About Egypt

WHY TO INVEST IN EGYPT?

EGYPT’S SUCCESS PILLARS

The Location

Situated at the heart of the world, Egypt stands as a major trade and trans-shipment destination. It occupies the north Eastern corner of Africa, Its north coast is on the Mediterranean Sea, while the eastern coast is bound by the Red Sea.
Egypt stands at crossroads between Europe, the Middle East, Africa and west & south Asia. A few hours plane ride from Cairo will take travelers to Paris, Rabat, Istanbul, Kuwait city or Moscow.
At the heart of international trade and commerce, Egypt can competitively supply a market of one billion people.

Why to Invest in Egypt?

• Reliable infrastructure with constant expansion.

• Committed available feedstock through project life time at competitive prices.

• Stability of political, economic and legal environment.

• Issuance of an “Investment Encouragement Law” including investment guarantees and incentives law.

• Logistical advantage of Egypt’s distinguished geographical proximity to European, Arabian and African markets.

• Availability of specialized technical expertise including fields of Machine equipment &technology (with relatively low labor cost).

• Growing market demand.

• Attractive tax exemption and guarantees Package.

• Reliable organizations.

Egypt's Success Pillars

The reduction of customs duties has opened Egypt’s markets to more foreign trade and stimulated domestic producers. Business procedures have been streamlined. Corporate and personal taxes have been cut dramatically and now are lower than in most countries. State assets in all sectors of business are being transferred into the private sector. Companies are being restructured.

The cost of doing business in Egypt is extremely favorable, particularly labor and land costs. Electricity and gas are priced extremely competitively. The movement of goods is being speeded up with an improved transport system. The ports are being modernized.

Investment Environment

The Ministry of Investment was created in 2004 by Presidential Decree No. 231 as the primary government body that provides an environment that is conducive to investment in Egypt, enhancing the competitiveness of economic activities, encouraging and increasing the opportunities for local and foreign investment

The Ministry of Investment is assisted directly and indirectly through affiliated organizations and in cooperation with other ministries and organizations. The Ministry of Investment oversees the General Authority for Free Zones and Investment (GAFI), the General Authority for Economic Zone North West Gulf of Suez (SEZONE), the Capital Market Authority (CMA), the Egyptian Insurance Supervisory Authority (EISA), the Mortgage Finance Authority (MFA) as well as the holding companies and affiliated companies in public business sector.

The Ministry of Investment implements definitive policies to promote and develop investment by:

1.       Creating the suitable organizational and legislative environment for investment

2.       Promotion

3.       Performance progress measurement

Investment Incentives Low no.8

Generous incentives to invest in Egypt’s private sector have been approved by the Government through the offering of a series of Investment Laws revolving around tax incentives, customs exemptions, and many new investor protections and guarantees.

Law 230 and its update by the 1997 Investment and Incentives Guarantee Law No  8, offer investors:

• A project could be wholly owned by foreigners.

• Guarantees against nationalization and expropriation of the project.

• Output of the project is not subject to price control.

• Projects are allowed to repatriate their capital and profits.

• Foreign experts salaries are exempt from income tax if their stay in Egypt is for less than one year.

• Imported capital assets and construction materials required to establish an approved project are subject to a unified import duty rate of 5%.

Exemption of contracts:

• All related contracts to the companies’ activities such as (articles of incorporation, land deed, loan and mortgage) are exempted from the fiscal stamps and authentication fees for three years from the date on which such companies are registered in the Commercial Register.

• Egyptian joint stock companies under Law 8 of 1997 whose shares are registered with the Egyptian Stock Exchange will enjoy an exemption from the corporate tax on their profits equal to the Central Bank of Egypt's lending or discount rate.

• Interest from bonds issued by joint-stock companies under Law 8 of 1997 is exempt from the tax on income from moveable capital provided that the bonds are offered for public subscription and that they are registered in the Egyptian Stock Exchange.

Package of Incentives for Future Privatizations

Preface:

The Ministry of Investment (MOI) has prepared a program for the upcoming year 2005. It is expected that the pace of the program will pick up to capitalize on the improvement in regional and local circumstances that could be conducive to foreign direct investment. The efforts vested by the MOI to realize this take off are multifaceted including diligent attempts for better outreach to local, Arab and foreign investors, continuously offering them more incentives, in addition, to the challenging task of restructuring and repacking the companies and assets to be offered for sale. Those efforts aim at bridging the gap between the seller, which is the Government in our case and the perception of the market to the state on assets.

Package of Incentives:

In light of the afore-mentioned, MOI produced a new set of incentives and procedures addressing various aspects of the   transaction from the valuation to the commitment of all related parties to the contractual details . Those incentives were approved by  the Cabinet and are now     considered to be an integral part of the program thereafter.

We hereby, elaborate on few of those approved incentives:

1. Optimization of Investment:

• Excess land and idle assets are to be transferred to the relevant holding company prior to the offering to downsize the company under sale and    make it more lucrative economically.

• Working capital items like inventory and receivable could be transferred as well to the Holding Company upon the investor’s request.

2. Valuation of Assets:

• Details of incentives related to the valuation vary depending on the activity of the company from trading to transportation to industrial activities. However, the pervasive incentives related thereto and which are applicable to all companies are:

• Valuation of utilized land is made using the price per square meter in the nearest new industrial community. Terms of payment in those communities     are granted to the investor conditional on his acceptance to preserve the full labor force of the sold company.

• Buildings are to be valued at net book value with a minimum of L.E. 150 per square meter.

• Machinery and equipment are to be valued at book value, as well as furniture.

• Inventory and receivables also are valued at net book value.

3. Financial Mix:

• One of the major incentives offered to the potential investor is the readiness of the Government to transfer the outstanding debt to banks as well as other liabilities on the books of the company under sale to the Holding Company. This aims at rendering the company a healthy investment opportunity for the potential buyer.

4. Other Incentives:

• The potential investor can enjoy tax holidays and other incentives stipulated by Investment Incentives Law No.8/ 1997.

• The approved incentives clearly stipulate that all government entities are bound to abide by all the contractual commitments resulting from the transaction and that the potential investor or lessee should not dare the consequences of any legal disputes between any of those entities and the public enterprises.