the executive regulations of the Investment Law.
These amendments will contribute to and encourage the expansion of private free zones and facilitate the interaction between foreign investors and banks during the company establishment process. Previously, there were obstacles that required waiting until the company was established and procedures were completed, but with these amendments, foreign investors will be able to deal with banks immediately upon submitting the application.
He stated, "We have identified the responsible entity for implementation of this matter, as well as the required timeframe to complete this process, and the same applies to each decision."
Dr. Mostafa Madbouly continued, stating that the second decision involves amending Article 34 of the Investment Law to encourage industries based on natural gas as an input in production and enhance their benefits from the private free zone system.
He further explained that several international companies have expressed interest in implementing petrochemical projects within the framework of the free zones. The state had previously faced difficulties in this regard due to issues in the natural gas sector. However, with the Egyptian state now having a clear plan for natural gas, the state, through the Higher Energy Council, can grant approvals for these projects, allowing them to establish a free zone for export purposes.
Dr. Mostafa Madbouly added, "The third decision pertains to the approvals required for company establishment and implementation. There were complaints that obtaining approvals from all relevant entities took months. Therefore, we have decided to set a maximum timeframe of 10 working days to obtain all necessary approvals. As soon as the foreign or local investor expresses their intention to establish a company, they will receive the required approvals within a maximum of 10 working days. If the required documents are submitted and there is no response from the entity, it will be considered an implicit approval."
The Prime Minister then reviewed the remaining decisions, saying, "A unified electronic platform will be established in the General Authority for Investment and Free Zones for the establishment, operation, and liquidation of companies and projects. All relevant entities will be integrated into this platform, allowing companies to apply online in line with global developments and carry out all procedures through the platform."
Dr. Mostafa Madbouly emphasised that the state has confirmed that any contracts previously concluded or sanctioned by the state will be honoured as long as the investor does not break the terms and commitments of those contracts. He emphasised the state's efforts to expedite land registration for these enterprises.
Despite complaints about commencing the projects years earlier and meeting the required duties, challenges with land registration were faced. As a result, instructions have been issued to honour those contracts, simplify procedures, and obligate the Real Estate Registry to register the lands and properties for these projects as long as no violations occur.
The Prime Minister added, "The most important thing is that the state opens up property ownership in Egypt to foreigners." He pointed out that previous regulations stipulated that the maximum number of properties a foreigner could own in Egypt was two properties in two different cities. However, the Minister of Justice will work with all relevant entities to launch a new number that allows any foreigner intending to own properties in Egypt to do so without restrictions, as long as they comply with the regulations, including payment in foreign currency.
Regarding the section on activity permits, the Prime Minister clarified that it was important not to limit the issuance of the Golden License to national or strategic projects only. Therefore, any projects in any sector deemed important by the state will expand the issuance of the Golden License to all investors, whether local or foreign.
Additionally, an important point arose regarding the limited duration of enjoying the Golden License for companies established after the 2017 Investment Law and those established before. It was agreed that any company, regardless of its establishment date, has the right to apply for and benefit from the advantages of the Golden License, as long as it meets the criteria.
Madbouly also mentioned the importance of establishing a vision for the Egyptian state. It entails investigating the feasibility of separating the institutions in charge of monitoring and regulating services and facilities from the ministries that provide those services.
For example, if a facility has a regulatory body and a ministry provides the service, the regulatory body is intended to be separate from the ministry. As a result, the circumstances of each institution will be examined in order to take appropriate action, such as moving regulatory entities' jurisdiction to the Cabinet, separating the ministry, and forming a new regulatory body to oversee and govern the facility.
The Prime Minister also addressed a request from the private sector for equal treatment. It was raised that certain legal provisions granted preferential treatment to some state-owned companies and entities over the private sector. It was agreed upon to modify the regulations to ensure equal treatment for all, where the private sector is treated on an equal footing with all state entities, without granting preferential treatment to any party.
In addition, the Prime Minister addressed the issue of expediting the program of offerings and selling state-owned assets, pointing out that there are numerous entities owned by the state, including companies and assets, which are often owned by multiple parties within the state. To be able to offer or include them in the offerings program, a series of administrative and bureaucratic procedures are required, consuming a significant amount of time.
The approved concept is to propose a law for the establishment of a unit under the supervision of the Cabinet, which would gather data on all these companies and make binding decisions regarding their consolidation, liquidation, and the sale of the state's share in them.
The Prime Minister further explained that there are steps to be taken by the Ministry of Finance, including the publication and accessibility of all reports related to the government's actions aimed at enhancing governance and transparency in the upcoming phase.
An important amendment will be made to the operating procedures, allowing foreign investors to register in the importers' registry for a period of 10 years, even if they do not hold Egyptian citizenship.
Previously, company registration in the importers' registry and the ability for investors to import production inputs required the company to have 51 percent Egyptian ownership or for the investor to hold Egyptian citizenship. However, the amendment now states that as long as the company is established in Egypt, even if it is 100 percent foreign-owned, it has the right to be registered and begin importing production inputs.
During his talk, the Prime Minister also addressed another issue that arose as a result of the agreement with the business sector and its goal. A comprehensive decision will be made saying that no organisation is permitted to issue regulatory decisions that impose burdens or adjust fees or service charges that would place an additional burden on investors.
However, the Investment Law requires that any decision that might increase the obligations on investors be referred to and approved by the Investment Authority, the Cabinet, and the Higher Investment Council, all of which are presided over by the President. In addition, the Ministry of Justice will release another ruling outlining the basis for charging improvement fees.
This came in response to complaints from various entities about the lack of clarity regarding the application of what is known as improvement fees. The Minister of Justice has been directed to establish comprehensive regulations on this matter, which will be published for everyone's benefit.
Another issue raised as a complaint was the imposition of taxes on investors while they have outstanding dues owed by the state. In this context, an agreement has been reached to enact a settlement system, and specific controls have already been put in place. The Ministry of Finance has been instructed to activate this system so that if the investor has dues owed by the state, they can be collected, or if the investor has obligations, they can be settled.
The Prime Minister referred to another decision that will be implemented within three months, through the Minister of Finance, who has already commissioned a global consulting firm to develop a policy document for the country's tax regulations for the next five to ten years. This is in response to complaints from investors who are often surprised by tax law amendments, leading to a lack of transparency.
Therefore, the Prime Minister clarified that the forthcoming document, to be announced in three months, will clarify the tax policies for the next five to ten years, providing a clearer understanding of the working conditions and operations within the country.
Furthermore, the Prime Minister addressed another important point regarding the completion of amendments to the profit transfer law between holding companies and their subsidiaries in the private sector.
The complaint in this context was related to the double payment of taxes. Consequently, these amendments have been prepared and will be ratified in parliament at the earliest opportunity. Additionally, the Prime Minister highlighted another significant aspect of facilitation, which involves an alternative mechanism for resolving disputes, redirecting them to the judiciary and maintaining their validity throughout the litigation period.
Previously, the Economic Courts Act was responsible for resolving such disputes but imposed a maximum limit on the value of the dispute. For example, if a dispute concerned a sum of 100,000 pounds, any dispute exceeding this value would be referred to the general judiciary. These measures may result in extended time frames.
Regarding various compensations related to expropriation of properties or lands pertaining to investors, the Prime Minister pointed out the state's commitment to completing all procedures and paying compensation to investors within three months.
Furthermore, the Prime Minister emphasised the agreement to involve both the World Bank and the International Finance Corporation in formulating a comprehensive vision and strategy for investment in Egypt with the Egyptian government. This involves boosting investment prospects in the Egyptian market in accordance with President Abdel Fattah el-Sisi's orders to the administration. To attract investment in Egypt, it is critical to use international offices and experience.
The Prime Minister also stated that revisions to the Economic Zones Law, specifically the Suez Canal economic zone, as well as any future economic zones, have been agreed upon. The goal is to support and improve the attractiveness of these locations by offering incentives and facilitations that encourage various activities.
Dr. Madbouli pointed out that the decisions included the establishment of a permanent unit within the Cabinet, chaired by the General Authority for Investment and Free Zones, and composed of various relevant entities, to deal with the startup companies.
This unit will be responsible for receiving applications for the establishment of these companies and will develop a clear vision for their operations, while facilitating the necessary procedures for their establishment.
The Prime Minister also stated that a set of incentives for specific sectors has been agreed. There is an agreement in the agriculture sector to expand the mechanism of commodity exchange and contract farming. This accomplishment has been accomplished with strategic crops, and there is a strategy to adapt it to a variety of vital crops and agricultural activities, ensuring that Egyptian farmers benefit from these agricultural practises.
Regarding the real estate and housing sector, Prime Minister Madbouly clarified that preliminary agreement has been reached to grant real estate developers and investment projects in new cities a reduced interest rate of 10 percent on installments, instead of the current rate announced by the Central Bank, for a period of two years.
Additionally, the implementation period for real estate projects will be extended by 20 percent of the original total duration, easing the burden on real estate investors. Moreover, the percentage required for considering a project as completed will be reduced to 85 percent from 90 percent. Furthermore, there is ongoing consideration of additional incentives to provide further facilitation for real estate developers, which will be presented at the next meeting of the Supreme Council for Investment.
The Prime Minister stated, "As for the industrial sector, it is currently our top priority, according to the directives of President Abdel Fattah El-Sisi." He added that several measures have been agreed upon regarding exemptions from customs duties and other administrative fees that were supposed to be borne by specific industries in the planned new areas or desired industrial activities that need to be encouraged.
He further explained that the Minister of Industry will be responsible for identifying specific industries and activities for which a decision will be issued.
Those who wish to invest in these industries and activities will be exempted from customs duties and various administrative fees. Additionally, some tax incentives will be announced. Today, we have agreed on the first of these incentives, which specifically applies to green hydrogen production.
He stated, "An investor who wishes to establish an industrial project will be allowed to pay an initial down payment for the land, and we will provide a grace period of two years for them to build the factory during that time. Afterward, they can repay the factory's price in installments."
He stated that the Cabinet has adopted a daft law relating to the production of green hydrogen and its derivatives, which involves the implementation of a package of extraordinary incentives for this business. Furthermore, there is an agreement to activate a comparable set of incentives for all investment projects, not just hydrogen. These incentives include a tax refund of up to 55 percent of the income tax, where the government will refund this percentage of the tax to the investor for the initiatives they have done. Exemptions from value-added tax will also be expanded for equipment, machinery, and raw materials, as well as project exports.
"In the transportation sector, it has been agreed that logistics zones, dry ports, and similar projects will benefit from all of the incentives stipulated in the Investment Law," he stated. As a result of investor complaints, pricing methods inside and outside of ports will be unified."
He stated that the whitelist will be expanded in order for manufacturers and exporters to benefit from all incentives.
"The most important thing is not just announcing the incentives, but putting them into action on the ground, as directed by President Abdel Fattah El-Sisi," he continued. As a result, we have committed to a precise schedule and defined the organisations accountable for implementation and follow-up."
He explained that there will be a follow-up on the implementation of these measures at the future meeting of the Supreme Council for Investment.
Regular meetings will be held by the group of ministers responsible for implementation, who are present today, to periodically monitor what is occurring on the ground until the next meeting of the Supreme Council for Investment. This will allow us to implement a greater number of choices before the next Supreme Council for Investment meeting.