After approving Investment Law, what's next to attract new investments?

Experts and investors believe that approving the new law is not enough to improve the investment atmosphere

Minister of Investment Sahar Nasr said on Monday in a press statement that implementing the Investment Law now is the most important mission for her and her ministry.
She is responsible, according to the new law, for issuing regulations and organising the process of approving licences for establishing new projects.
Nasr stated that an important step has been taken by finishing the law's approval and now the government will work on attracting new investments and solving all the problems that investors face.
The minister said that the current version of the law is the best one, because the parliament had long talks with the government about the added articles, especially about transparency and investment incentives, which shows that the government is serious about attracting new investments and it is also serious about supporting the private sector, especially in the poorest governorates, because it is the leading sector nowadays.
However, some economic experts do not seem fully satisfied with the law or believe that the problem of the current economic situation is a result of the old law.
In his opinion article in El Shorouk Newspaper, former deputy prime minister Ziad Ahmed Bahaa-Eldin named four major problems with the law.
He stated that the first problem is that the law allows working by investment incentives, after Egypt has suffered from such measures back in 2005 and ended them. He believes it opens the door for corruption and prevents taxes' incomes that the country really needs today due to the huge budget deficit.
The second problem, in his opinion, is that the law institutes further bureaucracy in the system of licensing because it allows different ministries and institutions to get involved in this process as well as in the process of land allocations.
He added that the third problem is that the law makes the General Authority for Investment (GAFI) an organ of the Ministry of Investment instead of being an independent institution.
The final problem he stated was that the investment atmosphere problems cannot all be solved by this law, explaining that the problems that prevent investment inflows into Egypt are related to many laws and regulations of the Egyptian law, the unclear economic state of Egypt, and the severe, unnecessary involvement of governmental and military investments in the market, which create an atmosphere of unfair advantages.
From another direction, the vice president of 15th of May City's business association, Abdel Ghany El Abassery, stated that the problem is not about the law, emphasising that the previous law was not that bad.
He believes that the problem is about the centralisation and bureaucracy that make investors struggle to establish their companies.
He said that the government has to simplify the process of licensing in order to make it easier to establish a company, adding that in Dubai, it takes only a couple hours to establish a company. "If the government allowed establishing a company in a month, I'll call it progress," he noted.
El Abassery said that the government must give every governorate the authority to approve licences on its own, like it was before 2011.
On the other hand, the former dean of Economics and Political Science at Cairo University, Aliaa El-Mahdy, said that Egypt has many other dimensions to look at besides implementing the new law.
She emphasised that the current inflation rate is very high, adding that the possibility of raising the interest rate once again above the current levels will lead to recession, which will not help in attracting any new investments to the Egyptian market.
She explained that it will raise the prices of all the goods and that it will make people spend less on unnecessary goods and services, which will not be a good indicator for new investments.
It is important to mention that the International Monetary Fund (IMF) has officially asked the Egyptian authorities and the Central Bank of Egypt (CBE) to raise the interest rates for the banking sector to control the hiking inflation rate.
The managing director of the International Monetary Fund (IMF), Christine Lagarde, said during a conference held in April during the spring meetings of the IMF in Washington that there is "clearly a question that needs to be addressed, I would say, head-on, and that is inflation."
Lagarde added that "the Egyptian programme that is underway has been very courageous and has led to major reforms for the country," yet, she also believes that other reforms have to continue, but there has to be a special focus on tackling inflation.
"I think that the Central Bank and the Finance Minister of Egypt are both aware and will, I hope, tackle the inflation risk, which is weighing on the population," she noted.
It is important to note that Egypt implemented many serious reforms, such as floating the pound in November in order to make the IMF approve a three-year $12 billion programme, which includes ambitious economic reforms.
On the other hand, El-Mahdy stated that there are many other factors that could affect Egyptian abilities to attract more foreign investments.
She said that the declaration of the state of emergency by President Abdel Fattah Al-Sisi back in April has a seriously negative effect, because it tells investors around the world that Egypt is not safe or secure. She added that, unfortunately, it has outweighed all the efforts to convince American businesspeople to invest in Egypt back during the president's visit to the United Stated of America at the beginning of April.
She believes that implementing security is a very important step that opens the door for new investments.
The Egyptian president declared a state of emergency for three months after explosions hit churches in Tanta and Alexandria on 8 April.
She also believes that the situation was already bad due to the numerous conflicts in the Middle East and North Africa.
Reham El-Desouki, an economist at Arqaam Capital said to Reuters, in an article published on Monday that "a large number of investors were waiting impatiently for the law in order to understand the investment environment in Egypt and its incentives, especially with regards to the cost of starting a project and incentives for land."
Reuters stated that the government has approved an earlier version of the Investment Law in 2015, adding that the law would "bolster investor confidence, but the legislation was criticized for coming up short."
"The new Investment Law includes a raft of new incentives, such as a 50% tax discount on investments made in underdeveloped areas and government support for the cost of connecting utilities to new projects," the article read.
The law states that one provision will return to investors half of what they pay to acquire land for industrial projects if production begins within two years, according to Reuters. The law also "restores private sector free zones—areas exempted from taxes and customs—a provision that had held up the law's passage because of objections over whether to forfeit tax revenues at a time of austerity."
However, Reuters said that Egypt's direct foreign investment jumped by 39% in the first half of the current fiscal year ending in June to reach $4.3bn.
"In light of current conditions, the investment incentives are needed," according to Mohamed Abu Basha, an economist at EFG Hermes, who told Reuters that "the incentives will give a push to investors to come to Egypt."
Reuters stated that the new law "is expected to boost badly needed investment by cutting down bureaucracy, especially for starting new projects, and providing more incentives to investors looking to put money in Egypt."