I confess that the state of the investment law is a mystery to me The government's insistence on amending it yet again, in the belief that this will solve our economic problems, is both confusing and worrying. About 18 months ago, on March 12, 2015, the government rushed through an ill-considered investment law on the eve of the Sharm El-Sheikh conference despite warnings from many experts and commentators. The country has paid the price of this hastiness. Instead of taking advantage of then propitious political and economic circumstances to make a breakthrough with investment, we frittered away time, effort, and credibility on unfulfilled promises and on implementing the provisions of an unworkable law. Then when the parliament had the chance to redeem the situation, it faltered, approving the flawed law along with some 340 other laws it reviewed in a matter of days. In recent months, rational voices have been heard from within the state admitting the error and calling for legislative, economic, and political reforms of the investment climate instead of continuing to rely on an exceptional law that is neither useful nor convincing to investors. But the mountain gave birth to a mouse. After months of talk about a new investment law, after major corporations and law and accounting firms were surveyed about what the law should include, and after more warnings from experts, commentators, and investors, a draft of the new law was published in Friday's Al-Ahram, but what a disappointment. Once again we're considering offering tax breaks, having successfully eliminated them in 2005, along with the corruption, distortion, and manipulation they entail. Yet again, we're thinking about giving the General Authority for Investment the powers to grant licenses and allocate land for all investment projects in Egypt, despite the impossibilityof this system. Again, we're dividing the country into investment zones, special zones, free zones, urban zones, peripheral zones, and development zone, each with its own system of procedures and exemptions, further complicating an already complicated situation. Again the Investment Ministry is ignoring investors' real problems—resulting from an unstable currency market, ambiguous government policies, state interference in all economic activities, and a morass of bureaucratic and regulatory red tape—thinking it can compensate with a new law promising out-of-date incentives and exemptions. In fact, mere talk of tax breaks is outrageous. It's galling for the government to call on citizens to pay their taxes, bear higher energy costs and price hikes, and tighten their belts when it grants investment corporations ten-year income tax breaks, along with exemptions on energy costs and even social insurance. Why are we considering ideas that are proven failures? Why not learn from the experience of the last two years? Here's my attempt at resolving the investment law mystery.Perhaps because of the belief that special incentives, exemptions, and guarantees are needed to attract investors to the country. But actually this kind of thinking no longer applies. Global investors today look for countries with stable legislation, clear government economic policies, stable financing, fair and swift courts, an efficient currency market, balanced labor relations, advanced physical infrastructure, and political and social stability. Only countries that don't have these elements attempt to compensate by offering tax breaks and free land and sacrificing their future resources for short-term gain. Perhaps it's due to the idea that overhauling the investment climate will take time we don't have and that the current crisis requires rapid action and immediate results. While true, this statement is used to serve false ends. The crisis is real and the country needs rapid solutions, but not every quick fix is worth it and not all ideas for comprehensive reform are pointless. In investment in particular, there is no way around comprehensive reform. What brought us to this point is an accretion of ill-considered decisions, a desire for speedy results, and a search for quick achievements to feed media coverage. Perhaps it's explained by the inherent bias in favour of large foreign investors without serious thought given to the needs of local investors, small and medium businesses, and the need to create jobs for our unemployed youth in a competitive world. Recent research in this field, however, shows that what most encourages foreign investors is a country that is attentive to the interests of all investors regardless of nationality, financing sources, or the nature and size of their business. And perhaps what drives us to again amend the investment law is the need to do something, anything, even if it has no real benefit, just for the sake of action. But in this case, it is only spinning our wheels. I hope we don't again rush to a solution before we give sufficient thought to the problem we need to solve, because our economy cannot bear more experiments and gambles. *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, 24 October.
