Thursday,23 May, 2019
Current issue | Issue 1374, (21 December 2017 - 3 January 2018)
Thursday,23 May, 2019
Issue 1374, (21 December 2017 - 3 January 2018)

Ahram Weekly

A new investment era

Investment has been the buzzword of 2017, with the government taking important steps towards facilitating the business environment. Nesma Nowar gauges the opinion of local and foreign investors on doing business in Egypt a year after the floatation of the Egyptian pound

Investment Minister Sahar Nasr has advocated for the passing of the new investment law
Investment Minister Sahar Nasr has advocated for the passing of the new investment law

The investment climate in Egypt is very favourable for foreign investment, Tunc Ozkan, chairman of Polaris International for Industrial Parks, a Turkish company operating in Egypt, said. “What I’m seeing now is much better than in previous years,” Ozkan added. 

A year after the floatation of the Egyptian pound, the macroeconomic picture was better, with the Central Bank of Egypt (CBE) increasing its reserves and the government’s policies becoming clearer, he said.

Lifting restrictions on foreign-currency (forex) transactions had had a very positive impact on investment, Ozkan said, adding that many other investment-positive things had been happening over the last year-and-a-half.

These include developing infrastructure such as roads and the electricity network. 

“Two or three years ago, we were thinking about how long the electricity might be cut off for. But now this issue has been resolved,” Ozkan said.

He added that the government had been exerting major efforts to solve the problems of investors and that it had opened up a lot of land for new projects. He also referred to Egypt’s young people, describing them as a “major asset” for Egypt because labour, especially in manufacturing, was a key factor for foreign investors. 

However, Ozkan said that many foreign investors were in a wait-and-see mode a year after the floatation. “What we see now is that investors and companies are looking forward to investing in Egypt as the environment is now stable and very positive,” he said.

Showing this appetite for investment, Ozkan said his company was expanding its investments in Egypt and had signed a contract to build a new industrial park on 5.5 million square metres of land in the Suez Canal Economic Zone. The new project will start in the second half of 2018, he said. 

Describing it as the best decision taken, Ozkan said the floatation had been very positive for investment.

A year ago, a main problem had been exchange policy, he commented. “It was totally wrong, and everyone was suffering. Before the floatation, no one was thinking about investing. On the contrary, they [the investors] were trying to take their money out.”

Before the government floated the pound in November 2016, there was a dire shortage of foreign currency in Egypt that almost brought the economy to a halt. The dollar shortage forced the CBE to introduce capital controls, making it all-but-impossible to repatriate profits, scaring off investors.

These problems are no longer there, he added. However, the floatation had also come at a price. “If there’s a problem now, it lies in people’s purchasing power, which is lower than last year,” he said.

For this reason, the retail sector is suffering, as is the manufacturing sector that supports it. However, Ozkan said that by next year, with an increase in salaries, things would be better for the sector. 

The floatation roughly halved the value of the Egyptian pound, pushing prices up across the board and affecting people’s purchasing power. Inflation peaked in July at 33 per cent, but it has started to ease since then. In November, inflation fell to 26 per cent, from 30.8 per cent in October.

Finance Minister Amr Al-Garhi said he expected inflation to drop to 20 per cent in January and to 13 to 14 per cent by August.  

Ozkan also mentioned uncertainty as a challenge for investment, saying that foreign investors always looked for certainty when they came into a market. Though most internal issues pertaining to uncertainty had been solved in Egypt, the wider region remained unstable, Ozkan said.

The ongoing political conflicts in the region had created difficulties for investors, he said. 

Of the new investment law, Ozkan said he was not sure whether it would change investor behaviour. He said the matters the law addresses were not the major issues upon which an investment decision was taken.

In a bid to encourage investment, the government’s new investment law offers foreign investors a bundle of incentives such as tax breaks and rebates. It also deals with bureaucratic problems and promises the simplification of procedures, as well as offering guarantees to investors.

But what was important to investors, according to Ozkan, was that the legal system should protect both the local partner and the foreign investor and should ensure a fair settlement in the case of problems. 

He added that the main problem with the bureaucracy in Egypt was that it takes a lot of time to deal with issues, which, however, was also the case in many other places. 

“From my experience, there is a lot of bureaucracy in Egypt. It takes time, but if you’re confident you are right, you will always find a solution,” Ozkan said. “I haven’t faced any unsolved problem in Egypt,” he added.

Regarding incentives, he said it was good to encourage investment through incentives, but these had to be conditional because they could benefit some people while harming others.

He said the government was doing its best to improve the business environment, but he stressed the importance of implementation on the ground. He expects that there will be a major inflow of investment coming into Egypt in 2018 and 2019, because investors have been waiting to see stability. Since this has now been achieved, they will start coming, he said. 

“Everything looks as if Egypt is ready for a new investment era,” Ozkan said. 

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