The parliament is planning to amend the Corporates Law no. 159 for the year 1981 and discuss a new bankruptcy law during the upcoming legislative term in October.
Amr Ghallab, head of the parliament’s Economic Affairs Committee, said that the two laws will continue the economic reforms undertaken by the government since early 2016, which started with the Civil Service Law. This targeted the administrative reforms, of which the government has started implementing a part.
Ghallab told Daily News Egypt that the package of legislations approved by the parliament during the past legislative term targeted reforming the structural imbalances in the economic system to increase the growth and attractiveness of that system before direct, indirect and local capital.
How do you see the laws approved by the parliament during its last session?
Over the past period, the parliament issued several economic legislations to prepare the climate for capital, whether regarding the Industrial Licensing Law, which is a major achievement, or the value-added tax (VAT) Law and the Investment Law.
Over the past legislative term, we issued several important legislations, the most prominent being the VAT Law and the industrial licensing, the latter which facilitates the procedures of projects and their implementation. We also issued the Investment Law, which approves a group of incentives for the different economic zones and transferring profits based on specific controls and rules.
During its upcoming session, the parliament targets continuing the economic reforms whether to attract capital or set the pace of markets through tightening control on them with the aim of increasing efficiency and transparency through the legislation of the Bankruptcy Law and amending the Corporates Law and a law to amend the Consumer Protection Agency (CPA).
The laws issued over the past period and those expected to be issued over the upcoming period do not only aim at legislative reforms, but they also at preparing the climate for capital flow as the state with all its institutions is working towards that goal.
The parliament approved the Investment Law proposed by the government. What are the incentives it provides?
The Investment Law, which was approved after the parliament discussed it for more than two months. Business organisations were contacted during the discussions. The government was also keen on responding to all the amendments of the parliament’s Economic Committee.
In addition, the matter is not only about the law that was approved, but also about the government sending the executive regulations to the committee to make remarks about them, whose discussion took place in August.
The incentives provided by the new Investment Law aims to deepen the industry in the Egyptian economy and increase their contribution in the GDP to increase exports, provide foreign currency, and increase jobs.
The new law provides incentives to projects implemented after the law’s activation, according to the investment map, through carrying out a deduction of the net profit on the taxes due. The law allocates 50% deduction of the tax for the first segment. It includes the neediest geographic areas for development based on the data and statistics issued by the Central Agency for Public Mobilization and Statistics (CAPMAS). The deduction will be 30% for the second segment, which includes the rest of the country based on the distribution of investment activities.
The project stipulated that the investment incentive must not exceed 80% of the paid-up capital until the start of the activity.
The Egyptian government has high hopes for the Investment Law to attract foreign dierect investments. What are your expectations in this regard?
The new recently approved Investment Law will increase Egypt’s ability to attract foreign direct investments ranging between $8-10bn by the end of this fiscal year. This could exceed $10bn during the upcoming fiscal year, with the continuation of the economic reform package this fiscal year.
The confidence of foreign investors in the Egyptian economy has increased investments in treasury bills and bonds as well as foreign direct investments over the few upcoming months. We aim that, following these major reforms, the Egyptian economy would become a centre for direct foreign investments in the Middle East over the upcoming period.
The law will contribute to enhancing Egypt’s position in the indexes of direct investments internationally with the improvement in the investment climate and not only modern legislations. More than 65% of the Investment Law was amended during its discussion in the parliament’s Economic Committee. The Minister of Legal and Parliamentary Affairs, Omar Marwan, can attest to that.
Experts say that incentives alone are not enough and the climate must be improved as well. What do you think about that?
Of course there is an important aspect to focus on, which is that incentives alone are not enough to attract capital, but they go hand in hand with preparing the climate through a whole package of economic legislations—something the parliament has been able to achieve so far.
Those legislative packages, whether the ones already issued or the ones expected to be issued over the upcoming term, aim to create rules after the entrance of investors into the market and their exiting from it, whether the exiting is partial or total.
Foreign investors always complain about the issue of transferring profits. Was this issue solved in the new Investment Law?
The new law allows transferring investors’ profits abroad, an issue many foreign investors complained about. It gave investors the right to completely transfer profits abroad with controls and rules for this matter.
All these details are made clear in the executive regulations of the Investment Law. They were sent by the government to the parliament and were discussed during several sessions held in August.
Why is the investment map not issued until now?
There is an investment map to be issued later, and I believe it will take a long time as ministries will work to gather all investment opportunities that could be placed on that map given that each ministry is obliged to propose the investment opportunities available at it and send it to the General Authority for Investment and Free Zones (GAFI).
I cannot determine the date of issuing the investment map of these opportunities in the different ministries, where there are large efforts made by the three branches of the state.
The two ministries of trade and housing have already sent their available investment opportunities to GAFI in order to place them on the map. This took place in August.
The investment map to be issued by the government is one of the many technical matters not excepted to be proposed to the parliament. The executive regulations of the Investment Law were proposed to the parliament. The government has actually taken a good path in terms of these regulations and wanted them to be more accurate and detailed in addressing investors over the upcoming period.
How do you see the steps taken by Minister of Investment and International Cooperation Sahar Nasr and her meetings with investors over the past period?
I am optimistic about the steps taken by the Minister of Investment and her meetings with investors, whether in Egypt or abroad via her presence in different events.
I believe that Sahar Nasr is marketing and promoting the different investment opportunities through those meetings.
Nasr has visited many countries in Southeast Asia during the last month to promote several investment opportunities in them.
These tours and meetings are serious steps that stress the presence of a desire to promote investments and that there is a change in the mindset of the ministry.
Previously, there was not a database of these investment opportunities that can be promoted in all the economic events across the world, but everything is improving.
I am very pleased with Nasr’s efforts and her ability to implement the tasks assigned to her efficiently.
There are concerns by local investors regarding the new law and claims that it favours foreign investors. Is this true?
The new, recently approved Investment Law does not treat foreign investors any differently from local one. Everyone has the chance to benefit from the incentives and guarantees provided by the law.
Reforms have specified the steps that would be taken in dates, and the procedures and controls to be implemented. This is what will happen in the amendments of the Corporates Law, planned to be passed to the parliament over the next legislative term.
How do you see the decision of the Central Bank of Egypt (CBE) to increase the interest rate and its effect on the borrowing cost?
The decision by the CBE to increase the basic interest rate on the tools of the monetary policy by 2% took it to 18.75% on depositing, 19.75% on loaning, and 19.25% for credit, discount, and main operation prices in the CBE.
The decision was extremely difficult and took place during a short period after the decision to increase the interest rate 2% in May. It has severely impacted the market, but something is reassuring: that the decision is temporary. With the activation of the Investment Law and its regulations, the interest rate must decline.
There is tough criticism towards the government by some parliament members who accuse it of failing to counter the growing inflation indicators, which have resulted in the intervention of the CBE. They also say that there is no coordination between the monetary and fiscal policies. Do you support those claims?
The CBE’s intervention was traditional in order to rein in the inflation indicators, which went above 30%. This does not mean there was no coordination between the fiscal and monetary policies, because there is actually great coordination between the government and the CBE.
The government is required to help the CBE intervene to counter inflation and its high indicators through certain measures. The government has already opened new outlet, delivered goods directly, increased control, and activated the role of civil society. However, it cannot do everything when it already has many burdens, so civil society must intervene and help. Some institutions are already helping, but more is needed, and their role must be better activated.
There is a large increase in prices with the absence of the government’s control role. Is there a legislative intervention from your parliament to protect citizens from price spikes?
There will be more control over markets after discussing the draft laws of the CPA made by the government, which will be discussed in the next legislative term.
There is already an increase in the prices in markets due to the lack of control. This is something we must admit. The government is deficient in its control role. There must be strict procedures against all merchants who manipulate prices.
There is a parallel market in Egypt that is hard to control in terms of prices. Control is only carried out over the official market. That parallel market must be entered into the official market, so we do not remain in a pointless cycle where we keep blaming one another.
During the past period, the government made several economic decisions regarding subsidies, including increasing fuel and energy prices. The issue of subsidised food commodities is one of the issues that highly concerns the government. How does the parliament see this?
Switching to monetary support instead of in-kind support, which does not deliver subsidised goods to those who deserve it, will create a more efficient system. I support the recent decision made by the Minister of Supply to issue ration cards to social security pensioners, migrant workers, and individuals with chronic diseases, in addition to those with low income in the private and public sectors.
The Minister of Supply is using a practical way because there was no clear database in the past, but this situation ended with the mechanisation of ration cards.
The decision includes issuing new ration cards to those will low incomes, the unemployed and those who have degrees and no jobs based on a social research with incomes no more than EGP 800. It also includes minors who do not have a fixed income for the death of parents, and workers in the public sector with incomes of less than EGP 1,500 monthly, in addition to pensioners with no more than a monthly income of EGP 1,200.
I think we will be awaiting this decision in the parliament’s Economic Committee, and I agree that it is necessary to review the full in-kind support.