Seminar: Prospects and Challenges of Private Investment in Egypt

The Kemet Boutros-Ghali Foundation for Peace and Knowledge organized a seminar titled "Prospects and Challenges of Private Investment in Egypt" at the Diplomatic Club on the evening of Tuesday, October 8, 2024.

The seminar witnessed active participation and engagement from attendees, most notably Amr Moussa, former Secretary-General of the Arab League; Mohamed Fayek, former Minister of Information; Dr. Ali El-Moselhy, former Minister of Supply; Engineer Khaled Abdelaziz, former Minister of Youth and Sports; Ambassador Soha Gendi, former Minister of Immigration and Egyptians Abroad; Dr. Aladdin Hilal; and Dr. Mostafa El-Feki. Many members of the Foundation’s Board of Trustees, ministers, and officials were keen to comment and interact with the discussion topics. However, there was consensus that the investment climate in Egypt requires a transparent and fair political and legislative environment to attract investment into the country.

Mamdouh Abbas, Chairman of the Board of Trustees of the Kemet Boutros-Ghali Foundation, opened the seminar by stating:
"We were keen to begin this cultural season with a topic that goes to the heart of Egypt's economic development issues, which affects all social classes, as it is the engine of progress needed to overcome the challenges facing the country."

He praised Dr. Ziad Bahaa El-Din for his efforts, saying:
"We are delighted that Dr. Ziad Bahaa El-Din is speaking to us today, given his extensive experience in investment promotion through his former leadership of the General Authority for Investment, followed by other important positions related to economic development. This makes him an expert on the obstacles and challenges of investment in Egypt."

Mounir Fakhry Abdel Nour, former Minister of Trade, Industry, and Tourism, who moderated the seminar, stated that the problem with Egypt's economy lies in misaligned priorities and unaccountable spending. He added that Egypt's debt has increased, and investments have focused on long-term projects without evaluating their feasibility. He also criticized the focus on exchange rates without working to reduce the deficit, as well as the numerous imbalances in international transactions, all of which are evident in the data and indicators.

He emphasized that the vast majority seek a way out of the current crisis, and this can only happen by attracting foreign investors through a transparent and fair political and legislative environment to restore investor confidence in Egypt.

Abdel Nour agreed with Bahaa El-Din’s call for the cancellation of the Investment Law, saying:
"I believe his opinion is very valid. We should not create a law that shields investment in one way or another. The basic principle is that we should simply allow investment."

Ziad Bahaa El-Din stressed the importance of diversity in investment, not just its size, saying:
"Increasing investment is important, but what’s more important is the quality of that investment."
To clarify his view, he offered a populist analogy: imagine a restaurant owner struggling with low customer turnout. He has two options:

Improve his service and food quality and spend on marketing to attract customers.
Stand someone outside the restaurant shouting: ‘Food today is a quarter of the price!’
He explained that the latter approach reflects a dangerous trend in countries: returning to tax exemptions, focusing on real estate projects, and loosening oversight of production and consumer protection, which prioritizes high investment rates without assessing the value and developmental returns of those investments.

Bahaa El-Din stressed that investment is now more crucial than ever, as it directly relates to issues like unemployment, the labor market, inflation, brain drain, and the budget deficit. He affirmed that none of these issues can be resolved without increasing domestic, Arab, and foreign investment, which demonstrates a state's strength and capacity to spend.
He stated: "What is needed is an increase in both the volume and quality of investment in Egypt."

To illustrate his perspective, Bahaa El-Din posed a number of questions, starting with:
"Why has Egypt failed to create a suitable investment environment despite more than 10 years of official rhetoric? What are the obstacles, and how can we begin to address them?"

He clarified that private investment does not refer to state-run national projects or stock market investments—which, while welcome, mostly involve ownership transfers rather than adding to productive capacity. This distinction is necessary and vital.

He emphasized that the success of investment is not measured by the amount of money invested, but by the extent to which it localizes technology, adds expertise, and strengthens economic indicators that benefit the national economy and, by extension, the people.

Bahaa El-Din then asked: "Why have we failed to establish a good investment climate for the past 50 years?", noting that the issue dates back to the aftermath of the 1967 defeat and the October 1973 war. He explained that the first Investment Law was Law No. 61 of 1971, introduced by Dr. Ibrahim Shehata, who was among the first to support national legislation to organize investment.

He added that after the October War, Law No. 74 was passed, known in the media as the "Open Door Policy Law." Each of these laws had its own philosophy and structure. Law 61, for instance, specified particular sectors and activities eligible for incentives and procedures to stimulate them.

Bahaa El-Din pointed out that since Law 61, about 12 investment laws have been enacted.
"For 50 years, we've been operating under the same philosophy—targeting specific projects and activities with incentives. This model hasn’t been viable for 30 years; it might have been effective in a socialist experiment, but it's now outdated."

He criticized the practice of limiting investment to certain sectors, arguing that it is illogical. Worse still, it leads to Egypt's tax revenues benefiting other countries, as we essentially donate our taxes to foreign entities.

He noted that free zones remain controversial, and it's important to understand that global competition now revolves around production costs, availability of land and energy, skilled labor, speedy dispute resolution, and a solid legislative framework that protects investors. He stressed that if Egypt wants to keep up with the world, it must abandon this outdated model.

Bahaa El-Din asked:
"Why is Egypt’s investment climate such a challenge despite its diverse economy and highly adaptable workforce?"

He cited new challenges emerging over the past 10 years, including:

The expanding role of the state in the economy through many competing entities, which crowds out the private sector.
Increased public spending and misallocation of resources.
High cost of doing business.
He pointed out that although Egypt’s income tax rate is only 22.5%—among the lowest globally—there are many other taxes and, more critically, a proliferation of fees collected by multiple agencies, which limits expansion and job creation.

He explained the difference between, for example, a road maintenance fee and a fee imposed on a factory for building a new floor, stating:
"This hemorrhaging of fees is the most painful issue people suffer from today."

He added:
"We can’t all be cheerleaders for investment promotion and then suddenly turn into watchdogs. The institutional framework has become exhausting, and it’s no longer acceptable."

He went on:
"The roots of our crisis still exist and require immediate treatment, even if we’ve managed to avoid total collapse. I believe we have a chance to overcome it."

Bahaa El-Din expressed concern about the government's latest narrative, warning that it suggests we are still stuck in the same mindset of the past 50 years.

He continued:
"I hope we don’t celebrate the end of the crisis, because it was the people who paid the price—suffering from more than 30% inflation over the past three years, shortages of medicines and food, and soaring prices. We must take their feelings into account."

He called for the cancellation of the Investment Law, asserting that it is no longer suitable and should not be in effect in Egypt.
"I stand firmly by my opinion that the Investment Law should be abolished. It’s outdated. Many countries no longer use such laws. In fact, some now pass investment laws to restrict investment in certain sectors, not expand them or offer incentives."

He cited a recent U.S. law to limit China’s acquisition of ports due to its growing activity in this area across multiple countries.

Bahaa El-Din concluded:
"The issue will not be solved with a law. There is a foundational philosophy that we must completely abandon when talking about investment in Egypt. The day Egypt cancels its Investment Law will be a significant milestone."

He stressed that the private sector is not just a handful of well-known businessmen, but includes everyone who takes on risk with their capital—even farmers should be considered part of the private sector.
"We need to understand and engage with this concept in all its breadth."

Responding to calls for the state to exit the economy, particularly in light of the Sovereign Fund of Egypt, Bahaa El-Din said:
"The goal is not for the state to exit the economy altogether. I am not a supporter of that. What’s needed are regulations and frameworks based on the principles of competitive neutrality. That’s what the ‘State Ownership Policy Document’ should have included—not just target divestment percentages as it currently does."

He emphasized that Egypt doesn’t need to revise a document that was dead on arrival, but rather requires a new one that defines the relationship between the state and investors.

He noted that the State Ownership Policy Document failed to meet its announced goals regarding divestment volume and that about 85% of the proceeds came from the Ras El Hekma deal, which he praised for its importance and timing.

Bahaa El-Din warned against excessive optimism, saying:
"The most dangerous outcome would be a wave of enthusiasm not matched by deep reform."
He stressed that Egypt's future is tied to industry and that the top priority must be training the labor force.

Mohamed El-Sewedy, Chairman of the Federation of Egyptian Industries, emphasized that industry and tourism are two sides of the same coin, with industry being the backbone of national development. He stated:
"The current policy of making promises that cannot be kept is inappropriate. Investors want the truth, even if it’s harsh—they must understand the risks before investing. The issue isn’t just passing laws, but also implementing them effectively."

He added that Egypt’s industrial sector benefits from a large local market of more than 110 million people and stressed the need for human capital investment, suggesting that focusing on exporting 5 or 6 key products is better than trying to reduce imports broadly.

Ahmed El-Wakil, Chairman of the Federation of Egyptian Chambers of Commerce, disagreed with Bahaa El-Din and said the problems began not 50 years ago but 72, before the 1967 defeat.

"Investment is the surplus of savings from countries and individuals. We must become a country that attracts investment," he said, adding:
"What have we done to achieve that? Nothing."

He pointed to Renault's Moroccan factory, where the local component now reaches 59%, and said that Peugeot left Egypt and never returned, while Toyota operates successfully in Turkey with 72% local content.
"The issue is that Egypt’s private sector climate has been shaped by problems going back 72 years."

Dr. Hisham Zaazou, former Minister of Tourism, emphasized the importance of focusing on the tourism sector when discussing Egypt’s economy. He criticized the lack of a clear strategy despite previously stated goals of reaching 28 million tourists, while the current minister has announced a target of 31 million over the coming years.

Zaazou opposed the merger of the Ministries of Tourism and Antiquities, saying it would have been more logical to merge Tourism with Aviation, citing the Turkish and Greek models.