Cairo - Mubasher: MubasherTrade Research said that the new Egyptian investment law might be offering too much of incentives for new projects according to different criteria.
The Egyptian Parliament has recently approved the long-awaited investment law, yet to be approved by the President.
The law is meant to be the cornerstone for an overhaul of the investment environment in Egypt, something that the country urgently needs for its economic performance to pick up, according to MubasherTrade.
“In general, we know that a well-functioning investment law is essential, but we also have to touch on some general points.”
In a report entitled “A new investment law: Are we 're-investing' the wheel?”, the research firm stated that the law offers different tranches of incentives, including geographical and operational factors related to employment, increasing local inputs, and others.
“In brief, the law offers General, Special, and Additional types of incentives subject to certain filtration.”
“General incentives include exemption from stamp duty tax and contract notarization fees for five years.”
“Special incentives include tax incentives, granting cost-based tax deductions at two rates (50% deduction of investment cost in deprived/poor locations and 30% in the rest of the country)”
“Additional incentives include reliefs related to the cost of utility connections, labor training cost, and others,” the report explained.
“These incentives were perceived by some as being too generous,” the report noted.
“Under the new law, free zones (both public and private) enjoy special custom treatment for their imported inputs, in addition to enjoying the previously-mentioned incentives offered to eligible projects.”
“This has been a highly debatable issue, as sometimes free zones are sometimes mistaken for free imports,” MubasherTrade explained.
The law comprehensively addresses the main issues relating to entry mechanisms. Designing incentives, establishing and post-establishing services, roles of different competent entities, different systems of investment and other issues.
“We do not believe the investment environment in Egypt has lacked good regulations; it has rather been suffering from poor implementation and the lack of efficient tools to make the best of existing laws. Ironically, under-performance has often been addressed by issuing new laws, thus missing the real point of "implementation.”
The one-stop shop will not perform better when we change its name to Investors’ Services Center. MubasherTrade Research believes it will perform better when the competent authorities truly delegate their representatives in the General Authority for Investment and Free Zones (GAFI) to efficiently and quickly provide services to investors.
A connected database of land plots available for investment is not a new idea to bring to the table. With several entities and authorities dealing with land allocation in Egypt, a high level of coordination is required between these entities for a more efficient process of land allocation.
“All parties involved must understand the difference between representing power and taking over power. Again, it is all about "implementation,” the report indicated.
