Mar 12, 2018 at 09:25 o\clock

Investment Climate in Egypt

The Egyptian equity market is one of the most developed in the area with more than 633 listed firms. Market capitalization on the exchange doubled in 2005 from الجنيه المصري مقابل الدولار الامريكي 47.2 billion to USD 93.5 billion in 2006, peaking at USD 139 billion in 2007. Subsequently, it has dropped to USD 58 billion in 2012, with turnover from USD 1.16 billion in January 2005 to USD 6 billion in January 2006.

Private equity has not been widely utilized in Egypt in the past for a source of financing for companies. The authorities, however, has staged several policy reforms and changes specifically intended to develop internal private equity funds and also to attract private equity financing from international sources.

The significant industries include textiles, hydrocarbon and chemical manufacturing, and generic pharmaceutical production. Unemployment is high at about 10.5%.

Until 2003, the Egyptian market suffered from shortages in foreign currency and too elevated interest prices. A series of budget reforms were conducted in order to redress weaknesses in Egypt's financial environment and to boost private sector involvement and confidence in the economy.

Major monetary reforms were released in 2005 in order to tackle the informal sector which based on quotes represents somewhere between 30% to 60 percent of GDP. Tax cuts for corporations have been introduced for the very first time in Egyptian history. The new revenue tax Legislation No 91 for 2005 decreased the tax rate from 40% to 20%. According to government figures, tax filing by individuals and corporations increased by 100%.

Many modifications were made to reduce trade tariffs. Among the legislators' aims were tackling the black economy, reducing bureaucracy and pushing through trade liberalization steps. Amendments to Investment and business law were introduced so as to draw foreign investors. By way of instance, the amount of times required for establishing a business was dramatically reduced.

Substantial improvement to the national economic environment improved shareholders' confidence in Egypt. The Cairo & Alexandria Stock Exchange is considered one of the greatest ten emerging markets in the world. The alterations to the policy also brought increased amounts of foreign direct investment in Egypt. According to the UN Conference on Trade and Development's World Investment Report, Egypt was rated the 2nd biggest country in bringing foreign investment in Africa.

Given the high number of amendments to legislation and regulations, Egypt has succeeded to a certain extent in adapting to international standards. Very recently the Cairo & Alexandria Stock Exchange (CASE) was welcomed with full membership into the World Federation of Exchanges (WFE)--the first Arab country to be invited.

Enforcement of these recently adopted regulatory frameworks remain, sometime problematic. Problems like corruption hamper economic growth in Egypt. Many scandals involving bribery were reported during the previous decades. "In 2002 alone, as many as 48 high-profile officials--including former cabinet ministers, provincial governors and MPs were convicted of influence peddling, profiteering and embezzlement. Maintaining good relations with politicians is occasionally a key to business success in Egypt. According to the 2006 Corruption Perception Index developed by Transparency International (in which the higher the rank the greater the amount of corruption), Egypt ranked 70 out of 163. On a scale from 0 to 10 (with 0 being highly corrupt), Egypt scored a 3.3 .

According to a research from the International Organization for Migration, 20 percent of Egyptian remittance-receiving families interviewed steered the remittances towards various forms of investment, although the huge majority (80 percent) was more concerned about utilizing remittances for meeting the everyday needs of their families including spending on health care and schooling. One of the 20 percent of households that decided to spend, 39% invested in property, 22% invested in tiny businesses employing fewer than five people and the smallest percentages of investors (6%) invested in medium private business employing no more than 20 individuals. Based on Egypt's Human Development Report 2008, despite representing approximately 5% of GDP, remittances given the initial capital for just 1.4 percent of newly established small and medium enterprises in Egypt in 2003-2004.

The Stock Exchange capitalisation of listed Firms in Egypt was valued at الجنيه المصري مقابل الدولار الامريكي 79.672 billion in 2005 by the World Bank Falling to $58 billion in 2012