Friday,20 July, 2018
Current issue | Issue 1374, (21 December 2017 - 3 January 2018)
Friday,20 July, 2018
Issue 1374, (21 December 2017 - 3 January 2018)

Ahram Weekly

‘Transformation is happening’

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
Al-Ahram Weekly

Local investor Amr Arram, chairman of Matco Trading and Contracting, a supplier of security products and solutions, said the business environment in Egypt was improving and was much better than a year ago. 

“There is an evident appetite to invest in Egypt, and that is reflected in the performance of the stock market,” Arram said. 

He said that investors could benefit from an expansion of infrastructure projects and the availability of industrial land across the country, in addition to the floatation of the Egyptian pound, which had been positive for investment.

Though the floatation had had its own inevitably negative effects on local producers in terms of higher costs, particularly of imported materials, Arram said it helped create a “new culture” in the marketplace. 

Before the floatation, importing had been easy and a lucrative business, he said. But when the pound was floated and the Central Bank of Egypt (CBE) tightened the regulations on importers in a bid to cut back on imports, this had prompted many importers to consider producing instead of importing.

“Everyone was importing, including myself, because it was easy to do. But what happened prompted me to speak with my Spanish agent about producing in Egypt instead,” Arram said. 

He said that he had looked into the possibility of setting up a factory in Egypt, particularly because it could benefit from agreements Egypt had signed with other Arab and African countries. This in turn could help access target markets in the Middle East and Africa. 

Egypt has been seeking to attract investors worldwide, inviting them to invest in the country and benefit from a list of bilateral, regional and international free-trade agreements to which Egypt is a party. These include the Common Market for Eastern and Southern Africa (COMESA), the Greater Arab Free Trade Area (GAFTA), and the Egypt-Turkey Free Trade Agreement, among others. 

Arram’s factory plan is in the works and will be implemented next year. However, manufacturing in Egypt is not a walk in the park. Local producers and manufacturers are facing challenges, such as the lengthy amount of time needed to start a business on the ground and obtain the needed licences and approvals, Arram said. 

Investors in Egypt have long complained of lengthy waiting times for obtaining approvals, with the World Bank ranking Egypt 122 out of 190 countries on its 2017 Doing Business Index, partly because of difficulties obtaining permits and licences.  

However, a new law issued this year, the Industrial Permits Law, will reduce the waiting period for obtaining industrial licences to set up new facilities from 600 days to between seven and 30 days, according to Minister of Trade Tarek Kabil.

Arram also referred to the problem of unskilled labour in Egypt, stressing the importance of addressing this issue. 

Another problem investors face may be difficulties exiting the market in case of defaults or bankruptcy. “There’s a perception in the country that if a businessman is jailed, he’s necessarily deceitful, which is not true,” Arram said. “Most such businessmen were people who wanted to invest and work in the country, but defaulted for one reason or another,” he added. 

He said it was better to solve business disputes in a way that would not repel investors. 

In January, the government approved a new bankruptcy law that abolishes prison sentences in bankruptcy cases and limits punishments to a monetary fine. It has yet to be approved by parliament.

The new law also aims to minimise the need for companies or individuals to resort to the courts and to simplify post-bankruptcy procedures. It comes as part of the economic reforms being put in place to attract investment.

Arram said it was important to address such challenges as Egypt had the potential to attract more investment, and any delay in dealing with such hindrances was a “loss of opportunities”. 

Of the new investment law, Arram said its aim of encouraging investment through incentives and other measures was good, “but our problem always lies in the implementation,” he added.

Though the floatation has helped improve the business environment, it has not done so without losses for local investors. Arram said the floatation had disrupted the cash-flow cycle, harming some businesses and causing them to incur losses.

Arram’s company incurred losses last year because of such issues, and it was now trying to adapt to cover them. However, despite such problems Arram said things would get better with time. 

“I’m very optimistic. Transformation is happening for the better in the business environment,” he said. 

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