I imagine many people are sick of hearing about the investment law. Others may find it distasteful to discuss such a technical, secondary issue while the country is still reeling from the painful blow in Sinai and the fall of brave soldiers who gave their lives for the nation and its security and people. However, honouring the martyrs who gave everything in the line of duty dictates that every Egyptian should recognise and respect their sacrifice. It also requires us all to do our own duty, whatever our position, and to give what we can, faithfully and sincerely, to serve the public interest. In this context, I can only address a topic that is neither as technical nor as secondary as it might seem, but is of direct relevance to the economic crisis we all feel; investment. This is particularly important now when the government is discussing amending the investment law yet again. For two years we have been talking about the need to change the law, the amendments, the flaws in the amended law, and the need to amend the law once more. Over the past 18 months, I have personally warned several times in these pages that the changes introduced to the law on the eve of the Sharm El-Sheikh conference in March 2015 would not bring the promised results. Instead, I said, they would undermine the country's credibility, squander the chance to woo investors coming from all over the world, and take us backwards. And I was not alone. Many other lawyers, economists and investors cautioned against the flawed law, but all this counsel fell on deaf ears. I would not have returned to the matter if the government were not yet again seemingly insistent on repeating the same errors while expecting different results. Yes, the law can be amended. The best way may be to repeal the 2015 amendments and revert to the previous, much better law. The problem, however, is no longer about the provisions of this or that law. We are past that stage. We must face the present crisis with a different logic from that which has dominated for decades, or else we will keep running around in circles. Since the early 1970s — specifically, in 1971 — Egypt has pursued an investment policy based on a series of statutes that aim to create a “special track” for Arab and foreign investors first and Egyptians second. This special track involved opening up investment in fields chosen by the state by offering special benefits, exemptions, and guarantees that allow investors to avoid the perils and pitfalls of dealing with the state administrative apparatus and complying with traditional laws and systems. At the time, this method of attracting investment was common around the world, but as decades passed, the logic shifted and the world changed and learned from experience. Investors no longer look for a special track or a handful of incentives and benefits. They seek an overall climate that is conducive to investment. This means a climate with modern commercial laws, easy access to finance, a simple system for land allocation, adequate information about government policies, a competitive environment, sound labour laws and relations, a fair and transparent tax system, courts that resolve disputes swiftly and fairly, a stable monetary policy, a good physical infrastructure, an educated, trained workforce, and a political climate that fosters pluralism, freedom and innovation. Countries successful at attracting and promoting investment have therefore abandoned the single law that offers investors a pathway through the jungle of red tape that impedes economic activity — because this special track was no longer working — opting instead to address the root of the problem by reforming statutes and regulations that generally hinder economic activity. So, I am sceptical that a new investment law will magically light a path for investors through the thicket of restrictive regulations and contradictory legislation. It would be better to overhaul these statutes entirely to encourage all sorts of investment — large and small, foreign and national — without need for an exceptional law. This is especially important now with the media reporting that the government may reinstate tax and customs breaks for investors in certain fields, like those that existed from 1971 to 2005, when the new income tax law abolished them. This would be a major step backwards. Such exemptions rob the public treasury of much needed resources, foster fraud and corruption, and favour large investors over small ones. Much better would be to develop the current tax administration, close tax and customs loopholes, and reassess tax distribution in Egypt. When new investment legislation is submitted to the parliament, I hope it rejects these tax breaks we worked so hard to eliminate a few years ago. I know thinking about revising the investment law is motivated by the need to quickly attract investors and the belief that overhauling the investment climate is a long process unsuited to current pressing conditions. But the worst thing now would be to act rashly to postpone genuine, necessary reforms, turn to exceptional laws that do not work, and put off comprehensive reform for another few years. *The writer holds a PhD in financial law from the London School of Economics. He is former deputy prime minister, former chairman of the Egyptian Financial Supervisory Authority and former chairman of the General Authority for Investment. A version of this article was published in Arabic in El-Shorouq newspaper on Monday 17 October.
