HomeReportsBureau of Economic and Business Affairs2019 Investment Climate Statements...Egypt

# 					2019 Investment Climate Statements: Egypt			

 In this section										/

													Executive Summary											

                -  Executive Summary 
                -  1. Openness To, and Restrictions Upon, Foreign Investment   
                -  2. Bilateral Investment Agreements and Taxation Treaties   
                -  3. Legal Regime   
                -  4. Industrial Policies   
                -  5. Protection of Property Rights   
                -  6. Financial Sector   
                -  7. State-Owned Enterprises   
                -  8. Responsible Business Conduct   
                -  9. Corruption   
                -  10. Political and Security Environment   
                -  11. Labor Policies and Practices   
                -  12. OPIC and Other Investment Insurance Programs   
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                -  14. Contact for More Information   

## Executive Summary

Progress on Egyptian economic reforms over the past two years has been noteworthy.  Though many challenges remain, Egypt’s investment climate is improving. The country has undertaken a number of structural reforms since the flotation of the Egyptian Pound (EGP) in November 2016 and implemtation of a three-year, USD 12 billion International Monetary Fund (IMF)-backed economic reform program.  Increased investor confidence and the reactivation of Egypt’s interbank foreign exchange (FX) market have attracted foreign portfolio investment and grown foreign reserves. As yields on government debt fall, investors may shift towards direct investments, which would be a positive market signal that the Egyptian economy is beginning to trend  towards higher growth. The Government of Egypt (GoE) understands that attracting foreign direct investment (FDI) is key to addressing many of the economic challenges it faces, including low economic growth, high unemployment, current account imbalances, and hard currency shortages. Though FDI inflows grew 13 percent year-on-year in 2017, they declined slightly in 2018 from USD 7.9 to 7.7 billion, according to the Central Bank of Egypt.

Egypt implemented a number of regulatory reforms in 2017 and 2018.  Key among these are the new Investment Law and the Companies Law – which aim to improve Egypt’s ranking in international reports of doing business and to help the economy realize its full potential.  These reforms have increased investor confidence.

The Investment Law (Law 72 of 2017) aims to attract new investment and provides a framework for the government to offer investors more investment-related incentives and guarantees.  Additionally, the law aims to attract new investments, consolidate many investment-related rules, and streamlines procedures.

The government also hopes to attract  international investment in several “mega projects,” including a large-scale industrial and logistics zone around the Suez Canal, the construction of a new national administrative capital, a 1.5 million-hectare agricultural land reclamation and development project, and to promote mineral extraction opportunities in the Golden Trianlge economic zone between the Red Sea and the Nile River.

Egypt is a party to more than 100 bilateral investment treaties, including with the United States.  It is a member of the World Trade Organization (WTO), the Common Market for Eastern and Southern Africa (COMESA), and the Greater Arab Free Trade Area (GAFTA).  In many sectors, there is no legal difference between foreign and domestic investors. Special requirements exist for foreign investment in certain sectors, such as upstream oil and gas as well as real estate, where joint ventures are required.

Several challenges persist for investors.  Dispute resolution is slow, with the time to adjudicate a case to completion averaging three to five years.  Other obstacles to investment include excessive bureaucracy, regulatory complexity, a mismatch between job skills and labor market demand, slow and cumbersome customs procedures, and various non-tariff trade barriers.  Inadequate protection of intellectual property rights (IPR) remains a significant hurdle in certain sectors and Egypt remains on the U.S. Trade Representative’s Special 301 Watch List. Nevertheless, Egypt’s reform story is noteworthy, and if the steady pace of implementation for structural reforms continues, and excessive bureaucracy reduces over time, then the investment climate should continue to look more favorable to U.S. investors.

*Table 1: Key Metrics and Rankings*

							1. Openness To, and Restrictions Upon, Foreign Investment					

**Policies toward Foreign Direct Investment**

The flotation of the EGP in November 2016 and the restart of Egypt’s interbank foreign exchange FX market as part of the IMF program was a first step in restoring investor confidence that immediately attracted increased portfolio investment and should lead to increased FDI over the long term.  The stable macro-economic outlook has allowed Egypt to focus on structural reforms to support strong economic growth. The next phase of reform has included a new investment law, an industrial licensing law, a bankruptcy law and other reforms to reduce regulatory overhang and improve the ease of doing business.  Successful implementation of these reforms could give greater confidence to foreign investors. Egypt’s government has announced plans to further improve its business climate through investment promotion, facilitation, efficient business services, and advocacy of more investor friendly policies.

With a few exceptions, Egypt does not legally discriminate between Egyptian nationals and foreigners in the formation and operation of private companies.  The 1997 Investment Incentives Law was designed to encourage domestic and foreign investment in targeted economic sectors and to promote decentralization of industry away from the Nile Valley.  The law allows 100 percent foreign ownership of investment projects and guarantees the right to remit income earned in Egypt and to repatriate capital.

The new Tenders Law No. 182 of 2018 requires the government to consider both price and best value in awarding contracts and to issue an explanation following refusal of a bid.  Nevertheless, the law contains preferences for Egyptian domestic contractors, who are accorded priority if their bids do not exceed the lowest foreign bid by more than 15 percent. Additionally the new law includes a wide range of reforms, such as establishing new rules in the contracting process on good governance, sustainable development goals, transparency, competition, equal opportunity, and an improved business environment.  Egyptian small- and medium-sized enterprises (SMEs) have the right under the new law to obtain up to 20 percent annually of the Government’s contracts. This aims to achieve a positive return on investment of public expenditures, along with controls to combat corruption.

The Capital Markets Law (Law 95 of 1992) and its amendments, including the most recent in February 2018, and related regulations govern Egypt’s capital markets.  Foreign investors are permitted to buy shares on the Egyptian Stock Exchange on the same basis as local investors.

The General Authority for Investment and Free Zones (GAFI) is an affiliate of the Ministry of Investment and International Cooperation (MIIC) and the principal government body regulating and facilitating investment in Egypt. ”The Investor Service Center (ISC)” is an administrative unit established within GAFI that provides ”one-stop-shop” services, easing the way for global investors looking for opportunities presented by Egypt’s domestic economy and the nation’s competitive advantages as an export hub for Europe, the Arab world, and Africa.

ISC provides a full start-to-end service to investors, including assistance related to company incorporation, establishment of company branches, approval of minutes of Board of Directors and General Assemblies, increase of capital, change of activity, liquidation procedures, and other corporate-related matters.  The Center also aims to issue licenses, approvals, and permits required for investment activities, within 60 days from the date of request submissions. Other services GAFI provides include:

- Advice and support to help in the evaluation of Egypt as a potential investment location;
- Identification of suitable locations and site selection options within Egypt;
- Assistance in identifying suitable Egyptian partners;
- Aftercare and dispute settlement services.​

ISC Branches are expected to be established in all Egyptian governorates.  Egypt maintains ongoing communication with investors through formal business roundtables, investment promotion events (conferences and seminars), and one-on-one investment meetings

**Limits on Foreign Control and Right to Private Ownership and Establishment**

The Egyptian Companies Law does not set any limitation on the number of foreigners, neither as shareholders nor as managers or board members, except for Limited Liability Companies where the only restriction is that one of the managers should be an Egyptian national.  In addition, companies are required to obtain a commercial and tax license, and pass a security clearance process. Companies are able to operate while undergoing the often lengthy security screening process. Nevertheless, if the firm is rejected, it must cease operations and undergo a lengthy appeals process.  Businesses have cited instances where Egyptian clients were hesitant to conclude long term business contracts with foreign firms that have yet to receive a security clearance. They have also expressed concern about seemingly arbitrary refusals, a lack of explanation when a security clearance is not issued, and the lengthy appeals process.  Although the GoE has made progress in streamlining the business registration process at GAFI, its apparent overall lack of familiarity or experience of Egyptians working closely with foreign nationals has sometimes led to inconsistent and questionable treatment by banks and government officials, thus, delaying registration.

Sector-specific limitations to investment include restrictions on foreign shareholding of companies owning lands in the Sinai Peninsula.  Likewise, the Import-Export Law requires companies wishing to register in the Import Registry to be 51 percent owned and managed by Egyptians.  In 2016, the Ministry of Trade prepared an amendment to the law allowing the registration of importing companies owned by foreign shareholders, but, as of April 2019, the law had not yet been submitted to Parliament.  Nevertheless, the new Investment Law does allow wholly foreign companies, which invest in Egypt to import goods and materials.

Land/Real Estate Law 15 of 1963 explicitly prohibits foreign individual or corporation ownership of agricultural land (defined as traditional agricultural land in the Nile Valley, Delta and Oases).  The ownership of land by foreigners is governed by three laws: Law No. 15 of 1963, Law No. 143 of 1981, and Law No. 230 of 1996.  Law No. 15 stipulates that no foreigners, whether natural or juristic persons, may acquire agricultural land.  Law No. 143 governs the acquisition and ownership of desert land. Certain limits are placed on the number of feddans (one feddan is equal to approximately one hectare) that may be owned by individuals, families, cooperatives, partnerships and corporations.  Partnerships are permitted to own 10,000 feddans. Joint stock companies are permitted to own 50,000 feddans.

Under Law No. 230 non-Egyptians are allowed to own real estate (vacant or built) only under the following conditions:

- Ownership is limited to two real estate properties in Egypt that serve as accommodation for the owner and his family (spouses and minors), in addition to the right to own real estate needed for activities licensed by the Egyptian Government.
- The area of each real estate property does not exceed 4,000 m2.
- The real estate is not considered a historical site.

Exemption from the first and second conditions is subject to the approval of the Prime Minister. Ownership in tourist areas and new communities is subject to conditions established by the Cabinet of Ministers.  Non-Egyptians owning vacant real estate in Egypt must build within a period of five years from the date their ownership is registered by a notary public. Non-Egyptians cannot sell their real estate for five years after registration of ownership, unless the consent of the Prime Minister for an exemption is obtained.  http://www.gafi.gov.eg/English/StartaBusiness/Laws-and-  Regulations/Pages/BusinessLaws.aspx  

**Other Investment Policy Reviews**

The Organization for Economic Cooperation and Development (OECD) signed a declaration with Egypt on International Investment and Multinational Enterprises on July 11, 2007, at which time Egypt became the first Arab and African country to sign the OECD Declaration, marking a new stage in Egypt’s drive to attract more FDI.

The United Nations Conference of Trade Development (UNCTAD) signed in an Investment Policy Review with Egypt in June 1999 that recognized the efforts that the GoE had made to establish an adequate investment regulatory framework and improve the business environment.

The UNCTAD Review pointed out that overcoming the limited involvement of multinational companies in manufacturing sectors with export potential such as food, garments, and electronics, would require policy emphasis on infrastructure investments, promotion of  clusters of related enterprises, and self-sustaining development. Since the publication of its policy review on Egypt, UNCTAD has assisted the government with training diplomats on investment trends, policies, and promotion, and staff on FDI statistics.

**Business Facilitation**

GAFI’s new ISC was launched in February 2018 at a ceremony attended by President Sisi. The ISC provides a full start-to-end service to the investor as described above.  The new Investment Law also introduces ”Ratification Offices” to facilitate the obtaining of necessary approvals, permits, and licenses within 10 days of issuing a Ratification Certificate.

Investors may fulfill the technical requirements of obtaining the required licenses through these Ratification Offices, directly through the concerned authority, or through its representatives at the Investment Window at GAFI.  The Investor Service Center is required to issue licenses within 60 days from submission. Companies can also register online. MIIC and GAFI have also launched e-establishment, e-signature, and e-payment services to facilitate establishing companies.

**Outward Investment**

Egypt promotes and incentivizes outward investment.  According to the Egyptian government’s FDI Markets database for the period from January 2003 to February 2019, outward investment indicated that Egyptian companies implemented 241 Egyptian FDI projects.  The estimated total value of these projects, which employed about 48,204 workers, was USD 23.86 billion.

The following countries received the largest amount of Egyptian outward investment in terms of total project value:  United Arab Emirates (UAE), Saudi Arabia, Algeria, Jordan, Germany, Kenya, Libya, Morocco, Sudan, and Ethiopia. The UAE, Saudi Arabia and Algeria accounted for about 28.6 percent of the total amount.

Elsewedy Electric (Elsewedy Cables) was the largest Egyptian company investing abroad, implementing 19 projects with a total investment estimated to be USD 2.1 billion.

Egypt does not restrict domestic investors from investing abroad.

							2. Bilateral Investment Agreements and Taxation Treaties					

Egypt has signed 115 Bilateral Investment Treaties (BITs), out of which 74 BITs have entered into force.  The full list can be found at http://investmentpolicyhub.unctad.org/IIA.

The U.S.-Egypt Bilateral Investment Treaty provides for fair, equitable, and nondiscriminatory treatment for investors of both nations. The treaty includes provisions for international legal standards on expropriation and compensation; free financial transfers; and procedures for the settlement of investment disputes, including international arbitration.

In addition to BITs, Egypt is also a signatory to a wide variety of other agreements covering trade issues. Egypt joined the Common Market for Eastern and Southern Africa (COMESA) in June 1998.  In June 2001, Egypt signed an Association Agreement (AA) with the European Union (EU), which entered into force on June 1, 2004. The agreement provided immediate duty free access of Egyptian products into EU markets, while duty free access for EU products into the Egyptian market was phased in over a 12-year period ending in 2016.  In 2010, Egypt and the EU completed an agricultural annex to their agreement, liberalizing trade in over 90 percent of agricultural goods.

In July 1999, Egypt and the United States signed a Trade and Investment Framework Agreement (TIFA). The TIFA forum has been an effective forum to discuss tariff and non-tariff barriers and address issues affecting U.S. commercial interests.

Egypt is also a member of the Greater Arab Free Trade Agreement (GAFTA), and a member of the Agadir Agreement with Jordan, Morocco, and Tunisia, which relaxes rules of origin requirements on products jointly manufactured by the countries for export to Europe.  Egypt also has an FTA with Turkey, in force since March 2007, and an FTA with the Mercosur bloc of Latin American nations.

In 2004, Egypt and Israel signed an agreement to take advantage of the U.S. Government’s Qualifying Industrial Zone (QIZ) program.  The purpose of the QIZ program is to promote stronger ties between the region’s peace partners, as well as to generate employment and higher incomes, by granting duty-free access to goods produced in QIZs in Egypt using a specified percentage of Israeli and local input.  Under Egypt’s QIZ agreement, Egypt’s exports to the United States produced in certain industrial areas are eligible for duty-free treatment if they contain a minimum 10.5 percent Israeli content.

The industrial areas currently included in the QIZ program are Alexandria, areas in Greater Cairo such as Sixth of October, Tenth of Ramadan, Fifteenth of May, South of Giza, Shobra El-Khema, Nasr City, and Obour, areas in the Delta governorates such as Dakahleya, Damietta, Monofeya and Gharbeya, and areas in the Suez Canal such as Suez, Ismailia, Port Said, and other specified areas in Upper Egypt.  Egyptian exports to the United States through the QIZ program have mostly been ready-made garments and processed foods. The value of the Egyptian QIZ exports to the United States was approximately USD 877 million in 2018, up 16 percent from 2017.

Egypt has a bilateral tax treaty with the United States. Egypt also has tax agreements with 59 other countries, including UAE, Kuwait, Saudi Arabia, Mauritius, Bahrain, and Morocco.

The Egyptian Parliament passed and the government implemented a value added tax (VAT) in late 2016, which took the place of the General Sales Tax, as part of the IMF loan and economic reform program. Yet, the government decided to postpone the “Stock Market Capital Gains Tax” for three years as of early 2017. In 2016, there were a number of tax disputes between foreign investors and the government, but most of them were resolved through the Tax Department and the Economic Court.

							3. Legal Regime					

**Transparency of the Regulatory System**

The Egyptian government has made efforts to improve the transparency of government policy and to support a fair, competitive marketplace.  Nevertheless, improving government transparency and consistency has proven difficult and reformers have faced strong resistance from entrenched bureaucratic and private interests.  Significant obstacles continue to hinder private investment, including the reportedly arbitrary imposition of bureaucratic impediments and the length of time needed to resolve them.  Nevertheless, the impetus for positive change driven by the government reform agenda augurs well for improvement in policy implementation and transparency.

Enactment of laws is the purview of the Parliament, while executive regulations are the domain of line ministries.  Under the Constitution, draft legislation can be presented by the president, the cabinet, and any member of parliament.  After submission, parliamentary committees review and approve, including any amendments. Upon parliamentary approval, a judicial body reviews the constitutionality of any legislation before referring it to the president for his approval.  Although notice and full drafts of legislation are typically printed in the Official Gazette (similar to the Federal Register in the United States), in practice consultation with the public is limited.  In recent years, the Ministry of Trade and other government bodies have circulated draft legislation among concerned parties, including business associations and labor unions. This has been a welcome change from previous practice, but is not yet institutionalized across the government.

While Egyptian parliaments have historically held “social dialogue” sessions with concerned parties and private or civic organizations to discuss proposed legislation, it is unclear to what degree the current Parliament, seated in January 2016, will adopt a more inclusive approach to social dialogue.  Many aspects of the 2016 IMF program and related economic reforms stimulated parliament to engage more broadly with the public, marking some progress in this respect.

Accounting, legal, and regulatory procedures are transparent and consistent with international norms.  The Financial Regulatory Authority (FRA) supervises and regulates all non-banking financial markets and instruments, including capital markets, futures exchanges, insurance activities, mortgage finance, financial leasing, factoring, securitization, and microfinance.  It issues rules that facilitate market efficiency and transparency. FRA has issued legislation and regulatory decisions on non-banking financial laws which govern FRA’s work and the entities under its supervision. (http://www.fra.gov.eg/jtags/efsa_en/index_en.jsp  )

The criteria for awarding government contracts and licenses are made available when bid rounds are announced.  The process actually used to award contracts is broadly consistent with the procedural requirements set forth by law.  Further, set-aside requirements for small- and medium-sized enterprise (SME) participation in GoE procurement are increasingly highlighted. FRA maintains a centralized website where key regulations and laws are published: http://www.fra.gov.eg/content/efsa_en/efsa_pages_en/laws_efsa_en.htm  

The Parliament, seated in early 2016, and the independent “Administrative Control Authority” both ensure the government’s commitment to follow administrative processes at all levels of government.  Egypt does not have an online equivalent of the U.S. Federal Register and there is no centralized online location for key regulatory actions or their summaries.

The cabinet develops and submits proposed regulations to the president following discussion and consultation with the relevant ministry and informal consultation with other interest groups. Based on the recommendations provided in the proposal, including recommendations by the presidential advisors, the president issues “Presidential Decrees” that function as implementing regulations.  Presidential decrees are published in the “Official Gazette” for enforcement.

The specific government agency or entity responsible for enforcing the regulation works with other departments for implementation across the government.  Not all issued regulations are announced online. Theoretically, the enforcement process is legally reviewable.

Before a government regulation is implemented, there is an attempt to properly analyze and thoroughly debate proposed legislation and rules using appropriate available data.  But there are no laws requiring scientific studies or quantitative analysis of impacts of regulations. Not all public comments received by regulators are made public.

**International Regulatory Considerations**

In general, international standards are the main reference for Egyptian standards.  According to the Egyptian Organization for Standardization and Quality Control, approximately 7,000 national standards are aligned with international standards in various sectors.  In the absence of international standards, Egypt uses other references which are referred to in Ministerial decrees No. 180//1996 and No. 291//2003, which stipulate that in the absence of Egyptian standards, the producers and importers may use the following:

- European standards (EN)
- U.S. standards (ANSI)
- Japanese standards (JIS)

Egypt is a member of the WTO and participates actively in various committees.  Though Egypt ratified the Trade Facilitation Agreement (TFA) on June 22, 2017 by a vote of Parliament and issuance of presidential decree No. 149/2017, it has still not deposited its formal notification to the WTO. As of April 2019, the Ministry of Foreign Affairs was in the process of notifying the WTO.  Customs officials are reviewing Categories B and C. In March 2019, the Egyptian Customs Authority published an updated draft of the Customs Law on its website in Arabic for public comment. The law includes language for key TFA reforms, including advance rulings, separation of release, Single Window, authorized economic operators, post-clearance audits, e-payments, and more.

**Legal System and Judicial Independence**

Egypt’s legal system is a civil codified law system based on the French model.  If contractual disputes arise, claimants can sue for remedies through the court system or seek resolution through arbitration.  Egypt has written commercial and contractual laws. The country has a system of economic courts, specializing in private sector disputes, which have jurisdiction over cases related to economic and commercial matters, including intellectual property disputes.  The judiciary is set up as an independent branch of the government.

Regulations and enforcement actions can be appealed through Egypt’s courts, though appellants often complain about the very lengthy judicial process, which can often take years.  To enforce judgments of foreign courts in Egypt, the party seeking to enforce the judgment must obtain an exequatur (a legal document issued by governments allowing judgements to be enforced).  To apply for an exequatur, the normal procedures for initiating a lawsuit in Egypt must be satisfied. Moreover, several other conditions must be satisfied, including ensuring reciprocity between the Egyptian and foreign country’s courts, and verifying the competence of the court rendering the judgment.

Judges in Egypt are said to enjoy a high degree of public trust and are the designated monitors for general elections.  The Judiciary is proud of its independence and can point to a number of cases where a judge has made surprising decisions that run counter to the desires of the regime.  The judge’s ability to loosely interpret the law can sometimes lead to an uneven application of justice.  The system’s slowness and dependence on paper processes hurts its overall competence and reliability.  The executive branch claims to have no influence over the judiciary, but in practice political pressures seem to influence the courts on a case by case basis.  In the experience of the Embassy, judicial decisions are highly appealable at the national level and this appeal process is regularly used by litigants.

**Laws and Regulations on Foreign Direct Investment**

No specialized court exists for foreign investments. In 2016, the Import-Export Law was revised to allow companies wishing to register in the Import Registry to be 51 percent owned and managed by Egyptians; formerly the law required 100 percent Egyptian ownership and management.  In November 2016, the Supreme Investment Council also announced seventeen presidential decrees designed to spur investment or resolve longstanding issues. These include:

- Forming a “National Payments Council” that will work to restrict the handling of FX outside the banking sector;
- A decision to postpone for three years the capital gains tax on stock market transactions;
- Producers of agricultural crops that Egypt imports or exports will get tax exemptions;
- Five-year tax exemptions for manufacturers of “strategic” goods that Egypt imports or exports;
- Five-year tax exemptions for agriculture and industrial investments in Upper Egypt;
- Begin tendering land with utilities for industry in Upper Egypt for free as outlined by the Industrial Development Authority.

The Ministry of Investment and International Cooperation issued a new Investment Law that was discussed extensively with all stakeholders prior to its mid-2017 release.  New laws regarding Bankruptcy and Companies’ Law were also released in late 2017 and early 2018.

**Competition and Anti-Trust Laws**

The Egyptian Competition Authority (ECA) is the body tasked with ensuring free competition in the market and preventing anticompetitive practices.  The Authority operates under the Egyptian Competition Law, which covers three categories of violations: (1) cartels; (2) abuse of dominance; and (3) vertical restraints.  The ECA monitors the market, detects anti-competitive practices that are considered violations to the law, and takes measures to stop such violations. The Anti-Trust and Competition Protection Council (ACPC) monitors business practices of companies to ensure they comply with the standards of the free market.  The main challenges to competition in Egypt include a regulatory system that protects established companies and large companies, a significant informal sector, and the lack of availability of reliable information.

**Expropriation and Compensation**

The Investment Incentives Law provides guarantees against nationalization or confiscation of investment projects under the law’s domain.  The law also provides guarantees against seizure, requisition, blocking, and placing of assets under custody or sequestration. It offers guarantees against full or partial expropriation of real estate and investment project property.  The U.S.-Egypt Bilateral Investment Treaty also provides protection against expropriation. Private firms are able to take cases of alleged expropriation to court, but the judicial system can take several years to resolve a case.

**Dispute Settlement**

*ICSID Convention and New York Convention*

Egypt acceded to the International Convention for the Settlement of Investment Disputes (ICSID) in 1971 and is a member of the International Center for the Settlement of Investment Disputes, which provides a framework for the arbitration of investment disputes between the government and foreign investors from another member state, provided the parties agree to such arbitration.  Without prejudice to Egyptian courts, the Investment Incentives Law recognizes the right of investors to settle disputes within the framework of bilateral agreements, the ICSID or through arbitration before the Regional Center for International Commercial Arbitration in Cairo, which applies the rules of the United Nations (UN) Commissions on International Trade Law.

Egypt adheres to the 1958 New York Convention on the Enforcement of Arbitral Awards; the 1965 Washington Convention on the Settlement of Investment Disputes between States and the Nationals of Other States; and the 1974 Convention on the Settlement of Investment Disputes between the Arab States and Nationals of Other States.  An award issued pursuant to arbitration that took place outside Egypt may be enforced in Egypt if it is either covered by one of the international conventions to which Egypt is party or it satisfies the conditions set out in Egypt’s Dispute Settlement Law 27 of 1994, which provides for the arbitration of domestic and international commercial disputes and limited challenges of arbitration awards in the Egyptian judicial system.  The Dispute Settlement Law was amended in 1997 to include disputes between public enterprises and the private sector.

To enforce judgments of foreign courts in Egypt, the party seeking to enforce the judgment must obtain an exequatur.  To apply for an exequatur, the normal procedures for initiating a lawsuit in Egypt, and several other conditions must be satisfied, including ensuring reciprocity between the Egyptian and foreign country’s courts and verifying the competence of the court rendering the judgment.

Egypt has a system of economic courts specializing in private sector disputes that have jurisdiction over cases related to economic and commercial matters, including intellectual property disputes.  Despite these provisions, business and investors in Egypt’s renewable energy projects have reported significant problems resolving disputes with the Government of Egypt.

*Investor-State Dispute Settlement*

The U.S.-Egypt Bilateral Investment Treaty allows an investor to take a dispute directly to binding third-party arbitration.  The Egyptian courts generally endorse international arbitration clauses in commercial contracts. For example, the Court of Cassation, on a number of occasions, has confirmed the validity of arbitration clauses included in contracts between Egyptian and foreign parties.

A new mechanism for simplified settlement of investment disputes aimed at avoiding the court system altogether has been established.  In particular, the law established a Ministerial Committee on Investment Contract Disputes, responsible for the settlement of disputes arising from investment contracts to which the state, or an affiliated public or private body, is a party.  This is in addition to establishing a Complaint Committee to consider challenges connected to the implementation of Egypt’s Investment Law.  Finally, the decree established a Committee for Resolution of Investment Disputes, which will review complaints or disputes between investors and the government related to the implementation of the Investment Law.  In practice, Egypt’s dispute resolution mechanisms are time-consuming, but broadly effective.  Businesses have, however, reported difficulty collecting payment from the government when awarded a monetary settlement.

Over the past 10 years, there have been several investment disputes involving both U.S. persons and foreign investors.  Most of the cases have been settled, though no definitive number is available. Local courts in Egypt recognize and enforce foreign arbitral awards issued against the government.  There are no known extrajudicial actions against foreign investors in Egypt during the period of this report.

*International Commercial Arbitration and Foreign Courts*

Egypt allows mediation as a mechanism for alternative dispute resolution (ADR), a structured negotiation process in which an independent person known as a mediator assists the parties to identify and assess options, and negotiate an agreement to resolve their dispute.  GAFI has an Investment Disputes Settlement Center, which uses mediation as an ADR.

The Economic Court recognizes and enforces arbitral awards.  Judgments of foreign courts may be recognized and enforceable under local courts under limited conditions.

In most cases, domestic courts have found in favor of state-owned enterprises (SOEs) involved in investment disputes.  In such disputes, non-government parties have often complained about the delays and discrimination in court processes.

It is recommended that U.S. companies employ contractual clauses that specify binding international (not local) arbitration of disputes in their commercial agreements.

**Bankruptcy Regulations**

Egypt passed a new bankruptcy law in January 2018, which should speed up the restructuring and settlement of troubled companies.  It also replaces the threat of imprisonment with fines in cases of bankruptcy.

In practice, the paperwork involved in liquidating a business remains convoluted and extremely protracted; starting a business is much easier than shutting one down.  Bankruptcy is frowned upon in Egyptian culture and many businesspeople believe they may be found criminally liable if they declare bankruptcy.

							4. Industrial Policies					

**Investment Incentives**

The Investment Law 72//2017 provides incentives to investors, including:

General Incentives:

- All investment projects subject to the provisions of the new law enjoy the general incentives provided by it.
- Investors are exempted from the stamp tax, fees of the notarization, registration of the memorandum of incorporation of the companies, credit facilities, and mortgage contracts associated with their business for five years from the date of registration in the Commercial Registry, in addition to the registration contracts of the lands required for a company’s establishment.
- If the establishment is under the provisions of the new investment law, it will benefit from a 2 percent unified custom tax over all imported machinery, equipment, and devices required for the establishment of such a company.

Special Incentive Programs:

- Investment projects established within three years of the date of the issuance of the Investment Law will enjoy a deduction from their net profit, subject to the income tax:    - 50 percent of the investment costs for geographical region (A) (the regions the most in need of development as well as designated projects in Suez Canal Special Economic Zone and the “Golden Triangle” along the Red Sea between the cities of Safaga, Qena and El Quseer);
  - 30 percent of the investment costs to geographical region (B) (which represents the rest of the republic). 
- Provided that such deduction shall not exceed 80 percent of the paid-up capital of the company, the incentive could be utilized over a maximum of seven years.

Additional Incentive Program:

The Cabinet of Ministers may decide to grant additional incentives for investment projects in accordance with specific rules and regulations as follows:

- The establishment of special customs ports for exports and imports of the investment projects.
- The state may incur part of the costs of the technical training for workers.
- Free allocation of land for a few strategic activities may apply.
- The government may bear in full or in part the costs incurred by the investor to invest in utility connections for the investment project.
- The government may refund half the price of the land allocated to industrial projects in the event of starting production within two years from receiving the land.

Other Incentives related to Free Zones according to Investment Law 72/2017:

- Exemption from all taxes and customs duties.
- Exemption from all import/export regulations.
- The option to sell a certain percentage of production domestically if customs duties are paid.
- Limited exemptions from labor provisions.
- All equipment, machinery, and essential means of transport (excluding sedan cars) necessary for business operations are exempted from all customs, import duties, and sales taxes.
- All licensing procedures are handled by GAFI. To remain eligible for benefits, investors operating inside the free zones must export more than 50 percent of their total production.
- Manufacturing or assembly projects pay an annual charge of 1 percent of the total value of their products.
- Excluding all raw materials, storage facilities are to pay 1 percent of the value of goods entering the free zones while service projects pay 1 percent of total annual revenue.
- Goods in transit to specific destinations are exempt from any charges.

Other Incentives related to the Suez Canal Economic Zone (SCZone):

- 100 percent foreign ownership of companies.
- 100 percent foreign control of import/​export activities.
- Imports are exempted from customs duties and sales tax.
- Customs duties on exports to Egypt imposed on imported components only, not the final product.
- Fast-track visa services.
- A full service one-stop shop for registration and licensing.
- Allowing enterprises access to the domestic market; duties on sales to domestic market will be assessed on the value of imported inputs only.

The Ministry of Industry & Foreign Trade and the Ministry of Finance’s Decree No. 719//2007 provides incentives for industrial projects in the governorates of Upper Egypt (Upper Egypt refers to governorates in southern Egypt).  The decree provides an incentive of EGP 15,000 (approximately USD 850) for each job opportunity created by the project, on the condition that the investment costs of the project exceed EGP 15 million (approximately USD 850,000).  The decree can be implemented on both new and ongoing projects.

**Foreign Trade Zones/Free Ports/Trade Facilitation**

Public and private free trade zones are authorized under GAFI’s Investment Incentive Law.  Free zones are located within the national territory, but are considered to be outside Egypt’s customs boundaries, granting firms doing business within them more freedom on transactions and exchanges.  Companies producing largely for export (normally 80 percent or more of total production) may be established in free trade zones and operate using foreign currency. Free trade zones are open to investment by foreign or domestic investors.  Companies operating in free trade zones are exempted from sales taxes or taxes, and fees on capital assets and intermediate goods. The Legislative Package for the Stimulation of Investment, issued in 2015, stipulated a 1 percent duty paid on the value of commodities upon entry for storage projects and a 1 percent duty upon exit for manufacturing and assembly projects.

There are currently 11 public free trade zones in operation in the following locations: Alexandria, Damietta, East Port Said Port Zone, Ismailia, Qeft, Media Production City, Nasr City, Port Said, Shebin el Kom, and Suez.  Private free trade zones may also be established with a decree by GAFI, but are usually limited to a single project. Export-oriented industrial projects are given priority. There is no restriction on foreign ownership of capital in private free zones.

The Special Economic Zones (SEZ) Law 83//2002 allows establishment of special zones for industrial, agricultural, or service activities designed specifically with the export market in mind.  The law allows firms operating in these zones to import capital equipment, raw materials, and intermediate goods duty free. Companies established in the SEZs are also exempt from sales and indirect taxes, and can operate under more flexible labor regulations.  The first SEZ was established in the northwest Gulf of Suez.

Law 19//2007 authorized creation of investment zones, which require Prime Ministerial approval for establishment.  The government regulates these zones through a board of directors, but the zones are established, built, and operated by the private sector.  The government does not provide any infrastructure or utilities in these zones. Investment zones enjoy the same benefits as free zones in terms of facilitation of license-issuance, ease of dealing with other agencies, etc., but are not granted the incentives and tax/custom exemptions enjoyed in free zones.  Projects in investment zones pay the same tax/customs duties applied throughout Egypt. The aim of the law is to assist the private sector in diversifying its economic activities.

The Suez Canal Economic Zone, a major industrial and logistics services hub announced in 2014, is expected to include upgrades and renovations to ports located along the Suez Canal corridor, including West and East Port Said, Ismailia, Suez, Adabiya, and Ain Sokhna.  The Egyptian government has invited foreign investors to take part in the projects, which are expected to be built in several stages, the first of which is scheduled to be completed by 2020. Reported areas for investment include maritime services like ship repair services, bunkering, vessel scrapping and recycling; industrial projects, including pharmaceuticals, food processing, automotive production, consumer electronics, textiles, and petrochemicals; IT services such as research and development and software development; renewable energy; and mixed use, residential, logistics, and commercial developments.  Website for the Suez Canal Development Project: http://www.sczone.com.eg/English/Pages/default.aspx  

**Performance and Data Localization Requirements**

Egypt has rules on national percentages of employment and difficult visa and work permit procdeures.  The application of these provisions that restrict access to foreign worker visas has been inconsistent.  The government plans to phase out visas for unskilled workers, but as yet has not done so. For most other jobs, employers may hire foreign workers on a temporary six-month basis, but must also hire two Egyptians to be trained to do the job during that period.  Only jobs where it is not possible for Egyptians to acquire the requisite skills will remain open to foreign workers. The application of these regulations is inconsistent. The Labor Law allows Ministers to set the maximum percentage of foreign workers that may work in companies in a given sector.  There are no such sector-wide maximums for the oil and gas industry, but individual concession agreements may contain language establishing limits or procedures regarding the proportion of foreign and local employees.

No performance requirements are specified in the Investment Incentives Law, and the ability to fulfill local content requirements is not a prerequisite for approval to set up assembly projects.  In many cases, however, assembly industries still must meet a minimum local content requirement in order to benefit from customs tariff reductions on imported industrial inputs.

Decree 184//2013 allows for the reduction of customs tariffs on intermediate goods if the final product has a certain percentage of input from local manufacturers, beginning at 30 percent local content.  As the percentage of local content rises, so does the tariff reduction, reaching up to 90 percent if the amount of local input is 60 percent or above. In certain cases, a minister can grant tariff reductions of up to 40 percent in advance to certain companies without waiting to reach a corresponding percentage of local content.  In 2010, Egypt revised its export rebate system to provide exporters with additional subsidies if they used a greater portion of local raw materials.

Manufacturers wishing to export under trade agreements between Egypt and other countries must complete certificates of origin and local content requirements contained therein.  Oil and gas exploration concessions, which do not fall under the Investment Incentives Law, do have performance standards, which are specified in each individual agreement and which generally include the drilling of a specific number of wells in each phase of the exploration period stipulated in the agreement.

Egypt does not impose localization barriers on IT firms.  Egypt does not make local production a requirement for market access, does not have local content requirements, and does not impose forced technology or intellectual property transfers as a condition of market access.  But there are exceptions where the government has attempted to impose controls by requesting access to a company’s servers located offshore, or request servers to be located in Egypt and thus under the government’s control.

							5. Protection of Property Rights					

**Real Property**

The Egyptian legal system provides protection for real and personal property.  Laws on real estate ownership are complex and titles to real property may be difficult to establish and trace.  According to the World Bank’s 2019 Doing Business Report, Egypt ranks 125 of 190 for ease of registering property.

The National Title Registration Program introduced by the Ministry of State for Administrative Development has been implemented in nine areas within Cairo.  This program is intended to simplify property registration and facilitate easier mortgage financing. Real estate registration fees, long considered a major impediment to development of the real estate sector, are capped at no more than EGP 2000 (USD 110), irrespective of the property value.  In November 2012, the government postponed implementation of an enacted overhaul to the real estate tax and as of April 2017 no action has been taken.

Foreigners are limited to ownership of two residences in Egypt and specific procedures are required for purchasing real estate in certain geographical areas.

The mortgage market is still undeveloped in Egypt, and in practice most purchases are still conducted in cash.  Real Estate Finance Law 148//2001 authorized both banks and non-bank mortgage companies to issue mortgages. The law provides procedures for foreclosure on property of defaulting debtors, and amendments passed in 2004 allow for the issuance of mortgage-backed securities.  According to the regulations, banks can offer financing in foreign currency of up to 80 percent of the value of a property.

Presidential Decree 17//2015 permitted the government to provide land free of charge, in certain regions only, to investors meeting certain technical and financial requirements.  This provision expires on April 1, 2020 and the company must provide cash collateral for five years following commencement of either production (for industrial projects) or operation (for all other projects).

The ownership of land by foreigners is governed by three laws: Law 15//1963, Law 143//1981, and Law 230//1996.  Law 15//1963 stipulates that no foreigners, whether natural or juristic persons, may acquire agricultural land.  Law 143//1981 governs the acquisition and ownership of desert land. Certain limits are placed on the number of feddans (one feddan is equal to approximately one hectare) that may be owned by individuals, families, cooperatives, partnerships and corporations.  Partnerships are permitted to own up to 10,000 feddans. Joint stock companies are permitted to own up to 50,000 feddans.

Partnerships and joint stock companies may own desert land within these limits, even if foreign partners or shareholders are involved, provided that at least 51 percent of the capital is owned by Egyptians.  Upon liquidation of the company, however, the land must revert to Egyptian ownership. Law 143 defines desert land as the land lying two kilometers outside city borders. Furthermore, non-Egyptians owning non-improved real estate in Egypt must build within a period of five years from the date their ownership is registered by a notary public.  Non-Egyptians may only sell their real estate five years after registration of ownership, unless the consent of the Prime Minister for an exemption is obtained.

**Intellectual Property Rights**

Egypt remains on the Special 301 Watch List in 2019.  Egypt’s IPR legislation generally meets international standards, but is weakly enforced.  Shortcomings in the IPR environment include infringements to copyrights and patents, particularly in the pharmaceuticals sector.

Book, music, and entertainment software piracy is prevalent in Egypt, and a significant portion of the piracy takes place online.  American film studios represented by the Motion Pictures Association of America are concerned about the illegal distribution of American movies on regional satellite channels.

Multinational pharmaceutical companies complain that local generic drug-producing companies infringe on their patents.  Delays and inefficiencies in processing patent applications by the Egyptian Patent Office compound the difficulties pharmaceutical companies face in introducing new drugs to the local market.  The government views patent linkage as “a legal violation” against the concept of separation of authorities between the Ministry of Health and the Egyptian Patent Office. As a result, the Ministry of Health has the authority to issue permits for the sale of drugs, but generally issues these permits without cross-checking patent filings.

Eight GoE ministries have the responsibility to oversee IPR concerns: Supply and Internal Trade for trademarks, Higher Education and Research for patents, Culture for copyrights, Agriculture for plants, Communications and Information Technology for copyright of computer programs, Interior for combatting IPR violations, Customs for border enforcement, and Trade and Industry for standards and technical regulations.  Article 69 of Egypt’s 2014 constitution mandates the establishment of a “specialized agency to uphold [IPR] rights and their legal protection.” A National Committee on IPR was temporary established to address IPR matters until a permanent body is established. All IPR stakeholders are represented in the committee, and members meet every two months to discuss issues. The National Committee on IPR is chaired by the Ministry of Foreign Affairs and reports directly to the Prime Minister. As of April 2019, Parliament was drafting a revision of the 2002 IPR law, and was receptive to U.S. government advice and input.

The Egyptian Customs Authority (ECA) handles IPR enforcement at the national border and the Ministry of Interior’s Department of Investigation handles domestic cases of illegal production. The ECA cannot act unless the trademark owner files a complaint.  Moreover, Egypt’s Economic Courts often take years to reach a decision on IPR infringement cases.

ECA’s customs enforcement also tends to focus on protecting Egyptian goods and trademarks. The ECA is taking steps to adopt the World Customs Organization’s (WCO) Interface Public-Members platform*,* which allows customs officers to detect counterfeit goods by scanning a product’s barcode and checking the WCO trademark database system.

For additional information about treaty obligations and points of contact at local offices, please see WIPO’s country profiles at http://wipo.int/directory/en/

							6. Financial Sector					

**Capital Markets and Portfolio Investment**

To date, high returns on GoE debt have crowded out Egyptian investment in productive capacity.  The large foreign inflows Egypt witnessed in 2018 have been mostly portfolio capital, which is highly volatile.  Returns on GoE debt have begun to decrease, which could presage investment by Egyptian capital in the real economy

The Egyptian Stock Exchange (EGX) is Egypt’s registered securities exchange.  There are more than 500,000 investors registered to trade on the exchange. Stock ownership is open to foreign and domestic individuals and entities.  The GoE issues dollar-denominated and Egyptian pound-denominated debt instruments. The GoE has developed a positive outlook toward foreign portfolio investment, recognizing the need to attract foreign capital to help develop the Egyptian economy.

The Capital Market Law 95//1992, along with the Banking Law 88//2003, constitutes the primary regulatory frameworks for the financial sector.  The law grants foreigners full access to capital markets, and authorizes establishment of Egyptian and foreign companies to provide underwriting of subscriptions, brokerage services, securities and mutual funds management, clearance and settlement of security transactions, and venture capital activities.  The law specifies mechanisms for arbitration and legal dispute resolution and prohibits unfair market practices. Law 10//2009 created the Egyptian Financial Supervisory Authority (EFSA) and brought the regulation of all non-banking financial services under its authority. In 2017, EFSA became the Financial Regulatory Authority (FRA).

Settlement of transactions takes one day for treasury bonds and two days for stocks.  Although Egyptian law and regulations allow companies to adopt bylaws limiting or prohibiting foreign ownership of shares, virtually no listed stocks have such restrictions.  While a significant number of the companies listed on the exchange have been family-owned or dominated conglomerates, the exchange has gone through a period of major delisting of many companies that do not have sufficient shares or do not meet the management, fiscal, and transparency standards. Free trading of the remaining shares in many of these ventures is increasing, with a 110 percent increase in trade value and a 53 percent increase in trading volume from 2016 to 2017.  Companies are delisted from the exchange if not traded for six months.

The Higher Investment Council extended the suspension of capital gains tax for three years, until 2020 as part of efforts to draw investors back.   In 2017, the government implemented a stamp duty on all stock transactions with a duty of 0.125 percent on all buyers and sellers. Egypt’s stamp duty on stock exchange transactions includes for the first time a 0.3 percent levy for investors acquiring more than a third of a company’s stocks.

Foreign investors can access Egypt’s banking system by opening accounts with local banks, and buying and selling all marketable securities with brokerages.  The government has repeatedly emphasized its commitment to maintaining the profit repatriation system to encourage foreign investment in Egypt, especially since the pound floatation and implementation of the IMF loan program in November 2016.  The current system for profit repatriation by foreign firms requires sub-custodian banks to open foreign and local currency accounts for foreign investors (global custodians), which are exclusively maintained for stock exchange transactions. The two accounts serve as a channel through which foreign investors process their sales, purchases, dividend collections, and profit repatriation transactions using the bank’s posted daily exchange rates.  The system is designed to allow for settlement of transactions in fewer than two days.

The Egyptian credit market, open to foreigners, is vibrant and active. Repatriation of investment profits has become much easier, as there is enough available hard currency to execute FX trades. Since the floatation of the EGP in November 2016, FX trading is considered straightforward, given the reestablishment of the interbank foreign currency trading system.

**Money and Banking System**

Benefitting from the nation’s increasing economic stability over the past two years, Egypt’s banks have enjoyed both ratings upgrades and continued profitability.  Thanks to economic reforms, a new floating exchange system, and an Investment Law passed in 2017, the project finance pipeline is increasing after a period of lower activity.  Banking competition is improving to serve a largely untapped retail segment and the nation’s challenging, but potentially rewarding, the SME segment. The Central Bank of Egypt (CBE) has mandated that 20 percent of bank loans go to SMEs within the next two years).  Also, with only about a quarter to a third of Egypt’s adult population owning or sharing an account at a formal financial institution (according to press and comments from contacts), the banking sector has potential for growth and higher inclusion, which the government and banks discuss frequently.  A low median income plays a part in modest banking penetration. But the CBE has taken steps to work with banks and technology companies to expand financial inclusion.

Egypt’s banking sector is generally regarded as healthy and well-capitalized due in part to its deposit-based funding structure and ample liquidity—especially since the floatation and restoration of the interbank market.  The CBE estimates that approximately 4.3 percent of the banking sector’s loans are non-performing in 2018. Still, since 2011, a high level of exposure to government debt, accounting for over 40 percent of banking system assets, at the expense of private sector lending, has reduced the diversity of bank balance sheets and crowded out domestic investment.  Given the floatation of the Egyptian Pound and restart of the interbank trading system, Moody’s and S&P have upgraded the outlook of Egypt’s banking system to positive from stable to reflect improving macroeconomic conditions and ongoing commitment to reform.

38 banks operate in Egypt, including several foreign banks. The CBE has not issued a new commercial banking license since 1979.  The only way for a new commercial bank, whether foreign or domestic, to enter the market (except as a representative office) is to purchase an existing bank.  To this end, in 2013, QNB Group acquired National Société Générale Bank Egypt (NSGB). That same year, Emirates NBD, Dubai’s largest bank, bought the Egypt unit of BNP Paribas.  In 2015, Citibank sold its retail banking division to CIB Bank. In 2016 and 2017, Egypt indicated a desire to partially (less than 35 percent) privatize at least one (potentially two) state-owned banks and a total of 23 firms through either expanded or new listings on the Egypt Stock Exchange, though no action has been taken as of early 2018. In March 2019, Egypt began its program to privatize 23 State-Owned Enterprises with a successful minority stake in the Eastern Tobacco Company.

According to the CBE, banks operating in Egypt held EGP 4.216 trillion in total assets at the end of first quarter of 2018, of which approximately 45 percent were held by the largest five banks (the National Bank of Egypt, Banque Misr, the Commercial International Bank, Qatar National Bank Al-Ahli, and the Banque Du Caire). Egypt’s three state-owned banks (Banque Misr, Banque du Caire, and National Bank of Egypt) control nearly 40 percent of banking sector assets.

The chairman of the EGX recently stated that Egypt is allowing, even encouraging, exploration of the use of blockchain technologies across the banking community.  The FRA will review the development and most likely regulate how the banking system adopts the fast-developing blockchain systems into banks’ back-end and customer-facing processing and transactions. Seminars and discussions are beginning around Cairo, including visitors from Silicon Valley, in which leaders and experts are still forming a path forward.  While not outright banning cryptocurrencies, which is distinguished from blockchain technologies, authorities caution against speculation in unknown asset classes.

Alternative financial services in Egypt are extensive, given the large informal economy, estimated to be from 30 to 50 percent of the GDP. Informal lending is prevalent, but the total capitalization, number of loans, and types of terms in private finance is less well known.

**Foreign Exchange and Remittances**

*Foreign Exchange*

There has been significant progress in accessing hard currency since the floatation of the EGP and reestablishment of the interbank currency trading system in November 2016.  While the immediate aftermath saw some lingering difficulty of accessing currency, by 2017 most firms operating in Egypt reported having little difficulty obtaining hard currency for business purposes, such as importing inputs and repatriating profits.  In 2016 the Central Bank lifted dollar deposit limits on households and firms importing priority goods which had been in place since early 2015. With net foreign reserves at an all-time high of over USD 44 billion (March 2019), accessing foreign currency is no longer an issue.

Funds associated with investment can be freely converted into any world currency, depending on the availability of that currency in the local market.  Some firms and individuals report that the process takes time. But the interbank trading system works in general and currency is available as the foreign exchange markets continue to react positively to the government’s commitment to macro and structural reform.

The floating exchange rate operates on the principle of market supply and demand: the exchange rate is dictated by availability of currency and demand by firms and individuals.  While there is some reported *informal*Central Bank window guidance, the rate generally fluctuates depending on market conditions, without direct market intervention by authorities.  In general, the EGP has stabilized within an acceptable exchange rate range, which has increased the foreign exchange market’s liquidity. Since the early days following the floatation, there has been very low exchange rate volatility.

*Remittance Policies*

The 1992 U.S.-Egypt Bilateral Investment Treaty provides for free transfer of dividends, royalties, compensation for expropriation, payments arising out of an investment dispute, contract payments, and proceeds from sales.

The Investment Incentives Law stipulates that non-Egyptian employees hired by projects established under the law are entitled to transfer their earnings abroad.  Conversion and transfer of royalty payments are permitted when a patent, trademark, or other licensing agreement has been approved under the Investment Incentives Law.

Banking Law 88//2003 regulates the repatriation of profits and capital.  The current system for profit repatriation by foreign firms requires sub-custodian banks to open foreign and local currency accounts for foreign investors (global custodians), which are exclusively maintained for stock exchange transactions.  The two accounts serve as a channel through which foreign investors process their sales, purchases, dividend collections, and profit repatriation transactions using the bank’s posted daily exchange rates. The system is designed to allow for settlement of transactions in fewer than two days, though in practice some firms have reported short delays in repatriating profits, no longer due to availability but more due to processing steps.

**Sovereign Wealth Funds**

The Cabinet has approved   the establishment of a sovereign wealth fund, which will be charged with investing state funds locally and abroad across asset classes and will be tapped to manage underutilized assets.  The framework of the EGP200 billion sovereign wealth fund was issued in March of 2018. The government is collaborating with regional and European institutions to take part in forming the fund’s sector-specific units.

							7. State-Owned Enterprises					

State and military-owned companies compete directly with private companies in many sectors of the Egyptian economy.  According to Public Sector Law 203//1991, SOEs should not receive preferential treatment from the government, nor should they be accorded any exemption from legal requirements applicable to private companies.  In addition to the SOEs groups, 40 percent of the banking sector’s assets are controlled by three state-owned banks (Banque Misr, Banque du Caire, and National Bank of Egypt). In March 2014, the government announced that nine public holding companies will be placed under an independent sovereign fund.

In an attempt to encourage growth of the private sector, privatization of SOEs and state-owned banks accelerated under an economic reform program that took place from 1991 to 2008. Following the 2011 revolution, third parties have brought cases in court to reverse privatization deals, and in a number of these cases, Egyptian courts have ruled to reverse the privatization of several former public companies.  Most of these cases are still under appeal.

The state-owned telephone company, Telecom Egypt, lost its legal monopoly on the local, long-distance, and international telecommunication sectors in 2005.  Nevertheless, Telecom Egypt held a *de facto* monopoly until late 2016 because the National Telecommunications Regulatory Authority (NTRA) had not issued additional licenses to compete in these sectors.  In October 2016, NTRA, however, implemented a unified license regime that allows companies to offer both fixed line and mobile networks. The agreement allows Telecom Egypt to enter the mobile market and the three existing mobile companies to enter the fixed line market.  The introduction of Telecom Egypt as a new mobile operator in the Egyptian market will increase competition among operators, which will benefit users by raising the bar on the quality of services as well as improving prices. Egypt is not a party to the WTO’s Government Procurement Agreement.

SOEs in Egypt are structured as individual companies controlled by boards of directors and grouped under government holding companies that are arranged by industry, including Petroleum Products & Gas, Spinning & Weaving; Metallurgical Industries; Chemical Industries; Pharmaceuticals; Food Industries; Building & Construction; Tourism, Hotels & Cinema; Maritime & Inland Transport; Aviation; and Insurance. The holding companies are headed by boards of directors appointed by the Prime Minister with input from the relevant Minister.

**Privatization Program**

Egypt has made some progress on its program to privatize 23 State-Owned Enterprises (SOEs). The process formally began in March 2019 with a successful public offering of a minority stake in the Eastern Tobacco Company. The long-awaited program had been delayed repotedly due to market conditions.  The government plans to sell 20-30 percent of Banque du Caire’s shares in an initial public offering on the EGX by the end of 2019, according to the Central Bank. Efforts to privatize before had stalled in an environment where the public often associates privatization with poor quality and higher prices.

Egypt’s privatization program is based on Public Enterprise Law 203//1991, which permits the sale of SOEs to foreign entities.  In 1991, Egypt began a privatization program for the sale of several hundred wholly or partially SOEs and all public shares of at least 660 joint venture companies (joint venture is defined as mixed state and private ownership, whether foreign or domestic).  Bidding criteria for privatizations were generally clear and transparent.

							8. Responsible Business Conduct					

Responsible Business Conduct (RBC) programs have grown in popularity in Egypt over the last 10 years.  Most programs are limited to multinational and larger domestic companies as well as the banking sector and take the form of funding and sponsorship for initiatives supporting entrepreneurship and education and other social activities.  Environmental and technology programs are also garnering greater participation. The Ministry of Trade has engaged constructively with corporations promoting RBC programs, supporting corporate social responsibility (CSR) conferences and providing Cabinet-level representation as a sign of support to businesses promoting RBC programming.

A number of organizations and corporations work to foster the development of RBC in Egypt.  The American Chamber of Commerce has an active CSR committee. Several U.S. pharmaceutical companies are actively engaged in RBC programs related to Egypt’s hepatitis-C epidemic.  The Egyptian Corporate Responsibility Center, which is the UN Global Compact local network focal point in Egypt, aims to empower businesses to develop sustainable business models as well as improve the national capacity to design, apply, and monitor sustainable responsible business conduct policies.  In March 2010, Egypt launched an environmental, social, and governance (ESG) index, the second of its kind in the world after India’s, with training and technical assistance from Standard and Poor’s. Egypt does not participate in the Extractive Industries Transparency Initiative. Public information about Egypt’s extractive industry remains limited to the government’s annual budget.

							9. Corruption					

Egypt has a set of laws to combat corruption by public officials, including an Anti-Bribery Law (which is contained within the Penal Code), an Illicit Gains Law, and a Governmental Accounting Law, among others.  Countering corruption remains a long-term focus. There have been cases involving public figures and entities, including the arrests of Alexandria’s deputy governor and the secretary general of Suez on several corruption charges and the investigation into five members of parliament alleged to have sold Hajj visas.  Nevertheless, according to some businesses, corruption laws have not been consistently enforced. Transparency International’s Corruption Perceptions Index ranked Egypt 105 out of 180 in its 2018 survey, an improvement of 12 places from its rank of 117 in 2017. Transparency International also found that approximately 50 percent of Egyptians reported paying a bribe in order to obtain a public service.

Some private companies use internal controls, ethics, and compliance programs to detect and prevent bribery of government officials. There is no government requirement for private companies to establish internal codes of conduct to prohibit bribery.

Egypt ratified the UN Convention against Corruption in February 2005. It has not acceded to the OECD Convention on Combating Bribery or any other regional anti-corruption conventions.

While NGOs are active in encouraging anti-corruption activities, dialogue between the government and civil society on this issue is almost non-existent, the OECD found in 2009 and a trend that continues today.  While government officials publicly asserted they shared civil society organizations’ goals, they rarely cooperated with NGOs, and applied relevant laws in a highly restrictive manner against NGOs critical of government practices.  Media was also limited in its ability to report on corruption, with Article 188 of the Penal Code mandating heavy fines and penalties for unsubstantiated corruption allegations.

U.S. firms have sometimes identified corruption as an obstacle to FDI in Egypt.  Companies might encounter corruption in the public sector in the form of requests for bribes, using bribes to facilitate required government approvals or licenses, embezzlement, and tampering with official documents.  Corruption and bribery are reported in dealing with public services, customs (import license and import duties), public utilities (water and electrical connection), construction permits, and procurement, as well as in the private sector.  Businesses have described a dual system of payment for services, with one formal payment and a secondary, unofficial payment required for services to be rendered.

*Resources to Report Corruption*

Several agencies within the GoE share responsibility for addressing corruption.  Egypt’s primary anticorruption body is the Administrative Control Authority (ACA), which has jurisdiction over state administrative bodies, SOEs, public associations and institutions, private companies undertaking public work, and organizations to which the state contributes in any form.  In October 2017, Parliament approved and passed amendments to the ACA law, which grants the organization full technical, financial, and administrative authority to investigate corruption within the public sector (with the exception of military personnel/entities).  The law is viewed as strengthening an institution, which was established in 1964.  The ACA appears well funded and well trained when compared with other Egyptian law enforcement organizations.  Strong funding and the current ACA leadership’s close relationship with President Sisi reflect the importance of this organization and its mission. It is too small for its mission (roughly 300 agents) and is routinely over-tasked with work that would not normally be conducted by a law enforcement agency.

The ACA periodically engages with civil society.  For example, it has met with the American Chamber of Commerce and other organizations to encourage them to seek it out when corruption issues arise.

In addition to the ACA, the Central Auditing Authority (CAA) acts as an anti-corruption body, stationing monitors at state-owned companies to report corrupt practices.  The Ministry of Justice’s Illicit Gains Authority is charged with referring cases in which public officials have used their office for private gain.  The Public Prosecution Office’s Public Funds Prosecution Department and the Ministry of Interior’s Public Funds Investigations Office likewise share responsibility for addressing corruption in public expenditures.

Contact information for the government agency responsible for combating corruption:

Minister of InteriorGeneral Directorate of Investigation of Public FundsTelephone: 02-2792-1395 / 02-2792 1396Fax: 02-2792-2389

							10. Political and Security Environment					

Stability and economic development remain Egypt’s priorities. The GoE has taken measures to eliminate politically-motivated violence, while also limiting peaceful protests and political expression.  Egypt’s presidential elections proceeded without incident in March 2018. Late 2018 and early 2019 saw a relatively low number of small-scale terrorist attacks primarily against security targets in Cairo and elsewhere in the Nile Valley, with some against civilians. Militant groups committed several large-scale attacks in the Western Desert and Sinai in late 2017, and a car bombing in Alexandria in early 2018.  In the Sinai Peninsula, militants affiliated with ISIS have conducted terrorist attacks against military installations and personnel, as well as a prominent religious site targeting civilians. In response, the government launched a comprehensive counterterrorism offensive beginning in early 2018, which is still ongoing. The United States designated three groups – Harakat Sawaad Misr (HASM), Liwaa el Thawra, and ISIS Egypt – as Specially Designated Global Terrorists in 2018, and designated ISIS-Sinai Province as an alias of Ansar Bayt al-Maqdis, which had been designated a Foreign Terrorist Organization in September 2015.

							11. Labor Policies and Practices					

Official statistics put Egypt’s labor force at approximately 29 million, with an official unemployment rate of 10.7 percent as of December 2018, a 0.6 percent decrease since the previous quarter and a continuation of a gradual downward trend since its peak of over 13 percent in 2014.  Women account for some 75 percent of those unemployed, according to a May 2017 statement by Abu Bakr el-Gendy, head of Egypt’s Central Agency for Public Mobilization and Statistics (CAPMAS). Accurate figures are difficult to determine and verify given Egypt’s large informal economy in which some 62 percent of the non-agricultural workforce is engaged, according to ILO estimates.

The government bureaucracy and public sector enterprises are substantially over-staffed compared to the private sector and other international norms.  According to the World Bank, Egypt has the highest number of government workers per capita in the world.  Businesses highlight a mismatch between labor skills and market demand, despite high numbers of university graduates in a variety of fields.  Foreign companies frequently pay internationally competitive salaries to attract workers with valuable skills.

The Unified Labor Law 12//2003 provides comprehensive guidelines on labor relations, including hiring, working hours, termination of employees, training, health, and safety.  The law grants a qualified right for employees to strike, as well as rules and guidelines governing mediation, arbitration, and collective bargaining between employees and employers.   Non-discrimination clauses are included, and the law complies with labor-related International Labor Organization (ILO) conventions regulating the employment and training of women and eligible children. Egypt ratified ILO Convention 182 on combating the Worst Forms of Child Labor in April 2002. On July 2018, Egypt launched the first National Action Plan on combating the Worst Forms of Child Labor. The law also created a national committee to formulate general labor policies and the National Council of Wages, whose mandate is to discuss wage-related issues and national minimum-wage policy, but it has rarely convened and a minimum wage has rarely been enforced in the private sector. .

Parliament adopted a new Trade Unions Law in late 2017, replacing a 1976 law, which experts said was out of compliance with Egypt’s commitments to ILO conventions.  After a March 2016 Ministry of Manpower and Migration (MOMM) directive not to recognize documentation from any trade union without a stamp from the government-affiliated Egyptian Trade Union Federation (ETUF), the new law established procedures for registering independent trade unions, but some of the unions noted that the directorates of the Ministry of Manpower didn’t implement the law and placed restrictions on freedoms of association and organizing for trade union elections.  Executive regulations for trade union elections stipulate a very tight deadline of three months for trade union organizations to legalize their status, and one month to hold elections, which, critics said, restricted the ability of unions to legalize their status or to campaign. On April 3, 2018, the government registered its first independent trade union in more than two years. Under the new law, a trade union or workers’ committee may be formed if 150 employees in an entity express a desire to organize.  Minimum membership thresholds for forming a general trade union are 20,000 and for a trade union federation, 200,000. The new law explicitly bans compulsory membership or the collection of union dues without written consent of the worker and allows members to quit unions. Each union, general union, or federation is registered as an independent legal entity, thereby enabling any such entity to exit any higher-level entity.

The 2014 Constitution stipulated in Article 76 that “establishing unions and federations is a right that is guaranteed by the law.”  Only courts are allowed to dissolve unions. The 2014 Constitution maintained past practice in stipulating that “one syndicate is allowed per profession.”  The Egyptian constitutional legislation differentiates between white-collar syndicates (e.g. doctors, lawyers, journalists) and blue-collar workers (e.g. transportation, food, mining workers). Workers in Egypt have the right to strike peacefully, but strikers are legally obliged to notify the employer and concerned administrative officials of the reasons and time frame of the strike 10 days in advance.  In addition, strike actions are not permitted to take place outside the property of businesses.  The law prohibits strikes in strategic or vital establishments in which the interruption of work could result in disturbing national security or basic services provided to citizens.  In practice, however, workers strike in all sectors, without following these procedures, but at risk of prosecution by the government.

Collective negotiation is allowed between trade union organizations and private sector employers or their organizations.  Agreements reached through negotiations are recorded in collective agreements regulated by the Unified Labor law and usually registered at MOMM.  Collective bargaining is technically not permitted in the public sector, though it exists in practice.  The government often intervenes to limit or manage collective bargaining negotiations in all sectors.

MOMM sets worker health and safety standards, which also apply in public and private free zones and the Special Economic Zones (see below).  Enforcement and inspection, however, are uneven.  The Unified Labor Law prohibits employers from maintaining hazardous working conditions, and workers have the right to remove themselves from hazardous conditions without risking loss of employment.

Egyptian labor laws allow employers to close or downsize operations for economic reasons.  The government, however, has taken steps to halt downsizing in specific cases.  The Unemployment Insurance Law, also known as the Emergency Subsidy Fund Law 156//2002, sets a fund to compensate employees whose wages are suspended due to partial or complete closure of their firm or due to its downsizing.  The Fund allocates financial resources that will come from a 1 percent deduction from the base salaries of public and private sector employees.  According to foreign investors, certain aspects of Egypt’s labor laws and policies are significant business impediments, particularly the difficulty of dismissing employees.  To overcome these difficulties, companies often hire workers on temporary contracts; some employees remain on a series of one-year contracts for more than 10 years. Employers sometimes also require applicants to sign a “Form 6,” an undated voluntary resignation form which the employer can use at any time, as a condition of their employment. Negotiations on drafting a new Labor Law, which has been under consideration in the Parliament for two years, have included discussion of requiring employers to offer permanent employee status after a certain number of years with the company and declaring Form 6 or any letter of resignation null and void if signed prior to the date of termination.

Egypt has a dispute resolution mechanism for workers.  If a dispute concerning work conditions, terms, or employment provisions arises, both the employer and the worker have the right to ask the competent administrative authorities to initiate informal negotiations to settle the dispute. This right can be exercised only within seven days of the beginning of the dispute. If a solution is not found within 10 days from the time administrative authorities were requested, both the employer and the worker can resort to a judicial committee within 45 days of the dispute.  This committee is comprised of two judges, a representative of MOMM and representatives from the trade union, and one of the employers’ associations. The decision of this committee is provided within 60 days. If the decision of the judicial committee concerns discharging a permanent employee, the sentence is delivered within 15 days. When the committee decides against an employer’s decision to fire, the employer must reintegrate the latter in his/her job and pay all due salaries. If the employer does not respect the sentence, the employee is entitled to receive compensation for unlawful dismissal.

Labor Law 12//2003 sought to make it easier to terminate an employment contract in the event of “difficult economic conditions.”  The Law allows an employer to close his establishment totally or partially or to reduce its size of activity for economic reasons, following approval from a committee designated by the Prime Minister.  In addition, the employer must pay former employees a sum equal to one month of the employee’s total salary for each of his first five years of service and one and a half months of salary for each year of service over and above the first five years.  Workers who have been dismissed have the right to appeal. Workers in the public sector enjoy lifelong job security as contracts cannot be terminated in this fashion; however, government salaries have eroded as inflation has outpaced increases.

Egypt has regulations restricting access for foreigners to Egyptian worker visas, though application of these provisions has been inconsistent.  The government plans to phase out visas for unskilled workers, but as yet has not done so. For most other jobs, employers may hire foreign workers on a temporary six-month basis, but must also hire two Egyptians to be trained to do the job during that period.  Only jobs where it is not possible for Egyptians to acquire the requisite skills will remain open to foreign workers. Application of these regulations is inconsistent.

							12. OPIC and Other Investment Insurance Programs					

The Overseas Private Investment Corporation (OPIC) is operating in Egypt to provide the capital and risk mitigation tools that investors need to overcome the barriers faced in this region. In 2012, OPIC launched the USD 250 million Egypt Loan Guaranty Facility (ELGF), in partnership with USAID, to support bank lending and stimulate job creation. The ELGF’s main objective is to help SMEs access finance for growth and development, by providing creditors the needed guarantees to help them mitigate loan risks.  This objective goes hand-in-hand with the Central Bank of Egypt’s initiative to support SMEs. The ELGF expands lending to SMEs by supporting local partner banks as they lend to the target segment and increase access to credit for SMEs. The result is the promotion of jobs and private sector development in Egypt. The ELGF and partner banks sign a Guarantee Facility Agreement (GFA) to outline main terms and conditions of credit guarantee. The two bank partners are Commercial International Bank (CIB) and the National Bank of Kuwait (NBK).  USAID has collaborated with OPIC/ELGF and the CIB to provide training to SME owners and managers on the basics of accounting and finance, banking and loan processes, business registration, and other topics that will help SMEs access financing for business growth.

OPIC is affiliated with several renewable energy, oil and gas, and water supply projects in Egypt, as well. Apache Corporation, the largest U.S. investor in Egypt, has supported its natural gas investment with OPIC risk insurance since 2004. In December 2018, the OPIC Board approved a project to provide USD 430 million in political risk insurance to Noble Energy, Inc. to support the restoration, operation, and maintenance of a natural gas pipeline in Egypt and the supply of natural gas through a pipeline from Israel.

							13. Foreign Direct Investment and Foreign Portfolio Investment Statistics					

*Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy*

Measurements of FDI in Egypt vary according to the source and the definitions employed to calculate the figure.  The Central Bank of Egypt records figures on quarterly and annual investment flows based on financial records for Egypt’s balance of payments statistics.  They are reported in the table below. The Ministry of Petroleum maintains statistics on investment in the oil and gas sector (which accounts for the bulk of FDI in Egypt), while GAFI has statistics on all other investments – including re-invested earnings and investment-in-kind.  Statistics are not always current. GAFI’s figures are calculated in EGP at the historical value and rate of exchange, with no allowance for depreciation, and are cumulative starting from 1971.

U.S. firms are active in a wide range of manufacturing industries, producing goods for the domestic and export markets.  U.S. investors include American Express, AIG, Ideal Standard, Apache Corporation, Bechtel, Bristol-Myers Squibb, Cargill, Citibank, Coca-Cola, Devon Energy, Dow Chemical, ExxonMobil, Eveready, General Motors, Guardian Industries, H.J.  Heinz, Johnson & Johnson, Kellogg’s, Mars, Mondelez, Microsoft, Proctor and Gamble, Pfizer, PepsiCo, Pioneer, and Xerox. Leading investors from other countries include BG, ENI-AGIP, BP, Vodaphone, and Shell (in the oil/gas sector), Unilever, Al-Futtaim, (UAE), the M.A. Kharafi Group (Kuwait), and the Kingdom Development Company (Saudi Arabia).

*Table 3: Sources and Destination of FDI*

Data not available.

*Table 4: Sources of Portfolio Investment*

							14. Contact for More Information					

Mohamed El Husseiny, Economic Specialist, U.S. Embassy Cairo02-2797-2323Elhusseinyma@state.gov

## View report by:

### On This Page

                    -  Executive Summary 
                    -  1. Openness To, and Restrictions Upon, Foreign Investment   
                    -  2. Bilateral Investment Agreements and Taxation Treaties   
                    -  3. Legal Regime   
                    -  4. Industrial Policies   
                    -  5. Protection of Property Rights   
                    -  6. Financial Sector   
                    -  7. State-Owned Enterprises   
                    -  8. Responsible Business Conduct   
                    -  9. Corruption   
                    -  10. Political and Security Environment   
                    -  11. Labor Policies and Practices   
                    -  12. OPIC and Other Investment Insurance Programs   
                    -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                    -  14. Contact for More Information   

Tags

Bureau of Economic and Business AffairsBureau of Near Eastern AffairsEgypt

Back to Top

01 / Select a Year

02 / Select Sections	

                  -  Select All Sections 

03 / Select Countries You can add more than one country or area.

                - White House
                - USA.gov
                - Office of the Inspector General
                - Archives
                - Contact Us

follow us
FacebookXInstagramYouTubeFlickrGovDelivery

              - Privacy Policy
              - Accessibility Statement
              - Copyright Information
              - FOIA
              - No FEAR Act

## U.S. Department *of* State

#### The Lessons of 1989: Freedom and Our Future