INVESTMENT CLIMATE
Services sectors led investment growth: A bold package of reforms is being implemented on many fronts, namely;
- The minimum capital requirement for incorporation reduced to LE 1,000,
- Corporate tax cut was cut in half and is a flat rate of 20%,
- Weighted average custom tariffs were reduced from 14% to 6.9%,
- Tariff bands were streamlined and reduced from 27 to 6 by number,
- Customs on capital assets has been capped at 5%
All this has helped to create a much more inductive environment for investment into Egypt.
Since domestic investments represent the majority of the total investments implemented in Egypt and therefore are a major economic driver, the GoE sought to support the investment climate via a special focus on infrastructure investments. Unfortunately total investment saw a drop of 10.7% in FY08/09 (vs a growth of 15.5% in FY07/08) affected by the global economic slowdown. Nonetheless by the beginning of 2009 more confidence started to be shown in Egypt’s potential witnessed by the number of new projects flashing in the headlines across various sectors.
GoE support to SMEs
|
Authority |
Facility |
|
United Bank |
Allocating LE 1 bn for financing SME projects under a new SME program “Intelaka”. Each project will be eligible for a finance scheme up to LE 10 mn or 50% of its sales value. |
|
The Social Development Fund and Audi Bank |
An agreement to provide LE 10 mn in loans for the establishment and continued support of SMEs |
|
The Central Bank of Egypt (CBE) |
Exemption of SME-lending banks from the 14% reserves requirement |
|
Ministry of Finance |
New easy terms for the taxation of small enterprises in accordance with the investor's capital and the volume of the business. The rules allow the repayment of 60% of the value of the last tax over three batches at the end of June, September and December |
|
Social Fund for Development |
An agreement with a financial leasing company in Upper Egypt to provide SMEs with a minimum financing limit of LE 10 K to be used in purchasing needed equipments and vehicles |
|
Ministry of Local Development |
LE1.6 mn worth of loans to finance 1,663 small projects in 15 governorates; of which 622 projects are located in Suhag governorate |
|
Social Fund for Development (SFD) |
LE 15 mn for financing micro-projects in five Governorates; Souhag, Asuit, Al-Fayoum, Al-Sharkya and Al-Beherya |
|
The Social Development Fund and The Principal Bank for Development and Agriculture |
An agreement to finance small projects particularly agriculture in Qena and Asuit Governorates worth LE 5 mn |
|
Social Fund for Development (SFD) |
Reduced interest rate on SMEs loans by 2% |
Acknowledging the SMEs' vital role in the economy - as they contribute with 80% of the country’s value added and 75% of its non-agricultural private sector workforce – the GoE introduced a set of incentives to support their growth.
GoE support to Investment
|
Authority |
Facility |
|
The Central Bank of Egypt (CBE) |
Cutting lending rates 4 consecutive times reaching 10.5% in June |
|
Ministry of Finacne |
Postponing the implementation of the value added tax. In addition to introducing amendments to the current sales tax as unifying the taxes grades, increase the registration limit in the tax to support SMEs. |
|
The People’s Asembly |
Amending the bidding offers and auctions law to facilitate PPP agreements particularly in infrastructure projects. Such amendments include; decreasing final insurance for PPP agreements from 5% of the agreements value to less than 2% and not exceeding 5%. |
|
Minister of Trade and Industry |
Allocating an incentive worth of LE 15 k for each job opportunity provided by the investors. Such incentive will be deducted from their taxes |
|
The Egyptian Customs Authority |
Rebating sales tax on capital goods imported by investors since the start of the year |
|
GoE |
A set of new stimuli for investors including; granting factories' building licenses within 15 days instead of 6 months; faster renewal of industrial registrar within 24 hours for a 6-month validity; providing the final approvals for energy-intensive projects within one week; and granting a gracing period of 4 months without letters of guarantee to projects established over 3 years |
4Q08/09 marked the only YoY growth in FDI inflows of 44.8% following the severe drop seen since the onset of the global economic crisis. The better than expected performance in this quarter pushed FDI inflows to US$8.1 bn - above CICRe of US$6.4 bn in FY08/09. However, FDI is still considered the hardest hit segment amidst the global credit crunch marking a YoY drop of 39% in FY08/09, negatively impacted by the repercussions of the economic crisis on the US, Europe and GCC wealth. Given the nascent pick-up in global economy, and increasing oil prices helping GCC wealth, we expect FDI to grow reaching US$9.6 bn in FY09/10. We believe FY10/11 to mark the strong rebound with expected inflows of US$13 bn, thus returning to pre-crisis levels, and in any case a very credible performance over these troubled times.
GOE'S 5-YEAR PLAN (FY07/08 – FY11/12)
GoE's 5-Year Plan (FY07/08 – FY11/12) includes six programs that represent the main focal points of the development plan.
- Employment and training program:
Aims to provide 4.5 mil job opportunities; by which 750k jobs are to be provided per year, in addition to training and skill upgrading of 100 k individuals each year. - Industrial support program:
Establishing 1,000 large factories and 2,000 medium – sized industrial projects. - Rural development program:
Includes the establishment of 400 villages and the reclamation of 1 mn feddans. - Tourism development:
Aims to increase inbound tourism at a rate of 1 mn visitors per year. - Pre-university education development program:
Aims to establish 3,500 schools. - Housing expansion program:
Aims to build 500k housing units at a rate of 85k units per year, and activating the role of the Real Estate Finance Authority.