Explicit Barriers/Prohibitions: A few explicit prohibitions or restrictions on foreign investment exist in the following areas:
--Land/Real Estate: Law 15 of 1963 explicitly prohibits foreign individual or corporate ownership of agricultural land (defined as traditional agricultural land in the Nile Valley, Delta and Oases). Foreign individuals can own a maximum of two residences. Companies/citizens of other Arab countries have customarily received Egyptian-national treatment in this area.
--Commercial Agents and Importation for Resale (i.e., Traders): These activities are explicitly limited to Egyptian nationals.
-- Some projects require prior approval from relevant ministries in addition to GAFI, including investment in the Sinai, all military products and related industries, and tobacco products.
Informal and De-facto Restrictions:
--Banking/Insurance: 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. The same situation earlier appeared to have been the case with insurance companies. However, since 2002, several entirely new entities have been allowed to operate in the Egyptian market.
--Other obstacles to investment and business include excessive bureaucracy; a shortage of skilled mid-level management; periodic shortfalls in credit facilities; periodic inability of companies to obtain needed foreign exchange; slow and cumbersome customs procedures; and non-tariff trade barriers. The current Egyptian government is taking steps to address these barriers. Since late 2004, the Central Bank has taken steps to ensure availability of foreign exchange and eliminate backlogged requests. The Ministry of Foreign Trade and Industry is also implementing more efficient customs procedures to complement the reduction in tariff rates in September 2004.
Pharmaceutical prices remain controlled, although the government has decontrolled prices of other industrial products. The government uses a standard cost-plus formula to determine pharmaceutical prices for new-to-market products. These prices have not been revised to reflect the 45% devaluation of the Egyptian currency that has occurred since mid-2000, which sharply reduced the profitability of pharmaceutical companies, most of whom rely heavily on imported inputs. The further devaluation of the Egyptian pound associated with the January 2003 currency float has placed increased pressure on pharmaceutical companies, as input costs continue to increase while retail prices remain fixed.
While not a legal requirement, all proposed foreign investments are scrutinized by the security services. This can sometimes cause significant delays in the approval process.
Although in the past the government had stated that it would not allow foreign investors to control the majority of production in "strategic industries," the Ministry of Investment has stated that the government no longer considers any industries strategic. |
