Egypt - Foreign investment

Egypt has declared that foreign private capital is both desired and welcome and that foreign capital investment has a place in the country's economic development. Investors in approved enterprises are assured of facilities for transfer of profits, withdrawal of capital, and employment of necessary foreign personnel. In 1974, Egypt sought specifically to encourage capital investments from multinational corporations in the West, so new projects financed with foreign capital were protected, capital was freed for reexport within five years of its investment in Egypt, andinvestment profits earned within Egypt were allowed transfer abroad. In 1991, all foreign exchange transfer restrictions were lifted.

The main laws governing foreign investment are the Capital Market Law of 1992, as amended to increase stock market regulation in 1998; the Investment Incentives and Guarantees Law of 1997, establishing the regime for free trade zones (FTZs); and a series of laws in 1998 setting conditions for private (including foreign) participation in public banks, insurance, maritime transport, electricity distribution, and telecommunications.

Depending on their size, location, and other characteristics, new projects financed with foreign capital are exempt from taxation for five to ten years; in addition, payments of interest on foreign loans are not taxable and investors are exempt from certain customs duties. There is one basic condition for approval: the project must be on an approved list in the fields of industrialization, mining, energy, tourism, transportation, reclamation and cultivation of barren land, or animal husbandry. Applications must be made to the General Authority for Arab Investment and the Free Zones, which consists of the minister of state for Arab and foreign economic cooperation and seven other members. The bidding process for contracts has been made more transparent, but Egyptian bids have preference up to 15% above foreign bids. Since 1991, Egypt has liberalized its foreign trade by reducing the number of items on its list of banned imports. In 1990, the list covered 37% of all imports; in 1992, 11%; and in 1999, only apparel was banned. The use of other non-tariff barriers on imports and export restrictions has also been reduced. Bureaucratic barriers, however, still hamper investment. In 2002, there were seven operative FTZs, and two being developed. FTZs offer exemption from import duties, sales taxes, and taxes and fees on capital goods. A 1% tax is charged on warehoused goods and on exports from assembly plants. Investments are often located in the free zones of Alexandria, Cairo (Nasr City), Port Sa'id, Ismailia, Damietta, Safaga, Sohag, and Suez. In 2003, to deal with the chronic shortage in foreign exchange, a law was passed requiring that 75% of foreign exchange earnings be converted into local currency.

From 1992, foreign direct investment (FDI) inflow was about $1 billion a year. As of 2001, FDI stock totaled at least $10 billion. Inflows of FDI peaked in 1999 at nearly $3 billion, but then fell to $1.2 billion in 2000, and then to only $510 million in 2001. In terms of portfolio investment, the Egyptian stock market declined nearly 60% in 2001, and did not recover in 2002.

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Ali Omar
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Jan 2, 2014 @ 8:08 am
Thanks good information I need that for help me in my study about FDI in Egypt

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