Openness to Foreign Investment

The government of Prime Minister Nazif has made increasing foreign investment a major goal of its economic reform program and strategy for fostering private sector-driven growth.  Egypt faces a significant challenge in improving living standards and increasing employment opportunities for its growing population.  The Ministry of Investment (MOI) handles privatization of state-owned enterprises (except for banks, which are handled by the Central Bank) and coordinates among various ministries with investment-related areas of responsibility including the Capital Market Authority, the Egyptian Insurance Supervisory Authority, the General Authority for Real Estate Mortgage Affairs and the General Authority for Free Zones and Investment (GAFI).   

Key Laws Governing Foreign Investment:

Investment Incentives Law 8 of 1997:  This law was designed to encourage domestic and foreign investment in targeted economic sectors and to promote decentralization of industry from the crowded Nile Valley area.  The law and its executive regulations and amendments provide over 20 investment incentives.  The law allows 100 percent foreign ownership of investment projects and guarantees the right to remit income earned in Egypt and to repatriate capital.  Other key provisions include:  guarantees against confiscation, sequestration, and nationalization; the right to own land; the right to maintain foreign-currency bank accounts; freedom from administrative attachment; the right to repatriate capital and profits; and equal treatment regardless of nationality.

The Income Tax Law enacted in June 2005 eliminated some of the incentives in the Investment Incentive Law, namely all corporate tax exemptions and tax holidays that the latter law had authorized for newly established companies.  The 2005 tax law also repealed tax deductions extended to companies listed on the stock exchange.  The tax incentives were not eliminated retroactively, however, so all existing companies will continue to receive their tax incentives until the end of the period stipulated when the company was established.

Under the Investment Incentives Law, qualifying investments in various fields are assured approval, effectively creating a "positive list."  These fields include land reclamation; fish, poultry, and animal production; industry and mining; tourism (covering hotels, motels, tourist villages, and transportation); maritime transportation; refrigerated transportation for agricultural products and processed food; air transportation and related services; housing; real estate development; oil production and related services; hospitals and medical centers that offer 10 percent of their services free of charge; water pumping stations; venture capital; computer software production; projects financed by the Social Fund for Development; and leasing.  Projects in certain fields, however, still require special approval (generally security clearance) from relevant ministries.  Such projects include:  any investments in the Sinai and any investments related to military production and related industries.

Procedures for obtaining approval to establish new companies are becoming simpler and waiting times shorter than in the past.  GAFI's "One-stop-shop" interfaces with other government ministries on behalf of new investors and provides after-care services for existing companies.  The One-stop-shop reportedly processes approvals for new investments on average within 72 hours. The approval system is computerized and in some instances regulations enable a company to begin operating pending security clearance.  While not a legal requirement, in practice all proposed foreign investments are scrutinized by the security services, which has in the past caused significant delays in the approval process.

Law 94 of 2005 amended the Investment Incentives Law and made companies incorporated under the Investment Incentives Law subject to the relatively simpler incorporation provisions of the Companies Law 3 of 1998 (see below).  Further, Law 94 limited the authority of the board of directors of each Public Free Zone (see below) to issuance of preliminary approvals for projects to be established in the free zone, with the final approval issued by GAFI.

Companies Law 3 of 1998:  This law applies to domestic and foreign investment in sectors not covered by the Investment Incentives Law, whether shareholder, joint stock, limited liability companies, representative offices, or branch offices.  The Companies Law permits automatic company registration upon presentation of an application to GAFI, with some exceptions.  These exceptions include companies whose founders have failed to comply with procedures and laws in the past, as well as companies whose founders have demonstrated insufficient qualifications to operate a business.  The law does provide a right to petition a denial of incorporation.  It also removes a previous legal requirement that at least 49 percent of shareholders be Egyptian; allows 100 percent foreign representation on the board of directors; and strengthens accounting standards.  Founders of joint stock and limited liability companies must submit a bank certificate to GAFI showing that 10 percent of the company's issued capital has been paid in.

Law 94 of 2005 (mentioned above) also amended some of the provisions of the Companies Law.  It removed restrictions on board members representing other board members by proxy in board of directors meetings and made it possible for a board of directors to be formed of an even number of members.  Law 94 also added a provision stipulating that companies operating in the Sinai do not acquire legal persona unless approved by a decree from the Chairman of GAFI.  It also granted companies established under the Companies Law or the Commercial Law certain incentives under the Investment Incentives Law, including protection from nationalization, imposition of obligatory pricing and cancellation or suspension of licenses to use immovable property.  It also granted companies the right to own real estate required for their activities and the right to import raw materials, machinery, spare parts and transportation methods without being required to register at the Importers Register.

Other laws governing foreign investment:

Land/Real Estate Law 15 of 1963:  This law explicitly prohibits foreign individual or corporate ownership of agricultural land (defined as traditional agricultural land in the Nile Valley, Delta and Oases).  Prime Ministerial Decree No. 548 for 2005 removed restrictions on foreign property ownership in a number of tourist and new urban areas, namely the Red Sea, Hurghada, Sidi Abdel-Rahman and Ras Al-Hekma in Matrouh Governorate.  Foreign individuals are still, however, limited to ownership of a maximum of two residences in Egypt.  Companies/citizens of other Arab countries have customarily received national treatment in this area.

Public Enterprise Law 203 of 1991:  Egypt has an ongoing privatization program under the Public Enterprise Law for the sale of several hundred wholly or partially state-owned enterprises and all public shares of at least 660 joint venture companies (joint venture defined as mixed state and private ownership, whether foreign or domestic).  The law permits sales to foreign entities.  Law 203 was amended in 1998 to allow the general assemblies of the public holding companies that manage public enterprises in a particular sector to accept bids below the initial reserve price.  Only around 10 companies have been sold under this provision since that time.  Since the appointment of the new Cabinet in July 2004 to date, no companies or assets have sold at below reserve price.

Capital Market Law 95 of 1992:  This law and its amendments and regulations govern Egypt’s capital markets.  In 1998, the government made significant amendments and changes to the law to strengthen stock market regulations against fraud, price manipulation, and insider trading.  Foreign investors can buy shares on the Cairo and Alexandria Stock Exchange (CASE) on the same basis as local investors.  In April 2006, CASE announced new membership rules for brokerage firms, including an increase in their capital requirement from 250,000 Egyptian Pounds (the Pound or LE) to LE 5 million.  Additional regulations prohibiting price manipulation and information exploitation were also issued in April 2006, on the back of a major stock market slump that began in February 2006.  In October 2006, the Capital Market Authority (CMA) announced plans to install a regulatory regime to decrease investor risk in the stock market, including advanced techniques in monitoring listed securities, in addition to new solvency, transparency and membership rules for brokers and traders.

Maritime Law 1 of 1998:  This law amended the General Egyptian Maritime Organization Law 12 of 1964.  The Maritime Law permits the private sector, including foreign investors, to conduct most maritime transport activities, including loading, supplying, and ship repair.

Electricity Law 18 of 1998:  This law amended Law 12 of 1996 to allow the government to sell minority shares of electricity distribution companies to private shareholders, both domestic and foreign.

Tenders Law 89 of 1998:  This law amended the Tenders and Bidding Law 9 of 1983 governing foreign companies' bids on public tenders.  It required the government to consider both price and best value in awarding contracts and to issue an explanation for a bid's refusal.  However, the law retained preferences for Egyptian domestic contractors, who are accorded priority if their bids do not exceed the lowest foreign bid by more than 15 percent.  The law was amended in mid-2006, requiring contracting government entities to acknowledge price fluctuations in the first year of the contract or increases or decreases in cost, and to compensate contractors where necessary.

Insurance Law 156 of 1998:  This law amended Law 91 of 1995, removing a 49 percent ceiling on foreign ownership of insurance companies, authorizing privatization of state-owned insurance companies, and abolishing a ban on foreign nationals serving as corporate officers.

Commercial Law 17 of 1999:  This law has more than 700 articles covering general commerce, commercial contracts, banking transactions, commercial papers (including checks), and bankruptcy.

Central Securities Depository and Registry Law 93 of 2000:  This law allows bookkeepers and companies dealing in central depository instruments to dematerialize shares (i.e. replace physical entries for securities to book entries).

Special Economic Zones Law 83 of 2002:  This law authorized establishment of special zones for industrial, agricultural, and service activities that are mainly export-oriented.  Firms operating in these zones enjoy incentives and facilities designed to encourage increased local and foreign investment in export-producing sectors.  

Telecommunications Law 10 of 2003:  This law stipulated that Telecom Egypt (TE) would relinquish its monopoly status as Egypt's sole domestic fixed-line operator and sole international operator by January 2006 and provided for greater flexibility in selling shares of TE through public offerings.  Despite the January 2006 deadline, in March 2006 the Minister of Communication and Information Technology announced that a study concerning the viability of a second license for a fixed-line operator would not be carried out before 2008.

Banking Law 88 of 2003:  This law replaced a number of laws that regulated the Central Bank of Egypt and the banking sector, foreign exchange, account secrecy, and privatization of public sector banks.  The law strengthened prudential banking regulations, raised minimum capital requirements for banks and foreign exchange bureaus, and re-affirmed the government's authority to privatize public sector banks. 

Oil & gas exploration and development:

These sectors are subject to different procedures, with an individual law required for each investment.  Companies are initially granted exclusive rights for exploration in a concession area.  If commercial discoveries are found, a joint venture with the state-owned Egyptian General Petroleum Company is formed, based on a standard production sharing agreement that is specified in the law for the concession.

With regard to privatization of public enterprises, the MOI has made enterprises in all sectors subject to privatization, and has sold entities in the construction, petroleum, telecoms and chemicals sectors, all previously considered "strategic" sectors and therefore not part of the privatization program.  Several of these companies have been sold to foreign investors, who are treated equally to local investors in the privatization process.  The MOI has also opened the privatization program to include services and some public utilities.  Some infrastructure areas, including ports and airports, power generation, and cellular phone networks have also been opened to private investors on a build-own-operate-transfer (BOOT) basis.  Foreign companies have won major BOOT tenders in power generation and airport and maritime port construction.  Since 2002, however, the government has suggested that BOOT projects that require payment for their services in foreign exchange will also be required to generate foreign exchange revenues.

A variety of privatization methods are currently in use by the MOI, including asset unbundling and leasing with options to buy.  Incentives, including five-year tax exemptions (notwithstanding the 2005 tax law) and the removal of real estate value from company valuations, have been announced for the sale of 61 companies that have been identified as distressed or loss makers.  The MOI is also restructuring public enterprises that are facing difficulties in remaining afloat.  The restructuring is tailored individually to lead to eventual sale of the enterprises in the medium to long-term.  Additional incentives have been used to make public enterprises more attractive to investors, including allowing the transfer of excess and idle assets, some working capital items, and liabilities to the public holding companies responsible for all public entities in a particular sector.  Bidding criteria for privatizations are generally clear and transparent.

Investors have traditionally identified valuation and commitment, as reflected in the pace of execution of deals, as the two primary obstacles to effective privatization in Egypt.  While the government's commitment and the pace at which it has concluded privatizations have increased markedly under the Nazif administration, privatization remains controversial in Egypt.  Starting mid-2006, sectoral issues such as price and supply sensitivities in the sugar industry, and mounting political opposition, particularly after the parliamentary elections in late 2005, have obliged the Nazif administration to reconsider its rapid pace of privatization.
 
While the Nazif administration has taken significant steps to attract foreign investment, certain informal barriers still exist.  For example, foreigners are prohibited from functioning as Commercial Agents and Traders.  In the banking sector, the Central Bank has not issued a new commercial banking license in almost 20 years.  In practice, the only way for a new bank, whether foreign or local, to enter the market (except as a representative office) is to purchase an existing bank.  In the past year, the government has sold its shares in several joint venture banks to foreign banking entities.  The first public bank to be privatized – Bank of Alexandria – was also sold to a foreign banking entity, Sanpaolo IMI of Italy in late 2006.  In the insurance sector, the government has stated that it will not issue licenses for new insurance companies, in order to focus investor attention on privatization of the existing firms.  Therefore, as in the banking sector, foreign firms can only enter the Egyptian insurance market through purchase of shares in existing insurance firms.  

Pharmaceutical prices remain controlled, although the government has decontrolled prices of many other industrial products.  The government uses a standard cost-plus formula to determine pharmaceutical prices for new-to-market products.  Most pharmaceutical companies rely heavily on imported goods, so the significant devaluation of the Pound since 2003 has sharply reduced their profitability.  The Ministry of Health and Population has revised prices on existing pharmaceuticals over the last few years, but in a selective manner that has precluded price adjustments for the majority of domestic and foreign pharmaceuticals. 

Other obstacles to investment include excessive bureaucracy, a shortage of skilled mid-level managers, limited access to credit, slow and cumbersome customs procedures in some areas, and non-tariff trade barriers.  The Egyptian judicial system, which generally upholds the sanctity of contracts, is extremely slow and can take several years to process cases.  The judicial system is also subject, in some cases, to political influence. 

Overall, the government's efforts to attract foreign investment appear to have paid off, particularly in portfolio investment.  The CASE was the best performing emerging market stock exchange in the world the past two years.  The CASE also fared better than neighboring Gulf exchanges in a major correction that hit the region in the second quarter of 2006.  Foreign direct investment, particularly greenfield investment in non-energy sectors, has not grown as rapidly, but many companies that are already present in the Egyptian market have increased their investments.  The value of foreign investments in companies’ capital amounted to LE 12.4 billion between January and July 2006, higher than the total value realized in 2005, which stood at LE 10.2 billion.

Conversion and Transfer Policies

Since January 2003, Egypt's stated policy has been a free-floating foreign exchange rate regime, with all banks free to set their own rates.  The Central Bank posts an average rate at the end of each day based on reported transactions, which serves as a market guideline.  The Pound depreciated significantly in 2003 and early 2004, reaching LE 6.22/$1 in mid-2004.  In late December 2004, the Pound suddenly appreciated to LE 5.73-78/$, where it has remained since, despite significant upward pressure on the Pound over the last two years.  The Central Bank maintains the current exchange rate through operations it calls "sterilization”.  The government's actions to improve liquidity, including abolishing the foreign exchange surrender requirement in December 2004, have led to vastly improved access to foreign exchange and the complete elimination of the parallel market. 

Egyptian law allows individuals and businesses to conduct all normal foreign exchange transactions, including establishing foreign exchange accounts and transferring foreign exchange in and out of Egypt.  Authorized banks may provide the full range of foreign exchange transactions, including accepting deposits, executing transfers, and opening letters of credit.  Foreign currency is available at banks and foreign exchange bureaus. 

The 1992 U.S.-Egypt Bilateral Investment Treaty provides for free transfer of dividends, royalties, compensation for expropriation, payments arising out of an investment dispute, contract payments, and proceeds from sales.  Transfers are to be made in a "freely convertible currency at the prevailing market rate of exchange on the date of transfer with respect to spot transactions in the currency to be transferred."

The Investment Incentives Law stipulates that non-Egyptian employees hired by projects established under the law are entitled to transfer their earnings abroad.  Conversion and transfer of royalty payments are permitted when a patent, trademark, or other licensing agreement has been approved under the Investment Incentives Law.

Banking Law 88 of 2003 regulates the repatriation of profits and capital.  The government has repeatedly emphasized its commitment to maintaining the profit repatriation system to encourage foreign investment in Egypt.  The current system for profit repatriation by foreign firms, announced in late June 2002, requires sub-custodian banks to open foreign and local currency accounts for foreign investors (global custodians), which are exclusively maintained for stock exchange transactions.  The two accounts serve as a channel through which foreign investors process their sales, purchases, dividend collections, and profit repatriation transactions using the bank’s posted daily exchange rates.  The system is designed to allow for settlement of transactions in less than two days.

Expropriation and Compensation

As noted previously, the Investment Incentives Law provides guarantees against nationalization or confiscation of investment projects under the law's domain.  The law also provides guarantees against seizure requisition, blocking, and placing of assets under custody or sequestration.  It also offers guarantees against full or partial expropriation of real estate and investment project property.  The U.S.-Egypt Bilateral Investment Treaty also provides protection against expropriation.

While the national government does not generally expropriate property, there have been reports of local authorities in one governorate expropriating land from a private firm.  While the governorate offered compensation, it was below market value for the land and has yet to be paid, more than 10 years after the expropriation.  Private firms are able to take cases of expropriate to court, but as noted previously, the judicial system is very slow and can take several years to resolve a case.    

Dispute Settlement

Although previous administrations had moved very slowly to resolve investment disputes, the Nazif administration made has investment dispute resolution a priority.  The government resolved the concerns of two major foreign investors through enactment of new legislation in mid-2005.  A number of disputes with U.S. investors, however, remain unresolved.  These disputes involve widely differing issues, and do not appear to reflect a pattern or any discrimination against U.S. investments.  The U.S. Embassy recommends that U.S. companies put clauses specifying binding international arbitration of disputes in their commercial agreements.

Egypt acceded to the International Convention for the Settlement of Investment Disputes in 1971 and is a member of the International Center for the Settlement of Investment Disputes (ICSID), which provides a framework for arbitration of investment disputes between the government and foreign investors from another member state, provided that the parties agree to such arbitration.  Without prejudice to Egyptian courts, the Investment Incentives Law recognizes the right of investors to settle disputes within the framework of bilateral agreements, the ICSID or through arbitration before the Regional Center for International Commercial Arbitration in Cairo, which applies the rules of the United Nations Commissions on International Trade Law.  The U.S.-Egypt Bilateral Investment Treaty allows for the possibility of an investor taking a dispute with a party directly to binding third-party arbitration.  The Egyptian courts generally endorse international arbitration clauses in commercial contracts.  For example, the Court of Cassation has, on a number of occasions, confirmed the validity of arbitration clauses included in contracts between Egyptian and foreign parties.

Egypt adheres to the 1958 New York Convention on Enforcement of Arbitrary Awards; the 1965 Washington Convention on the Settlement of Investment Disputes between States and the Nationals of Other States; and the 1974 Convention on the Settlement of Investment Disputes between the Arab States and Nationals of Other States.  An award issued pursuant to an arbitration that took place outside Egypt may be enforced in Egypt if it is either covered by one of the international conventions to which Egypt is party or satisfies the conditions set out in the Arbitration Law. 

Egypt's Dispute Settlement Law 27 of 1994 also provides for the arbitration of domestic and international commercial disputes and limited challenges of arbitration awards in the Egyptian judicial system.  The law was amended in 1997 to include disputes between public enterprises and the private sector.  The Egyptian judicial system functions extremely slowly, and cases can often remain in the system for several years.  Arbitral awards are made in the original currency of the transaction, via the competent court in Egypt, usually the Cairo Court of Appeal.  A special order is required to challenge an arbitration award in an Egyptian court.  To enforce judgments of foreign courts in Egypt, the party seeking to enforce the judgment must obtain an exequatur.  To apply for an exequatur, the normal procedures for initiating a lawsuit in Egypt must be satisfied.  Moreover, several other conditions must be satisfied, including ensuring reciprocity between the Egyptian and foreign country's courts and verifying the competence of the court rendering the judgment. 
 
Egypt does not have a bankruptcy law per se, but the Commercial Law 17 of 1999 includes a chapter on bankruptcy.  The terms of the bankruptcy chapter are silent or ambiguous on several key issues that are crucial to the reduction of settlement risks.  The government is currently undertaking a comprehensive review of Egypt's commercial legislation, and should address the current legal shortcomings regarding regulation of bankruptcy.  The review is expected to take several years.

Performance Requirements and Incentives

Performance requirements:  No performance requirements are specified in the Investment Incentives Law.  The ability to fulfill local content requirements is no longer a prerequisite for approval to set up assembly projects, but assembly industries still must meet a minimum local content requirement of 40 percent to benefit from customs tariff reductions on imported industrial inputs.  Oil and gas exploration concessions, which do not fall under the Investment Incentives Law, do have performance standards, which are specified in each individual agreement and which generally include the drilling of a specific number of wells in each phase of the exploration period stipulated in the agreement.  The Labor Law 12 of 2003 requires that foreign workers account for no more than 10 percent of the total workforce of a firm.  This law's requirements do not apply to the oil and gas industry, but most or all individual concession agreements have some sort of requirement on percentage of local employees.

Tax Incentives:  As noted previously, parliament passed a new personal and corporate income tax law in July 2005.  The law eliminated tax incentives for new businesses, but reduced all taxes by 50 percent.  The law also changed the relationship between the Tax Authority and taxpayers, requiring taxpayers to do a self-assessment and then submit a tax return, which can be audited by the Tax Authority.  Under previous legislation, the Tax Authority assessed all taxpayers' returns and presented a bill, a process that could take several years.  The Minister of Finance has publicly stated that the new, reduced tax rates and a greater level of trust between taxpayers and the government will encourage economic actors in Egypt's large informal sector to register their enterprises and begin paying taxes.  Domestic and foreign individuals and businesses are treated equally under the new tax law.  The executive regulations of the new tax law were issued in late 2005.   

Communities Law 3 of 1998:  All incentives under this law were removed with the new income tax law, but the government is developing a new set of incentives for investment in communities covered by this legislation.  The government has not announced a timeline for enactment of the new incentives. 

Pricing and Customs Preferences:  By law, the government may not intervene to set the prices or profits of companies established under the Investment Incentives Law, except for pharmaceuticals, as noted previously. 

Geographical Areas:  There are no formal legal geographical restrictions on investments.  However, due to congestion in Cairo, the government generally denies approval for investments in manufacturing facilities in Cairo, unless a compelling economic rationale exists.  The government also offers incentives to move existing manufacturing facilities out of Cairo.  Upon request, government officials will assist investors in locating a site for a project, often in one of the new industrial sites located outside Cairo, and will sometimes provide necessary infrastructure.  In addition to the new industrial sites outside Cairo, the government has targeted Upper Egypt (Upper Egypt refers to governorates in southern Egypt) for development by private investors.  Land in industrial zones in Upper Egypt is offered free of charge.  The government will also provide hookups to infrastructure (water, sewer, electricity, and gas) and transfer land titles to the developer three years after project startup.
 
Research & Development (R&D) Projects:  Large-scale R&D activities in Egypt are modest.  Spending on R&D in the government's economic development plan for fiscal year 2006/07 (FY06/07) stands at around LE 400 million.  The majority of government-funded R&D programs are in agriculture, health, and, to a lesser extent in the manufacturing sector.  There is no discrimination against U.S. or other foreign firms wishing to participate in R&D programs in Egypt.  Most Egyptian R&D programs are established by government initiative to target specific problems and/or opportunities.  Donor support plays an important role in Egypt’s R&D activities, constituting about 15 percent of total R&D spending.

Import and Export Policies:  There has been significant progress in trade reform under the Nazif government.  Shortly after taking office in July 2004, the new government cut tariffs sharply and simplified the customs regime to stimulate trade and economic development.  The government removed GATT-inconsistent services fees and import surcharges, reduced the number of ad valorem tariff rates from 27 to 6, dismantled tariff inconsistencies, including sharp escalation and reverse progression on tariff rates, and rationalized national sub-headings above the six-digit level of the Harmonized System.  As a result of this reform, Egypt's average weighted tariff rate fell from 14.6 percent to 9.1 percent and the number of ad valorem tariff rates was reduced from 27 to 6.  The government also eased or lifted a number of restrictions on U.S. products over the last year.  Tariffs on fabric imports were significantly reduced and tariffs on clothing were finally made consistent with Egypt's WTO commitments.  A BSE-related ban on U.S. beef imports was lifted in early 2005, and a requirement that beef imported for direct consumption contain no more than 7 percent fat content was made voluntary. 

In October 2005, new import and export regulations were issued, which reduced the number of imported goods subject to inspection by the General Organization for Export and Import Control (GOEIC) and permitted importers to provide their own certificates of health and safety conformity from any internationally accredited laboratory inside or outside of Egypt.  The new regulations also transferred responsibility for issuing and reviewing certificates of origin from GOEIC to the Egyptian Customs Authority. 

Despite the government's sweeping customs/tariff reform and easing of import restrictions, significant problems remain.  The WTO Customs Valuation Agreement, first introduced in 2001, has still not been fully implemented.  As a result, importers face a confusing mix of new invoice-based and old reference-price valuations.  Acknowledging these problems, the Ministry of Finance (MOF) has reiterated its commitment to fully implement the WTO Customs Valuation Agreement and is working in concert with USAID, which is funding a comprehensive five-year, $20-million customs reform project. 

A number of non-tariff barriers or bans continue in force to protect local producers.  Mandatory quality-control standards make importing certain products into the Egyptian market difficult.  Over 130 categories of imports are still subject to mandatory quality-control inspections, including foodstuffs, appliances, electrical products, and auto parts.  Although the government says that the quality control standards are applied equally to imports and domestically produced goods, in practice, imports are scrutinized more rigorously by multiple government agencies.  At best, enforcement is opaque.

Many U.S. agricultural products also face burdensome import licensing requirements.  Although a ban on whole poultry was lifted in July 1997, imported poultry parts are still prohibited, ostensibly because they do not meet halal (religious) standards.  Health food products such as low-calorie foods, diet pills, and vitamins also face informal barriers to trade.  These products must obtain a special registration from the Food Institute of the Ministry of Health, which can take months to process.  Products with domestic substitutes have experienced substantial delays, some as many as six months to one year. 

Shelf-life standards also act as an indirect trade barrier.  Egypt sets the shelf life of many imported products using non-science-based standards that do not recognize quality, safety, and technological differences between producers.  By government decree, imports (mainly food products) must have 50 percent or more of their shelf life remaining.  The government is reviewing Egypt's shelf life standards to make them more science-based and WTO-consistent.

The import inspection process remains confusing, despite the designation of the GOEIC as the coordinator for all import inspections.  The Ministries of Health and Agriculture maintain their own inspection units and procedures.  Imported refrigerated containers of foodstuffs typically take 25 days to clear customs.  While two-month delays were common in the past, overall customs clearance times are improving, and import inspections now typically take three to four weeks.

Ministerial Decree 619 of 1998 required a certification of origin for imports and stipulated that consumer goods (durable and non-durable) be shipped directly from the country of origin.  The decree was amended in late 1999 to ease requirements for the certificate of origin and allow shipment of imported consumer goods from the main branches of the producing company and its distribution centers.  Company invoices noting the country of origin and bearing the endorsement of an Egyptian overseas commercial office can now be used as certificates of origin.  Ministerial Decrees 577 and 580 of 1999 require cars to be imported in the year of production.  In 2000 the decree was amended adding one year after the year of production to the period during which passenger vehicles can be imported.  Since May 1999, the Central Bank of Egypt has required 100 percent coverage for credit lines opened for goods imported by traders for resale purposes.

The Export Promotion Law 155 of 2002 aimed to improve the duty drawback and temporary admission systems for exporters by establishing a central unit under the joint supervision of the Ministries of Finance and Trade and Industry to monitor and streamline the systems.  The duty drawback system requires full custom duties to be paid on semi-finished imports.  There is a one-year time limit for re-exporting these imports as part of a final product in order to claim a full rebate of the duties and taxes paid.  In November 2002, the Ministries of Finance and Trade and Industry jointly inaugurated the first upgraded temporary-admissions unit at the Port of Alexandria.  With assistance from USAID, three other central units for temporary admissions are now operational in Suez, Port Said, and Damietta.

The Export Promotion Law also established an "Export Promotion Fund," to promote Egyptian exports and increase their share in foreign markets.  The Fund supports a number of sectors, mainly textiles and food industries, through financial incentive packages aimed at alleviating initial costs in the export process.  The Fund’s annual budget currently stands at LE 1.2 billion.  To date the fund has not been used to subsidize exports.  Although there are no executive regulations for the Export Promotion Law, discreet implementing decrees have been issued.  Financial and administrative regulations for the Export Promotion Fund were also issued and approved by the Ministry of Trade and Industry and published in the Official Gazette.

Egypt only rarely provides agricultural export subsidies and does not impose export performance requirements.  Exports of scrap iron are subject to a levy of LE 225 per ton to ensure a sufficient supply for the domestic steel industry.  As noted above, exporting industries, including Investment Incentives Law projects, are required to pay the full customs rate on imported inputs but receive a rebate of duties and taxes when they export finished products.  Although exporters had previously reported lengthy delays in the customs rebate process, recent rebate transactions have been processed faster and more efficiently than in the past.  The paperwork process associated with import-export transactions also has been simplified and updated.

Right to Private Ownership and Establishment

By law, foreign and domestic private firms have the right to establish and own business enterprises and engage in all forms of remunerative activity, except for the restrictions on foreign business noted previously.  Private enterprises may freely establish, acquire and dispose of interests in business enterprises.  In practice, private firms sometimes find themselves at a disadvantage when competing for resources with state-owned firms.  For example, state-owned firms often have easier access to bank credit from the state-dominated banking system than do private firms, whether domestic or foreign.

Protection of Property Rights

The Egyptian legal system provides protection for real and personal property, but laws on real estate ownership are complex and titles to real property may be difficult to establish and trace.  The Nazif government has set modernization of laws on real estate ownership and tenancy as a priority for 2007.  There are price controls on older residential and commercial real estate property resulting in apartment rents as low as $10 per month.  However, these rent controls do not apply to real estate put into service in recent years.  There are no restrictions on foreign ownership and rental of non-agricultural real estate in Egypt although specific procedures are required in some cases depending on the geographical location and building codes in different governorates.

The mortgage facility in Egypt remains underdeveloped, though MOI has made access to affordable mortgage financing a priority.  In June 2001 the People’s Assembly passed Real Estate Mortgage Law 148 for 2001.  The law authorized both banks and non-bank mortgage companies to issue mortgages, provided clear procedures for foreclosure on property of defaulting debtors and established the General Authority for Real Estate Mortgage Affairs.  Amendments to both the Capital Market and Real Estate Mortgage laws passed in June 2004 allowed for the issuance of mortgage-backed securities.

Two real estate finance companies were established in the first half of 2004 and one of the two companies started issuing mortgages in the second quarter of 2004.  Real estate registration fees, long considered a major impediment to development of the real estate sector, were capped in May 2006 at no more than LE 2000, irrespective of the contract value.  In early August 2006, MOI issued the new schedule of property registration as follows:  LE 500 for areas up to 100 square meters, LE 1000 for up to 200 sq. meters, LE 1500 for up to 300 sq. meters and LE 2000 for areas over 300 sq. meters.

Law No. 83 for 2006, issued in June 2006, amended certain provisions pertaining to notarization fees, which remain high, and the Land Register Law.  In June 2006, a new Real Estate Tax Law was also passed, decreasing real estate taxes from 40 to 10 percent of the rental fee and exempting from taxes leases below LE 600 per annum.  Also in late June, a mortgage refinancing company was established, with a paid-in capital of LE 200 million, and a license for up to LE 1 billion.  The company is to have the role of a market-maker by providing long term finance to banks and real estate financing companies, at lower-than-market interest rates. The World Bank is reported to have provided a loan of LE 214 million for the new facility.  Despite these efforts, the mortgage market remains in its infancy in Egypt, and the concept of mortgage-based purchases has not yet taken hold in Egyptian society. 

For information on protecting your Intellectual Property Rights, see Chapter 3 Protecting Your Intellectual Property.

Transparency of Regulatory Rights

The Nazif administration has made considerable effort to improve the transparency of government policy.  The process has proven difficult, however, given the extremely opaque policies in place prior to Nazif's taking office and resistance from entrenched bureaucratic interests.  Significant obstacles continue to hinder private sector investment, including the often-arbitrary imposition of bureaucratic impediments and the length of time needed to resolve them.  In October 2005, new import and export regulations were issued, completely replacing all prior regulations.  The new regulations have reportedly sped up import and export clearance processes, but Customs officials still have significant flexibility in classifying goods.  Enforcement of health and safety regulations remains uneven and is complicated by a multiplicity of laws, agencies, and opinions.  For example, at least four ministries regulate the operation of restaurants.

Law 89 of 1998 amended the Tenders and Bidding Law 9 of 1983 to improve equality and transparency in government procurement.  Key provisions of the law include:  a prohibition on reopening negotiations after final bids have been received; more transparency in the criteria for bid acceptance and rejection; equality among bidders, contractors, and government agencies; more weight given to the technical aspects of a tender or bid; protection of contractor rights; reduction of insurance fees; immediate return of deposits once the government announces bid or tender results; and the establishment of a Central Office for Complaint Resolution in the MOF.

In January 2005, parliament passed the Law on Protection of Competition and Prohibition of Monopolistic Practices.  A new quasi-governmental body, the Egyptian Competition Authority, began operating in 2006 to implement the law.  Funding for the new agency comes from direct government appropriations and/or donations from professional or academic bodies.  The MOI also issued corporate governance guidelines as Ministerial Decree No. 332 in October 2005.  The non-binding guidelines – formulated along the lines of OECD principles – apply to private sector share-holding and limited liability companies, in addition to brokerages.  In July 2006, corporate governance guidelines for public sector companies were also issued by MOI.

Accounting standards in government entities are still not fully consistent with international norms, although efforts are underway to bring standards into conformity with International Financial Reporting Standards (IFRS).  The MOI issued a directive in September 2006 with new accounting standards for all listed companies, including public entities.  The new standards, which come into effect in January 2007, will be close, but not identical to IFRS.  Over the last two years the MOF has also adjusted its own budget classification system according to the Government Finance Statistics Manual for 2001 of the IMF.

Egyptian law does not require that proposed legislation be published prior to consideration in parliament.  In practice, however, proposed legislation is occasionally circulated among concerned parties such as business associations and labor unions.  Responsiveness on the part of legislators to feedback received from concerned parties is questionable.  After approval by parliament, new legislation is published in the Official Gazette.

Efficient Capital Markets and Portfolio Investment

The Nazif administration has taken steps to streamline capital markets and overcome years of stagnation in the banking system, which had led to poor access to credit for the private sector and a resulting lack of economic growth.  Credit in the banking system is increasingly allocated on market principles and policy interest rates are now more market-determined than under previous administrations.  Foreign investors have equal access to credit, though the public sector still absorbs a significant portion of the available credit.

The Capital Market Law 95 of 1992, along with the Banking Law of 2003, constitutes the primary regulatory framework for the financial sector.  The law grants foreigners full access to capital markets, and authorizes establishment of Egyptian and foreign companies to provide underwriting of subscriptions, brokerage services, securities and mutual funds management, clearance and settlement of security transactions, and venture capital activities.  The law also authorizes the issuance of corporate bonds and bearer shares, and makes income from most stocks and bonds non-taxable.  The law specifies mechanisms for arbitration and legal dispute resolution and prohibits unfair market practices.  The law also established the CMA as an independent supervisor for the securities industry.  The CMA is currently under the authority of the MOI.  The CMA and the CASE regularly publish reports on trading and market conditions in Egypt. 

The Central Securities Depository and Registration Law and its executive regulations, issued in 2000, eased registration and deposit of securities.  Settlement of transactions now takes three days for dematerialized issues, four days for materialized issues and two days for 14 active stocks that are not bound by the five percent daily price movement ceiling. 

Although Egyptian law and regulations allow companies to adopt bylaws limiting or prohibiting foreign ownership of shares, only one company listed on the stock exchange has such restrictions.  A significant number of the companies listed on the exchange are family-owned or dominated conglomerates, and free trading of shares in many of these ventures, while increasing, remains limited.  However, stocks are de-listed from the exchange if not traded for six months. 
 
In 2002, the then Minister of Foreign Trade added an additional chapter to the executive regulations of the Capital Market Law to allow margin trading to increase liquidity and trading in the market through brokerage firms and financially solvent licensed companies.  In April 2003, the U.S. Securities and Exchange Commission included the CASE in its list of accredited stock exchanges, allowing U.S. financial institutions to invest in the Egyptian stock market without undertaking the cumbersome procedures previously required.  In May 2006, the CMA issued Decree No. 50 for 2006, organizing online trading on the CASE.  The decree allows brokerages to receive requests for buying/selling of shares by clients via the Internet.  The decree also mandates infrastructure requirements, mainly web security provisions, which brokerage firms must meet in order to provide online services.  To date, two companies have obtained online trading licenses.  Short selling was also introduced on the CASE in June 2006.

Leasing Law 95 of 1995 allows for the leasing of capital assets and real estate and was designed to reduce the high start-up costs faced by new investors.  Notably, the law specifically allowed for the purchase of real estate assets through leasing mechanisms.  The Leasing Law was amended in 2001 to make leasing more attractive for investors by exempting financial leasing activities from sales taxes and fees; specifying financial standards that leasing companies must adhere to; increasing the control, organization and efficiency of the leasing activities; and incorporating clear guarantees for the parties involved.

The Egyptian commercial banking system had total assets of LE 574 billion ($100 billion) and total deposits of LE 582 billion ($101 billion) at the end of August 2006, according to Central Bank statistics.  Following privatization of Bank of Alexandria (BOA) – the smallest of the public banks – the remaining three state-owned banks (National Bank of Egypt (NBE), Bank Misr and Banque du Caire) account for around 42 percent of total assets, down from 65-70 percent in the early 1990's.  Banque du Caire and Banque Misr are set to merge by the end of 2006, leaving only two public banks in Egypt. 

The profitability of public sector banks remains weak, partly due to high provisioning requirements that have absorbed more than 50 percent of pre-provision profits in the past few years, reflecting the banks’ poor asset quality.  The banking sector as a whole, but particularly the public banks, have faced problems with non-performing loans granted to loss making state-owned enterprises and private businesses.  According to government estimates, non-performing loans account for roughly 16 percent of total loans outstanding, but some outside observers put it even higher.  Despite the increases in provisioning, most observers believe the state-owned banks are still significantly under-provisioned.  In early January 2006, the government announced that an agreement had been reached between the MOF, the Central Bank and BOA for settlement of public sector debt to BOA, on the order of LE 7 billion.  Proceeds from issuance of a new mobile phone operator license issued in 2006 (approximately LE 17 billion), will also be used to settle some of the public banks' non-performing loans, according to the Central Bank.

Political Violence

Egypt suffered a number of terrorist attacks in the past 18 months, in Taba in October 2004, Cairo in April 2005, Sharm el Sheikh in July 2005 and Dahab in April 2006.  These incidents appear to be aimed at undermining government authority via the tourist sector.  The incidents were not directed at foreign investors or their property, though they targeted hotels and areas frequented by foreign tourists.  Although tourist numbers decreased somewhat in the immediate aftermath of these events, the decrease was temporary and the inflow of tourists continues to increase steadily.  The government has increased security in tourist areas following these incidents; all Americans are urged to be vigilant and exercise good security practices while in Egypt.

Recent democratic changes have fostered a more public debate regarding the future of political reform in Egypt.  This debate has generated frequent public demonstrations, most of which have remained peaceful.  There have been incidents involving violence, however, but the violence was not directed toward foreigners or foreign investment

Corruption

While U.S. investors have reported corruption by lower-level government officials, they have not identified corruption as a leading obstacle to foreign investment.  Corruption in Egypt is a crime.  Two agencies oversee enforcement of corruption laws in the public sector– the Administrative Control Authority (ACA) under the authority of the Cabinet of Ministers and the Illicit Gain Office under the authority of the Public Funds Prosecution of the Interior Ministry.  In the private sector, there are two types of corruption cases, commercial and civil.  Commercial cases are subject to the Commercial Law and the Dispute Settlement Law.  The district attorney’s office and the civil courts adjudicate civil cases.  The ACA may intervene when corruption occurs in the private sector if public money and/or public interests are involved.

Giving and accepting bribes are criminal acts in Egypt.  Penalties include pecuniary fines and imprisonment.  Bribing foreign officials is also a crime in Egypt.  High-profile corruption cases since 2002 have resulted in lengthy trials, and convictions in some instances, for several former government officials, including a former Minister of Finance, former head of the Egyptian Customs Authority, and the former Governor of Giza Province.  Several businessmen and prominent bankers also have been charged (and some convicted) for alleged corruption related to non-payment of loans.  Enforcement of corruption laws does not appear disproportional against foreigners, but evidence indicates that cases brought to court are often politically motivated, i.e., cases tend to be brought against individuals who have fallen out of favor with the government.

Egypt is a signatory to the UN Convention Against Corruption, but has not signed the OECD Convention on Combating Bribery or any other regional anti-corruption convention.  Certain government officials have recently made public statements against corruption, and the MOI announced an anti-corruption initiative that will include a review of existing anti-corruption laws, and the functioning of enforcement efforts.  The MOI has also identified the privatization program as part of the government's anti-corruption measures.

Transparency International ranked Egypt 70th out of 163 surveyed countries in its 2006 survey on perceptions of corruption

Bilateral Investment Agreements

Egypt has signed investment agreements with over 40 other countries, including Armenia, Belgium, China, Finland, France, Germany, Greece, Italy, Japan, Libya, Luxembourg, Morocco, the Netherlands, Romania, Singapore, Sudan, Sweden, Switzerland, Thailand, Tunisia, the United Kingdom and the U.S.  The U.S-Egypt Bilateral Investment Treaty provides for fair, equitable, and nondiscriminatory treatment for investors of both nations.  The treaty includes provisions for international legal standards on expropriation and compensation; free financial transfers; and procedures for the settlement of investment disputes, including international arbitration.

In addition to specific investment agreements, Egypt is also a signatory to a wide variety of agreements covering trade issues.  In July 1999, Egypt and the United States signed a Trade and Investment Framework Agreement (TIFA), a step toward creating freer trade and increasing investment flows between the U.S. and Egypt.  In June 2001, Egypt signed an Association Agreement with the European Union (EU).  Egypt’s parliament ratified the agreement in March 2003, and it entered into force on June 1, 2004.  The agreement provides for immediate duty free access of Egyptian products into EU markets, while duty free access for EU products will be phased in over a twelve-year period.  In recent years Egypt has worked on reaching agreements with 11 Arab League members in connection with the Arab Common Market Treaty of the 1960's.  These agreements call for phasing out existing tariffs over a 10-year period, but all have long negative lists.

In February 2004, Egypt signed a free trade agreement with Jordan, Morocco and Tunisia.  The Aghadir Agreement, as it is known, committed the parties to removing substantially all tariffs on trade between them by January 1, 2006, and to intensifying economic cooperation through harmonization of standards and customs procedures. The agreement has not yet entered into force, however, as Morocco has not completed its ratification.  The agreement called for an immediate tariff reduction of 80 percent and complete elimination of tariffs by the end of 2005, if all parties had ratified and exchanged instruments of ratification in 2004.  Egypt joined the Common Market for Eastern and Southern Africa (COMESA) in June 1998.

On December 14, 2004, Egypt and Israel signed an agreement to take advantage of the U.S. government Qualifying Industrial Zone (QIZ) program.  The purpose of the QIZ program is to promote stronger ties between the region's peace partners by granting duty-free access to goods produced in QIZs in Egypt and Jordan using a specified percentage of Israeli input.  At present, more than 600 Egyptian companies have registered to export under this program.  The industrial areas currently included in the QIZ program are Tenth of Ramadan, Fifteenth of May, South of Giza, Shobra El-Khema, Nassr City, El-Amria, and Port Said.  Exports from these areas are increasing rapidly.   

OPIC and Other Investment Insurance Programs

In July 1999, Egypt and the U.S. signed an updated investment agreement to facilitate the U.S. Overseas Private Investment Corporation (OPIC)'s provision of political risk insurance for U.S. private investment as well as for bid, performance, and advance payments, and customs bonds and guarantees issued on behalf of U.S. suppliers and contractors in Egypt.

Egypt is a member of the World Bank's Multilateral Investment Guarantee Agency (MIGA).

Labor

Egypt's labor force has grown steadily in recent years, with upwards of 600,000 new entrants into the labor market each year.  As of June 2006, official statistics put the labor force at 21.8 million.  According to more detailed data available for FY04/05, 6.0 million (31 percent) were civil servants and public-sector employees and 13.3 million (69 percent) work in the private sector. Recent official figures do not indicate the size of the informal sector.  However, independent sources estimate the informal sector has at least 6.7 million workers.  Official statistics estimate unemployment at 11.2 percent of the total labor force in FY 04/05, and 10.0 percent in FY 05/06, while unofficial estimates range between 12 and 20 percent.

There is universal agreement that the government bureaucracy and public sector companies are substantially over-staffed compared to private sector business.  Skilled labor in some professions is in short supply, despite high numbers of university graduates in those fields, and foreign companies frequently pay higher wages to attract workers with valuable skills.  Millions of Egyptians continue to seek employment abroad on both a temporary and permanent basis.

The Unified Labor Law 12 of 2003 provides comprehensive guidelines on individual labor relations, including organization of recruitment, work and termination of employees, vocational guidance, training, health, and safety.  The law established a qualified right of employees to strike, as well as rules and guidelines governing mediation, arbitration, and collective bargaining between employees and employers.  Non-discrimination clauses are also included, and the law complies with labor-related International Labor Organization (ILO) conventions regulating the employment and training of women and eligible children (Egypt ratified ILO Convention 182 on Combating the Worst Forms of Child Labor in April 2002).  The law also created a national committee to formulate general labor policies and the National Wage Council, which discusses wage-related issues and national minimum-wage policy.   

Under the Unified Labor law, workers may join trade unions but are not required to do so.  A trade union or workers’ committee may be formed if 50 employees in an entity express a desire to organize.  Most union members, about 27 percent of the labor force, are employed by state-owned enterprises.  All trade unions are required to belong to the Egyptian Trade Union Federation.  The ILO's Committee of Experts has emphasized repeatedly that a law requiring all trade unions to belong to a single federation infringes on the freedom of association, but the government has not changed the law.

Regarding the right to strike, workers have the right to strike peacefully, provided the trade union organizes the strike in defense of vocational, economic, and social interests and announces it at least ten days in advance.  Strikers must also notify the employer and concerned administrative officials of the reasons and time frame of the strike.  The law prohibits strikes in strategic or vital establishments in which the interruption of work could result in disturbing national security or basic services provided to citizens. 

Collective negotiation is allowed between trade union organizations and employers or their organizations when attempting to improve labor terms, conditions, and employment provisions; cooperating between labor parties to achieve social development for workers of an establishment; and settling disputes between workers and employers.  Agreements reached through negotiations are recorded in collective agreements regulated by the Unified Labor law.

The Ministry of Manpower and Migration sets worker health and safety standards, which also apply in public and private free zones and the Special Economic Zones (see below).  Enforcement and inspection, however, are uneven.  The Unified Labor law prohibits employers from maintaining hazardous working conditions, and workers have the right to remove themselves from hazardous conditions without risking loss of employment. 

The labor laws allow employers to fully or partially close down or downsize their firms for economic reasons.  Parliament passed an Emergency Subsidy Fund Law in June 2002 to compensate employees whose wages are suspended due to partial or complete closure of their firm or due to its downsizing.  The Emergency Subsidy Fund Law states that financial resources for the fund will come from a 1 percent deduction from the base salaries of government, public enterprise, and private sector employees in firms with over 30 workers.  Government contributions and outside donations will also provide support.  Press reports indicate that the Fund has been used in a number of cases where difficult economic conditions and some privatization deals have resulted in the downsizing of companies' labor forces.

According to foreign investors, certain aspects of Egypt's labor policies are significant business impediments, particularly the difficulty of dismissing employees.  The Unified Labor Law is somewhat more flexible in this area than the previous one, allowing employers and employees to terminate employment contracts under specific circumstances, but the process is still not easy.  The privatization program in some cases also requires a company's new owner to retain all workers.  The government has, however, used privatization proceeds to offer early retirement and/or other separation incentive packages to workers in some privatized companies.

Foreign Trade Zones/Free Ports

Public and private free zones are authorized under the Investment Incentive Law and are established by a decree from GAFI.  Free zones are located within the national territory but are considered to be outside Egypt’s customs boundaries, granting firms doing business within them more freedom on transactions and exchanges.  Companies producing largely for export (normally 80 percent or more of total production) may be established in free zones and operate in foreign currency.  Free zones are open to investment in any sector, by foreign or domestic investors.  Companies operating in free zones are exempted from customs duties, sales taxes or taxes and fees on capital assets and intermediate goods.  However, warehouse companies are subject to an annual fee of 1 percent on the imported product's value, and production and assembly profits are subject to an annual fee of 1 percent on the exported product's value.

There are currently 11 public free zones in operation in the following locations:  Alexandria, Badr City, Damietta, East Port Said Port Zone, Ismalia, Koft, Media Production City, Nasr City, Port Said Shebin el Kom, and Suez.   The Port Said free zone was initially scheduled to be phased out by 2007, but a presidential decree issued in late March 2006 extended the time limit until January 2009.  Private free zones may also be established with a decree from GAFI but are usually limited to a single project.  Priority is given to export-oriented industrial projects.  The investor has the freedom to select his activity and there is no restriction on foreign ownership of capital in private free zones.

In May 2002, Parliament approved the Special Economic Zones (SEZ) Law 83 of 2002, which provided for the establishment of special zones for industrial, agricultural, or service activities designed specifically with the export market in mind.  The law allows firms operating in these zones to import capital equipment, raw materials, and intermediate goods duty free.  Companies established in the SEZs are also exempt from sales and indirect taxes and can operate under more flexible labor regulations.  The law’s executive regulations were issued in September 2002 and the first SEZ was established in the North West Gulf of Suez.  Currently there are 22 projects operating in the North West Gulf of Suez SEZ.

Foreign Direct Investment Statistics

Measurements of foreign direct investment (FDI) in Egypt vary according to the source and the definitions employed to calculate the figure.  The Ministry of Petroleum keeps statistics on investment in the oil and gas sector (which accounts for the bulk of FDI in Egypt), while GAFI keeps statistics on all other investments.  The Central Bank records figures on quarterly and annual investment flows based on financial records, for Egypt's balance of payments statistics.  There are wide disparities between the three sources, and none can be considered definitive in assessing levels of foreign investment.

GAFI's figures are calculated in Egyptian Pounds at the historical value and rate of exchange, with no allowance for depreciation and are cumulative starting from 1971.  As of October 2006, GAFI statistics indicated that U.S. investors had FDI in 473 companies outside the oil/gas sector, with a total investment of LE 3.93 billion ($689 million at the current exchange rate).  The U.S. ranked eighth in terms of FDI in Egypt, following the United Arab Emirates, UK, Saudi Arabia, Spain, Kuwait, France and Holland.  In the oil/gas sector, where both the UK and U.S. are very active, the overall investment ranking of the two countries is probably the same.  The Ministry of Petroleum estimates that investment in the oil/gas sector has been on average $2-3 billion annually in recent years, largely associated with the expansion in gas exploration and production, and particularly with construction of two major liquefied natural gas plants on the Mediterranean (by Union Fenosa of Spain and British Gas).  The Ministry's estimates include operating expenses and operations costs. 

The U.S. Department of Commerce calculated the stock of U.S. FDI in 2005 at $4.839 billion, with Apache Corporation the largest single U.S. investor.  In addition to their major role in the energy sector, U.S. firms are active in a wide range of manufacturing industries, producing goods for the domestic and export markets.  Examples of U.S. investors include American Express, AIG, American Standard, Bristol-Myers Squibb, Citibank, Coca-Cola, ExxonMobil, Eveready, General Motors, Guardian Industries, H.J. Heinz, Johnson and Johnson, Devon Energy, Procter and Gamble, Pfizer, PepsiCo, Pioneer, and Xerox.  Leading investors from other countries include such companies as BG, ENI-AGIP, Shell, and Union Fenosa (in the oil/gas sector), Unilever, the M.A. Kharafi Group (Kuwait), and the Kingdom Development Company (Saudi Arabia).  Based on a summation of all information available on FDI, we estimate total FDI in Egypt at $3.9 billion in FY 04/05.

                                                   INVESTMENT STATISTICS (USD billions)

	2000/2001	2001/2002	2002/2003	2003/2004	2004/2005	2005/2006
Foreign Direct Investment	.509	.428	.701	.407	3.902	6.111
(flow)
Portfolio Investment	.261	.999	-.41	-.2	.8	2.764
(flow)
US FDI (stock)	1.998	2.537	2.959	3.533	4.24	4.839

                           * 04/05 and 05/06 figures include FDI in the energy sector.
                           ** Provisional.
                           *** U.S. FDI figures are for calendar year.
                           Source:  Central Bank of Egypt; U.S. Department of Commerce

Web Resources

Commercial Service in Egypt:  http://www.buyusa.gov/egypt/en/
U.S. Embassy:  http://usembassy.egnet.net
American Chamber of Commerce in Egypt:  http://www.amcham.org.eg/
Ministry of Investment:  http://www.investment.gov.eg/MOI_Portal/
General Authority for Investment and Free Zones:  http://www.gafinet.org/
Ministry of Trade and Industry;  http://www.mfti.gov.eg/
OPIC:  http://www.opic.gov/
Capital Markets Authority:  http://www.cma.gov.eg/cma/jtags/english/default_en.jsp
Egyptian Insurance Supervisory Authority: http://www.eisa.com.eg/index.htm
Ministry of Investment: www.investment.gov.eg
Ministry of Finance: http://www.mof.gov.eg/english