Friday,20 July, 2018
Current issue | Issue 1277, (7 - 13 January 2016)
Friday,20 July, 2018
Issue 1277, (7 - 13 January 2016)

Ahram Weekly

New year economic line-up

The new parliament has an ambitious economic legislative agenda, writes Niveen Wahish

Al-Ahram Weekly

One had almost forgotten how things work in the presence of a parliament. Laws are presented by the government or put forward by parliamentary committees and are then discussed in specialised committees and the debating chamber before being voted on. This procedure should be the norm once again when the newly elected parliament convenes on Sunday.

For the past two and a half years and in the absence of a parliament — the last parliament was dissolved in June 2012 — all laws have been issued by the president. This in itself is now the focus of debate.

According to the constitution, the new parliament must review all the laws passed in its absence within 15 days of convening, a task deemed impossible given the amount of legislation.

Close to 350 laws were issued during the rule of interim president Adli Mansour and since President Abdel-Fattah Al-Sisi took office in 2014, according to “Egypt’s Regulatory Assessment,” a guide issued by N Gage Consulting, an Egypt-based consulting firm.

All the laws issued in the absence of a parliament now have to be reviewed by the new parliament, said Gamal Abu Ali of the Hassouna & Abou Ali law firm in Cairo. However, he added that some think that the laws would only need to be reviewed had the parliament been in recess rather than entirely absent.

But he believes that at least for the sake of formality and to avoid claims of unconstitutionality in the future, the new parliament might need to quickly run through the past laws before it gets down to considering new legislation.

Abu Ali pointed to three laws that need to be reviewed, whether through a government initiative or the parliamentary committees. They include the investment law, the labour law and laws regulating imports and customs.

Amendments to the investment law were introduced last March, ahead of the Egypt Economic Development Conference (EEDC). Although they were viewed as a good step forward at the time they may require further changes. The law does not offer enough incentives, tax or otherwise, for investors compared to those offered by neighbouring countries, Abu Ali said.

Such incentives do not necessarily have to be across the board, or in the form of 100 per cent tax exemptions, he said. They could be for specific sectors that the government wants to support or in certain areas, such as Upper Egypt, where incentives are needed to attract investors, he suggested.

The incentives in the amended law include the government paying the cost of social insurance for workers. While this is a good move, it will not make a difference for investors, Abu Ali said. The amendments introduced in March also stipulate that the government could take on the training of workers, but “there is no precedent of the government excelling in training to fall back on for that to be an incentive,” he added.

The government is also offering to share in the cost of infrastructure that the investor requires but this falls short of incentives in neighbouring countries that are offering land along with infrastructure. “The least we can do is offer similar incentives to neighbouring countries,” Abu Ali said.

He acknowledged that Egypt is a huge market that in itself is attractive to investors, but in the current economic climate the purchasing power of the population is weak. “Further incentives are needed,” he said.

Another law that is urgently needed is the new labour law, according to Abu Ali. He wants to see a labour law that places the interests of workers as well as business owners at its heart. He said a new law is needed to facilitate hiring and firing and that this will help create more jobs. But he also said that new social insurance laws and laws regulating the right to organise, alongside the new labour law, are needed.

The draft of the new labour law has reached the presidency, but is still pending the president’s approval, according to the N Gage study. This is only likely to come after the formation of the new parliament.

A third area that needs clear legislation is the law regulating foreign trade and imports, given the debate on whether certain goods should be imported to save hard currency, said Abu Ali.

The N Gage study shows that around 20 laws at various stages of development are waiting to see the light. These include the Commercial Registry Law, amendments to the Consumer Protection Law, the law on real-estate ownership registration, the amendment to the Companies Law 159/1981, and the law on bankruptcy.

Karim Refaat, chairman and CEO of N Gage Consulting, doubts that all these laws will pass given the shortage of time in the new parliamentary session. When the parliament convenes it will first have to issue its executive charter, establish committees and deal with other procedural matters, Refaat explained. After completing this process, only four months will be left before the parliament goes into recess at the end of June.

During these months, Refaat believes that certain issues will impose themselves, such as taxation and customs and imports-related procedures. He said the government will need to present its economic plans, which include targets for growth, and it will need to spell out its spending targets, and how it will procure the money to pay for them and to show how it will cover the budget deficit.

The parliament will have to approve the 2016-2017 budget proposals by the end of June, entailing debate on the issue of taxation and the introduction of the new value added tax (VAT).

According to the N Gage study, the shift to VAT was included in the 2015-2016 budget and was earmarked to generate LE32 billion, but it had not been implemented as the first quarter of the fiscal year drew to an end.

The study says that the direction in the government is to amend the current General Sales Tax (GST) Law instead of shifting to a fully fledged VAT, but there is no agreement yet on the tax rate or the minimum registration limit.

“The delay in implementing the amendments puts the government in a tough position, given the very ambitious fiscal targets in fiscal year 2015-2016, where a deficit of 8.9 per cent of GDP is targeted versus an expected 11.5 per cent in FY 2014-2015,” it said.

Another law that will be crucial to increasing government revenues, by cracking down on smuggling, could be the new customs law. The draft law aims at speeding up customs release procedures, thus saving time and money for traders, the N Gage study reported. It also increases “penalties, sanctions and fines on all customs law infringements.”

Refaat also believes that the new investment law will have to see further debate and amendments if the government is serious about attracting investors. “As much as the issuance of the law had a positive effect on promoting business for the New Egypt, six months after it saw the light, actual changes in the investment landscape have not been seen,” said the N Gage study.

Both Abu Ali and Refaat were unable to estimate how aggressive MPs will in tackling these issues. Many of the new MPs are new faces whose economic ideology is not yet clear, Abu Ali said.

Their being new to parliamentary life may mean that during this first session they will not be very confident and will not have the ability to lobby and will therefore very much be guided by what the government wants.

Refaat also wants to see “the dynamics and anatomy” of the new parliament, as well as the composition of its committees and the identities of its speaker and two deputies before he judges what it could deliver.

However he is optimistic. Irrespective of the controversy over the new parliament, Refaat said, there are good MPs in it with good track records that could bode well for the future.

add comment

  • follow us on