Obstacles affecting investment because of the investor

Short-term business outlook is seen by most investors, because each investor has his primary
and primary goal is to make quick profit, while ignoring the long-term impact of making higher
profits.
Many investors are in a big problem, which is the problem of poor experience in conducting a
good feasibility study. In addition, many investors resorted to employing some foreigners in the
feasibility study of Egyptian projects.

Problems of access to finance, problems of electricity and corruption, problems of obtaining

permits, permits, problems of informal activity "parallel market", crime, taxes, labor regulations,
and unskilled manpower.
Timeline
2008-2011
Investing in Egypt from Japanese point of view (FDI) ‫لو مستثمر جاي من بره عاوز يفتح هنا‬
Egyptian market is a price market not a quality market
The quality of the Egyptian market as a price market and not a quality market: The Egyptian
market is difficult to market high value-added products. Examples of this are the difficulty of
marketing plasma air conditioners, while low-quality, low-quality products are popularly
received by the Egyptian consumer. And the inability of many segments to acquire high-priced
Japanese goods.
Customs clearance:
Some Japanese companies face difficulties when exporting some products to the Egyptian
market on the pretext of not matching them to Egyptian specifications, despite the conformity
of those Japanese products to international standards, such as some types of car filters,
which is difficult to justify.
High tariffs on some products "the protective trend of some Egyptian industries."
High tariffs on some types of cables and iron towers because of the desire to protect the
Egyptian industries of products, while those fees are low on some types of lighting equipment
and electrical wires, which do not have Egyptian products.
Taxation: One of the Japanese companies made to the General Authority for Investment filed
a request to exempt it from taxes for a period of ten years, "the period granted by law to newly
established foreign companies," but the request of the Japanese company has been rejected
because it has acquired part of the plant purchased from one of the Egyptian companies "
Which have already enjoyed the tax exemption referred to. “The Japanese Arbitration
Company has resorted to this and the attempts of the Ministry of Commerce and Industry and
the General Authority for Investment to resolve this issue have failed.
No law to hold the employee accountable for negligence
There is no law to hold the employee accountable for negligence, negligence or failure to
complete the work. If the betrayal in the past is by spying for the enemy, the betrayal today
that you are interrupting the production must be in a deterrent punishment and every
procedure has a fixed time. Some senior investors are surprised by the call of the minister
and the officials. So what small investor do? Mostly, he is going to someone finishing his job,
which supports corruption.
Manufacturing is expensive
That manufacturing in Egypt is expensive, and there is scarcity in the territories, even labor in
the Gulf countries cheaper than unskilled Egyptian labor, and logistics services in terms of
transport infrastructure and facilities are not compared to the Gulf States.
The instability of the currency is one of the most important investment problems in Egypt, in
addition to the fact that taxes are very high compared to the surrounding countries.
Land prices
The high price of the land in most of the new cities, where the state trading in the land
contributed to the increase in prices madly, which is a concern of the cessation of market
movement and the reluctance of companies to implement new projects
Peru
The bureaucracy came in second place in terms of hindering investment in Egypt, in terms of
the long and complex procedures that the investor is subjected to before the start of his
project activity, which may take up to three to five years to complete, as well as the multiplicity
of clients under a forest of disabled legislation For investment, which is devoted to the
government bureaucracy.
This is in addition to the multiplicity of entities mandated to issue licenses for any project
according to the nature of the activity, which puts the investor in front of hundreds of
employees and supports administrative corruption.
 The land and licenses are the most prominent handicap investors can face in Egypt.
One of the most conditions when obtaining an industrial project license is environmental
approvals. Example building an oil plant in one of the new cities. It is a rare fact that about
40 people gather representatives of the residents, factories around you and
representatives of the city. Benefits and damages of the project and take their consent as
a condition for the approval of the environment on the project, which is absolutely
worthless because the businessman can hire 40 people and do all of this easily but the
benefits of both the project or the environment, and whether the ministry experts cannot
determine the suitability of the project to environmental standards Whether or not, 40
people D have a personal interest in a piece of land for the project may benefit the project
stop the country
 2011-2016
Corruption
Egypt 2016 was 14 in top corruption countries
Exchange rate:
The existence of two prices for the exchange of the dollar in Egypt, one official and the other
informal, disabled investment, as it causes losses to the foreign investor, which transfers the
funds at the official price, which is less than the parallel market price by nearly 40%, and
therefore if the project is distinct and has many incentives, The investor is reluctant to pump
his investments.
This is in addition to the inability of the Central Bank to provide the necessary dollars to import
inputs of production, whether raw materials or equipment and the existence of long waiting
lists.
Liberalization of exchange rate
The delay in the implementation of some projects as a result of the liberalization of the
exchange rate, most of the contractors stopped implementation due to the high prices of
building materials, explaining that the obstacles in the social housing project holders of the
blue brochure within the eighth declaration, completed the payment of installments in full and
the time limit for the receipt of their units ended. That some units have been completed and
are being handed over to the citizens.
Transfer of Profits:
The inability of companies to transfer their profits due to the scarcity of the dollar is one of the
obstacles to investment in Egypt. This is in addition to the recent measures taken by the
Central Bank for the transfer of foreign currency abroad. This led a number of foreign
companies to withdraw their investments from Egypt. The last of them was Lufthansa
Security situation:
Where the idea of promoting the war on terrorism occupied a large part of the Egyptian
political statements over the past period, whether internally or externally, and was marketed
through the media in the form of a mental image that suggests political instability and security
in Egypt, which made the foreign investor think a thousand times before entering into
investments New in the Egyptian market despite the multiple investment advantages.
One window:
Is a project that has been discussed for more than 10 years The government failed to
implement this law, despite the fact that it was expressly stipulated in the Investment
Guarantees and Incentives Law No. 16 of 2015, as a result of the lack of agreement between
the authorities on the land, To invest as a single entity to deal with the investor, and to
terminate the procedures of his project with all parties, and therefore did not provide new or
 paid in the direction of growth of foreign direct investment, which prompted the Ministry of
Investment to seek to modify or change altogether.
This is the fourth amendment to the law on guarantees and incentives for investment within
two years, which gives the investor a hint of economic instability, confusion and absence of a
clear economic vision.
Energy:
The shortage of energy supplies is one of the biggest obstacles facing industrial projects in
Egypt, especially the heavy and energy-intensive industries that are dependent on the
emerging economies, as they contribute significantly to economic growth and raise export
rates. The government's reduction of factory supply rates by 50% High prices of a lot of
goods.
Is a matter of concern to investors in this area, whether local or foreign, which limits the
injection of new investments in this area.
Taxes:
Tax legislation has been confusing investors in Egypt. Recently, more than one tax legislation
has been issued, the most recent of which was the value added tax, which led to confusion in
the Egyptian market for the conflicting implementation dates of the law, the lack of clarity on
the method of implementation, To amend many tax laws in the coming period on the grounds
that they have not been modified for decades, which worries investors and invites them to
wait for completion of the development of the tax system as described by the government,
which may take years.
Tariffs
If you manufacture in the Gulf or Saudi Arabia you are exempted from taxes and customs
either on export or import of production supplies
Egypt’s applied tariff rate averaged 7 percent for agricultural products and 50 percent for non-
agricultural products in 2018. On September 11, 2018, Egypt raised tariffs on 5,791 products
through Presidential Decree 419/2018. Also through this Decree, Egypt reduced tariffs on
several medicines and imported natural gas vehicles, and eliminated duties on electric cars.
Egypt’s tariff on passenger cars with engines with 1,600 cubic centimeters (cc) or less is 40
percent, and its tariff on cars with engines of more than 1,600 cc is 135 percent. Tariffs on a
number of processed and high-value food products, including poultry, meat, apples, pears
and cherries, range from 20 percent to 30 percent. There is a 300 percent tariff on alcoholic
beverages for use in the tourism sector plus a 40 percent sales tax. The tariff on alcoholic
beverages for use outside the tourism sector ranges from 1,200 percent on beer to 1,800
percent on wine to 3,000 percent on sparkling wine and spirits, foreign movies are subject to
tariffs amounting to 46 percent. They are also subject to sales taxes and box office taxes
higher than those for domestic films
No Respect for Contracting:
 The recent judicial decisions concerning the return of the privatization companies have raised
the alarm of foreign investors in terms of the government's non-compliance with their
contracts. This is in addition to a number of arbitral cases raised by some investors regarding
projects whose land has been withdrawn or delayed payment of companies that contracted
with the Egyptian government to develop some factories. Despite the formation of a
ministerial committee to resolve disputes, the process is still slow, with a lack of clarity of
vision and procedures.
Labor regulations on foreign employees
9:1 ratio or 85 % Egyptian and 15 % non-Egyptian
Risk of expropriation
Massive number of criminal inquiries into alleged corruption cases, which currently exceed
6,000, has created a hostile environment for private-sector investment. A perceived risk of
expropriation is discouraging both domestic and foreign investors.
Bank reluctance
Banks have been reluctant to lend because of the political and economic uncertainty of the
transition, and that in turn could exacerbate the problem and lead to further deterioration of
the economy.
2018
-Estimates are subject to different interpretations among taxpayers.
-As well as customs procedures that take about 28 days-The establishment of the first logistics
center at Cairo airport to provide one-stop services for international trade to Egypt and shortening
the procedures within 3 days less or more, to be circulated to all customs outlets by mid-2020.
-One of the investors in the agricultural reclamation sector, which incurred in the fees and taxes
that he pays recently, where he compensates the local investor, for example, from 70 to 50
thousand under the item "insurance", wondering what this insurance.
Problems of private sector investors
According to CBE
 Micro: less than 10 Employees
 Small and medium: between 10 and 200 employees
 Large: more than 200 employees
Low access of finance
Low access to finance constrains private sector development. This is the result of high public
borrowing crowding out the private sector, a lack of long-term funding instruments for banks
as well as deeper structural issues related to the financial infrastructure. The latter include low
credit information coverage, weak creditor rights, and the absence of a collateral registry for
 movable assets and inflexible use of movable assets as collateral. SMEs have
disproportionally low access to finance – their share of loans represents only 5 per cent of the
total – and current lending practices are not responsive to their needs. Women-led SMEs in
particular face large obstacles in accessing bank finance due to a number of issues,
principally the lack of collateral. Moreover, domestic debt markets are dominated by
government bond issuance, and capital markets regulation needs to be modernized to better
channel savings into productive long-term investments.
In Egypt, the government usually borrows from the domestic financial market at interest rates
higher than in international markets, with two notable negative implications. First, the burden
on the government budget balance of these future commitments. Second, the crowding-out
effect for the private sector, as banks reduce their lending to private businesses in order to
accommodate the government. Saif (2011) highlighted that the private sector in the country
received only 10% of the available financing from the banking sector, an amount largely
insufficient for private businesses to meet their own needs, resulting in an untapped potential
for productivity gains.
The situation is particularly problematic for Egyptian MSMEs, lagging behind in terms of
access to finance, compared to both their larger counterparts in the private sector and their
homologues in other SEMCs. The MSME sector has access to only 5% of the overall
domestic finance and suffers from a financing gap of nearly EUR 13.9 billion (Nasr and Reille,
2015). The lack of competition in the banking sector enables banks to be overcautious in
lending to private borrowers (International Monetary Fund, 2014), whereas the absence of a
clear definition of MSMEs limits their ability to tailor financial services to the needs of these
firms (Loewe et al, 2013).
Data gathered from 36,452 MSME’S in Egypt supervised by the Central Bank of Egypt and the
Egyptian Banking Institute, to measure the potential positive effect of higher access to finance on
the extensive margin of export of the firms surveyed, that is, the probability of becoming an
exporting firm and serving more than one market.
Figure 1: Share of bank and non-bank financing for private investment in Egypt
Figure 1 shows that bank financing is not the primary source of finance for private businesses,
regardless of their size, although large enterprises receive a relatively higher share of bank
financing than small and, most particularly, medium sized firms. The latter remain well below 10%
of bank financing
Figure 2 shows the share of firms receiving bank loans in the three size categories. The data
shows that only 6% of small and medium firms have access to bank loans, compared to nearly
18% of large firms.

Figure 2: Share of firm with access to bank loans in Egypt

Licensing procedures
Industrial licensing procedures are overly complex and burdensome. The new draft law to
ease industrial licensing procedures does not go far enough in terms of establishing clear and
enforceable deadlines for the government to abide by, decentralizing licensing at the
municipality level and clarifying the relationship between this new law and the extensive
existing legislation on industrial licensing.
Country and social role for MSMEs
In order to counter the problem of lack of access to finance for MSMEs, the microfinance law was
enacted in 2015 to allow licensed entities to provide microfinance loans of up to EUR 5,000 to
small firms engaged in production of goods, provision of services or trading activities. The
Egyptian Financial Supervisory Authority has a supervisory role over licensed microfinance
entities, to ensure their transparency and effectiveness in providing support to the MSME sector
In 2016, the Central Bank of Egypt launched an initiative to facilitate access to bank financing for
MSMEs, consisting in the issuing of a number of instructions to the banking sector, aimed at
creating an enabling environment for MSMEs. These instructions include:
 Increasing loans to MSMEs to nearly 20% of the total credit provided to the private sector;
 setting at 75% the risk weight for lending requirements to make it applicable only to micro
firms;
 Allowing banks to exclude credit provided to micro firms from the required reserve ratio;
 Not exceeding lending rates of 5%;
 according specific attention to firms in the industrial and productive sectors, import
substitution economic activities, labor-intensive enterprises and innovative projects that
aim to export their products;
 Establishing specialized units within each bank mandated to provide technical assistance
and training opportunities to MSMEs (Central Bank of Egypt, 2016).
One stop-shop

One-stop-shop entities are service units where agency Representatives entrusted with issuing
documents and licenses for small enterprises are grouped in one place pursuant to the Law
on the Development of Small Enterprises 141/2004 and its executive regulations, these
service units are part of the service complex that includes, in addition to the service Unit, an
integrated loan center, The unit comprises government representatives and Social Fund for
Development staff to assist in issuing the following:
 Tax card
 Commercial registry
 Temporary license for startup enterprises (valid for 30 days)
 Final license
 National number for startup and existing enterprises
However, confinement of center’s role to facilitating the delivery of industrial licenses only (this
limits the number of licenses issued through the center as it is easier, less risky and less
costly to start commercial and service activities)

Rise up
Made SME access to finance by allow to them thought:
Venture Capitalists
Venture capitalists are an important source for providing the high-growth, entrepreneurial
SME community with much-needed financing. Types of venture capital include seed and
startup financing and early-, expansion- and mature-stage financing. In Egypt, the
government has launched initiatives to 29 enhance the venture capital industry, such as the
adoption of the law No. 8-1997 and the Capital Markets Law No. 92-1995, which grants
venture capital firms tax exemptions. According to the Middle East and North Africa Venture
Capital Report of 2013, published by the Middle East and North Africa Private Equity
Association, venture capitalists typically invest in startups and non-listed, early-stage small
businesses. The investment commitment over the life of the deal averages USD 3 to 5 million,
reaching in some cases up to USD 15 million. A typical exit plan is usually through initial
public offerings, mergers and acquisition, management buy-out or trade sale. Despite venture
capital not being confined solely to technology investments, technology is often a core factor
that creates the level of scalability required in a venture capital deal. According to the Global
Venture Capital and Private Equity Country Attractiveness Index Report produced by Ernest
and Young, in 2009 Egypt ranked 67th globally in terms of a venture capital ranking index,
while in 2012 it ranked 56th—the country at that time still in the midst of a fluctuating and
turbulent environment. Index ranking is based on weighted average assessment of key
performance factors including (1) economic activity; (2) depth of capital markets; (3) taxation;
(4) investor protection and corporate governance; (5) human and social environment; and (6)
entrepreneurial culture and deal opportunities. Even with vacillating rankings across the last
few years, Egypt still occupies a midpoint position among major developing African and North
African regions.

Angel Investors
Angel investors are unlike formal venture capitalists. They have different investment criteria,
tending to invest more on intuition rather than on the precise valuation of a company balance
sheet. That angel investors rely so heavily on their intuition is because they typically invest in
the very early stages of a company, when the entrepreneur may not yet have a well-
articulated business plan. Angel investors play a role in providing substantial managerial
knowledge and access to a company’s personal networks. In addition, business angel
investments help mitigate information asymmetries by providing a positive signal of the
venture’s quality. Angel-investing activities are still considered new to the Egyptian
ecosystem.

Crowdfunding
Crowdfunding is the use of small amounts of capital from a large number of individuals to
finance a new business venture. Crowdfunding makes use of the easy accessibility of vast
networks of friends, family and colleagues through social media websites like Facebook,
Twitter and LinkedIn to get the word out about a new business and attract investors.
Crowdfunding has the potential to increase entrepreneurship by expanding the pool of
investors from whom funds can be raised beyond the traditional circle of owners, relatives and
venture capitalists. This type of financing is beneficial to entrepreneurs as it provides access
to capital, hedges risk, works as a marketing tool, allows crowdsourcing and brainstorming,
and introduces loyal customers easier than any other source of traditional funding and
provides the opportunity of pre-selling. However, the concept in Egypt is still new and only a
few companies are engaged in crowdfunding— such as Shekra and Shariqty—which do not
rely on their technology platforms but on their hard-working management teams to help
pipelines of entrepreneurs who deserve the investments.

FDI investment in Gas obstacles in 2014

Lack of transparency
Mediterranean energy markets are mainly managed by state-owned monopolies that
influence prices and trading conditions. For this reason, foreign investments tend to be
discouraged by scarce information on market prices and available transmission capacity. This
problem is coupled with a lack of legal obligations for the monopolist, which makes
increasingly difficult for a third party to access the market.
Lack of interconnection:

Lack of interconnection between countries, an essential step to eliminate trade barriers would
be completion of the Arab gas pipeline and the construction of a connection between Syria and
Turkey. This would not only allow Egyptian gas to flow to Turkey, but also enable other regional
countries to import gas from the Caspian basin.

For Example: Natural gas is of critical relevance for the overall Mediterranean energy trade.
While MENA countries are among the world’s leading gas producers, European countries are
counted among the greatest consumers.

Egypt is the main natural gas supplier for the rest of the corridor, through two branches of
pipelines. One of them goes to Israel, while the other passes through Jordan, Syria and ends
in Lebanon. The lack of alternative sources and routes sets a barrier to the increase of gas
trade as well as to security of supply.
 FDI Obstacles in services industry
Foreign equity restrictions
Egypt restricts foreign equity in construction and transport services to 49 percent. In
information technology-related industries, Egypt requires that 60 percent of senior
executives be Egyptian citizens within three years of the startup date of the venture.
Financial Services
Foreign banks are able to buy shares in existing banks, but are not able to secure a
license to establish a new bank in Egypt. New commercial banking licenses have not
been issued to foreign banks since 1979. Three state-owned banks (Banque Misr,
Banque du Caire, and the National Bank of Egypt) control approximately 40 percent of
the banking sector’s total assets
Telecommunications Services
The state-owned telephone company, Telecom Egypt, holds a de facto monopoly in
fixed line telecommunications, primarily because the National Telecommunications
Regulatory Authority has not approved additional telecommunications licenses. The
lack of competition among internet service and fixed landline providers has contributed
to high prices, low internet speeds, and poor service quality.
Express Delivery Services
The Egyptian National Post Organization (ENPO) must grant special authorization to
foreign-owned private courier and express delivery service suppliers seeking to
operate in Egypt. In addition, although express delivery services constitute a separate,
for-profit, premium delivery market, ENPO requires private express delivery operators
to pay a postal agency fee of 10 percent of annual revenue on shipments of less than
20 kilograms (approximately 44 lbs). ENPO imposes an additional fee on private
 couriers and express delivery services of 5 EGP ($0.30) on all shipments under 5
kilograms (approximately 11 lbs).
Role of Egypt
Egypt implemented an investment law (No. 72) in October 2017 to address longstanding
complaints of foreign investors. The law now allows foreign investors to operate sole
proprietorships and partnerships. In addition, the law relaxed local hiring requirements,
allowing firms to increase the number of non-nationals working at any business from 10
percent of the work force to 20 percent. Further regulatory changes also allow foreigners to
act as importers for their own businesses, albeit with some limitations on the items that can be
imported and the purposes for which they can be imported.

Obstacles in livestock sector 2012

 length of time animals spend in quarantine waiting slaughter
 Quarantine inspection only made once a year for cattle and camels
 Limited capacity for risk assessment leading to disproportionate level of checks and
quarantine.
Obstacles face importers of supplements
Import licensing:

Restrictive element of Egypt’s law prohibits the importation of used vehicles for commercial
purposes.

Either the National Nutrition Institute or the Drug Planning and Policy Center of the Ministry of
Health and Population (MOHP) must register and approve all nutritional supplements,
specialty foods, and dietary foods.

Importers must apply for a license to import specialty food products and renew the license
every one to five years, at a cost of up to $1,000 per renewal, depending on the product.
While there is no law that prohibits the importation of nutritional supplements in finished pill
form, import licenses for these products are not provided, the MOHP must approve the
importation of new, used, and refurbished medical equipment and supplies, the MOHP
approval process consists of a number of steps, which some importers have found
burdensome that is the following requirement must be meet:

 Importers must submit a form requesting the MOHP’s approval to import.

 Provide a safety certificate issued by health authorities in the country of origin such as
the U.S. Food and Drug Administration (FDA) and submit a certificate of approval from
the U.S. FDA or the European Bureau of Standards.
 The importer must present an original certificate from the manufacturer indicating the
production year of the equipment and, if applicable, certifying that the equipment is
new.
 The importer must prove it has a service center to provide after-sales support for the
imported medical equipment, including spare parts and technical maintenance.