Investment in Egypt

user Youssry Saleh & Partners calender 24 Jun 2016 views 4662 Views

Legal Framework :Post 25th of January, 2011 Revolution Direction following Revolution of 25th of January, 2011, Egypt has been heading towards the future in a slightly different track. Political and economic distress has led to significant changes

in the political, economic and legal landscapes. A new system in now required and is being developed to encourage investment, prioritize productivity and “promote citizens’ profits while ensuring society’s earnings”.

A new political structure is being built to fulfill dreams of Egyptians who called for change, dignity, freedom of speech, and social justice. Egypt has begun the process of transformation to eventually become a stable, democratic and modern economy spurring greater economic growth and prosperity.

The government has embraced an aggressive three-dimensional promotion strategy based on the business reform, attraction of FDI and care for investor. The strategy that rests on the main pillars outlined below.

Efficiency and Simplification:

  • Time required for registering foreign representative offices has been reduced from 40 days to 72 hours;
  • Subscription fees to the Chamber of Industry and the Federation of Egyptian Industries can now be paid at the one-stop shop;
  • GAFI is in the process of launching of the second phase of electronic portal for companies’ establishment on the official website of GAFI;
  • GAFI is expanding its network of processing centers in governorates.


  • Lifting of the required preliminary industrial license when establishing at GAFI;
  • Lifting of the security approval requirements when establishing media companies;
  • Issuance of the import/export certificates for specific activities for one to five years.

For SMEs: to encourage small and medium sized enterprises, the government has established “Bedaya Center” to help develop and assist SMEs in gaining access to financing from banks.

Reduction of the industrial businesses’ cost: through the decision of the Ministry of Industry to reduce the value of Letters of Guarantee required for acquisitions of lands in industrial zones.

Investor’s care:

  • Establishment of the “Contracts Committee”, with GAFI being a member, to resolve conflicts arising between investors and different governmental entities over previously signed contracts;
  • Modification of Investment Law No. 8 of year 1997 to allow reconciliation between the investor and the government in case of proven fraud.

The Legal System

Egyptian legal system was initially based on the French Civil Code System, Code Napoleon; however, it later developed its own principles and structures adopting Islamic law in some areas. The developed structure had a significant impact on legal systems of many countries in the MENA region with many civil codes of Arab countries mirroring Egyptian Civil Code.

Egyptian legal system, similar to most civil code systems, is based on a civil code that covers personal rights, tort law, and the law of contracts. There are specific codes, however, that cover other areas of law such as the Commercial Code, complimenting the Civil Code in areas of commercial law and the Code of Civil Procedures.

Such codes refer primarily to private and public laws which include administrative legal matters related to the functions and legal relations of state entities.

Egyptian administrative law is closely based on French administrative law.

Egypt accepts the compulsory jurisdiction of the International Court of Justice with reservations. Judicial review is performed by Supreme Court and Council of State, which oversee the validity of administrative decisions. Egypt is a signatory to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Judicial System

Judicial system of Egypt is divided into several sections each headed by responsible judges of respective courts. The courts enact according to the applicable laws of Egypt. Courts execute judicial functions based on the set hierarchy. The hierarchy of the administrative courts is referred to as the State Council (Conseil d’Etat).The judicial system of Egypt follows the dual judiciary system: ordinary judiciary and administrative judiciary.

Egyptian court system is divided into civil and administrative courts, whereby civil courts hold jurisdiction in matters of private law, and administrative courts holding jurisdiction in matters of public law.

Egyptian Constitution sets out constitutional principles; adherence of all legislation to these principles is obligatory. Constitutional court handles constitutional challenges to legislation and conflicts between civil and administrative courts’ judgments.

Some courts of Egypt have limited judicial functions.

Courts of Egypt:

  • Court of Appeal
  • Court of Cassation
  • Constitutional Court
  • Courts of Limited Jurisdiction
  • Family Court
  • Court of First Instance
  • Administrative Judiciary
  • Public Prosecution

Legal Framework of Foreign Investment

Investment in Egypt, whether foreign or local, is governed and regulated by Companies Law No. 159 for year 1981, commonly referred to as “Companies Law”, Investment Law No. 8 for year 1997 amended by Presidential Decree No. 17 for the year 2015, referred to as “Investment Law” and Capital Market Law No. 95 for year 1992, “Capital Market Law”.

Foreign investors are free to invest in Egypt without restrictions after obtainment of clearance following Security Check performed by relevant national security authorities, except for several activities which are restricted for direct investment by foreign investors.

Restricted activities:

  • Importation for the purpose of trading in Egypt;
  • Acting as a commercial agent.

Special Requirements and Approvals:

  • Certain regulatory approvals are required for foreign and local investments in Egyptian banks and insurance companies exceeding 10% of the issued shares;
  • All foreign investment in the Sinai region is subject to regulatory approval;
  • Foreign investment in certain aviation activities is restricted

Investment Guarantees and Incentives

Investment Law No. 8 for year 1997 provides certain incentives, guarantees and benefits, for both Egyptian and Foreign investors in certain fields of activities. Pursuant to the Investment Law, entities established in Egypt as of the date of the coming into force of the law that are active in certain fields enjoy these benefits.

Relevant fields:

  • Land reclamation; reclamation and/or cultivation of barren and desert lands;
  • Animal, poultry and fish production;
  • Manufacturing and mining;
  • Equipping and developing specific industrial areas;
  • Hotels, motels, hotel apartments, tourist resorts and villages;
  • Touristic transportation;
  • Refrigerated storage and transportation of agricultural and industrial products;
  • Refrigerated transport of goods in refrigerators for storage of agricultural products, industrial products and food stuffs, containers stations and grain silos;
  • Air transportation and services related thereto;
  • Maritime transportation;
  • Petroleum services supporting drilling, exploration, transportation and delivery of gas;
  • Housing projects for non-furnished and non-administrative rental;
  • Infrastructure projects for potable water, sewage, electricity, roads, multi-story garages under BOT agreement whether over or under ground and waiting car meters, and communications;
  • Hospitals, medical centers which provide 10% of their capacity for free treatment;
  • Development of computer software programs and systems;
  • Financial leasing;
  • Guaranteeing subscription in securities;
  • Risk capital;
  • Projects funded by the Social Fund for Development;
  • Development of new urban communities;
  • Production of electronic components;
  • Formation and management of technology areas;
  • Credit classification of establishments and provision of information about them in the stock markets;
  • Purchase and liquidation of debts of SMEs;
  • Building and management of Nile River docks;
  • Formation, management, operation and maintenance of Collective River transport means, inside and between cities and new urban communities.

The guarantees and incentives are applicable only to the activities provided for by the law.

The guarantees and benefits provided under the Investment Law include without limitation:

  • Immunity from nationalization or expropriation;
  • Immunity from administrative attachment or freezing of assets;
  • The right to obtain ownership of land and buildings required for the activity or increasing of its scope;
  • The right to directly import equipment, raw materials, and transportation vehicles appropriate and necessary for the activity;
  • The right to export directly;
  • Exemption from certain provisions of the Companies’ Law such as the distribution of 10% of company’s profits to employees;
  • Exemption from stamp tax;
  • Exemption from notarization and registration fees related to the company’s Letter of Association, loan and mortgage agreements related to its business for a period of five years effective from the date of company’s registration at the Commercial Registry
  • Exemption from notarization and registration fees associated with registration of title of land required for the company’s activities;
  • A unified customs duty of 5% on import of all machinery, equipment, and tools utilized during the set-up of a company;

The General Authority for Investment and Free Zones (GAFI) is the responsible authority for application of the law, and issuance of decrees for the establishment of entities benefiting from the Investment Law.

No price controls on the products of companies and establishments are imposed; as well as no controls are imposed on their profits.

Dispute Settling

Investment disputes related to implementation of Investment Law provisions may be settled in the manner agreed upon with the investor; agreement may be reached between the concerned parties on settling disputes within the context of the Conventions in force between Egypt and the country of the investor, or within the context of the Agreement on Settlement of Disputes arising in relation to Investments between countries and the nationals of the other countries, which Egypt has adhered to by virtue of Law No. 90 for the year 1971 (the Washington Convention of March 18, 1965 creating ICSID); according to the terms and conditions and in cases to which these agreements apply, or according to the provisions of the Egyptian Law on Arbitration in Civil and Commercial Matters promulgated by Law No. 27 for the year 1994.

Alternatively, disputes can be settled through arbitration before the Cairo Regional Center for International Commercial Arbitration.

Exchange Controls

Foreign exchange policy of Egypt is governed by the Banking Law No. 88 for 2003. The Law enables any natural or juristic person to retain and transact with foreign currencies generated by operations in Egypt; such transactions should be performed through banks registered with the Central Bank of Egypt (CBE) or franchised dealers.

Egyptian Pound (EGP) is a floating currency non-convertible outside Egypt.

Financial System

Increased emphasis is placed on the role of Central Bank of Egypt (CBE); bank sector is being consolidated through a variety of methods ranging from mergers to privatization.

The Central Bank of Egypt has managed to create an efficient banking system through hiking capital reserve regulations, encouragement of mergers and acquisitions, development of regulatory and supervisory apparatus, and handling non-performing loans.

The financial sector has also witnessed growth of non-bank financial products such as mortgage finance, finance leasing, fixed-income products, factoring and insurance.

Investment banking services and products in Egypt are regulated by several governmental authorities. Banking and financial services activities require an obtainment of license from CBE. Investment banking services require obtainment of license from the Egyptian Financial Supervisory Authority (EFSA).

Laws regulating investment banking:

  • Law No. 159 of 1981 on Commercial Companies
  • Law No. 88 of 2003 on Central Bank, Banking Sector and Money
  • Law No. 80 of 2002 on Anti Money Laundering
  • Law no. 95 of 1992 on Capital Markets
  • Law No. 93 of 2000 on Central Depository and Custody
  • The Egyptian Commercial Code, Law No. 17 of 1999
  • Law No. 91 of 2005 on Income Tax

The Egyptian Financial Supervisory Authority (EFSA): public Authority responsible for supervision and regulation of non-banking financial markets and instruments such as capital market, exchange, activities related to insurance services, mortgage finance, financial leasing, factoring and securitization.

Its primary role is regulation of the market in terms of its stability and competitiveness of attraction of local and foreign investments, minimization of inconsistency risks and resolution of issues arising from application of different supervisory rules.

The Capital Market Authority (CMA): is the market regulatory agency responsible for the development of a transparent and secure market for investors.

Egyptian Stock Exchange (EGX): the oldest stock market in the MENA region; is the first Arab member of the World Federation of Exchanges (2005).

NILEX: the region’s first small-cap stock exchange. It offers SMEs access to financing and investors-a transparent picture of companies as well as a clear exit strategy.

In general, cross-border activities in Egypt should be conducted in a way that cannot be classified as a “public offering” of such a product or service.

No restrictions on engaging in investment banking activities for individuals or entities as long as these activities are included in the purpose of the entity.

Interest rates are imposed by the CBE; however, a bank and its client may mutually engage in an agreement on an interest rate higher than the declared rate by the CBE. Fees and commissions are based on agreement between a bank and its clients.
All shareholding structures of Egyptian investment banks and capital market related companies should report to and obtain approval from EFSA.

All shareholding structure of Egyptian banks should report to and obtain approval from CBE.