is it a good idea to invest in egypt?if yes,why?
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Is it a good idea to invest in Egypt now? If yes, Why?
News Letter | April 2012
In This Issue:
Pg. 1 Is it a good idea to invest in Egypt now? Pg. 1 Is the Egyptian Economy Already Rebounding? Pg. 2 Goldman Sachs's Jim O'Neill on the Egyptian Economy Pg. 3 Substantial Business Related Reform Pg. 4 The Project for the Development of the Suez Canal and the Ground Area Around It Pg. 4 NILEX Updated its Listing Rules Pg. 5 About Us
Ever since Mubarak’s regime fell in February 2011, Egypt has been going through a transitory period with the objective of adopting a democratic system. Now that we are in April 2012, it is safe to say that a good deal of progress has been achieved on that regard. Fair elections of the members of the Parliament with its two chambers, the People’s
Assembly and the Shura Council, have taken place. Security has been restored to a large extent and there has been considerable progress on curbing corruption. Most importantly, the military has promised to relinquish full power in June following the presidential elections, thus, ending the transitory period.
Is the Egyptian Economy Already Rebounding?
The ITIDA’s CEO, Eng. Yasser El
Kady, said “there have been a
number of fantastic ICT success
stories as Egypt continue to mark
its appeal to global companies with
17 new investments by
multinational companies in the past
2 years and a number of substantial
deals taking place in the last 12
months”
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There are several indications that the economy is indeed getting back on track.
In February the Egyptian stock exchange index reached its highest point since July
2011 A.T. Kearney’s Global Services Location index placed Egypt in 4th place in
the world for offshoring and outsourcing for the year 2011. Some of the world
leading information and communication technology (ICT), companies, such as
Vodafone, Microsoft, and IBM are expanding their operations in Egypt.
Moreover, Egypt’s Information Technology Industry development Agency (ITIDA)
announced back in December that it has reached its 2011 goal of USD1.1 billion
in IT export revenue. Egypt’s General Authority for Investment and Free Zones
(GAFI) indicated in its last report on agribusiness that investors are interested in
the massive mega farm project to be built in either North Sinai or the Toshka
region in Upper Egypt. The report states that “the farm is designed to attract
investments of almost USD$5 billion and will create 45,000 jobs".
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Abou El-Fadl, El-Kassed, and Partners Law Office "A&K" News Letter | April 2012
The next eleven have the potential to be, along with the BRICs, the world's largest economies in the 21st
century
Goldman Sachs's Jim O'Neill on the Egyptian Economy
Economist Jim O’Neill, who coined the term ‘BRIC’ and accurately predicted the fastest growing economies of the past decade (Brazil, Russia, India, and China) recently released a new book called “The Growth Map” in which he predicts that Egypt could soon outperform the BRICs and that it offers exciting opportunities for investors over the next decade. In fact, O’Neill believes that Egypt “could be one of the top 10 contributors to global GDP this decade, adding well over USD 2 trillion''. What are some of his reasons? Egypt, with its population of 85 million, is rapidly growing; the majority of Egyptians are educated and many of those are multilingual; Egypt lies in a strategic location between Europe, Africa, and Middle East; with more
than 6 million tourists visiting Egypt every year, there is a great potential for growth in the tourism sector; great potential in the construction business; Egypt is rich with oil and gas reserves; huge industrial and agricultural resources”.
Egypt "could be one of the top 10
contributers to global GDP this decade,
adding well over $2 trillion", Jim O'Neill
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Abou El-Fadl, El-Kassed, and Partners Law Office
"A&K"
News Letter | April 2012
Head of Egypt's current government, Dr. Kamal Ganzouri (left) with Field Marshal Hussein Tantawi (right).
Substantial Business Related Reforms
During the last year, many government,
international entities, and investors were hesitant
to invest in Egypt because of the political
situation. In order to ameliorate the investment
atmosphere in Egypt, the Egyptian government
took several steps to boost investment and allay
any unease.
In August 2011 a committee was formed, headed
by the Prime Minister and included several high
profile officials, with the sole purpose of finding
amicable solutions for contract or agreement
disputes arising between investors and public
authorities.1
In early January 2012 Field Marshal Hussein
Tantawi issued a new law amending the
Investment Law by adding two Articles. One
Article refers to the above-mentioned committee.
The second states that the government has the
right to reconcile with investors concerning
specified crimes stated in the Penal Code, which
include embezzlement and forgery, if those crimes
were committed in any act relating to the
Investment Law and on condition that the final
judgment was not issued by the Egyptian courts.2
In addition to the legal reforms, it has become
easier to establish companies and branches. The
General Authority for Investment and Free
Zones (GAFI) has improved its procedures
and reduced bureaucracy. This has resulted in
a substantial decrease in the time frame for
establishing new commercial entities from a
few weeks to 3 to 7 working days.
After substantially winning in the
parliamentary elections, the Muslim
Brotherhood, in order to alleviate any unease,
made several statements to reassure investors.
They indicated that they are committed to an
open and transparent economy and have
recently met with delegations of foreign
investors including J.P. Morgan Chase and
Morgan Stanley. In a statement released in
February 2012, Mr. Khairat Al Shater, Deputy
Chairman of the Brotherhood, said that the
Brotherhood is "open to the whole world,
ready for any economic agreements that would
achieve common interest, does not sacrifice
people's rights and are based on mutual
respect, pride and dignity and achieve the
requirement of the phase in Egypt".
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Mr. Khairat Al Shater, Deputy
Chairman of the Brotherhood
1 Prime Minister Decree 1009/2011. It was later amended by Prime Minister Decree 1491/2011
2 Law 4/2012
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The Project for the Development of the Suez Canal and the Ground
Area Around It
Abou El-Fadl, El-Kassed, and Partners Law Office
News Letter | April 2012
The Egyptian National Competitiveness Council
(ENCC), a non-profit, non-governmental
organization, with strong ties to the Egyptian
government, has asked national and
international investment companies/bureaus to
prepare a feasibility study on the project for the
development of the Suez Canal and the ground
area around it. The said decision by the ENCC to
take the project forward was taken after it had
already studied the project internally and
concluded that the development of the Suez
Canal and the ground area around it could
produce great investment opportunities in
various fields, such as the transit business,
industrial projects especially exporting ones, and
tourism.
This is a grand scale project but how big is
it? The chairman of the board of ENCC, Mr.
Seif Fahmy, stated that the project can
attract up to USD 250 billion of investment
money in a 10 year period, which is what
he believes is the project duration.
Accordingly, it is safe to say that if the
feasibility study done by independent
investment companies/bureaus fall in
line with the Chairman’s statement,
then we would be looking on, without
a doubt, one of the most ambitious
and massive non-energy related
investment projects in the Middle East
in modern history.
ENCC believes that the project can directly
create up to one million new jobs and
indirectly contribute to the creation of up
to two million new jobs.
NILEX Updated its Listing Rules
In order to make the listing in the Nile Stock
Exchange (NILEX) more appealing and make it
more secure to investors, the Egyptian
Financial Supervisory Authority (EFSA) issued a
Decision in October 2011 amending the listing
rules. The new listing rules were applied by
the NILEX in November 2011.3 NILEX is an
Egyptian Stock Exchange created in 2007 and
is dedicated to small and medium sized
companies. When it first launched, companies
had to have a capital of at least LE500,000 and
a maximum of LE25 million. Now companies
who wish to be part of the new NILEX
trading system for SMEs will not need a
minimum capital requirement, with the
maximum ceiling set at LE50 million. By
establishing a new trading system, NILEX
hopes to attract more investors and
companies from the small and medium
businesses. The government boasted, at the
time of its launch, that NILEX is the first mid
and small cap market in the MENA region.
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3 EFSA Decision 81/2011
5
Copyright 2012 AbouElfadl, ElKassed, & Partners Law Office Reproduction is permitted provided that the source is acknowledged
For inquiries: Ms. Yara Ahmed info@ak-p-law.com
Images References:
Pg.1 img.1 | totallycoolpix.com Pg.1 img.2 | af.reuters.com Pg.2 img.1 | wikipedia.org Pg.2 img.2 | telegraph.co.uk Pg.3 img.1 | english.ahram.org.eg Pg.3 img.2 | news.egypt.com Pg.4 img.1 | encc.org.eg
Abou El-Fadl, El-Kassed, and Partners Law Office
News Letter | April 2012
AbouElfadl, ElKassed& Partners Law Office, "A&K"
A&K is an international corporate law firm committed to serving the business community with its cutting edge expertise and professionalism. A&K has experience and expertise in diverse legal fields across a wide array of business. The accumulated experience and reputation of the Partners is the result of more than 25 years within long-standing international law firms. A&K partners have firsthand knowledge of several major mergers and acquisitions, due diligences, and a variety of business transactions.
This issue was supervised and edited
By:
AK&P Law Office
Edit by:
Miss: Tami Clay
Address:
13 El Themar St., Moustafa Mahmoud
Square, Mohandessin, Giza, Egypt
P.O. Box: 12311
Tel: (+202)374 93 924
Fax: (+202)374 93 932
E-Mail: info@ak-p-law.com
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