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Sunday, 4 June 2017

Investment Act signed into law

The new Investment Act is now the law of the land: The long-awaited Investment Act has come into effect after being signed by President Abdel Fattah El Sisi and published in the Official Gazette (pdf) on Thursday. The House of Representatives had passed the bill — which offers a range of tax and non-tax incentives meant to encourage investment — early in May, after months of deliberation.

A quick refresher on the Investment Act: In addition to bringing back private sector-run free zones, the act offers investors tax breaks as high as 50% for doing business in specific under-developed areas and also promises attractive rebates on the cost of land acquisition if factories begin production within two years of breaking ground. Companies benefitting from the tax breaks have to be established within three years of the executive regulations to the law being issued, and the incentives will be mainly geared towards strategic industries, including auto and pharma, Trade and Industry Minister Tarek Kabil told the press on Thursday. Among its other provisions:

  • GAFI is now the General Authority for Investment (GAI), and it will have new service standards: It will have one day to accept or reject a request to incorporate and must rule on board and general assembly resolutions within 15 days;
  • Online incorporation: The GAI is tasked with coming up with a way for companies to incorporate and obtain their commercial registration certificate online;
  • Companies incorporated under the act will be able to employ up to 20% foreign labor, but will likely be required to prove or declare that there are insufficient qualified Egyptians to take the positions;
  • New sectors: Companies in waste recycling / refuse-derived fuel sector, education, sports, river transport and manufacturers of agricultural production inputs will all be eligible to incorporate under the Investment Act.
  • New tech zones will roll out under the Ministry of Communications and IT.

Executive regulations still to come: Investment Minister Sahar Nasr tasked a cabinet committee on Thursday with completing the final draft of the executive regulations within the government’s 90-day window (which expires in the first of week of August), according to an official statement (pdf). Chatter at a cabinet meeting last week had suggested that the Investment Ministry is expecting to deliver the final draft to the Council of Ministers by mid-June.

Law and regulations to be accompanied by administrative policies: The act and executive regulations will also be accompanied by a number of structural and administrative policies, Nasr also said in the statement. Those will include unifying and digitizing most investment-related procedures, setting deadlines for state bodies to issue licenses and permits, and launching operations at the investor service center; which will act as a one-stop-shop to serve the needs of business.

Nasr also promised full disclosure and transparency, stressing that under the new act, the General Authority for Investments will issue detailed annual reports that list incentive beneficiaries as well as their projects.

Investment Act is significant, but not enough on its own: The Investment Act coming into effect is a significant milestone that signals improvement in the overall economic climate, but this one law alone isn’t enough, Egyptian Businessmen’s Association (EBA) head Ali Issa tells Al Ahram. Other important pieces of legislation include the Bankruptcy Act, the new Companies Law, and a unified law for industry. (Tap here for our updated list of core business-related bills now before the House and other government agencies). “This law is a positive development for the investment scene but the devil is in the details,” Arqaam Capital economist Rehaam El Desouki tells Reuters. She added that the law looked like an improvement on what was there before as it sets a time cap on several bureaucratic processes, but investors will wait for more details before rushing into Egypt.

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