Favourable investment laws, exemptions are increasing foreign interest in Egypt
Arabian Business meets Mohamed Nasser, founder of Mohamed Nasser & Partners law firm, to give us an insight on the legal aspects which are encouraging foreign investors to direct their investments to his home country.
Egypt has been the top destination for foreign direct investments (FDI) in the Arab world during the past five years, harvesting a whopping $124.5bn worth of projects between January 2015 and December 2019.
To be more specific, the country accounted for 35.2 percent of the $340bn invested in the region throughout this period.
In total, 476 new projects, or 10.9 percent of total foreign projects in the Arab world, were launched in Egypt during those five years.
What are the encouraging laws on foreign investments in Egypt?
In 2017, investment laws in Egypt have undergone massive changes which made investment in Egypt more appealing and profitable for businesses, multinationals, and investors from all over the world.
According to the new regulations, a foreign investor can now, under the name of his company, own real estate such as lands, factories, and buildings. Additional incentives and tax exemptions are now granted to most investment sectors. The management now can be fully constituted of foreign personnel without the requirement of having an Egyptian partner or manager on board, and many more changes that have eased and improved the business environment in Egypt.
As an example, one of my clients is a Dutch agricultural company called Rjik Zwaan, they are the third largest producer of agricultural seeds in the world. Upon the change of the law, and their enablement to buy land, I recommended they buy a big plot of land to use as their experimental greenhouse, where they test new seeds. It has become their hub that serves the GCC and the Middle East.
Are there specific sectors that get incentives and tax exemptions?
All sectors are benefiting from the new law, each with a different set of terms and conditions, yet there is no industry that has not witnessed a positive change in its laws. As an example, there are tax exemptions for food related industries such as poultry, livestock, and fish up till 10 years.
The establishments of malls, residential projects, educational facilities such as the establishment of schools and universities, tourism-related industries such as hotels and restaurants, power and energy and technology and communications have their own set of incentives and exemptions.
What about mergers and acquisitions?
There has been a rise in the number of successful Egyptian startups in addition to the already established businesses, this created a larger number of mergers and acquisitions (M&A) in the market which also led to further regulations that protect the benefits, stocks, and transition of power between companies.
Egypt’s mergers and acquisitions transaction value have witnessed an outstanding increase of 400 percent in the first half of 2021, despite the pandemic. This number was from 111 deals totalling more than $4bn in value, putting Egypt right on top as the most popular country in the Middle East for inbound M&A from foreign investors.
Can you give us an example of how a company could benefit from investing in Egypt?
The manpower in Egypt is affordable in comparison with its counterparts in other countries. The new laws facilitated the establishment of companies and even if foreign personnel are needed, their residency and work permits have become a very simple task.
There are two free zones as well, that can be of great value to specific industries. As an example, one of my clients, a Saudi oil and gas corporation was seeking to cut labour costs.
I recommended they simply relocate only two of their departments, the IT and finance, to be based in Egypt, which eventually saved them millions of dollars.
Can you tell us more about the free zones and what are their advantages?
Egypt has two special economic zones, the Suez Canal Economic Zone and the Golden Triangle Economic Zone. Their system includes incentives and guarantees, including a standard personal income tax tariff of 5 percent.
Characterised by integrated customs management, tax administration, investor dispute resolution unit, project licensing centre, in addition to public services for investors, projects established within the economic zones benefit from Egyptian certificates of origin for exporters, allowing them to take advantage of international trade agreements signed with Egypt and access to several foreign markets.
Additional privileges, subject to terms and conditions, can be obtained such as the country bearing part of the cost of technical training for employees, a refund of half of the value of land allocated to industrial projects if production begins within two years of the date of delivery of the land, and allocation of free land for some strategic industries.
What is the correct procedure for investors to start a business in Egypt?
Of course after they have decided on the industry they want to venture in, they should get a law firm that would handle their procedures and give them the correct and sound advice on the best way to benefit from exemptions and incentives the laws offer to their industry.
The law firm will handle the process starting from the establishment procedures of their company, choosing the appropriate type of company that best suits their needs, due diligence when required for mergers and acquisitions, work permits and residencies for foreign employees, registration of land and other forms of real estate, employee contracts and benefiting from labour law.