• Provide foreign currency to import production inputs/necessities to avoid having an insignificant pricing that does not reflect the reality of pricing and falls under haphazard/random estimations

• To have a clear monetary policy that must be compatible with a fiscal policy that is stable and transparent.

• The importance of rationalizing the state’s projects and extend its implementation timeframe as this is a salient factor for the stability of monetary policy so that the crisis does not occur again.

• Grant IDA full independence; it should be led by an independent chairperson and allowed to regulate itself. This practice should be adopted across the board to ensure the independence of other similar entities in Egypt. 

• Ensure that free zones and other investment zones are treated equally, particularly with regards to accessing incentives.  Free zones employ local workers and utilize local inputs, thus, enterprises operating in the free zones should be able to access the incentives offered through the Export Development Fund, along with other relevant incentives.

• It is imperative to create a national committee to effectively unify and coordinate all efforts that aim at attracting and marketing investment opportunities in Egypt, on both the domestic and international levels. More often than not, in most developing countries, agencies concerned with investment, while each performing robustly on its own, end up working in isolation without any meaningful and effective coordination with others. This practice results in meager results, as critical stakeholders, such as the stock exchange, investment banks, banking units, and non-bank financial institutions, are excluded and do not participate in the effort. 

• Create a new position in Egyptian diplomatic missions and assign the incumbent the responsibility of promoting investment opportunities in Egypt. Additionally, establish new GAFI-affiliated investment offices, both inside Egypt and in selected key global markets with potential investors.

• End the freeze placed on the investment incentives scheme (both the tax and non-tax incentives), which are stipulated in Law No. 72 of 2017. This will contribute to boosting investment attraction efforts and achieving the goals behind these incentives. Additionally, activate the new set of tax incentives included in the amended Investment Law to encourage businesses to reinvest their excess profits, thereby increasing the rate of investment in Egypt.

• Speed up the dispute adjudication process, and establish a time frame for the proceedings. The outcome of the adjudication process should be presented to the ministerial committee at least twice a month irrespective of the number of disputes ready for presentation, or the preliminary recommendations resulting from the process.

• Activate, via a presidential decree, the coordination council, which serves as a channel through which the government and the CBE work together to set monetary policy goals. This does not undermine the independence of CBE, especially that its law requires that CBE and the government collaborate, through this council, to reach an agreement on the goals of the monetary policy.

• CBE must launch an intensive campaign to promote a program for providing low-cost financing for the purchase of capital equipment, as well as developing and modernizing the current production capacities. In light of the current circumstances, it is important to revisit the restrictions imposed on banks with regard to contributing to share capitals in new companies; these restrictions constraint the diversification of the financing process.

• The Ministry of Trade and Industry should track the idle production capacity in the different sectors and introduce a well-integrated program that aims at increasing employment and modernizing and developing the unused production capacities through international agreements for technology transfer.

• Activate CBE’s decision regarding the setting up of small bank branches in governorates and remote areas. The current fees for opening bank accounts must be lowered, and the procedures simplified to encourage citizens to open accounts.

On May 10, 2020, CBE issued a number of instructions, which entailed the following:

• Suspending all fees and commissions on POS, ATMs, and electronic wallets for 6 months, as well as exempting in-country local currency transfers from all the fees and charges for 3 months.  
• Raising the maximum limits for mobile phone accounts and prepaid cards; allowing banks to open internet and mobile accounts for existing clients using the data held by the bank; using electronic identification procedures for new clients, and allowing the issuance of electronic wallets and prepaid cards at no fee for 6 months. 
• Setting a temporary daily limit on withdrawals and deposits for individuals: LE 50,000 in banks’ branches and LE 20,000 from ATMs.

• Allow the National Post Organization to issue payment cards against the accounts of its depositor, and in parallel, install ATMs in post offices. This will increase the volume of transactions through secured parties, which will facilitate tracking these transactions, especially in remote areas and villages.

• Reconsider Articles 115 through 119 of the Penal Code—The Chapter on Public Funds— to counter the prevailing modus operandi of the government, which is characterized by irresolution and hesitancy. In this regard, attention should be given to enacting a specific and clear law holding ministers and public officials politically accountable for their policies and action, rather than limiting their accountability to the legal realm—accountability for criminal conduct. Attention should also be given to providing support to public officials and building their confidence in making decisions that serve the public interest and respond to national development objectives, as long as these decisions are well-studied, and were subject to broad-based and meaningful community dialogue. 

• Resolve the confusion surrounding the voting procedures, namely the cumulative voting system for electing board members in companies that are listed in the Egyptian stock exchange, and non-banking financial companies:  Circular No. 1 of 2019, issued by the Financial Regulatory Authority, obligates companies to specify cumulative voting as the applicable voting system in their rules of procedure. This directive contradicts with Circular No. 1 of 2018, which is issued by GAFI. The latter, which reflects the legal and regulatory framework for protecting the rights of minority shareholders, stipulates that adopting the system of cumulative voting is optional rather than mandatory, which is in line with Article 74 (Paragraph 2) of the Companies Law.  Thus, it is imperative to issue a clear directive to eliminate any ambiguity regarding the voting system.

• Establish a Cabinet-level committee to coordinate all economic decisions before issuing them. The committee should include representatives of FEI and the FECOC.
• Revive the “E’rada” Initiative, which is designed to vet all economic laws; and ensure that all its members have adequate seniority to be able to operate under the auspices of the Prime Minister.

• On July 14, 2019, the Prime Minister issued a decree to revive “E’rada” Initiative and establish its board of trustees, which includes the presidents of FEI and FECOC.

• Make e-government a priority in order to increase the efficiency of government transactions and curb administrative corruption. Set a deadline of 2022 to complete the effort.

• Several electronic platforms were created; the Egyptian Government Services Portal, a leading platform, is currently offering 75 online public services; the government plans to expand the number of online services to100. 
• A mobile application was created providing access to more than 30 services through mobile phones. 

• Issue a binding decree or a law to address senior debt restructuring. Currently, banks face significant challenges when working with distressed businesses that are going through a restructuring process. Any liquidity provided by banks is directed towards meeting the distressed business’s debt obligations to sovereign creditors (e.g., taxes, customs duties, etc.) and thus the restructuring process is derailed and the banks are exposed to high-risk losses. Accordingly, the regulatory framework, whether a law or a decree, should obligate sovereign creditors to closely coordinate with banks when rescheduling senior debts of distressed companies. Adopting this recommendation will ensure the availability of adequate liquidity during the restructuring exercise, and at the same time, protect banks against the risk of loss.

• Expedite the issuance of the micro, small, and medium-sized enterprises (MSMEs) law, which was reviewed by FEI, to encourage formalization of informal enterprises.

• On July 13, 2020, the President ratified the Micro, Small, and Medium-sized Enterprises Development Law (No. 152 of 2020), which includes 109 Articles, organized into 9 chapters. Articles 105 and 106 of the law prescribe a penalty of a deprivation of liberty; additionally, several issues remain ill specified and should be more adequately addressed in the executive regulations.

For example, executive regulations should clearly specify the following issues:

• The types of violations that will render the closing of a business legal, as well as the controls that should govern the exercise of the powers by the competent authorities (Article 56).
• The procedures to be taken and the sectors to be targeted for formalization; the latter should be consistent with the priorities set in Egypt’s Sustainable Development Strategy (Article 91). 

• Support and strengthen the Industrial Development Bank to enable it to fulfill its role of funding industrial projects and expanding industrial activities in Egypt, including developing programs and procedures to incentivize expanding support for promising industrial endeavors.

• Reduce delays in court proceedings to enhance the timely delivery of justice; and build the capacity of judges in economic courts, with a focus on increasing their knowledge of economics principles and issues.

• On August 7, 2018, the President ratified the amendments to the Economic Courts Law (No. 120 of 2008), which were approved by the House of Representatives. The new Law No. 146 of 2019 will help accelerate litigation involving lawsuits falling under the jurisdiction of the laws governing trade, investment, and financial transactions.

• Reconsider the security screening process required for foreign investors as it consumes an inordinate amount of time (up to seven months). A 30-day advance notification requirement should suffice—a no response during these 30 days is to constitute an approval.

• Do not impose a real estate tax in free zones, and consider exempting factories from such tax: In May 2018, the General Assembly of the Legal Opinion and Legislation Departments of the State Council issued a legal opinion confirming that business enterprises located in free zones are exempt from the taxes prescribed in Real Estate Tax Law No. 196 of 2008. This exemption is to take effect from the date on which the Investment Law No. 72 of 2017 entered into force. Article 41 of the Investment Law stipulated that free zone business enterprises shall not be subject to the provisions of the applicable laws on taxes and duties in Egypt, which includes the real estate tax.  Accordingly, it is not legally possible to require these enterprises to pay real estate tax starting June 6, 2017, the day the Investment Law entered into force. Compliance with the legal opinion of the State Council, and establishing a mechanism to ensure its implementation is yet to be seen. 

• Review the sanctions-related provisions in all business-relevant laws and draft laws, and eliminate sanctions that entail deprivation of liberty, thereby making them consistent with the Investment Law. The latter expressly states that no penalties that entail deprivation of liberty shall be imposed on investors in any economic activity and that penalties shall be limited to fines.  Indeed, several of recently issued laws, including the NGO Law, the Social Insurance Law, and the Trade Unions Law did away with all penalties involving jail time. However, there remain other laws and draft laws that include sanctions that entail deprivation of liberty (e.g., the regulations pertaining to cheques under “the Cheques Law”).

Consider amending the Comprehensive Health Insurance Law (No. 2 of 2018) to address several shortcomings. The amendments should address the following points:

• The amount of Takafulia contribution  that a business is required to make under the law should be calculated based on its net annual income instead of its gross annual revenue. Additionally, a contribution ceiling and floor should be specified.
• Establish contribution brackets—ranges of net annual incomes, each subject to a certain contribution rate; the contribution rate should be progressive, in other words, lower brackets pay lower rates and higher brackets pay higher ones.
• Affix a label “finished product” to imported goods to avoid imposing the Takafulia contribution on production inputs, and thus increasing costs. This will prevent duplication, as the contribution is already imposed on the gross annual revenues.
• Since the required contribution constitutes a business expense, it should be tax-deductible under all circumstances.
• Funding the new comprehensive health insurance scheme, should not be limited to this contribution. Other sources of funding include supplementary taxes on cigarettes and alcohol, as well as contributions from employees and employers, which add up to 5% of the employee’s salary.
• The contribution brackets should be structured such that the highest rate, 0.0025, be assigned to the highest bracket of net annual income, and gradually decrease to 0.0015 and then 0.001, as the net annual income decreases.
• Money-losing businesses should be subjected to the same contribution payment terms. That said, the contribution should not be charged to the profit and loss statement, but rather the shareholders' equity account. By doing so, the payment may be tax-deductible in the future, under certain circumstances, as it will be considered a loss carried forward.