The Legislative Reform Committee gave the go-ahead for the suggested Suez Canal Project regulatory legal frame work, according to Hani Sarie-Eldin, Chairman of Sarie – Eldin & Partners – Legal Advisors.
The Suez Canal Project is considered an Economic Zone of a Special Nature, according to Sarie-Eldin, a participant in the winning coalition which put together the general Suez Canal Corridor Development Project plan.
In an interview with Daily News Egypt, Sarie-Eldin said it was agreed on proposing a draft law of amendments on the law for Economic Zones of a Special Nature 83/2003. It will be a legislative framework for investing in the Suez Canal, converting the area into an economic authority and holding capabilities equivalent to ministries, governorates, and authorities.
”The authority will literally be a single-window,” Sarie-Eldin said. “The Suez Canal Corridor is the biggest national project for public and private investments. Its success in attracting real investments is a quantum leap for the Canal area, putting it on map of international investments.”
Sarie-Eldin thinks Egypt’s legislative environment should witness comprehensive development to revive trust in the Egyptian economy and attract investments. In his view, this is the main entrance of employment, growth and economic recovery.
What happened to the law of regulating investment in the Suez Canal area?
It was agreed upon that a draft law of amendments on the Economic Zones of a Special Nature law 83/2003 to be the legal and regulatory framework proposed to organise investing in area of Suez Canal, which is one of the best investment legislations. We proposed, as legal group works with Suez Canal Authority, major amendments on the law. The Legislative Reform Committee has approved the amendments and passed them to the Cabinet to approve them before President Abdel Fattah Al-Sisi issues it. The most important amendment is allowing the economic authority of Suez Canal area to launch a major development company for the area, and own it completely or through cooperation with the private sector, or to leave it completely to the private sector to implement infrastructure projects.
The Suez Canal area will convert into an economic authority and will work as single-window in completing all the investors’ procedures away from all ruling legislations of economic activity in Egypt and from dealing with any governmental body. The authority will have all the capacities of ministries, governorates and authorities. This amendment cancels the requirement of compelling the authority to own at least 50% of the major development company, the reason that deactivated the development of the economic zone in the Northwest Gulf of Suez. The authority could not fund its share in the major development company due to the lack of governmental support. The second amendment allows more flexibility in forming a board of directors of the economic authority by all the concerned parties, away from governmental bureaucracy, and no changes on tax system, to be as it is: 10% gains tax for companies and 5% tax on the earning.
When do you expect the law to be issued?
It was suggested the law will be issued before the Economic Summit in Sharm El-Sheikh, but it seems that it will be delayed until after the summit, due to the sequence and number of events. However, it will not take days after finishing the Economic Summit activities to speed up implementation of the needed projects. The investments will not begin except after the formation of the board of directors of the economic authority and the setting of the executive regulations.
The Suez Canal Corridor project is the second biggest project in Egypt after the project of digging the new canal and widening the old one. The project targets public and private investments as well; its success in attracting real investments will result in a developmental quantum leap for the Suez Canal region, as well as the provision of plenty of vacancies to limit unemployment rates that annually increase accompanied by weak reforms in the ailing economy due to political pressure and security turmoil during the last four years.
How can we avoid the fate of the Economic Zone in Northwest Gulf of Suez and the halt of its investments?
The Economic Zone in the Northwest Gulf of Suez is a special case. The end of its investments and its developmentare not due to the legislation, but because of lack of sufficient governmental funds for the start-up, in addition to obligating the board of directors to launch a major developmental company and owning at least 50% of it without providing fund. Moreover, the land of the Economic Zone was disputed.
Failure is not an option in this period. I expect the project to succeed due to the seriousness of the present political regime, and because the regime bargains for it, in addition to the executive procedures taken to make it succeed. The fund is available, the will of investment exists and the regime’s support is strong, so why would it not succeed? This is especially as we work on putting a special legislative framework for investing in the area that corrects the past mistakes.
With the completion of the general plan of the area, what will you propose to the investors of the Economic Summit?
We will present in front of the Economic Summit only projects of infrastructure: roads, sewage, water and power plants, and alternative energy, besides announcing section partitioning of the area. Investors who are willing and interested in investing in the area will be invited to determine the projects matching the nature of their businesses. We will not propose specialised investment projects to investors during the summit; what we will propose are only preliminary preparation and development projects.
How do you view the latest governmental amendments on laws of investment?
The amendments are “good” and the government believes they constitute major developments. They recognise the presence of mistakes in current legislations and began amending and reforming them in a way that improve the investment environment and correct all the accumulated mistakes in the environment of doing business. However, legislation alone is not enough to achieve reform, but speeding up implementation is very necessary, in addition to evaluating results. Egypt is not suffering from lack of legislations, but suffering from deficiency in applying the available legislations. The last amendments, especially with respect to giving the investor the minimum level of security regarding crime offences in case a mistake occurs by the investor’s company, are very necessary amendments. In addition, regulating and speeding up procedures of entering the market and exiting it will reassure the investor, besides forming active and expeditious committees to settle investment disputes.
Are the recent economic reform procedures sufficient for a growth of 7% and for the attraction of direct investments of $10bn annually?
The Egyptian market is able to attract foreign investments that exceed $10bn per year provided the continuance of the Egyptian government to reform, follow up with its implementation, evaluate the results and treat inefficiency. Egypt is a large consuming market that has 90 million consumers in which the demand is growing on about 1.6 billion consumers as per the commercial agreements. Continuing with the administrative reform and fighting corruption and bureaucracy enhances the financial reform recently done by the government.
With the statements of officials the roof of ambitions went up so, what do you believe the Economic Summit will come up with?
The Economic Summit must be put in its proper place. It is nothing but a step and a message indicating that the government is serious about reforming the structure of the economy which has been deteriorating for about four years. This would happen through legislative and financial reform that would cut deficit and debt, increasing operating rates, putting a fair exchange rate as well as eliminating the parallel market. The summit is the gate for the government to present its plan and the most important is the steps following what will be agreed upon in the summit as well as forming follow-up committees and mechanisms that guarantee implementing those agreements are expected to be signed at the summit.
What about the impressions of Sarie-Eldin clients on the investment climate in Egypt?
All investors are currently alerted to the situation in Egypt. They need a clear declaration of taxes and energy policy that the government has initiated and that needs to be completed. In addition, the government has declared its economic orientations during the next stage, but unfortunately this matter needs a lot of work that no one seems to be taking seriously. I believe that the Dispute Settlement Committee was proven effective in resolving the problems raised during the last period. However, a greater activation of the role of such committees and a prompt display to the competent ministerial committees is required, as it’s a mechanism proved successful.
So how can the government terminate those trade disputes forever?
What is more important than settling conflicts is putting limits to the governmental policies and procedures, in addition to the highly productive legislations for those trade disputes including the territorial pricing policies, the means of raising projects and the law that protects decision makers. The criminal law should no longer be politicised in Egypt; for instance an investor or an official should not be interrogated by criminal law due to an administrative error. I wish that the government realises its aspiration to settle 75% of the investment disputes before the Economic Summit to attract investments for economy recovery.
The government has already settled the dispute of the Emirati Group Al Futtaim – how would that affect the investment climate and the business environment?
Improving the business environment will require the settlement of all investment and trade disputes to reassure investors, attract new investments and allow existing investments to expand. Slowing the pace of litigation and enforcement of contracts delays the entry of investments, raises unemployment and disrupt the recovery of economy. I expect Al-Futtaim to double their investments in Egypt by completing the implementation of the Cairo Festival City project, which include at least EG 20bn over three years. The total value of the project is EGP 24bn and the company did not invest a quarter of them so far.
The Supreme Constitutional Court declared the parliamentary election law unconstitutional. Will this negatively affect the conference and the investment climate?
I think that the sentence will not negatively affect the investment climate in Egypt, and will not disrupt the flow of any immigrant capital looking for attractive opportunities. The invalidity of this law has protected the country from a worse position if it came after the parliament. I believe that if the presidential office amended the law, with a specific time frame that would be both a local and an international message to reassure that the political process did not deviate and that it is on the right path according to the map of the future.
After the amendment of the law it could be sued for unconstitutionality. How can we avoid such scenario?
I do not agree to the idea of immunisation of political rights law that organises the parliamentary elections against any attacks for protecting national security, but I demand the legislature to verify and fill all the gaps in front of any lawyer looking for fame who may sue any of the law articles after being amended. There’s a possibility of attacks on the new law after its amendment, but it is a weak possibility and its occurrence will drag the country to a state of instability and uncertainty about the future, so the legislature should be careful and pay attention to all that.ayyad
