INVESTMENT GUIDE IN EGYPT

Abdel Fattah El-Sisi

President of Egypt

Dear Investor,

Investment Guide for Egypt 

1. Introduction 

Egypt, with its strategic location, large domestic market, and ongoing economic reforms, presents a compelling investment destination for foreign investors. This comprehensive guide aims to provide potential investors with a thorough understanding of the investment landscape in Egypt, covering key sectors, legal frameworks, economic conditions, and cultural considerations. 

2. Economic Overview and Investment Climate 2.1 Economic Situation Egypt is classified as a Lower Middle-Income country with a GDP per capita of US$ 3,512.6 in the fiscal year 2023 (July 2022–June 2023) The country has been undergoing macroeconomic stabilization and structural reforms, supported by the International Monetary Fund (IMF) Extended Fund Facility (EFF) and significant investments, such as the large-scale UAE investment deal in Ras Elhekma 

2.2 Economic Growth and Challenges 

Despite ongoing reforms, Egypt faces economic challenges: 

• Growth is expected to recover gradually from an estimated 2.5% in FY24 to 3.5% in FY25 and 4.2% in FY26
• The economy is impacted by regional conflicts, affecting foreign income sources like Suez Canal revenues
• The budget deficit is expected to widen due to higher interest payments and the diminishing impact of one-off transactions

 2.3 Investment Climate Improvements 

Egypt's investment climate has been improving due to: 

• Economic reforms initiated as part of a three-year, $12-billion IMF program from 2016 to 2019
• Increased investor confidence and foreign portfolio investment
• The government plans to increase the role of the private sector, modernize the industrial base, and boost exports

 3. Legal and Regulatory Framework 3.1 Key Legislation  

1. Investment Law No. 72 of 2017: Provides a comprehensive framework for both local and foreign investors, offering incentives and streamlining procedures
2. Companies Law No. 159 of 1981: Regulates corporate operations, including establishment and governance of companies
3. Customs Law of 2020: Aims to streamline import and export procedures

 . 3.2 Corporate Structures for Foreign Investors 

Foreign investors can establish various types of entities: 

• Joint Stock Companies (JSCs): Suitable for large-scale investments
• Limited Liability Companies (LLCs): Preferred for smaller projects
• Sole Person Companies (SPCs): Can be fully owned by a single entity or individual.

 3.3 Regulatory Considerations 

• Ownership Restrictions: Generally no restrictions on foreign ownership, except in specific sectors and geographical areas.
• Permits and Licenses: May be required depending on the business activity.

• Key Sectors for Investment

 4.1 Information and Communications Technology (ICT) 

• Growth rate of 15.2% for the fiscal year 2022/2023
• Contribution to GDP increased to 5.1%
• Investments surged to $4.2 billion, a 20% increase from the previous fiscal year

 . 4.2 Oil and Gas 

• Expected to grow at a CAGR of about 8% between 2019 and 2027
• Attracts significant foreign direct investment (FDI).

 4.3 Renewable Energy 

• Substantial potential for solar, wind, and biomass energy projects
• Government commitment to transitioning to a more sustainable energy mix.

 4.4 Real Estate 

• Opportunities in the development of the New Administrative Capital
• Growth in business park developments and commercial real estate projects.

 4.5 Tourism 

• Major contributor to Egypt's GDP, accounting for around 12%
• Recovering from the impact of the COVID-19 pandemic.

 4.6 Agriculture 

• Major exporter of cotton, potatoes, and citrus fruits
• Opportunities in agribusiness and value-added processing.

 4.7 Transportation and Infrastructure 

• Significant investments planned for road, port, and railway infrastructure
• Government aims to enhance Egypt's position as a global logistics hub.

 4.8 Public-Private Partnerships (PPP) 

• Robust PPP framework, attracting investment in various sectors
• The government working with international development institutions to secure funding for PPP projects.

• Investment Incentives and Special Economic Zones

 5.1 Special Economic Zones (SEZs) 

1. Suez Canal Economic Zone (SCZone): Strategically located as a gateway between Asia, Africa, and Europe
2. Golden Triangle Economic Zone (GTZone): Located on the northwest coast of Egypt, near Alexandria

 5.2 Investment Incentives Key incentives under Law No. 160 of 2023 include: 

• Cash Investment Incentive: Refund ranging from 35% to 55% of taxes paid on income from business operations
• Extension of Special Incentives: Potential extensions up to nine years
• Additional Exemptions: Including exemptions from usufruct charges and infrastructure costs
• Free Zones Expansion: Licensing projects in sectors such as petroleum manufacturing and energy-intensive industries

• Setting Up a Business in Egypt

 6.1 Step-by-Step Process 

1. Understanding the legal framework
2. Conduct preliminary research and planning
3. Choose a business structure
4. Reserve a company name
5. Prepare required documents
6. Register with GAFI
7. Obtain necessary licenses and permits
8. Open a bank account
9. Complete tax registration
10. Fulfill post-registration obligations

 6.2 Additional Considerations 

• Building relationships with local partners can be beneficial
• Understanding and respecting local cultural nuances is essential

• Cultural Aspects and Business Etiquette

 7.1 Cultural Aspects 

• Importance of Relationships and Trust: Building personal relationships is crucial
• Hospitality and Social Interactions: Meetings often begin with small talk and socializing
• Respect for Hierarchy: Egyptian society and business culture are hierarchical
• Communication Style: Often indirect and nuanced, with importance placed on non-verbal cues
• Language: Arabic is the official language, but English is commonly used in business settings

 7.2 Business Etiquette 

• Dress Code: Formal business attire is expected
• Meeting Etiquette: Punctuality is appreciated, but meetings may not always start on time
• Gift Giving: Small gifts are common in business culture
• Dining Etiquette: Familiarize yourself with Egyptian dining customs
• Avoiding Sensitive Topics: Approach discussions on religion, politics, and personal matters with caution.

• Risks and Challenges

 8.1 Bureaucratic and Regulatory Challenges 

• Excessive bureaucracy and complex administrative procedures
• Lack of transparency and uneven enforcement of laws and regulations
• Limited access to credit

 8.2 Economic Challenges 

• Currency depreciation affecting the cost of imports.
• Macroeconomic instability, including structural budget deficits and balance of payments issues
• High inflation rates eroding consumer purchasing power.

 8.3 Social and Political Challenges 

• Potential for social unrest driven by issues such as youth unemployment
• Political risks stemming from government intervention and policy changes.
• Demographic pressures from a rapidly growing population.

 9. Conclusion: Egypt offers a diverse range of investment opportunities across various sectors, supported by ongoing economic reforms and strategic government initiatives. While challenges exist, the country's large domestic market, strategic location, and improving business environment make it an attractive destination for foreign investment. Investors should conduct thorough due diligence, understand the legal and cultural landscape, and develop strategies to mitigate potential risks. By leveraging the available incentives and navigating the business environment effectively, investors can capitalize on Egypt's growing market potential and contribute to its economic development.