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German Legal Expertise in the Middle East since 1981

Investing in Egypt

Guiding Principle

The office of Meyer-Reumann & Partners (M&P) in Egypt assists foreign investors to establish their projects under the EG-Investment Law. The General Authority for Investments and Free Zones (GAFI) acts as the official regulator. It is the governmental body responsible for project’s approval and reviewing their Articles of Association for a local entity for pursuing the investment project. Additionally M&P provides local support in the preparation for getting access to projects in the market.

A. The EG-Investment Law Law No. 8 of 1997 as amended by Law 17/2015

  I. Introduction and Scope of what has not been changed

On 12 March 2015, the Presidential Decree 17/2015 was issued to introduce substantial amendments to the Egyptian Investment Law 8/1997 (Egyptian Investment Law also known as “Egyptian Investment Guarantee and Incentives Law”). It amended certain provisions of the Companies Law 159/1981 (Companies Law), the Sales Tax Law 11/1991 (Sales Tax Law), and the Income Tax Law 91/2005 (Income Tax Law). All amendments generally aim to attract new investments to Egypt through offering further incentives and guarantees, removing obstacles, and streamlining the procedure.

  II. Guarantees and Incentives of the Investment Law 8/1997 not amended

The amendments of Law 17/2015 are substantial (see below) except for some guarantees and incentives. Basically, the following summary shows, what has not been changed:

  • Immunity from nationalization or expropriation,
  • Immunity from administrative attachment or freezing assets,
  • Exemption from certain provisions of Companies law (including distribution of 10 % of profits to employees),
  • In general, foreign investors can invest in Egypt without any restrictions after obtaining security clearances from the national security agencies. However, the following activities are not open to direct investment by foreign investors:
    • Importing for the purpose of trading in Egypt
    • Acting as a commercial agent
    • Foreign investments in certain aviation activities are also restricted.

  III. The Amendments of Law 17/2015 of Law No. 8 of 1997

Below is a brief description of the main amendments and additions:

  1. Trimming Sales Tax and Customs Duties
    The sales tax on machinery and equipment necessary for production was reduced from 10% to 5% to be returned to the investor when presenting his first tax return. Customs duties on imported equipment and machinery linked to an investment under Law 8/1997 are set at 2% instead of 5%. There are no more fees for non-pre-defined destination goods entering free zones.

    The Egyptian Investment Guarantee and Incentives Law No. 8 of 1997 and its amendments are the investment laws that governs foreign investments and activities in Egypt.

    Additional Non-Tax Incentives

    Further non-tax incentives may be granted to labor-intensive projects and to investments in remote areas and in certain sectors such as energy, agriculture, logistics, and transportation.

  1. Non-Tax Incentives may be Applied to:
    • Project related own customs ports;
    • Subsidies and favourable payment terms of the price of the power needed to operate the project.
    • Refunding the expenses after the commencement of the project for extending the infrastructure for the project’s land.
    • Subsidies for technical training programs for employees and social insurance subscriptions.
    • Allocation of governmental owned land free of charge or at discounted prices.
  1. Additional Non-Tax Incentives
    Incentives may be granted to labor-intensive projects and to investments in remote areas and in certain sectors such as energy, agriculture, logistics, and transportation.

    Non-tax incentives may be applied to project related own customs ports such as:

    • Subsidies and favourable payment terms of the price of the power needed to operate the project.
    • Refunding the expenses after the commencement of the project for extending the infrastructure for the project’s land.
    • Subsidies for technical training programs for employees and social insurance subscriptions.
    • Allocation of governmental owned land free of charge or at discounted prices.
  1. Shielding Senior Executives from Prosecution
    Companies’ executives are now shielded from criminal prosecution for legal violations committed by the company. Senior executives may only be liable if it is proven that they had knowledge of the crime and intended to commit it for their own benefit or the benefit of others.

    Penalties such as fines or suspension are now to be imposed on the company itself only. In case of recurrence, the operational license of the Company may be revoked or the company may be liquidated. This is in addition to any other complementary or ancillary penalties as stipulated by the law

  1. The One-Stop-Shop System
    The General Authority for Investment (GAFI) of the Ministry of Investment is now empowered to act as a one-stop-shop. Investors, in certain sectors, can get all licenses and approvals needed to establish and pursue the licensed activities. GAFI itself undertakes the burden of coordination between the different authorities ensuring the success of the one-stop-system. The determination, durations, procedures and methodology of such coordination shall be governed by a separate law.
  1. Exclusion from the Bids and Tenders Law
    Selection between investors qualified to obtain a license for a project shall be conducted on a free-competition and transparency basis. The Investment Law shall prevail over the Egyptian Bids and Tenders Law No. 89/1998. The criteria of selection shall be decided in the Executive Regulations.
  1. Facilitated Exit Procedures
    According to amendments, investors may freely exit the market without restrictions and without a lengthy procedure. Upon receiving the liquidation request, the authorities in charge shall notify the investor with all its pending obligations within a maximum period of 120 working days. The lapse of the said 120 days without a reply shall be considered an automatic release the investor from any further liability.
  1. Allocation of State Land
    A full new chapter is added to the Investment Law regulating allocation of state land and cutting through bureaucracy in a transparent and simple manner.
  1. Alternative Forums for Investor-State
    A new Chapter Seven is added to the Investment Law under title “Investment Disputes Settlement”. The chapter created three out-of-court forums to encourage amicable settlement of investment disputes with the government. The three out-of-court forums are:

            a) The GAFI Complaint Committee

    The Complaint Committee is competent to consider challenges against administrative decisions issued by GAFI in connection with the implementation of the Investment Law and its executive regulations.

    The committee will issue its decision within 60 days from the date of submitting the challenge. The lapse of the 60 days without a reply is considered a refusal of the challenge. The decision of the committee will be final and binding on GAFI. Resorting to the committee is voluntary and its decisions are not binding on the investor.

            b) The Ministerial Committee for Resolution of Investment Disputes

    A ministerial committee will be created at the Cabinet of Ministers to consider requests, complaints or disputes that may arise between an investor and a governmental body in connection with the implementation of the Investment Law The committee shall issue its decision with the reasons thereof within 30 days from finalizing the hearings. If approved by the Cabinet of Ministers, the decision shall be binding on the governmental party only. The Investor, conversely, retains his right to resort to state courts or arbitral tribunals to initiate the claim anew.

            c) The Committee for Settlement of Governmental Contract Disputes

    This ministerial committee will be established and charged with settling disputes between investors and governmental bodies arising out of investment If a settlement is reached between the parties, it will be effective and binding only when approved by the Cabinet of Ministers. If no settlement is reached, each party can commence litigation or arbitration as the case may be. Submission to the committee is not a pre-requisite for commencement of a litigation or arbitration case.

B. Some Selected Investment Opportunities in Egypt

The new incentives as per EG-Law 17/2015 are targeted to encourage more investors to invest in Egypt. Egypt’s Ministry of Investments has outlined specific investment opportunities in 2016 and onwards, in many sectors.

Hereinafter some projects are roughly indicating its basic nature: in the Industrial Sector:

  I. The Project Bio-Ethanol from Molasses

  • Bio-Ethanol from Molasses is an eco-friendly investment opportunity for alternative fuel production from sugar beet molasses).
  • The costs of the project are estimated at USD 135 million (including capitalized interest).
  • Period of Implementation: Expected construction period of 3 years (by 2017)
  • The projects key investment rationales are:
    • Locally available feedstock (sugar beet molasses)
    • Strong demand for biofuels: bio-ethanol to be sold either locally through an off-take agreement or exported to the EU given growing bio-fuels global demand.

  II. The Project Bio-Ethanol from Rice Straw

  • The Project Bio-Ethanol from Rice Straw is an investment opportunity for alternative fuel production from rice straw. It is an eco-friendly alternative bio-ethanol product to other agricultural wastes. Project land location has been identified and secured by the government.
    • Location: Mutubas, Kafr El Sheikh Governorate.
    • Project Description:
      • Expected annual output of 50,000 tons
      • Project feedstock (estimated at 275,000 tons) secured by a long-term feedstock supply agreement with waste recycling companies
    • the products may be exported to EU countries or use for, local sales to EGPC
    • Custom duties exemption on imported machinery for eco-friendly projects
    • Project land location has been identified and secured by the government
    • Strong government support to develop waste recycling projects through financial incentives and project development (Agriculture Waste Recycling Project or Ayady)
    • Availability of Pre-Feasibility Studies, Feasibility Studies, and other Studies:
      • Estimated Cost of the Project: USD 226.6 million
October, 2015 Morad S. Ahmed
Meyer-Reumann & Partners, Alexandria Office
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