Further Developments for Egypt’s Economic Reform

After several years marked by economic turbulence and uncertainty, two major political actions earlier this year launched Egypt towards a more optimistic and stable path. The first action is an amendment to the 1997 Investment Law No. 8, the aim of which is to attract new investments into Egypt as well as to ensure fair agreements between foreign and local investors. The law, which still requires the approval of President Abdel Fattah El-Sisi, seeks to boost direct foreign investment. It includes a number of incentives directed at creating an attractive and promising business climate for investors across various fields and industries. These incentives will create more job opportunities, increase production and exporting activities, and allow the country to produce certain goods that have been traditionally imported in the past. Furthermore, the new legislation provides tax exemptions of up to 50 percent for investments in the country’s most vulnerable and underdeveloped regions, in sectors such as electricity and renewable energy. Based on the new law, authorities will have a 60-day deadline to provide investors with all requested authorization. It offers a 2% unified custom tax on imported equipment and machinery. Investors will also be exempt from stamp taxes and fees for documenting the company, according to Article 25 of the law. In addition, Article 20 states that the total amount of foreign employees may amount to 20% of the total work force in their projects, instead of 10% as stated in the previous law. The second action consists of a proposal, as suggested by the head of the Arab Union for Direct Investment Sameh Sedki, that grants Egyptian citizenship to foreign investors who deposit either $3.5 million during a span of five years, or $5 million during a span of three years with no interest. The deposit would eventually be refunded to the foreign investor in Egyptian pounds. Middle Eastern and African investors may be interested in obtaining the Egyptian citizenship as they share a similar language, culture, and due to geographical proximity. European countries have launched similar initiatives to face their economic crises. In the United States, residency permits are offered in exchange for a $500,000 investment in a project that provides jobs for at least 10 people, or $1 million in the applicant’s own business. The ranges of efforts in the new economic zones will improve investment output and eventually lead to an expansion in direct foreign investments. These efforts will lead the country through a very tough economic reform in a stable manner. Although there are still challenges to be tackled, the country’s outlook is brighter than it has been since the 2011 revolution. Egypt is currently well positioned to compete with global investment markets.
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