Minister Sahar Nasr: Egypt Ready for Investment

With the New Investment Law just ratified by the President, we sit down with Minister of Investment Sahar Nasr to talk about how the legislation will facilitate conditions for an environment that supports growth in both domestic and foreign investment, with the overarching aim of accelerating job creation and achieving inclusive and sustainable economic development.


When is the New Investment Law’s executive bylaw expected to be issued?
I am confident we will have a draft finalized within a month from now, after the law was just approved by President Abdel Fattah El-Sisi, which is way ahead of the three month period granted by the law to have the executive regulations finalized. We have been bringing on board other stakeholders and we are cooperating with other ministries, private sector representatives, the Federation of Industries and civil society to ensure the executive regulations address all priorities and concerns for the whole investment community.


Once the draft is finalized, we will submit it to the Cabinet for the prime minister’s ratification. This is a key legislation that will guide our country toward the right path for growth and advancement. It will support our economy in attracting FDIs, improving the business environment, and avail new opportunities for both foreign and local investors.


What are the investment targets for domestic investments and FDI during the current and next fiscal years?
The government is targeting $10 billion in FDIs for the upcoming fiscal year. But you have to bear in mind foreign investments are not limited to just FDIs and also include portfolio investments in equities and treasuries, and also other forms of foreign borrowing. And there is a strong correlation between foreign investment and economic growth. In addition, larger inflows of foreign investments are needed for the country to achieve a sustainable high trajectory of economic growth since most such forms can act as long-term sources of capital.


As for FDI, it brings along the best global practices of technology and management, and can therefore boost value creation and productivity as key components in our economic growth model. This requires attracting quality-type FDIs that can integrate domestic firms into worldwide supply chain networks, and accordingly enhance their efficiency, and widen their market accessibility and access to finance.


How will the ministry help fill the fiscal gap?
The ministry’s mandate is twofold: first, bringing in foreign investments and second, securing funding from development partners to help finance the implementation of the government’s reform program and priority measures. Our reform program and measures to improve the investment environment should contribute to reducing systemic and investment risk, and accordingly will induce higher foreign inflows into the Egyptian economy.


A case in point is the strong recovery of foreign ownership in treasuries, which has now crossed $7 billion, up from around just $100 million a year ago. The Egyptian reform program which commenced under the leadership of President Sisi is supported by all the development partners including the World Bank, the African Development Bank, EBRD and the IMF. Our main target is promoting the investment opportunities in Egypt, with the ultimate objective of sustainable and inclusive economic growth.


Are there any upcoming amendments to certain law articles or new laws to improve the business and investment environment?
Our efforts go beyond just the Investment Law. The Ministry of Investment and International Cooperation is moving forward with a comprehensive set of legislative, regulatory and administrative reforms that aim to improve the investment climate in Egypt. Introducing new laws and amending old ones to cater to investors’ needs in today’s ever-changing dynamic environment is a key priority.

The ministry is moving forward with a comprehensive set of legislative, regulatory and administrative reforms that aim to improve the investment climate in Egypt. Laws catering to investors’ needs in today’s ever-changing dynamic environment are a key priority. [Reforms include] the new Investment Law, amendments to the Companies Law, the Capital Market Law, the Financial Leasing and Factoring Law, and the Bankruptcy Law, to name just a few.


When will the one-stop shop be effective?
We are working on a fast-track timeline to automate all services provided. There will also be a call center responsive to clients’ queries; drastic improvements in the starting company procedures are expected out of this renovation; actually companies will now be able to register in less than one hour through our new E-Registration system. The new investor services center will certainly streamline procedures, reduce bureaucracy, cut red tape and promote a level playing field.


How many investment disputes have been settled since you took office?
Since I took office last February, more than 300 disputes have been resolved. My priority is to assure investors that the government is prioritizing them and that the government will never turn its back on their concerns and problems. That is how we can encourage further investments in the country. Our job is to defy this misperception that the government is crowding out investors and is taking over.


But I also believe it is very important to have a proper and efficient dispute settlement mechanism to solve investors’ problems. This is more important, in my view, than the number of disputes settled. In other words, I was concerned with devising a new mechanism for such a process to ensure the maximum number of disputes are efficiently resolved. In that context, a committee has been formed and meets on a weekly basis to ensure the process is timely and efficient. Its findings are reported directly to the Prime Minister and the President and they closely monitor this dispute settlement mechanism.


When will Egypt receive the third WB and AFDB loan tranches? Who else are we negotiating with for finance? The UK, France, China?
The government is expecting the third tranche of the WB and the AFDB loans to be disbursed by the end of this year and further support has been agreed upon with our counterparts in France, Germany and the UK amounting to $1 billion. The government has adopted bold reforms in a number of areas which are considered as key especially concerning the economic portfolio, which ensure the continuity and progress of such cooperation with the same momentum and development to cover different fields.

How will International Cooperation and Investment unite to help the poor and most vulnerable cope with the rampant inflation triggered by economic reform?
Social and economic inclusion are key pillars in Egypt’s reform program. The government is taking important steps to mitigate potential adverse impacts expected in the short-term on the most vulnerable groups in the society. In this regard, the role of the Ministry of Investment and International Cooperation is to raise financing and attract investments that avail the necessary funding for the government to meet such goals.


First, the reform program was packaged with social safety nets that directly target and cater to the marginalized, underprivileged segments of the population. Such mitigation measures are critical to the success of the reform program as they prevent the reversal of implemented reforms and ensure societal buy-in.


Second, the government is keen on encouraging entrepreneurship and facilitating access to finance for start-ups in their different stages of development through various venture capital funds, incubators and accelerators. As such, the Ministry of Investment and International Cooperation established the “Egypt Start-Up Fund” with the vision of unlocking Egypt’s lucrative entrepreneurial potential, critically addressing the financing gap for underprivileged entrepreneurs and to accommodate the growing need for investment in Egyptian start-ups.


Are there any unorthodox or out-of-the-box approaches being utilized when it comes to promoting investment in Egypt?
Let me start by saying that although innovation is notoriously hard to achieve, it is considered a necessary condition for sustainable growth, job creation and attracting investments. Therefore, I am very proud to announce that the Ministry of Investment and International Cooperation is very close to launching Egypt’s first investment map; which is an online platform that will present all available investment opportunities in Egypt for both the public and the private sectors, as well as opportunities for public private partnerships.


Investors will be able to quickly find their desired opportunity and view the related details of the opportunity ranging from investment size, contract types, location and available utilities, to name a few, to restoring confidence in the economy; namely achieving progress on fiscal consolidation efforts, eliminating foreign exchange distortions, encouraging domestic and foreign investment and increasing the private sector contribution to growth and job creation. This wave of reforms has been fully supported by all our development partners.


How are the Gulf investments in Sinai development going? What about the Saudi Fund commitment to provide the needed finance?
We are working closely with our development partners such as the Saudi Fund for Development and the Kuwait Fund for Arab Economic Development to implement an aggressive development program in Sinai’s infrastructure such as water desalination plants, housing, wastewater, educational facilities and roads. Egypt and Arab financial institutions—the Saudi Fund for Development (SFD), the Kuwait Fund for Arab Economic Development (KFAED) and the Arab Fund for Economic and Social Development (AFESD)—are committed together to implement an ambitious program for the development of the Sinai Peninsula worth $2.5 billion.


We are working through this program with fast strides toward achieving unique development experience on the ground in Sinai; the Egyptian government aims to implement numerous development projects that serve development and justice goals in Sinai and to lay the foundation for a modern life for the original residents of this zone, as well as for newcomers. The projects are carried out over a variety of sectors, including housing, agricultural and infrastructure projects—such as the expansion of waterways—the connection of water through the establishment of water treatment stations, and sewage and irrigation systems. This shall contribute to raising incentives on investments in this highly qualified zone which can lead to unprecedented economic growth in Egypt.


The government is further working on projects in the educational field, such as the King Salman Bin Abdul-Aziz University which is being established in three cities (El-Tor, Sharm El-Sheikh and Ras Sidr), which shall serve as an unprecedented tool to qualify Sinai residents in order to enable them to work in different fields as well as improve the level of services in the health domain and social fields.


Egyptian-Saudi relations extend over long decades, based on common cultural heritage and Arab Islamic values that bring them close together. Several frameworks have been designed to cover the future of Egyptian- Saudi cooperation. Furthermore, the investor will be able to view available land, infrastructure, governmental services and nearby logistical services thus providing him/her with a holistic 360⁰ view of available and possible value and supply chains. With the rolling out of the investment map, we are hoping that it would also further facilitate the process for the operational licenses and land allocation systems.


What current mega projects are you working on to provide the required finance? Who are the lenders we are currently in talks with?
The current mega projects with top priority are: the New Administrative Capital, the Suez Canal Economic Zone, New Damietta for Furniture, One and Half Million Acres, the Golden Triangle as well as the Power Generation and Transmission Grid. Given that such mega projects act as a stimulus for the economy, the government has provided seed money for infrastructure development for the above-mentioned mega projects via provision of public investment, in addition to employing EPC plus finance models, as well as issuing investment certificates—as in the case of Suez Canal Economic Zone.


Negotiations with the Chinese and Saudi Arabian counterparts are underway to widen their investments in national mega projects such as the Suez Canal and the New Administrative Capital. And we believe that the new Investment Law will be a good vehicle to attract more foreign direct investment into such mega projects and we are encouraging private sector engagement through various partnerships—similar to the case of the Chinese developer (CFLD) in the New Administrative Capital.

Are you glad that privately administered free zones are back in the new Investment Law?
Yes, as this epitomizes the outcome of a democratic process at its best in improving the investment climate. The Parliament voted to keep the Special Free Zones and there was consensus on this issue. Economic zones are crucial for export promotion and geographical and sectoral targeting of investment. They should be better utilized to promote economic activities in competitive sectors, connect lagging regions to new markets, and help develop economic activities in priority sectors, and last but not least contribute in boosting exports.


Economic zones are also a means to creating business clusters to benefit from economies of scale and scope. This will promote investment activities and create job opportunities in regions where jobs are costly for the government.


It has to be noted that these zones are not fully tax-exempt. The new Investment Law provides certain incentives in harmony of the developmental and strategic objectives of the country. In addition to the above, the number of current private zone projects is 209 with a total capital exceeding $5 billion. These projects contribute to overcoming the high employment rates in the country, they provide around 83,000 direct job opportunities, in addition to numerous indirect job opportunities. These are firms that have made business plans based on being free zones, and hence excluding this was perceived as not timely in the context of the current economic situation and the unemployment rates.


As such, I believe the right decision was made. We believe that the new Investment Law will be a good vehicle to attract more foreign direct investment into mega projects and we are encouraging private sector engagement through various partnerships—similar to the case of the Chinese developer (CFLD) in the New Administrative Capital.