Upload
tarek-yousry
View
221
Download
0
Embed Size (px)
Citation preview
7/28/2019 FDI in Egypt During 5 Years
1/22
FDI in Egypt during 5 years
Presented by
Dr. Amany Asfour
President
Egyptian Business Women Association(EBWA)
Business & Professional Women Egypt
(BPW-Egypt)
African Association for Women Empowerment
(AFRAWE).Mediterranean Congress of Business &
Professional Women
Representative of Civil Society for North Africa
in the African Union.
Introduction:
The Africa and Middle East region historically has
attracted low levels of FDI. Africas share of global
inflows fell from 2.3% in 2001 to 1.7% in 2002 and,
although the countries of the Middle East may attract
substantial investment into the oil and gas sector, FDI
flows into the most diversified economy in the region. The
Middle East and North African (MENA) region as whole
(excluding Israel) is only responsible for 0.9% of global
flows of FDI.
Egypt has a well-diversified economy, with no single
sector contributing more than 21% of GDP. Its well-
7/28/2019 FDI in Egypt During 5 Years
2/22
integrated structure ensures sustained growth in a
diversified environment where sectors such as
manufacturing, energy, agriculture, tourism and services
interact to create economies of scale. This generates a
balanced distribution of the nations income, employment
and export revenues, and multiplies the opportunities for
investment and growth. Such a solid economic base
reduces vulnerability to external shocks and enables Egypt
to attract foreign investments in a variety o f fields (Fig ).
2
7/28/2019 FDI in Egypt During 5 Years
3/22
Figure ( ): Composition of GDP 2002/2003
An Era of Reform:
In the early 1990s, the government launched an
Economic Reform and Structural Adjustment Program
(ERSAP) supported by a Standby Arrangement with the
International Monetary Fund and a Structural Adjustment
Loan from the World Bank, in addition to bilateral debt
forgiveness/debt service relief from the Paris Club. This
comprehensive program, designed to achieve
macroeconomic stability in the wake of part ial reforms
implemented in the early 1980s and debt rescheduling in
1987, included: financial sector reforms, interest rate
liberalization, reduction in subsidies and price controls,
exchange rate standardization, foreign trade liberalization,
and public sector reform. The overarching goal was to
3
7/28/2019 FDI in Egypt During 5 Years
4/22
create an open, market-oriented, decentralized economy
receptive to foreign direct investment and private-sector
participation.
Egypt is an increasingly attractive choice as a
location for transnational corporations, with its natural
resources, skilled and competitively priced workforce,
geographical location, advanced infrastructure and
opportunities for combining trade and investment
strategies. Opportunities also abound in manufacturing,
high technology sectors, food processing, textiles, mining
and services.
A number of sectors and industries benefit from the
governments generous incentives and guarantees, such as
zero tax over the lifetime of a project.
Egypt offers many advantages to investors. These include:
well-established and accessible ports on both the
Mediterranean and Red Sea; the availability of highly
trained and skilled labour at competitive wage rates; an
efficient banking system and a dynamic and growing stock
market; political and social stability; a favourable business
environment with strong support from the government for
the private sector; and a well-developed infrastructure.
Main Policies and Actions:
The government continued to enhance the investment
climate in Egypt, through extending the exemptions
stipulated in the law of Investment Guarantees and
4
7/28/2019 FDI in Egypt During 5 Years
5/22
Incentives, to cover the expansions in investment projects
as well as the activities exercised under the BOT system.
Egypt's record in attracting FDI has been very
positive over the past decades.
FDI is the major source of capital flows to developing
countries. Egypt is well placed to attract additional foreign
investment given the success of its stabilization program
and the strength of its economic recovery. In 1999,
UNCTAD reports that Egypt was one of the two recipient
countries for FDI in Africa. Its share was 29%.
The choice of Egypt as a location for TNC activity is
increasingly attractive, given the country's major
advantages in availability of natural resources skilled and
competitively priced work force, geographical location,
advanced infrastructure and in the opportunities for
combining trade and investment strategies in Egypt.
As a result of the new philosophy adopted by the
government to respond to the private sector and achieve
economic growth needs new activi ties have been added to
benefit from the incentives and guarantees granted by
Investment Law 8 of 1997 such as:
Transportation to and from the new communities
and remote areas.
Services in the new communities and remote
areas
5
7/28/2019 FDI in Egypt During 5 Years
6/22
Integrated tourism development.
Development of industrial parks.
Volume of FDI to Egypt:Direct Investment in Egypt (net)
In Millions of US Dollars
1997/98 1998/99 1999/00 2000/01 2001/2002 2002/2003
Direct
Investment
in Egypt
(net)
1104 711 1656 509 428 701
Source (table 21) p. 30 - Monthly Economic Digest
Total GDP:In Millions of Egyptian Pounds
1997/98 1998/99 1999/00 2000/01 2001/2002 2002/2003
Total
GDP266,758 282,578 315,667 332,544 354,564 388,060
Source (table 3 a) p. 5 - Monthly Economic Digest
Gross Investments:Value
1997/98 1998/99 1999/00 2000/01 2001/2002 2002/2003
Total Investments 61.8 66.5 66.5 65.5 69.2 71.0
6
7/28/2019 FDI in Egypt During 5 Years
7/22
7
7/28/2019 FDI in Egypt During 5 Years
8/22
8
7/28/2019 FDI in Egypt During 5 Years
9/22
9
7/28/2019 FDI in Egypt During 5 Years
10/22
Environment for attracting FDI:
1. Legal Environment:
Recent Economic Legislation:
During the past decade, Egypt has implemented an
economic and structural reform adjustment program. An
important goal of the reform program was to shift the
10
7/28/2019 FDI in Egypt During 5 Years
11/22
economy towards a market-oriented economy policy. This
required dramatic legislative changes to enable the
economy to meet the challenges of the new global economy
in which Egypt has become an active participan t. The
needed legislative changes were implemented gradually in
order to preserve the stability of the market and the
economy as a whole.
Goals of Law No. 83/2002 for Special
Economic Zones:
In its efforts to attract national and foreign direct
investments to Egypt, the government has drafted and
passed the special economic zones law in 2002. The law
provides for the establishment of special economic zones
that have the ability to compete with their analogs all over
the world.
2. Administrative Environment:
In the new economic areas, the license could be
approved in 15 days because of the one stop shop.
GAFI:
GAFI is Egypt's "One Stop Shop" for investment,
easing the way for investors worldwide to take advantage
of the opportunities of this promising emerging market...
Investment opportunities exist in various sectors
throughout the Egyptian economy, with emphasis on export
oriented ones among many others.
11
7/28/2019 FDI in Egypt During 5 Years
12/22
GAFI is the primary governmental authority
concerned with regulating and facilitating investment, and
stands ready to assist investors. Services GAFI can provide
range from company registration to site location to partner
identification to contracts and licenses acquisition. GAFI's
services are provided at no cost to the investor.
3. Services Environment:
The importance of the presence of service companies
on an international standards and the presence of well
developed infrastructure.
Business Environment:
Streamlining investment procedures, dismantling
bureaucratic obstacles and literalizing the business
environment: these are priorities for the Egyptian
government in is bid to foster an attractive climate for
local and foreign investors alike.
Since the inauguration of the economic reform
program in 1991, the government has taken measures in the
economic, legal, monetary, financial and institutional
spheres to encourage private-sector participation and boost
investment levels. As a result, the economic policy and
business environment now offer investors a plethora of
attractive incentives and opportunities: duty-free zones and
industrial cities benefiting from the most advanced
infrastructure, a stable economy, liberal conditions for
trade, a freely convertible currency with full rights to
12
7/28/2019 FDI in Egypt During 5 Years
13/22
affect all transfers abroad... These developments, as any
observer of the current Egyptian scene can confirm, have
attracted an increasingly number of multinational
corporations.
Legal and economic reforms have eased or removed
price restrictions to accommodate the business
environment further. To boost investment in all sectors of
the economy, offices have been established across the
country, streamlining bureaucratic procedures
considerably.
In April 2002, a presidential decree made the General
Authority for Investment (GAFI) responsible for
establishing an Investment Service Pool (ISP) adopting the
"One-Stop Shop" approach. Representations of relevant
authorities and agencies at ISP are to minimize the cost,
effort and time required of investors who seek to establish
new businesses in Egypt. Three branches of the One-Stop-
Shop are to be established in Alexandria, Ismailia and
Assuit Governorates, followed by other additional outlets.
ISP provides IT facilities to cater for investors needs either
in the form of data collection, comparative stud ies, and
analytical reports regarding investment fields in Egypt.
Drawing on Egypt's skilled, inexpensive human
resource pool, investors today have a unique opportunity to
capture a domestic market of 70 million, not to mention a
sizable portion of the lucrative regional market. Egypt's
13
7/28/2019 FDI in Egypt During 5 Years
14/22
geographic location provides investors with a strategic
platform for virtually effortless entry to the Middle
Eastern, African, European, American, and Asian markets.
In addition, Egypt has signed a number of bilateral
and multilateral agreements to protect investments. It is a
party to the International Convention for the Settlement of
Investment Disputes, and has also entered an investment
guarantee agreement that insures against political risk for
US private investments in Egypt (Overseas Private
Investment Corporation). Egypt has also signed several
treaties for the Encouragement and Reciprocal Protection
of Investment. Agreements with Egypt's major-trading
partners also protect against double taxation.
The Egyptian business environment, which offers
investors so many incentives, has fostered the creation of
several companies under the Investment Law (8/1997). The
table below illustrates capital growth and the proliferation
of registered companies according to economic sector, and
demonstrates that industrial activities attract most
investment in-land or in free zones. Total capital
additions/expansions hit LE9.9 billion in 1999 and LE6.6
billion in 2001. At the end of June 2003, the total
cumulative number of companies registered at GAFI
amounted to 13,788, of which 11,682 registered in-land
and 772 in free zones; total issued capital was recorded at
LE154 billion, creating 1,152 million job opportunities.
14
7/28/2019 FDI in Egypt During 5 Years
15/22
As for companies registered in accordance to the
Companies Law (159/1981), the cumulative number at the
end of June 2003 amounted to 16,354, with a total capital
of LE33.6 billion. Below, the reader wil l found a detailed
discussion of the business environment, including the
benefits of investing in Egypt, corporate guidelines,
foreign investments, an overview of the privatization
program, and finally mega projects, free zones and
industrial cities.
INVESTMENT ADVANTAGES
Merely creating a business-friendly environment is
too passive a stance to promote the growth objectives of
Egypt's citizens, however, and so further steps have been
taken to attract investment and support business. These
consist of specific incentives ranging from tax holidays to
exemptions from certain laws.
Bureaucratic obstacles to market entry/exit and
business operations have been eliminated over the past few
years. Licensing for local and international investment is
automatic and open to private business, and no minimum
local content conditions obtain.
Incentives Available for Investing inEgypt
To create a friendly business environment is a
paramount objective on the Government's. Many steps have
been taken to attract investment and support business.
15
7/28/2019 FDI in Egypt During 5 Years
16/22
Indirect Incentives:
Investments in Egypt are defined and guaran teed in
the following international treaties, agreements, and laws:
Encouragement and Reciprocal Protection of
Investment
Agreements against Double Taxation
Direct Incentives:
The government has passed several laws and decrees
that encourage production and foreign direct investment,
by affirming all existing incentives, maximizing them and
streamlining the means by which they are granted:
Guarantees and incentives provided under Law No.8
/1997.
Investment Priority Areas under Law No. 8/1997.
Additional Investment Priority Areas under Prime,
Ministerial Decree No. 740/2000.
Additional Investment Priority Areas under Prime
Ministerial Decree issued in 2001/2002.
Guarantees and incentives providedunder Law No.8 / 1997
A project may be wholly owned by foreigners.
Guarantees against nationalization and expropriation
of the project. Any seizure of the asset of a project is
to be effected only through a court judgment.
16
7/28/2019 FDI in Egypt During 5 Years
17/22
Output of the project is not subject to price control.
Projects are allowed to repatriate their capital and
profits.
The majority of the board of directors may be non-
Egyptian.
Egyptian staff employees can be hired freely.
Foreign experts' salaries are exempt from income tax
if their stay in Egypt is less than one year.
There is an exemption from rules on workers'
participation in management.
Tax Holidays and Other Exemptions:
A project is exempt from corporate tax fo r five
years starting the first financial year following the
commencement of the company's activities or
production activities.
A five-year exemption on income and distributed
profits commences from the first financial year
following the start of business activity.
A twenty-year exemption on income and profits
commences on the first fiscal year following the start
of business activity in the Kharga, Baris and Farafra
oases; and the East Owaynat and Toshka regions.
17
7/28/2019 FDI in Egypt During 5 Years
18/22
Projects established in new urban communities,
industrial parks and remote areas enjoy a tax ho liday
of ten years.
Land reclamation projects enjoy a tax holiday of
ten years.
The project is allowed to import equipment and
machinery, spare parts and vehicles without the need
to be registered on the importation registry. Similarly,
it may export its products without being registered on
the exportation registry.
Projects are subject to a flat rate of only 5% as
custom duties on equipment and machinery imported
by the project.
Project contracts are exempt from stamp duties,
registration and notarization fees for three years
effective from the date of registration in the
Commercial Registry.
Fields of Investment: Activities in the
areas stated in Article No.1 of theInvestment Guarantees and IncentivesLaw
Reclamation and cultivation of barren and/or
desert land.
Animal, poultry and fish production.
Manufacturing and mining.
18
7/28/2019 FDI in Egypt During 5 Years
19/22
Hotels, motels, hotel apartments, villages and
tourist transportation.
Refrigerated transportation of goods,refrigerators for the purposes of storing crops,
manufactured products and food stuffs and container
stations.
Air transportation and directly related services.
Overseas maritime transport.
Petroleum services in support of drilling,
exploration as well as gas transport and delivery.
Housing complexes for the purposes of full,
unfurnished leasing for non-commercial uses.
Infrastructure operations including potable
water, sewage, electricity, roads, communications and
under multiple story garages.
Hospitals, medical and therapeutic centers that
offer 10% of their capacities free of charge.
Financial leasing.
Venture capital.
Production of computer programs and systems.
Development of new zones.
19
7/28/2019 FDI in Egypt During 5 Years
20/22
Establishment, operation and management of
under-ground multiple storey garages on the basis of
B.O.T system.
Obstacles Facing FDI:
1. Stability of foreign exchange market:
To follow monetary and fiscal policies leading to
stability in the foreign exchange market, so stability in the
exchange rate which is a prime concern for any foreign
investor.
2. Long list of Administrativeprocedures:
To have the license, sometimes it might take 1-1.5
years to get approval from different ministries and
authorities which is a loss o f time and money for the
investor.
New Strategies for Promotion of FDI:
1. Convection and partnership of local investment in
small and medium industries with FDI to transfer
technology and promote export Markets for small and
medium projects productive of goods or services.
2. Hi-Tech industrialization under regional
specialization and integration.
3. Aggressive privatization to create a competitive
market of Hi-Tech and quality.
20
7/28/2019 FDI in Egypt During 5 Years
21/22
4. Availability of market studies, information, training
programs, etc..
Unconditioned exemption of corporatetaxes:
If profit of organization was not subjected to
corporate tax in the host country, it i s subjected to income
tax of the country of origin of capital leading to loss of
income to host country budget while it is an exporting
income of budget to country of origin (rich country). So,poor countries supports to achieve development and
employments are losing for the sake of state budget of
exporting country.
There is a need for economic legislation fo r:
Consumer protection law:
To avoid any commercial fraud and to guarantee the
criteria of products according to international standards
and measures and in order to attract the fo reign investor in
a competitive market guaranteeing transparency.
Antitrust and competition law:
This will prevent monopoly and opens the market for
competition and gives a chance for the invo lvement of
private sector in all fields.
21
7/28/2019 FDI in Egypt During 5 Years
22/22