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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

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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

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AK&P Law Office

Edit by:

Miss: Tami Clay

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